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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1997, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from to
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COMMISSION FILE NO.: 0-25978
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THERAPEUTIC ANTIBODIES INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 62-1212485
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1207 17TH AVENUE SOUTH, SUITE 103
NASHVILLE, TENNESSEE 37212
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (615) 327-1027
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK; PAR VALUE $.001 PER SHARE
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K . [X]
The aggregate market value of the shares of Common Stock of
the registrant held by non-affiliates on March 13, 1998 ($3.46 per share), was
$59,657,483. As of March 13, 1998, the registrant had outstanding 23,252,825
shares of Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part III are incorporated by reference from the
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
on April 27, 1998. Certain exhibits listed in Part IV hereof are incorporated by
reference to the following documents previously filed by the Registrant with the
Commission: Registration Statement on Form 10, filed on May 1, 1995; Quarterly
Report on Form 10-Q for the period ended September 30, 1995; Quarterly Report on
Form 10-Q for the period ended March 31, 1996; Quarterly Report on Form 10-Q for
the period ended June 30, 1996; Quarterly Report on Form 10-Q for the period
ended September 30, 1996; Proxy Statement relating to the Special Meeting of
Shareholders held on July 5, 1996; Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; and Quarterly Report on Form 10-Q for the period
ended March 31, 1997.
TABLE OF CONTENTS
PART I
<TABLE>
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ITEM PAGE
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<S> <C> <C>
1. Business.................................................................................... 1
2. Properties..................................................................................20
3. Legal Proceedings...........................................................................21
4. Submission of Matters to a Vote of Security Holders.........................................21
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.......................22
6. Selected Financial Data.....................................................................23
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......24
8. Financial Statements and Supplementary Data ................................................29
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................................53
PART III
10. Directors and Executive Officers of the Registrant..........................................54
11. Executive Compensation......................................................................54
12. Security Ownership of Certain Beneficial Owners and Management..............................54
13. Certain Relationships and Related Transactions..............................................54
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................55
15. Signatures..................................................................................60
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PART I
ITEM 1. BUSINESS
GENERAL
Therapeutic Antibodies Inc. ("TAb" or the "Company"), is a
development stage biopharmaceutical company specializing in the preparation of
polyclonal antibodies for the treatment of disease. Headquartered in Nashville,
Tennessee, with operations in the United States, the United Kingdom, and
Australia, TAb is developing and producing a line of antibody products designed
primarily to treat life-threatening medical conditions for which there currently
are no satisfactory therapies.
The Company was incorporated in Delaware in 1984. The Company
was co-founded in 1984 by Professors John Landon and Tim Chard and Dr. Harry
Browne. Both Professors Landon and Chard have been active in the development of
antibodies for diagnostic purposes and the development of immunoassays. Each
formerly chaired a department at St. Bartholomew's and the Royal London School
of Medicine and Dentistry in London, and both have published numerous articles
relating to antibody/antigen interaction and detection. Since 1984, the Company
has affiliated itself with scientists at academic institutions in the United
States, Europe, Australia, New Zealand and Africa, to assist in the research,
testing and development of new antibody products. See "Item 1
- -Business-Principal Licensing and Other Collaborative Arrangements."
TAb has developed systems for the production and purification
of a new generation of polyclonal antibodies that management believes can
produce suitable therapies for neutralizing a variety of toxins, including
certain venoms, cytokines and drugs. Some of TAb's innovations include the
preparation of unique immunogens, the purification of specific antibodies and
the digestion of antibodies into fragments. Management believes that these
capabilities enable TAb to produce a broad range of specific antibodies that are
safer and more effective than the antibody products currently available. The
Company's antibody products are in various stages of development, ranging from
preclinical testing to commercial distribution.
TAb currently has six therapeutic products and product
candidates ("products"), two on the market and four in clinical evaluation. One
of these products, CytoTAb(R), is being studied in four significant indications
including sepsis syndrome. Rigorous, ongoing scientific studies are
demonstrating the efficacy and safety of these products. For example, animal
studies have demonstrated that TAb's rattlesnake antivenom, CroTAb(R), is on
average five times more potent on a per weight basis than the current antivenom
on the market, and in clinical trials, CroTAb(R) is associated with a reduced
incidence and severity of side-effects. TAb's European adder antivenom,
ViperaTAb(R), is nearly ten times more effective on a per weight basis than
competing products and enjoys a majority market penetration in certain
countries.
The Company's anti-cytokine product, CytoTAb(R), has been
demonstrated to neutralize the cytokine tumor necrosis factor (TNF). In a study
published in the New England Journal of Medicine, physicians from Oxford
University demonstrated that CytoTAb(R) is the first effective therapy against
infection-related shock in humans (the Jarisch-Herxheimer Reaction). The New
England Journal of Medicine published an editorial on the study, calling it "the
first to establish that passive immunization against TNF can block the
development of a shock-like syndrome in humans."
Researchers are associating a growing number of life
threatening or disabling conditions with elevated serum and tissue
concentrations of TNF, including cerebral malaria, septic shock and rheumatoid
arthritis. TNF has therefore become a primary therapeutic target in the
biopharmaceutical industry's efforts to develop drugs to
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prevent or treat these and other diseases. TAb is presently engaged in clinical
studies evaluating the efficacy of CytoTAb(R) in the treatment of cerebral
malaria, Sepsis Syndrome, the Jarisch-Herxheimer Reaction and acute Graft vs.
Host Disease (bone marrow transplant).
In January of 1998, the Company underwent a corporate
reorganization. Under this reorganization, TAb Australia Pty Ltd, was renamed
Therapeutic Antibodies Australasia Pty Ltd. ("TAb Australasia"). Polyclonal
Antibodies Ltd., TAb Wales Ltd., and TAb London were combined into Therapeutic
Antibodies UK Ltd ("TAb UK"). TAb's executive offices are located in Nashville,
Tennessee, in the vicinity of the Vanderbilt University Medical Center.
Research, production and testing operations are conducted through the Company's
subsidiaries. The Company operates its research and development laboratories
through TAb UK, at the facilities of St. Bartholomew's. The Company's antibody
production operations are situated in both Dyfed, Wales and Adelaide, Australia.
These operations are conducted through TAb UK and TAb Australasia See "Item 2
Properties."
THE INDUSTRY
The biotechnology/biopharmaceutical industry is considered a
segment of the pharmaceutical industry. Management believes that advances in
biotechnology research will contribute to the development of new pharmaceutical
products. In the past decade, medicine has benefited from advances in immunology
through the use of antibodies for diagnostic purposes, to detect the presence of
a variety of substances in the body. Antibodies are used for diagnostic purposes
to measure various hormones, cancer markers, drugs and other materials in
patient blood samples. An example of a commercial application of diagnostic
antibody technology is the home pregnancy test kit, which uses antibodies to
detect a pregnancy-associated hormone in samples of urine.
In addition to diagnostic applications, research has begun to
focus on the therapeutic applications of antibodies, which can be used for the
treatment of numerous toxic conditions including envenomation, drug overdose and
infectious disease. Although one of the Company's subsidiaries produces and
sells small amounts of animal antisera that is used for diagnostic purposes,
TAb's primary focus is on the production of antibodies for therapeutic purposes.
TECHNOLOGY AND PRODUCTION
Antibodies bind to toxic molecules, neutralizing them to a
greater or lesser degree. There are two types of antibodies. The first are
polyclonal antibodies which contain a variety of antibodies directed to
different sites, or epitopes, on the target disease molecule. The second type
are monoclonal antibodies consisting of a population of identical antibodies all
directed to a single epitope.
TAb has focused its development resources on polyclonal
antibodies. Company scientists believe that these are effective for certain
important therapeutic applications in humans, where target disease molecules
have multiple epitopes and are therefore more effectively treated with a
polyclonal approach, as well as applications involving small-molecule drugs
where the higher affinity of polyclonals is important.
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Management believes that, in combination, the following four
factors create a unique position for TAb in the biopharmaceutical industry.
First, the Company uses polyclonal antibodies as the basis of its technology;
second, the Company uses sheep to produce these polyclonal antibodies; third,
the Company produces Fab fragments from these polyclonal antibodies; and
finally, TAb uses highly efficient production and purification systems. These
factors are described in more detail in the following sections.
POLYCLONAL ANTIBODIES. TAb faces only limited competition in
the commercial development of polyclonal antibody products, as most immunology
companies in recent years have focused on monoclonal antibodies. Management
believes the characteristics of monoclonals provide advantages as diagnostic
tools for in vivo imaging and for laboratory testing or immunoassays, because
they are very selective and offer specificity to a particular epitope.
Potential advantages of processed and purified polyclonal
antibodies over monoclonals, for certain therapeutic applications, are that
polyclonals bind multiple sites, resulting in greater neutralization of toxic
molecules; usually bind more strongly; are often more robust and can therefore
better withstand the fragmentation and purification process; and can generally
be developed at less expense.
PRODUCTION OF ANTIBODIES FROM SHEEP. TAb uses sheep for the
production of its polyclonal antibodies. The Company has selected sheep because
of the substantial amounts of high affinity, specific antibodies that they can
produce. Sheep antibody based products also have a proven safety record when
used therapeutically in humans because side effects resulting from immune or
allergic responses are relatively limited. Sheep are also easy to handle,
inexpensive to purchase and maintain, and are available in large numbers
worldwide. Flock sizes are approximately 1,000 at TAb's facility in Wales, and
4,300 at its Australian facility. TAb plans to increase the size of its flock in
Australia over time as required to meet full-scale commercial production.
All TAb products are prepared using a very similar series of
manufacturing steps. The common technology explains why TAb has been able to
develop new products in a relatively short time. Management believes that it
could also simplify the process of seeking regulatory approval.
ANTIBODY FRAGMENTS. An antibody can be divided into two
identical components known as the antibody binding Fab fragments and an
additional Fc fragment. Each Fab fragment has a binding site which attaches to a
specific epitope on the target molecule in order to neutralize its toxic
effects. The Fc is potentially harmful and can cause hypersensitivity and other
side effects.
TAb separates and discards the potentially harmful Fc fragment
and obtains the two beneficial Fab fragments, unimpaired in their ability to
bind and neutralize the target molecule. Most other immunotherapy companies
applying similar technology have used intact antibodies, or have used the enzyme
pepsin which yields the larger F(ab')2 fragment. The latter comprises two Fab
fragments joined together, but without the harmful Fc fragment. Fab fragment
products are less likely to cause hypersensitivity and other side effects than
intact antibodies or F(ab')2 fragment products. Furthermore, their small size
ensures that the Fab fragment products are rapidly and evenly distributed
throughout the body. This means that, following injection, they are expected to
quickly reach the various tissues where a target molecule may be causing toxic
effects. In addition, their small size allows excess unbound antibody and
antibodies bound to small toxic molecules to be excreted more efficiently by the
kidneys.
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Any foreign protein, including an antibody of animal origin,
will induce an immune response if injected into a patient. Severe side-effects
such as anaphalatic death were common when passive immunization was first
introduced at the end of the last century for the treatment of diphtheria and
tetanus. This was due to the fact that unprocessed and unpurified equine serum
containing highly allergenic proteins were injected. Furthermore, large volumes
of such sera were administered, giving rise to a serious delayed complication
known as serum sickness. The incidence and severity of side-effects were reduced
significantly by separating antibodies from most of the contaminating proteins.
The incidence of harmful effects was further reduced by the use of enzymatic
cleavage to prepare the larger F(ab')2 based products. Removal of the Fc
fragment prevented the binding and activation of various blood cells. TAb uses
papain enzyme technology to produce Fab fragments which are less likely to cause
side-effects than either intact antibodies or F(ab')2. Being smaller, the Fab is
less immunogenic and only has a single binding site. Therefore, with a single
binding site, it cannot form potentially harmful large, cross linked, immune
complexes.
COMMON PRODUCTION PROCESS. Products for pre-clinical and
clinical trials have been developed primarily in TAb's development facility at
St. Bartholomew's in London. Once a new product has completed its development, a
product transfer group is responsible for moving the product to Wales and
preparing for clinical and commercial production. TAb completed construction of
a custom built 20,000 sq. ft. manufacturing plant at its facility in Wales in
1995. Internal validation by the Company is nearly complete and the plant awaits
inspection and approval by the FDA and MCA for commercial use. Management
believes that the production facilities will meet regulatory requirements. TAb's
Australian facility has serum processing capability with Therapeutic Goods
Administration approval and currently provides antisera to the manufacturing
plant in Wales.
PRODUCTS
TAb is concentrating on a portfolio of products in three
development programs with a view to balancing development risk and market
potential. The three programs are the Antivenom Program, the Anti-Drug Program
and the Anti-Cytokine Program.
ANTIVENOM PROGRAM. It is estimated that close to 1,000,000
people worldwide are bitten each year by poisonous snakes. This results in as
many as 100,000 deaths. In addition, there are large numbers of scorpion and
spider envenomations in North America and many other countries each year. It is
one of TAb's objectives to become the leading producer of antivenoms worldwide.
TAb has developed its first antivenoms to treat snakebites in North America,
Europe, Western Africa, Southeast Asia and Australia. Management believes that
there is an unsatisfied demand for safe and effective antivenom products.
VIPERATAB(R). TAb has developed ViperaTAb(R) for treating
poisonous bites by the European common adder, Vipera berus, and has entered into
an agreement with Swedish Orphan, a pharmaceutical marketing company, to market
this product in Scandinavia. In 1991, preclinical testing conducted on behalf of
TAb at the Liverpool School of Tropical Medicine indicated that ViperaTAb(R) was
nearly 10 times more effective on a weight for weight basis than an equine
derived antivenom available in Northern Europe. Clinical trials were completed
in 1994. ViperaTAb(R) was approved by the regulatory authorities in Sweden and
Norway in 1994, and Finland in 1995, for use in those countries on a named
patient basis. The Company commenced commercial distribution of ViperaTAb(R) in
Scandinavia in 1995.
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TAb's patent attorneys are currently advising TAb with respect
to a competing European antivenom patent application that, if granted, may have
an impact on TAb's activities. Management believes that this European patent
application, if granted, will not affect the commercial viability of
ViperaTAb(R).
CROTAB(R). TAb's Crotalid ("rattlesnake") antivenom project
was carried out in collaboration with scientists at the University of Arizona,
USA. Preclinical tests performed on behalf of TAb at the University of Arizona
indicated that the antivenom was demonstrated, on average, to be 5 times more
potent on a weight per weight basis than the then existing equine-derived
antivenom. The Company filed an IND application with the FDA in 1992 and in 1993
was awarded an FDA grant to assist in the funding of clinical studies of
CroTAb(R), which began in 1993. CroTAb(R) has been designated an orphan drug
candidate by the FDA, which would provide certain development, registration and
marketing incentives. See " Item 1 - Business - Government Regulation." Phase
II/III clinical studies with this product were completed in 1996 and the Company
is preparing to submit applications for FDA approval of CroTAb(R).
ECHITAB(TM). TAb has developed EchiTAb(TM) as an antivenom
against the West African carpet viper, Echis ocellatus. TAb has entered into an
agreement with the Federal Ministry of Health on behalf of the Nigerian
Government under which the Nigerian Government has contributed to the costs of
development and clinical trials of EchiTAb(TM). Commercial production of this
product commenced in 1997.
OTHER ANTIVENOMS. TAb has the capability to develop antivenom
products to treat a variety of other snake, spider and scorpion venoms, and the
company currently has several other anti-venom products under development.
ANTI-DRUG PROGRAM. DigiTAb(R) TAb has developed DigiTAb(R) for
treating digoxin intoxication. Digoxin is a prescription drug which is used to
treat certain cardiac conditions on a long-term support basis. It is the most
commonly prescribed form of digitalis which has been in use worldwide for many
years. However, digoxin has a narrow therapeutic range and can cause
life-threatening toxicity when taken in excess. It is estimated that 12,000
cases of severe digoxin toxicity occur annually, with the majority of these in
the United States.
In 1986, a major multi-national pharmaceutical company
introduced in the U.S. a specific sheep derived polyclonal antibody product
(using papain cleavage) to treat life-threatening digoxin intoxication.
DigiTAb(R) will therefore be competing directly with an established product in
this market.
TAb has completed research and development and preclinical
testing of DigiTAb(R). The Federal Food and Drug Administration ("FDA") has
accepted TAb's application for IND status and TAb is currently in Phase III
clinical testing of DigiTAb(R) in the United States and Europe.
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TriTAb(R) TAb is developing TriTAb(R) to treat tricyclic
antidepressant ("TCA") toxicity. TCAs are a family of structurally related
compounds used in the treatment of severe clinical depression and are one of the
main causes of poisoning by drug overdose in Europe and the United States.
Despite the recent introduction of safer non-TCA antidepressant drugs, TCAs as a
group, continue to hold a large share of the antidepressant market. Typically,
these drugs are generic and their patents have expired. Consequently, TCAs are
much less expensive than the newer non-TCA antidepressants. For this reason,
Management believes that TCA therapy is likely to remain in clinical use for
some time. In addition, they may exert a better clinical response in some severe
forms of depression.
Toxic side effects of TCA drugs are relatively common and the
incidence of toxicity has been estimated to run as high as 5 percent. The most
severe side effects of TCAs affect the heart, necessitating prolonged intensive
care treatment, and can ultimately be fatal. At present, no specific antidote
for TCA poisoning is available. TAb has developed an antibody treatment for TCA
toxicity, that the Company's preclinical tests demonstrated to be effective in
reversing TCA toxicity.
TAb is targeting the treatment of TCA toxicity victims
admitted to hospital emergency rooms with symptoms of serious toxicity. It is
estimated that such cases total 60,000 per year in Europe and the United States
The Company has completed all preclinical testing of TriTAb(R)
and the FDA has accepted an investigator IND application for this product. TAb
is actively pursuing pilot studies in the United States. The Company believes
these pilot studies may provide a rapid assessment of the efficacy of TriTAb(R),
with results available in 1998. Management is not aware of any other competitive
commercial efforts in this field.
ANTI-CYTOKINE PROGRAM. CytoTAb(R) - Sepsis. Sepsis Syndrome is
a name given to a spectrum of disorders caused by the body's exaggerated
response to infection or injury and is triggered by a wide variety of bacterial,
viral and fungal organisms. The three defining conditions for sepsis are a site
or source of inflammation, abnormal vital signs and a failure of one or more
major organ systems, typically the respiratory system (lungs), central nervous
system, cardiovascular system or the excretory system (kidneys). Immune
suppression, invasive procedures, trauma or surgery are the usual factors that
allow bacteria or their toxic products to enter the bloodstream.
An estimated 800,000 to 900,000 patients suffer with Sepsis
Syndrome each year in Europe and the United States alone and there is a fatality
rate ranging from 20 to 60 percent, depending on severity. The current clinical
management of Sepsis Syndrome is expensive, often involving intensive care
measures, mechanical ventilation, hemodialysis, nutritional support and a
variety of antibiotics. Furthermore, none of these interventions has
significantly decreased mortality rates, despite over 15 years of intensive
research.
A number of companies have been actively pursuing the
commercial development of antibody products to treat Sepsis Syndrome. TAb's
Management believes that most have adopted monoclonal technology, some with a
view to neutralizing endotoxins which often initiate the body's inflammatory
response to infection, while others have introduced antibodies to target
cytokines such as tumor necrosis factor ("TNF"), which act as mediators of
Sepsis Syndrome. Management is aware of monoclonal antibody products intended to
treat Sepsis Syndrome that have encountered problems in the testing stage and
some that have been withdrawn from clinical trials.
Through its sepsis program, TAb has developed a line of
polyclonal antibody products to target the inflammatory cytokines that act as
mediators to Sepsis Syndrome.
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TAb has completed a number of preclinical tests with its first
product in this program, CytoTAb(R), which is directed against TNF. The results
of the Company's preclinical tests indicated statistically significant
neutralization of the TNF. The FDA has accepted the Company's IND application
for this product.
In 1993, an opportunity arose to test TAb's anti-TNF antibody
in a model of human sepsis using a study designed by scientists from the
University of Oxford. This model involved Louse-Borne Relapsing Fever ("LBRF"),
which is a serious medical problem in Ethiopia; mortality in untreated patients
has exceeded 50 percent in some epidemics. The current treatment for LBRF, while
effective, is associated with a predictable pattern of side-effects, some of
which are life-threatening and appear closely to resemble classic Sepsis
Syndrome. TAb's first study consisted of a randomized, double blind, placebo
controlled trial of TAb's anti-TNF antibody carried out in 49 patients with LBRF
in Ethiopia. Subsequent studies have taken place in Ethiopia on over 90
patients. The results provide evidence that TAb's antibody product suppresses
cytokine activity as seen in LBRF patients and were published in The New England
Journal of Medicine in August of 1996. To the best of Management's' knowledge,
this is the first time a human study of an anti-cytokine antibody has provided
such successful results.
In 1995, the Company entered into an agreement with scientists
at Vanderbilt University Medical Center ("Vanderbilt") to coordinate initial
United States clinical trials of the CytoTAb(R) product. These trials commenced
in April 1995. Vanderbilt has extensive experience in testing the impact of
interventions on endotoxemia, and has studied a variety of proposed antibody
products in both in vivo and in vitro models. In a Phase I study, a total of 25
patients meeting criteria for severe sepsis have been treated with one of
several doses of CytoTAb(R). The results indicated that the antibody binds to
its target (TNF) with high affinity. The various doses were well tolerated with
no significant hypersensitivity reactions or episodes of immune complex disease.
The antibody was rapidly distributed.
During 1997, the Company concluded a Phase IIa clinical study
and announced the results. Based on the data accumulated from this trial, the
Company is undertaking a Phase IIb study in severely ill sepsis Patients who
have developed failure in two organs. Knowledge gained from this trial will be
used to design a pivotal phase III study.
TAb has adhered to a systematic strategy in the conduct of its
pre-clinical testing and human studies for this CytoTAb(R) product. The Company
believes that an orderly approach to study of the action of the drug will lead
to its useful application in the treatment of sepsis and many other disorders.
Because of the many disease states in which elevated tissue or serum levels of
TNF are implicated, the Company believes there may be numerous clinical
applications of CytoTAb(R), some of which cannot be predicted or quantified at
this time.
CytoTAb(R) - Jarisch-Herxheimer Reaction ("JHR"). The
Jarisch-Herxheimer Reaction occurs in some patients who have received
antibiotics to treat an infection and can be fatal. The antibiotic kills the
infecting organism which breaks up. The fragments of the organism cause a
massive response involving a cascade of cytokine release which leads to a high
temperature and rapid pulse.
JHR is a model system for sepsis, but it is also an indication
in its own right. Variations of JHR occur throughout the world including Europe
and the United States. Four such examples are Louse-Borne Relapsing Fever in
Ethiopia, Tick-Borne Relapsing Fever, Secondary Syphilis, and Lyme Disease in
the United States.
TAb plans to carry out Phase III trials in JHR under full Good
Clinical Practice ("GCP") with a view to submitting a product license
application in the United States and possibly Europe for CytoTAb(R) for JHR.
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Management believes that its CytoTAb(R) product has a notable advantage because
it has been the only product to have been tested and demonstrated efficacy in
treating JHR
CytoTAb(R)- Transplantation. Many kidney transplant patients
suffer acute rejection episodes which are often treated with an antilymphocyte
therapy, such as Orthoclone OKT(R)3. This treatment may itself be associated
with side effects stemming from release into the circulation of large quantities
of TNF. TAb is investigating the use of CytoTAb(R) to prevent and treat such
side effects. In 1997, the FDA cleared TAb's IND application for the development
of CytoTAb(R) in renal transplant patients
CytoTAb(R) - Cerebral Malaria. Severe cerebral malaria is
associated with elevated concentrations of TNF. The recurring exacerbations of
fever and other severe symptoms and signs of cerebral malaria represent a form
of sepsis. TAb is investigating the use of CytoTAb(R) in mitigating the
morbidity and mortality of severe cerebral malaria, and the possible
complications of cerebral malaria treatment. The Company completed a Phase I
pilot study for this indication in Thailand during the first quarter of 1997 and
has embarked on a subsequent Phase II study.
CytoTAb(R)- Acute Graft vs Host Disease. It is estimated that
some 10,000 patients worldwide suffer from the severe TNF-related complications
associated with stem cell transplantation. In bone marrow transplants, stem
cells are given to the patient, which may mount an immune response to the
patients' tissues leading to a release of cytokines, including TNF. The
deleterious effects of the TNF related complication can limit the quantity of
stem cells that can be given.
An agreement was reached in 1997 with investigators in the
U.S. to undertake a pilot study of CytoTAb(R) in the treatment of this syndrome.
The FDA has cleared an investigator IND application for this indication and a
study is currently being designed to determine if CytoTAb can neutralize this
syndrome, and more stem cells can be given. This would allow patients to recover
from the transplant more quickly, resulting in reduced hospital stay and
treatment. The reduced hospital stay could significantly reduce the total cost
of treatment, possibly making bone marrow transplant available to a broader
patient base.
TAb's position in relation to CytoTAb(R) may be affected by
two European patents. Opposition to these patents has been filed by TAb and
others on various general and specific grounds including lack of patentability.
If valid as granted, these European patents could be used to attempt to limit
TAb's freedom to use anti-TNF antibodies and, therefore, TAb's ability to market
CytoTAb(R) in certain European countries. TAb's Management does not believe that
the existence of these European patents will prevent TAb from achieving the
successful commercial exploitation of CytoTAb(R). TAb has itself applied for
specific patents covering the use of Fab fragments of anti-TNF antibodies, and
the techniques for its preparation. Patents have been issued in 1997 for these
claims in certain jurisdictions. See "Item 1 - Business-Intellectual Property"
PRINCIPAL LICENSING AND OTHER COLLABORATIVE ARRANGEMENTS
For certain product candidates, the Company has secured, or
will in the future pursue, some form of collaborative agreement as the preferred
arrangement for bringing its products to market. Abundant precedents exist
within the industry for such alliances. Typically, the biotechnology company
handles development while a collaborator provides funding and regulatory
assistance, and takes responsibility for marketing and distribution of the
product.
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COLLABORATIVE ARRANGEMENTS
The following is a summary of TAb's current agreements:
Swedish Orphan. In January 1990 the Company entered into an
agreement with Swedish Orphan AB, a Swedish company, appointing them as
exclusive sales representative to market ViperaTAb(R) in certain territories.
The agreement was subsequently amended to include certain other antivenoms
identified by the Company, and DigiTAb(R) and TriTAb(R). The territories are
currently Sweden, Norway, Denmark and Finland. Swedish Orphan specializes in the
development, regulatory handling, marketing and distribution of niche
pharmaceuticals and has arranged for the Karolinska Institute to conduct
clinical trials of the products which are a pre-requisite to their registration
in Scandinavia. Swedish Orphan receives a commission on sales of the products in
the territories. The agreement will continue until December 31, 2002 and
thereafter unless terminated by 120 days' notice by either party.
Helena Laboratories and Immuno Gen. In April 1993 the Company,
TAb Wales and Polyclonal Antibodies Ltd ("PAL") entered into an agreement with
Helena Laboratories (UK) Limited ("Helena") and Immuno Gen International Limited
("Immuno Gen"), appointing Helena and Immuno Gen as worldwide distributor for
certain antisera products (other than those developed with a third party) for
use solely in diagnostic or research diagnostic purposes.
FH Faulding. In September 1995 the Company entered into an
exclusive distribution agreement with FH Faulding and Co. Ltd., an Australian
company, appointing FH Faulding and Co. Ltd. to obtain registration and
marketing approvals for certain products and to be exclusive distributor of such
products in Australia, New Zealand and such other countries as the Company may
agree. The products are DigiTAb(R) and TriTAb(R).
In October 1996 the Company signed a Clinical Trials and
Registration Agreement with FH Faulding, to provide financial support for
clinical trials and to seek registration and marketing approvals for CytoTAb(R)
for treatment of cerebral malaria for Thailand and other countries in South East
Asia where malaria is a problem.
CSL. In February 1997 the Company signed a Clinical Trials,
Registration, Manufacturing, and Distribution Agreement with CSL, an Australian
company. This agreement makes CSL the exclusive distributor for Brown TAb(TM) in
Australia and Papua New Guinea.
Federal Ministry of Health of Nigeria. In August 1995 the
Company entered into an agreement with the Federal Ministry of Health on behalf
of the Nigerian Government under which the Nigerian Government has contributed
to the costs of development and clinical trials of EchiTAb(TM), and undertakes
to purchase commercial quantities of this antivenom. A royalty is payable to the
Nigerian Government on sales of EchiTAb(TM) outside Nigeria.
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Altana Inc. In October 1997, the Company signed a marketing
and distribution agreement with Altana Inc., covering the rights to three
emergency medicine products now under development by TAb. Altana Inc., is the
United States subsidiary of Altana AG, a leading German supplier of
pharmaceuticals through its Byk Gulden unit.
Under terms of the agreement, Altana will pay up to $23
million for the U.S. distribution rights to CroTAb(R), DigiTAb(R), and
TriTAb(R). The Company will receive $4.5 million in payments upon the
achievement of milestones expected in 1997 and 1998. Up to another $5.5 million
in payments will be provided to the Company based on achievement of additional
milestones culminating with the U.S. Food and Drug Administration approvals for
the product line. TAb will also receive bonus payments estimated at $13 million
tied to the first three years of each product's sales following FDA approval.
Revenues will be shared between the companies with TAb receiving 50 per cent of
net revenues through ongoing payments for the supply of product and royalties on
sales.
The agreement with Altana extends for five years following the
first FDA approval of each product. A renewal clause calls for an additional
five years if minimum sales targets are met. TAb will continue to be responsible
for the clinical development and regulatory submissions for each product. TAb
will also retain responsibility for manufacturing and packaging each product.
ACADEMIC AND CLINICAL AFFILIATIONS
A proportion of the Company's research and development and
product testing activities have been carried out through affiliations and
consulting arrangements with clinical research organizations and scientists at
academic institutions in the United Kingdom, Scandinavia and North America,
including St. Bartholomew's and the Royal London School of Medicine and
Dentistry, the Karolinska Institute, the University of Arizona and Vanderbilt
University Medical Center. These include arrangements in respect of preclinical
and clinical research, consultancy, patents, royalties and facility leases.
PROPRIETARY POSITION
COMPETITION
ANTIVENOMS. A number of organizations and companies
manufacture snake antivenom throughout the world. However, Management believes
most are using equine-derived products based on older technology. Based on
clinical results, Management believes that TAb's antivenom products are, in
general, safer and have greater efficacy.
There are two main European competitors to TAb's Vipera
product. The European Viper Antivenom is an equine-derived product made in
Croatia by the Zagreb Institute for Immunology. Institut Pasteur, part of
Pasteur Merieux Serums & Vaccins, also has an equine-derived Vipera antivenom
product. Management believes that TAb's product is superior, although both
competing products are considerably cheaper. Notwithstanding the price
differential, TAb has successfully competed with Institut Pasteur and the Zagreb
Institute for Immunology in Sweden where ViperaTAb(R) currently commands at
least 80% of the market.
Only one Crotalid antivenom product is currently approved in
the United States. There are frequent toxicity problems associated with that
product.
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Equine-derived antivenom products with which EchiTAb(TM) and
certain other of the Company's potential antivenoms will compete are produced
by, among others, Institut Pasteur and Haffkine BioPharmaceuticals.
DIGOXIN ANTIDOTE. TAb has two competitors, one of which is
well-established in Europe and the other in the United States. Glaxo Wellcome
plc's Digibind(R) is available in the United Kingdom and the United States and
Boehringer Mannheim GmbH's Digitalis - Antidot BM(R) is available in Europe.
Both of these products are Fab based and derived from sheep polyclonal
antibodies. However, Management believes that DigiTAb(R) could achieve an
attractive niche position in this area.
TRICYCLIC ANTIDEPRESSANT ANTIDOTE. No specific tricyclic
antidepressant antidote exists and TAb's Management does not know of any
commercially, competitive activity in this area. TAb intends to apply for orphan
drug status in the United States which, if granted, will provide seven years of
marketing exclusivity. Furthermore, TAb has been granted a United States patent
for the key immunogens, the production process, the resultant product and the
use of the product to treat tricyclic antidepressant toxicity.
SEPSIS SYNDROME TREATMENT. Management expects to encounter
significant competition from rival products for Sepsis Syndrome treatment. Many
potential competitors are working on a variety of approaches. For example, Xoma
Corp. Centocor, Inc. and Celltech Group plc. have all had anti-endotoxin
monoclonal antibody preparations to treat septic shock in Phase III clinical
trials. However, the results indicated that these products were of limited value
as a treatment for life-threatening septic shock.
Celltech Group plc, Chiron Corp., Knoll AG and Centocor, Inc.,
have developed monoclonal anti-TNF antibodies; Immunex Corp. has developed a TNF
receptor; Roche Bioscience has generated a modified TNF receptor product which
is in clinical trials. Synergen Inc. has developed IL-1 receptor antagonists;
and Cortech, Inc. has tested a bradykinin antagonist.
One monoclonal antibody to TNF is known to be in advanced
clinical development (Phase III) but some clinicians have been disappointed with
published results regarding these products and are skeptical about their
ultimate success. Management knows of no competing polyclonal antibody in
development for the treatment of Sepsis Syndrome.
Management believes that CytoTAb(R) has a notable advantage
over other products in clinical development in having been the only product so
far to have been tested and demonstrated efficacy in a condition similar to
Sepsis Syndrome: the Jarisch-Herxheimer Reaction.
While potential competitors are abundant in this field of
therapy, Management believes that TAb's approach offers greater promise of
broad-range efficacy than any other product known to be under development.
INTELLECTUAL PROPERTY
TAb's policy is to protect and defend the intellectual
property associated with its technology and products. TAb seeks patents whenever
appropriate. Management also believes that sufficient steps have been taken
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to ensure that trade secrets such as animal husbandry techniques and processes
unique to large-scale production of polyclonal antibodies are protected.
TAb has optimized the production and purification of
polyclonal antibodies and has developed extensive proprietary knowledge in this
area, combining scientific, veterinary and large-volume processing skills. TAb
has applied for patents (United States, Europe and elsewhere) which include
several key aspects of the relevant techniques; each application is now under
review by the relevant patent offices. However, some parts of the process are
non-patentable, and TAb has implemented policies and procedures designed to
protect proprietary information concerning manufacturing techniques.
TAb is pursuing a multinational patent strategy for the
protection of intellectual property associated with its technology and products.
TAb holds the following patents:
- - A United States patent encompassing a broad set of claims in
respect of the antidote to poisoning with tricyclic
antidepressants.
- - A patent on the use of Fab fragments of anti-TNF in the United
Kingdom, Australia, New Zealand, and through the European
Patent Office.
- - A patent on the use of mixed monospecific antivenoms in the
United Kingdom and Australia.
- - A United States patent on the isolation and purification of
antivenoms.
TAb is pursuing the following patent applications:
- - Various steps in the production and purification of polyclonal
antibodies.
- - The superiority of Fab fragments to TNF relative to other
antibody fragments or intact antibodies.
- - The superiority of Fab fragments to antivenoms relative to
other antibody fragments or intact antibodies.
There can be no assurance that the Company will receive the
requested approval of these pending patent applications.
MARKETING AND RESEARCH AND DEVELOPMENT STRATEGIES
MARKETING STRATEGY. Collaboration agreements between large
pharmaceutical companies and biotechnology companies are common. The large
pharmaceutical companies seek to in-license products which are at an advanced
stage of development, providing the pharmaceutical companies with lower risk
investments in the development of new pharmaceuticals and access to products
outside their core area of research and development expertise. This provides a
biotechnology or biopharmaceutical company, such as TAb, with a source of
revenue prior to the launch of a product together with access to marketing
skills and to an experienced sales force. These agreements typically include an
upfront payment on signing the agreement, milestone payments on reaching
pre-defined stages in the development program, and royalties payable on sales by
the marketing collaborator together with a margin on the supply of product.
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Management intends to enter into such arrangements for most
all of TAb's products. The stage at which TAb will out-license will depend on
balancing the market potential of the product with the costs and risks
associated with the continuing development program. Except in certain limited
circumstances, the Directors do not intend that TAb will establish its own sales
force but expect to market its products through alliances with collaborators.
Management groups TAb's products in two general categories:
Niche Products. These products include the antivenoms and
DigiTAb(R). Niche products serve an acute medical need in a low volume market.
Generally, the products have a lower commercial risk as they tend to have lower
development costs, shorter lead times and potentially accelerated regulatory
review. Management believes that TAb's niche products will be able to show
improved safety or efficacy compared with existing products or that they will be
able to present a market opportunity in an established market place.
Major Market Products. These products include the
anti-cytokine products and certain of the anti-drug products. Major market
products are being developed to meet medical needs for life threatening
conditions, which Management considers have significant market potential. For
products requiring sizable later stage trials, Management intends to out-license
these products at the end of Phase II clinical trials in order to optimize
return.
RESEARCH AND DEVELOPMENT STRATEGY. The nature of TAb's
technology affords flexibility in its development of a variety of products. By
varying the initial target molecule and using consistent production techniques,
TAb has already demonstrated that it can create products for different
therapeutic uses.
Management intends to take advantage of opportunities for
which United States orphan drug status might be granted given the development,
registration and marketing incentives which are available from such status being
granted.
TAb has already established and will continue to seek new
collaborative arrangements with academic institutions either sponsoring their
work directly or acquiring the intellectual property rights (or rights to use
the same) to complementary novel developments. This provides the Company with
another source of new technology to develop further its new products.
GOVERNMENT REGULATION
GENERAL
Regulation by government authorities in the United States,
Europe and other countries in which the Company operates is a significant
consideration in the development, production, marketing, labeling and
reimbursement of the Company's products and in its continuing research and
development activities.
In the United States, Europe and most other countries there is
a requirement to obtain and to maintain an approval for a product from the
appropriate regulatory authority ("marketing authorization"). The Company is
also subject to various laws, regulations, policies, guidelines and
recommendations relating to such matters as safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the
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protection of the environment. The general trend has been towards greater
regulation of the pharmaceutical industry and its products.
The submission of an application to a regulatory authority
does not guarantee that an authorization will be granted. Regulatory authorities
require substantial data in connection with marketing authorization
applications, resulting in a lengthy approval process. The time taken to obtain
such approval varies, but can take from a few months to several years and can
involve substantial expenditure. This may be due to the lack of the necessary
results required by regulatory authorities or changing or additional regulation
during the product development process. Furthermore, regulatory authorities of
different countries may impose differing requirements and may refuse to grant,
or may require additional data before granting an approval, even though the
product may have been approved by the regulatory authority of another country.
Even if approval is obtained, failure to comply with present or future
regulatory requirements, or new information reflecting on the safety or
effectiveness of the approved drug, can lead the regulator to withdraw its
approval to market the product.
In the United States, the principal regulatory agency is the
U.S. Food and Drug Administration ("FDA"). Nearly all other countries have
national regulatory authorities. The Company may have to satisfy different
requirements from the FDA, European authorities and other national regulatory
authorities. There is an ongoing initiative, the International Conference on
Harmonization, between representatives from Japan, the United States and the
European Union, to limit differences where possible, but it may be many years
before its objective is achieved, if at all. In Europe, the Company must take
into consideration (a) the regulatory climate within the European Union,
including the stance of the International Conference on Harmonization, the
European Agency for the Evaluation of Medicinal Products ("EMEA") and the
European Committee for Proprietary Medicinal Products ("CPMP"), as well as (b)
the position of the national regulatory authorities of other European countries.
New licensing procedures were introduced in the European Union in 1995 aimed at
progressively limiting the differences in requirements between the regulatory
authorities of European member states in respect of the same products. However,
it is too early to assess fully the impact of these new procedures.
Wherever practical, the Company intends to design preclinical
and clinical protocols which should generate sufficient data to be acceptable to
support applications for the same product in each country where it is intended
to be marketed.
PRICE REGULATION
In some countries it is necessary to obtain approval for the
price to be charged. This is true in a number of European member states. In the
United Kingdom the launch price is set by the company (subject to the
constraints of the pharmaceutical price regulation system, which controls the
profitability of a company's business with the United Kingdom's National Health
Service).
Governments may also influence the price through the control
of national healthcare systems and also organizations which may bear the cost of
supply of such products. In the United States, government-funded or private
medical care plans can influence prices, and there are a variety of indirect
controls.
U.S. REGULATION
REGULATORY AUTHORITIES. The development and marketing of
medicinal products for human use in the United States is regulated at the
federal and state levels. The principal federal regulatory agency is the FDA
within the Department of Health and Human Services. Although most states
maintain one or more agencies with
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power to regulate medicines, they commonly defer to the FDA in matters relating
to product development and approval.
Due to the requirements imposed by the FDA, the development
process for new pharmaceuticals in the United States is lengthy, expensive and
commercially risky. The great majority of compounds screened for possible
development are ultimately rejected at some stage in the pre-market testing
process; total development time for successful compounds often exceeds 10 years.
However, under the provisions of recent legislation the FDA has committed to
reduce the review time for applications. Although the agency has achieved some
reductions, especially for high-priority medicines, the review process remains
lengthy and complex. There has been little or no reduction in the testing
required before applications are submitted, which consumes most of the time
spent in developing new medicines for the U.S. market.
GOOD PRACTICE STANDARDS. Various standards are applied either
by law or custom to the activities of pharmaceutical companies. These include
principally Good Laboratory Practice ("GLP"), applied to studies performed
during preclinical developments to identify the compound's behavior and toxicity
in animals, Good Clinical Practice ("GCP"), intended to ensure the quality and
integrity of clinical data and to protect the rights and safety of human
subjects in clinical trials, and Good Manufacturing Practice ("GMP") which
ensures the quality of drugs by setting minimum standards for all drug
manufacturing facilities. Such standards have been developed by the FDA and by
the United States National Committee for Clinical Laboratory Standards.
Violation of these regulations can lead to invalidation of the relevant studies.
In Europe they are embodied in law (GMP and GLP) or guidelines (GCP).
The Company has used consulting firms in the United Kingdom
and in the United States for advice on compliance with existing regulations and
guidelines.
CLINICAl TRIALS. Clinical trials of new product candidates are
designed to establish their safety and efficacy in treating a specific disease
and are usually conducted in three phases, although there are not always
distinct divisions between the objectives and activities undertaken in each
phase. The clinical trial process may take from two to six years or more to
complete.
Phase I trials are normally conducted in a small number of
healthy human subjects or patients with the specific condition targeted. Their
purpose is to provide a preliminary evaluation of the product candidate's
safety, toxicity and behavior when administered to humans.
In Phase II trials, the product candidate is assessed for its
short-term safety and preliminary efficacy in a limited number of patients with
the targeted disease or disorder. The appropriate dose ranges and regimens for
Phase III are also determined during this Phase.
Phase III trials involve a comprehensive evaluation of safety,
efficacy and toxicity that might not have been seen in smaller studies. The
trials are carried out, typically on a multi-center basis, on a sufficient
number of patients to obtain statistically significant results. All adverse
reactions are investigated in detail and special features of the product
candidate are explored.
All clinical trials of investigational medicines in the United
States must be carried out under investigational new drug ("IND") submissions to
the FDA. FDA regulations impose requirements for documenting the safety of
proposed clinical trials, provide for submissions to FDA before clinical trials
can commence and authorize the FDA to suspend or withdraw permission to continue
clinical trials.
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If the drug is considered by the FDA and by prospective users
to provide an important benefit in the treatment of a serious disease, the
applicant may be faced with demands from patient groups, sometimes endorsed by
the FDA, for release of the drug for treatment during the investigative stage.
The supply of such treatment is termed treatment use. Supplying drugs on this
basis can involve significant expense and resource demands for the sponsor of
the drug, which must administer the pre-approval release program. This may, in
some situations, interfere with the ability to complete controlled clinical
trials of the drug.
APPROVAL PROCEDURES AND CRITERIA. The FDA applies essentially
the same requirements for approval of all products: proof of safety and
efficacy, demonstration of adequate controls in the manufacturing process and
conformity with requirements for labeling. Efficacy must usually be demonstrated
by two well-controlled clinical trials carried out in accordance with FDA
regulations.
The FDA has discretion to determine whether the data submitted
are adequate for approval. The time taken for this approval process is related
to the quality of the submission, the potential contribution of the compound in
improving the treatment of the target disease and the workload at the FDA. There
can be no assurance that any new drug will successfully proceed through this
approval process or that it will be approved in any specific period of time.
During its review, the FDA may ask for additional test data.
If the FDA approves the product, it may require post-marketing testing,
including potentially expensive Phase IV studies. This phase assesses further
the product's therapeutic value and provides additional information about the
safety and efficacy of the product across a broader patient base. In addition,
the FDA can impose restrictions on the use of the drug that may be difficult and
expensive to administer.
ORPHAN DRUG STATUS. The Orphan Drug Act encourages
manufacturers to seek approval of products intended to treat diseases with a
prevalence of under 200,000 patients per annum in the United States. This Act
provides tax incentives, FDA assistance with protocol design, and a period of
seven years of marketing exclusivity for the product. The Company expects some
of its proposed products to be designated as orphan drugs by the FDA. TAb's
Crotalid antivenom CroTAb(R) has already been designated by the FDA as an orphan
drug.
ACCELERATED APPROVAL. The FDA may accelerate approval of
medicines that offer a significant improvement in the treatment of fatal or
life-threatening conditions, or conditions for which there is no alternative
therapy. In certain cases, the FDA may permit Phase II and Phase III studies to
be compressed into a single study. It is unusual for the FDA to base an approval
on such compressed studies and, although many of the Company's products would be
included in this category, there can be no assurance that such combined testing
would be considered acceptable for any of the Company's products.
ACCEPTANCE OF FOREIGN CLINICAL DATA. The FDA will accept
reports of foreign clinical trials if they meet requirements for GCP and are
relevant to U.S. medical practice. It is, however, uncommon for the agency to
approve a product without some evidence from clinical trials conducted in the
United States, and most sponsors carry out at least one pivotal trial there.
Studies conducted outside the United States are subject to special audits by FDA
inspectors and may be rejected if U.S. requirements for record-keeping,
protection of human subjects and other matters relating to GCP are not met.
NON-PATENT MARKET EXCLUSIVITY. In U.S. medicines law there are
two forms of non-patent market exclusivity. First, the law prohibits approval of
abbreviated new drug applications or literature-based applications for
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copies of innovative products for a period of five years after the approval of a
new chemical entity, and three years after the approval of a new indication or
dosage form for which substantial clinical trials were required. These
provisions do not preclude approval of competitive applications based on
original data, and they apply only to new drugs, rather than antibiotics or
biological products.
Second, the law provides for a seven-year period of protection
for orphan drugs (see above). During this period, the FDA is precluded (subject
to complex exceptions) from approving any application for the same drug, even if
it is based on original data. These provisions apply to all drugs, including
antibiotics and biological products.
MANUFACTURING CONTROLS. The FDA inspects pharmaceutical
manufacturing establishments for compliance with current GMP and conformity with
specifications in marketing approvals. Biological manufacturing establishments
must be licensed by the FDA. The agency inspects foreign manufacturing
facilities that supply bulk or finished products for the United States market.
If companies cannot meet FDA requirements, their products may be excluded from
the United States.
ADVERTISING AND PROMOTION. The FDA regulates advertising and
promotion of prescription medicines. Promotion for unapproved uses is
prohibited, and sponsorship of medical symposia and publications is restricted.
Financial incentives to prescribers are regulated under federal and state
criminal laws as well as codes of practice for the medical professions.
ENFORCEMENT POWERS. The federal government has extensive
powers to compel compliance with medicines laws. Volatile products are subject
to seizure, and imported products may be detained. Companies and individuals
that violate the law are subject to injunctions and criminal penalties with no
requirement for proof of negligence or intent. Persons and companies convicted
of certain offenses can be barred from involvement in the medicines approval
process. The federal government can suspend or withdraw approval of products if
questions arise concerning safety or effectiveness.
PRODUCT LIABILITY. Companies that market medicines in the
United States are subject to suit in state and federal courts for personal
injuries caused by their products. The risk of product liability litigation is
significantly greater in the United States than in most European jurisdictions,
and damage awards can be substantial. FDA approval is not a defense to
liability, and failure to comply with FDA requirements may constitute evidence
of negligence.
EUROPEAN REGULATION
The Company's activities in Europe are regulated by national
and local laws and European Union law. There are European Directives governing
the development, manufacture and marketing (including wholesale) of medicinal
products which member states are required to implement into local law and which
must be interpreted in line with the European provisions. However, failure to
implement them properly by national governments may allow companies to rely upon
provisions of pre-existing local laws. Certain areas of regulation continue to
be regulated by national law, for example, the regulation of clinical research.
CLINICAl TRIALS. The three phase approach to clinical
development of new product candidates discussed in the section on U.S.
Regulation is also applicable to European regulation. See "Item 1. U.S.
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Regulation". When adequate preclinical data are available, application will
usually be made to the regulatory authority in the country where the trial is to
be conducted. In most developed countries, clinical trials may only be commenced
after notification to and/or approval by the competent regulatory authority and
an independent ethics committee. In European Union member states, marketing
authorizations must be supported by clinical trial data as set out in European
Directives and guidelines, but the approval process and criteria for
commencement of clinical trials are not yet harmonized by European Union law.
The International Conference on Harmonization is developing proposals for new
legislation harmonizing national laws and practices.
MARKETING AUTHORIZATIONS. When clinical trial data supporting
safety and efficacy and the necessary manufacturing and formulation data are
available, an application for a marketing authorization may be submitted. If a
regulatory authority is satisfied that the criteria of safety, quality and
efficacy are met, a marketing authorization will be granted although European
Union law does allow member states, exceptionally, to prohibit product use on
grounds connected with public order or morality. Marketing authorizations are
granted subject to certain generally applicable conditions and may also be
subject to product-specific restrictions determined by the regulatory
authorities.
From January 1, 1995, two new procedures for the registration
of medicinal products in the European Union came into effect; the "centralized"
and "mutual recognition" systems. Until January 1, 1998, national applications
may also be made in several member states either in parallel, or in sequence if
the product is not subject to compulsory licensing under the centralized system.
The centralized system is compulsory for certain biotechnology
products, and optional for certain other products, including new active
substances not previously authorized in the European Union, products
administered by innovative and novel delivery systems and significant new
indications for existing products. The EMEA coordinates the registration
process, but the CPMP, a body of scientific experts drawn from each member
state, undertakes the scientific assessment of the product dossier and gives an
opinion as to whether the product meets the criteria for authorization. Time
periods are laid down for various stages in the approval process, including
allowances for questions and appeals. The decision to grant or refuse a
marketing authorization is taken by the Commission and, when granted, the single
authorization obtained is valid throughout all member states and the European
Free Trade Association.
The mutual recognition system is based upon a marketing
authorization granted by one national regulatory authority, the "Reference
Member State" or "RMS". Having obtained a marketing authorization from the RMS,
the authorization holder may apply to the regulatory authorities of other member
states to "recognize" that prior authorization and to issue national
authorizations on the same terms. Such applications can be made sequentially.
There are procedures and time limits according to which objections by member
states can be raised and appeals may be heard, although these may significantly
lengthen the time from initial application to approval. Arbitrations are handled
by the CPMP whose decision, when adopted by the Commission, is binding on all
member states. Consequently, arbitration may adversely affect prior
authorizations.
The passage of a product through the approval system can
therefore be long and drawn out. Although the procedures impose time limits upon
the authorities, these limits do not run if the applicant delays in providing
additional data or responses to queries raised. In addition, the regulatory
authorities can suspend, vary or revoke a marketing authorization at any time
after it has been granted if they are no longer satisfied as to the product's
safety, quality or efficacy. Increasing harmonization of decision-making in the
European Union through the CPMP means that, in the future, concerns raised by
any one member state are likely to be examined at CPMP level and the outcome of
its deliberations will affect the product in all member states.
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Marketing authorizations are generally granted for a period of
five years and require renewal. During that period, should new developments
occur, the holder of the authorization is required to update the product
dossier. There is an obligation on the holder of the authorization to report
adverse events to the regulatory authorities and to keep product safety under
review.
MANUFACTURING AUTHORIZATIONS AND FACILITIES LICENSES. European
Union law requires that companies manufacturing medicinal products must hold a
manufacturer's authorization and must comply with the requirements of GMP. These
standards are enforced by inspection. Failure to comply may result in the
suspension or revocation of the manufacturer's authorization and may lead to
suspension of product marketing.
In the United Kingdom facilities licenses are issued after an
application to, and inspection by, the Medicines Control Agency ("MCA"), and
similarly in Australia by the Therapeutic Goods Administration ("TGA").
REGULATION IN OTHER COUNTRIES
In general, regulation is similar in countries outside the
United States and Europe, with the approval system regulated by specific
agencies in each geographic area. However, approval by one agency does not
ensure approval in other countries.
In Australia successful marketing of a therapeutic substance
may be dependent on receiving marketing approval from the TGA and also on
obtaining Commonwealth Government subsidy for use of the product via either the
Pharmaceutical Benefit Scheme or the Special Access Scheme. Applications for
listing on either of these Schemes requires additional information, in
particular economic analysis data, and approval for this second step may lag
behind obtaining marketing approval. The Australian Government is able to
exercise considerable power over price control through this process.
EMPLOYEES
As of December 31, 1997, the Company had 162 full-time
employees, including 49 scientists and 48 technicians engaged in research and
development, 6 regulatory personnel, and 25 management and 24 administrative
personnel. In addition, the Company employed 29 part-time employees at year end
1997. The Company believes that its future success will depend, in part, on its
ability to attract and retain highly skilled technical, marketing, support, and
management personnel.
None of the Company's employees in the United States is
subject to a collective bargaining agreement, and the Company has never
experienced a work stoppage. Management believes that its employee relations are
good.
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ITEM 2. PROPERTIES
The Company's physical properties are primarily owned or
leased through its subsidiaries. TAb UK operates the Company's research and
development laboratories at St. Bartholomew's in London. TAb UK leases 5,047
square feet of laboratory space from St. Bartholomew's. The current lease term
has an expiration date of September 30, 2003. TAb UK also leases 4,000 square
feet of office space at 14-15 Newbury Street in Central London, which lease
expires in 1999.
In addition, TAb UK owns and operates production offices,
quality control laboratories and a manufacturing facility in Ceredigion, Wales.
In 1992, TAb acquired these initial Welsh facilities, including approximately
230 acres of pasture land, animal stock, and production and ancillary
facilities. The Welsh facilities were established with financial support of the
Welsh government in the form of grants and investments. In 1995, TAb Wales
completed construction of a 20,000 square foot manufacturing plant within its
existing Welsh facilities.
In 1995, TAb Australasia (formerly TAb Australia Pty. Ltd)
leased offices and laboratories and acquired grazing rights over 250 hectares of
land at the Turretfield Research Center. The flocks of sheep were moved to this
location and a bleeding shed constructed. In the fourth quarter of 1996, TAb
Australasia completed construction of new facilities on the property. The new
facilities include offices, a cleanroom and a manufacturing plant, located
adjacent to the Company's existing facilities. The lease of the Turretfield
Research Center property will expire in 2015.
The Company's corporate headquarters is located in 9,392
square feet of leased office space in the vicinity of Vanderbilt University
Medical Center in Nashville, Tennessee. The lease expires on January 31, 2001.
All of the Company's laboratories, production facilities and
farms are suitably equipped for their intended purposes.
20
<PAGE> 23
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Company
or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
21
<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is currently traded on the London
Stock Exchange (under the symbol TAB.L). There is no public trading market for
the Company's Common Stock within the United States.
The following table presents quarterly information on the
price range(1) of the Company's Common Stock, stated in British pounds and
United States dollars. This information indicates the high and low sale prices
reported by the London Stock Exchange.
<TABLE>
<CAPTION>
QUARTER ENDING HIGH LOW
- -------------- ---- ---
<S> <C> <C> <C> <C>
March 31, 1997 (pound)3.89 ($6.38) (pound)3.035 ($5.07)
June 30, 1997 (pound)3.74 ($6.18) (pound)3.325 ($5.53)
September 30, 1997 (pound)3.325 ($5.62) (pound)1.80 ($2.85)
December 31, 1997 (pound)2.585 ($4.40) (pound)2.18 ($3.60)
</TABLE>
As of March 13, 1998, there were approximately 900 holders of
record of the Company's Common Stock. On March 13, 1998, the last sale prices
reported on the London Stock Exchange for the Company's Common Stock was
(pound)2.08 ($3.46).
The Company to date has paid no dividends on its Common Stock.
The declaration and payment of future dividends will be determined by the Board
of Directors in light of conditions existing in the future and are expected to
depend upon earnings, financial condition, capital requirements, and other
relevant factors not presently determinable. The Company does not expect to pay
dividends in the foreseeable future.
- ---------------------------
(1) Currency translations were calculated based upon the currency exchange rates
in effect on the date the price disclosed was reported on the London Stock
Exchange.
22
<PAGE> 25
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data at and for
each of the five years in the period ended December 31, 1997 have been derived
from the Company's consolidated financial statements. The data set forth below
should be read in conjunction with the consolidated financial statements and
notes thereto included elsewhere herein and also with "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
8/10/84
Year Ended December 31, (Inception)
--------------------------------------------------------------------------- through
12/31/97
----------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total Revenues............(1) $ 2,677,931 $ 3,268,368 $ 750,490 $ 1,130,323 $ 290,315 $ 9,386,745
Expenses:
Research and development ............... 11,462,352 9,185,126 6,321,674 5,107,894 3,597,555 42,042,457
General, administrative, marketing...... 4,176,139 3,083,151 2,247,472 1,619,824 1,055,971 14,919,720
Depreciation and amortization .......... 1,643,922 1,387,916 856,756 864,288 533,244 5,511,670
Interest expense and debt conversions... 1,001,959 2,002,932 388,258 137,018 781,097 4,532,180
Foreign currency losses (1) ............ 913,119 _ _ _ _ 913,119
Other .................................. 328,158 355,360 36,368 119,052 25,873 879,982
------------ ------------ ------------ ------------ ------------ ------------
Total expenses ......................... 19,525,649 16,014,485 9,850,528 7,848,076 5,993,740 68,799,128
Net loss ............................... $(16,847,718) $(12,746,117) $ (9,100,038) $ (6,717,753) $ (5,703,425) $(59,412,383)
============ ============ ============ ============ ============ ============
Basic and diluted net loss per share.... $ (0.74) $ (0.68) $ (0.57) $ (0.47) $ (0.48) $ (5.98)
============ ============ ============ ============ ============ ============
BALANCE SHEET DATA:
Cash and cash equivalents...... (1)(3) $ 4,915,077 $ 20,502,536 $ 3,397,082 $ 593,154 $ 103,842
Total assets.................. .(2)(3) 20,800,065 37,179,990 15,157,099 12,103,994 4,978,617
Long term debt, net of
current portion (2).................... 6,059,072 8,592,755 9,595,420 2,917,251 282,555
Deficit accumulated during
development stage ..................... (59,412,383) (42,564,665) (29,818,548) (20,718,510) (14,000,757)
Stockholders' equity.............(3) 9,758,345 25,215,530 894,479 4,862,404 1,917,332
</TABLE>
Notes:
(1) At December 31, 1997, the Company held approximately U.S. $2,960,000
denominated in British pounds and U.S. $347,000 in Australian dollars. The
decline in the exchange rate at year end between the British pound and
Australian dollar versus the U.S. dollar resulted in a foreign currency
transaction loss of U.S. $913,119. At December 31, 1996, the Company held
approximately U.S. $17,300,000 which was denominated in British pounds. As
a result of improvement in the exchange rate between the British pound and
the U.S. dollar, the Company experienced a foreign currency transaction
gain of U.S. $1,730,000 for the year ended December 31, 1996.
(2) In 1995 and 1994, the Company constructed a pilot production facility in
London and a manufacturing facility in Wales. These facilities were funded
through financing arrangements provided by Aberlyn Capital Management
Company, Inc. and the Welsh Development Agency. See Note 5 to the
consolidated financial statements for further information.
(3) On July 23, 1996, the Company completed an initial public offering of
4,190,477 shares of its common stock on the London Stock Exchange at
(pound)5.25 ($8.14) per share. See Note 1 to the consolidated financial
statements for further information.
23
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
financial statements and notes thereto. Statements made in this Annual Report on
Form 10-K which are not historical fact are forward-looking statements. In
addition, the Company, through its senior management, from time to time makes
forward-looking public statements concerning its expected future operations and
performance and other developments. Such forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are necessarily estimates reflecting the Company's best
judgment based on current information and involve a number of risks and
uncertainties, and there can be no assurance that other factors will not affect
the accuracy of such forward-looking statements. While it is impossible to
identify all such factors, factors which could cause actual results to differ
materially from those estimated by the Company include but are not limited to,
changes in the regulation of the pharmaceutical industry, both in the United
States and internationally, changes in pharmaceutical product testing or
approval standards, both in the United States and internationally, competitive
pressures on the pharmaceutical industry and the Company's response thereto, the
Company's ability to appropriately address the Year 2000 computer system issue,
general conditions in the economy and capital markets, and other factors which
may be identified from time to time in the Company's Securities and Exchange
Commission filings and other public announcements.
GENERAL
Since its inception, TAb has been in the development stage, devoting
its efforts and resources to drug discovery and development programs relating to
the development of highly purified, polyclonal antibodies for the treatment of
disease. Since inception, the Company's revenues have been from licensing
agreements with corporate partners, contract agreements, product sales, grant
income, interest income, and insurance and value added tax recoveries. Net
losses have been incurred each year since its inception and the Company expects
to continue to incur operating losses during at least the next year due to
continued spending on research, product development and increasing requirements
for process development, preclinical and clinical testing, regulatory affairs,
initial manufacturing activities and administration. To fund these activities,
the Company will continue to evaluate opportunities to raise further funding
which may be required in order to carry out the current business plan.
The Company conducts its operations from its headquarters in the United
States and through subsidiaries located in the United Kingdom, Australia and New
Zealand. For a discussion of the Company's international operations for the past
three fiscal years, see Note 11 to the Company's financial statements.
RESULTS OF OPERATIONS
Year ended December 31, 1997 Compared to Year ended December 31, 1996
TAb's revenues for 1997 decreased by 18% to $2,678,000 from $3,268,000
for 1996. During the year ended December 31, 1996 the Company recorded a foreign
currency transaction gain of $1,730,000 as a result of the U.S. dollar's
improvement during 1996 against the British pound. Due to a weaker British
currency in 1997, foreign currency transactions yielded a loss of $913,000 for
the year ended December 31, 1997. See Note 2b to the Company's financial
statements included as Item 8. As described under "Liquidity and Capital
Resources", licensing revenue increased 673% to $1,113,000 for the year ended
December 31, 1997 from $144,000 for the year ended December 31, 1996 due to
milestone payments received from licensing agreements with pharmaceutical
partners. Sales and contract revenue decreased
24
<PAGE> 27
during the year ended December 31, 1997 primarily because 1996 included one time
contract revenue of $173,000 which was attributable to the Company's Nigerian
EchiTAb(TM) contract. Grant revenue increased $87,000 due to a grant received
from the Welsh Government for expansion of the Company's Welsh operations.
Interest income in the year ended December 31, 1997, increased 46% to $887,000
from $607,000 due to additional cash and short term investment holdings from the
proceeds of the Company's UK public offering of Common Stock in July 1996.
Total expenses for the year ended December 31, 1997 increased by 22% to
$19,526,000 from $16,014,000 for the same period in 1996. Research and
development expenses during the same periods increased by 25% to $11,462,000
from $9,185,000 as a result of advanced clinical trial activities for DigiTAb(R)
and CytoTAb(R); the progression activities associated with preparing the
submissions through the regulatory review process for CroTAb(R); manufacturing
TAb's products for clinical trials; conducting and establishing the necessary
quality control and assurance systems. Additionally, the expansion of the
Australian facility was completed in early 1997 and the Company began devoting
resources there to meet the need for increased serum requirements for the
commercial production.
General and administrative expenses for the year ended December 31,
1997 increased by 31% to $3,562,000 from $2,722,000 for the year ended December
31, 1996. This increase relates primarily to increased insurance requirements,
stockholder relations and other activities required following the Company's
initial public offering in the UK in 1996.
Marketing and distribution expenses increased for the year ended
December 31, 1997 by 70% to $615,000 from $361,000 in the year ended December
31, 1996. This reflects increased staffing and associated expenses.
Depreciation and amortization expense for the year ended December 31,
1997, increased by 18% to $1,644,000 from $1,388,000 for the year ended December
31, 1996. This increase is the result of the depreciation of the capital
expenditure for the Australian production facility, which was placed in service
in February 1997.
Interest expense for the year ended December 31, 1997 decreased by 17%
to $1,002,000 from $1,201,000 in the year ended December 31, 1996, as a result
of the Company's repayment in 1996 of approximately $4,750,000 of its debt
obligations.
The Company's net loss for the year ended December 31, 1997, was
$16,848,000 compared to a net loss of $12,746,000 for the year ended December
31, 1996. In addition to the factors described above, changes in foreign
currency exchange rates used to translate the foreign subsidiaries financial
statements into US dollars resulted in higher expense levels.
25
<PAGE> 28
Year ended December 31, 1996 Compared to Year ended December 31, 1995
TAb's revenues for 1996 increased by 335% to $3,268,000 from $750,000
for 1995. During the year ended December 31, 1996, the Company received
approximately $97,000 more in contract revenue over the amount received in the
year ended December 31, 1995, which was attributable primarily to the Company's
Nigerian EchiTAb(TM) contract. Grant revenue increased $79,000 due to a grant
received from the Economic Development Authority of the Government of South
Australia for expansion of the Company's Australian operations. Interest income
in the year ended December 31, 1996, increased 527% to $607,000 from $97,000 due
to additional cash and short term investment holdings from the proceeds of the
Company's UK public offering of Common Stock in July 1996. As a result of
improvement in the exchange rate between the British pound and the U.S. dollar,
the Company experienced a foreign currency transaction gain of $1,730,000 for
the year ended December 31, 1996. See Note 2b to the Company's financial
statements included as Item 8 hereof.
The Company conducts research, development, manufacturing and/or
distributes its products in the United States, the United Kingdom, New Zealand
and Australia. In 1996 and 1995 the New Zealand and Australian operations did
not have a material impact on the results of operations. Trade revenues from
international operations increased 23% to $350,000 in 1996 from $283,000 in
1995.
Expenses for the year ended December 31, 1996 increased by 63% to
$16,014,000 from $9,851,000 for the same period in 1995. Research and
development expenses during the same periods increased by 50% to $9,682,000 from
$6,449,000 as a result of increased clinical trial activities for DigiTAb(R) and
CytoTAb(R) for malaria as well as the progression through the more advanced
trial phases for CytoTAb(R) for Sepsis and CroTAb(R). These costs were related
to manufacturing TAb's products for clinical trials, conducting clinical trials
and ensuring that the necessary quality control and assurance procedures are in
place. The cost of regulatory compliance also increased as the Company's
products advanced through the development stages. Additionally, the Australian
facility increased the number of sheep in its flock during 1996 to meet the need
for increased serum requirements for the clinical trials.
General and administrative expenses for the year ended December 31,
1996 increased by 39% to $2,225,000 from $1,601,000 for the year ended December
31, 1995. This increase relates primarily to expanded staffing and related
overhead expenses.
Marketing and distribution expenses decreased for the year ended
December 31, 1996 by 30% to $361,000 from $518,000 in the year ended December
31, 1995 due to a temporary reduction in marketing personnel.
Depreciation and amortization expense for the year ended December 31,
1996, increased by 62% to $1,388,000 from $857,000 compared to the year ended
December 31, 1995. This increase is the result of the depreciation of the
$4,000,000 capital expenditure for the Welsh production facility, which was
placed in service in December 1995.
Interest expense for the year ended December 31, 1996 increased by 209%
to $1,201,000 from $388,000 in the year ended December 31, 1995 due to increased
borrowings by the Company.
In the first quarter of 1996, the Company recorded a one-time debt
conversion expense of $802,000, relating to the conversion of an aggregate of
$2,565,000 of principal and interest on the Company's 6% Notes into shares of
Common Stock, which represented the difference between the stated conversion
price on the debt of $8.00 per share and the actual conversion price of $5.50.
26
<PAGE> 29
The Company's net loss for the year ended December 31, 1996, was
$12,746,000 compared to a net loss of $9,100,000 for the year ended December 31,
1995. This increase was due to the one-time debt conversion expense and the
other factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, TAb has been in the development stage, devoting
its efforts and resources to drug discovery and development programs. Capital
resources have been used for the establishment and expansion of production
facilities, for product research and development activities, for clinical
testing and to meet TAb's overall increased working capital requirements.
Management does not expect revenues from product sales to be a significant
source of funding until additional products receive regulatory approval. Future
capital requirements will depend on numerous factors, including the progress of
its research programs and clinical trials, the development of regulatory
submissions, the commercial viability of the Company's products, the development
of sales, distribution and marketing capabilities, and the terms of any new
licensing arrangements. Funds for the Company's operating and capital
requirements historically have been provided by the sale of equity and debt and
from collaboration agreements and other financing arrangements. Measures are
currently being taken to conserve cash resources while at the same time
sustaining the progress of clinical trials for products that promise the most
success. Meanwhile, the Company continues to evaluate opportunities to raise
further funding which may be required in order to carry out the current business
plan.
At December 31, 1997, the Company had cash and cash equivalents
totaling $4,915,000, of which approximately $2,960,000 was denominated in
British pounds and $347,000 in Australian dollars and short-term investments of
$1,997,000 denominated in U.S. dollars. The Company's net cash used in operating
activities during the year ended December 31, 1997, totaled $13,421,000, an
increase of 11% from the year ended December 31, 1996. Capital expenditures
decreased 62% to $1,257,000 in 1997 from $3,293,000 in 1996. The initial
expansion of the Company's production facilities in Australia was completed
during 1997. In 1998, the Company plans to begin scale up of the production
facilities in Wales and to furnish the new Australian facility with the
necessary laboratory equipment in anticipation of future commercial production.
Capital expenditures in 1998 are expected to be approximately $2,300,000. The
Company believes future cash requirements for capital expenditures can be funded
through financing arrangements and from the Company's current cash holdings.
In October 1997, the Company finalized an agreement with Altana Inc.
whereby Altana will pay up to $23,000,000 for the U.S. distribution rights to
CroTAb(R), DigiTAb(R), and TriTAb(R). The Company received $1,000,000 in 1997
for the achievement of certain milestones. Upon attainment of other milestones,
TAb may receive additional payments of up to $3,500,000 in 1998. Additional
payments under the agreement will be based on FDA approvals and sales for the
first three years of market availability.
TAb uses sheep for the production of its polyclonal antibodies and
supplies all the antisera required from its own flocks. Currently, TAb's
subsidiaries have approximately 5,600 sheep and TAb expects to substantially
increase the size of its flocks over several years to meet full scale production
requirements once additional products are approved for sale.
TAb has recognized the potential Year 2000 problems that may affect its
computing systems, laboratory equipment and business processes. The Company has
plans in place to ensure that all of its entities worldwide will have the
ability to operate effectively in the 21st century. A Year 2000 Task Force has
been formally established which includes subgroups located at TAb, TAb UK Ltd
(at both Wales and London sites) and TAb Australasia Pty Ltd. The Company is
currently conducting a preliminary assessment
27
<PAGE> 30
of its computer systems, laboratory equipment and business processes to identify
the systems that could be affected by the Year 2000 issue. The Company believes
that the Year 2000 issue will not pose significant operational problems for its
computer systems. The Company expects to complete its full assessment, including
the potential impacts of the Year 2000 from laboratory equipment and business
processes, by the end of April 1998. The Company will then be able to determine
the effect, if any, on future financial results.
NET OPERATING LOSS CARRYFORWARDS
As of December 31, 1997, the Company had approximately $56.0 million of
net operating loss carryforwards for income tax purposes, of which $44.9 million
are available for U.S. Federal taxes and expire from 1999 through 2012. In
addition, the Company has approximately $232,000 of research and development tax
credits available to offset future federal income tax, subject to limitations
for alternative minimum tax. The Internal Revenue Code of 1986, as amended,
contains certain provisions that limit the net operating loss carryforward
available to be used in any given year if certain events occur, including
significant changes in ownership. At present the Company's net operating loss
carryforward is not subject to these limitations. No assets have been recognized
in the Company's financial statements for these net operating loss carryforwards
because management believes the generally accepted accounting principle criteria
for recognition have not been met.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") and Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). The Company will adopt SFAS No. 130 and SFAS No. 131 in 1998 as required.
Because these standards require only disclosure of certain additional
information, the effect of adoption will not have a significant impact on the
Company's financial position, results of operations or cash flows.
28
<PAGE> 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
the years ended December 31, 1997, 1996 and 1995
and the cumulative development stage from
August 10, 1984 (inception) through December 31, 1997
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................30
Consolidated Financial Statements:
Balance Sheets.....................................................31
Statements of Operations...........................................32
Statements of Stockholders' Equity.................................33
Statements of Cash Flows...........................................34
Notes to Financial Statements......................................35
</TABLE>
29
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Therapeutic Antibodies Inc.
We have audited the accompanying consolidated balance sheets of Therapeutic
Antibodies Inc. and Subsidiaries (A Development Stage Company) as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997 and for the period from August 10, 1984 (inception)
through 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.
As discussed in Note 1, the Company has been in the development stage with its
primary activities being research and development and has not yet commenced
planned principal operations.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Therapeutic
Antibodies Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 and for the period from August
10, 1984 (inception) through December 31, 1997 in conformity with generally
accepted accounting principles.
/S/ Coopers & Lybrand, LLP
Louisville, Kentucky
March 5, 1998
30
<PAGE> 33
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,915,077 $ 20,502,536
Short-term investments 1,997,240 2,002,266
Trade receivables 594,267 101,281
Value added tax receivable 179,629 251,186
Inventories 489,138 400,167
Other current assets 409,929 474,412
------------ ------------
Total current assets 8,585,280 23,731,848
Property and equipment, net 11,456,690 12,682,680
Patent and trademark costs, net 598,924 529,228
Other assets, net 159,171 236,234
------------ ------------
Total assets $ 20,800,065 $ 37,179,990
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,457,121 $ 936,591
Accrued interest 146,326 161,367
Current portion of notes payable 2,545,701 1,446,327
------------ ------------
Total current liabilities 4,149,148 2,544,285
Notes payable, net of current portion 6,059,072 8,592,755
Deferred revenue 559,467 656,170
Other liabilities 274,033 171,250
------------ ------------
Total liabilities 11,041,720 11,964,460
------------ ------------
Commitments
Stockholders' equity:
Common stock - par value $.001 per share;
30,000,000 shares authorized; 23,252,825 -
December 31, 1997 and 22,353,692 - December
31, 1996 issued and outstanding 23,253 22,354
Additional paid-in capital 68,927,203 67,082,048
Deficit accumulated during the development
stage (1984-1997) (59,412,383) (42,564,665)
Cumulative translation adjustment 220,272 675,793
------------ ------------
Total stockholders' equity 9,758,345 25,215,530
------------ ------------
Total liabilities and stockholders' equity $ 20,800,065 $ 37,179,990
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
31
<PAGE> 34
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Cumulative
For the Years Ended Development Stage
December 31, from August 10, 1984
------------------------------------------------ (inception) Through
1997 1996 1995 December 31, 1997
------------ -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Sales and contract revenue $ 392,888 $ 600,607 $ 488,347 $ 2,791,117
Licensing revenue 1,112,955 143,500 100,000 1,356,455
Interest income 886,511 607,479 96,917 1,922,686
Grant income 205,569 118,535 39,509 732,519
Value-added tax and insurance recoveries -- -- -- 577,170
Foreign currency gains -- 1,733,357 3,054 1,785,984
Other 80,008 64,890 22,663 220,814
----------- ------------ ------------ ------------
2,677,931 3,268,368 750,490 9,386,745
----------- ------------ ------------ ------------
Expenses:
Cost of sales and contract revenue 110,740 334,989 31,360 545,157
Research and development 11,462,352 9,185,126 6,321,674 42,042,457
General and administrative 3,561,541 2,721,889 1,729,262 12,943,167
Marketing and distribution 614,598 361,262 518,210 1,976,553
Depreciation and amortization 1,643,922 1,387,916 856,756 5,511,670
Interest 1,001,959 1,201,335 388,258 3,730,583
Debt conversion expense -- 801,597 -- 801,597
Foreign currency losses 913,119 -- -- 913,119
Other 217,418 20,371 5,008 334,825
----------- ------------ ------------ ------------
19,525,649 16,014,485 9,850,528 68,799,128
----------- ------------ ------------ ------------
Net loss $(16,847,718) $(12,746,117) $ (9,100,038) $(59,412,383)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.74) $ (0.68) (0.57) $ (5.98)
============ ============ ============ ============
Weighted average shares used in
computing basic and diluted net
loss per share 22,888,226 18,821,524 15,938,219 9,937,666
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
32
<PAGE> 35
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1997, 1996 and 1995 and for the Cumulative
Development Stage from August 10, 1984 (inception) through December 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- COMMON STOCK PAID-IN
SHARES PAR VALUE SUBSCRIBED CAPITAL
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sale of common stock
1985 - 1994 9,033,619 $ 9,034 2,122 $ 22,621,470
One thousand-for-one stock
split 1985 2,797,200 2,797 (2,797)
Exercise of stock warrants
at $.75 per share 1989 66,667 67 49,933
Issuance of shares 1990,
1992 and 1994 1,949,373 1,949 (1,949) (13,677)
Issuance of shares for
acquisition of PAL 1992 1,415,875 1,416 3,155,984
Issuance of warrants
1992 and 1993 212,000
Translation adjustment
1992 - 1994
Net loss from August 10,
1984 (inception)
to December 31, 1994
---------- ------- ---------- ------------
Balance, December 31, 1994 15,262,734 15,263 173 26,022,913
Issuance of shares 172,510 173 (173)
Exercise of stock warrants
at $.50-$.75 per share 99,735 100 60,201
Sale of common stock 1,021,624 1,021 4,796,765
Net loss 1995
Translation adjustment
---------- ------- --------- ------------
Balance, December 31, 1995 16,556,603 16,557 - 30,879,879
Issuance of shares
upon debt conversion 466,383 466 2,564,639
Debt conversion charge 801,597
Sale of common stock, net 164,332 165 933,384
Initial public offering, net 4,190,477 4,190 30,370,518
Exercise of stock warrants
at $.75-$4.50 per share 942,897 943 1,332,989
Exercise of stock options 33,000 33 89,667
Issuance of warrants 46,944
Stock-based compensation expense 62,431
Net loss 1996
Translation adjustment
---------- ------- --------- ------------
Balance, December 31, 1996 22,353,692 22,354 - 67,082,048
Exercise of stock warrants
at $.60-$3.50 per share 888,716 889 1,357,197
Stock-based compensation expense 469,438
Exercise of stock options 10,417 10 18,520
Net loss 1997
Translation adjustment
---------- ------- --------- ------------
Balance, December 31, 1997 23,252,825 $23,253 - $ 68,927,203
========== ======= ========= ============
<CAPTION>
DEFICIT
STOCK ACCUMULATED DURING CUMULATIVE
SUBSCRIPTIONS DEVELOPMENT TRANSLATION
RECEIVABLE STAGE ADJUSTMENT TOTAL
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sale of common stock
1985 - 1994 (3,528,537) - - $ 19,104,089
One thousand-for-one stock
split 1985
Exercise of stock warrants
at $.75 per share 1989 50,000
Issuance of shares 1990,
1992 and 1994 2,838,499 2,824,822
Issuance of shares for
acquisition of PAL 1992 3,157,400
Issuance of warrants
1992 and 1993 212,000
Translation adjustment 1992 - 1994 $ 232,603 232,603
Net loss from August 10,
1984 (inception)
to December 31, 1994 $(20,718,510) (20,718,510)
------------- ------------- ------------ -------------
Balance, December 31, 1994 (690,038) (20,718,510) 232,603 4,862,404
Issuance of shares 690,038 690,038
Exercise of stock warrants
at $.50-$.75 per share 60,301
Sale of common stock 4,797,786
Net loss 1995 (9,100,038) (9,100,038)
Translation adjustment (416,012) (416,012)
------------- ------------ ------------ -------------
Balance, December 31, 1995 - (29,818,548) (183,409) 894,479
Issuance of shares
upon debt conversion 2,565,105
Debt conversion charge 801,597
Sale of common stock, net 933,549
Initial public offering, net 30,374,708
Exercise of stock warrants
at $.75-$4.50 per share 1,333,932
Exercise of stock options 89,700
Issuance of warrants 46,944
Stock-based compensation expense 62,431
Net loss 1996 (12,746,117) (12,746,117)
Translation adjustment 859,202 859,202
------------- ------------ ------------ -------------
Balance, December 31, 1996 - (42,564,665) 675,793 25,215,530
Exercise of stock warrants
at $.60-$3.50 per share 1,358,086
Stock-based compensation expense 469,438
Exercise of stock options 18,530
Net loss 1997 (16,847,718) (16,847,718)
Translation adjustment (455,521) (455,521)
------------- ------------ ------------ -------------
Balance, December 31, 1997 - $(59,412,383) $ 220,272 $ 9,758,345
============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
33
<PAGE> 36
THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Cumulative
For the Years Ended Development Stage
December 31, From August 10, 1984
----------------------------------------------- (Inception) Through
1997 1996 1995 December 31, 1997
------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net loss $(16,847,718) $(12,746,117) $(9,100,038) $(59,412,383)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,643,922 1,387,916 856,756 5,511,670
Disposal of property and equipment 282,806 532,817 111,615 927,238
Foreign currency loss (gain) 913,119 (1,733,357) (3,054) (872,865)
Warrant expense - 46,944 - 193,994
Stock-based compensation expense 487,968 62,431 - 550,399
Debt conversion expense - 801,597 - 801,597
Changes in:
Trade receivable (434,140) (52,373) 1,106,727 (509,232)
Inventories (88,971) (7,073) (332,559) (374,964)
Other current assets 60,616 (128,813) (334,980) (408,107)
Accounts payable and accrued expenses 646,550 (340,411) (84,553) 1,553,382
Accrued interest (777) (37,512) 154,858 776,225
Deferred revenue (84,063) 313,670 - 229,607
Other - (234,301) 236,139 (43,489)
------------ ------------ ----------- ------------
Net cash used in operating activities (13,420,688) (12,134,582) (7,389,089) (51,076,928)
------------ ------------ ----------- ------------
Cash flows from investing activities:
Decrease in restricted cash - - 1,126,000 -
Purchase of property and equipment (1,257,448) (3,293,214) (2,491,020) (13,888,323)
Patent and trademark costs, net (109,709) (198,502) (127,042) (660,997)
Purchase of short-term investments (11,931,028) (2,002,266) - (13,933,294)
Maturity of short-term investments 11,838,785 - - 11,838,785
Other - - - 69,750
------------ ------------ ----------- ------------
Net cash used in investing activities (1,459,400) (5,493,982) (1,492,062) (16,574,079)
------------ ------------ ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable 17,605 2,518,239 4,989,452 15,809,005
Payments on notes payable (1,299,211) (1,969,138) (2,144,704) (6,177,471)
Proceeds from line of credit 61,897 123,371 1,311,053 3,371,278
Payments on line of credit (118,505) (1,018,738) (1,741,540) (3,327,442)
Proceeds from convertible debt, net - 5,432,500 4,222,500 9,655,000
Payments on convertible debt - (4,320,325) - (4,320,325)
Proceeds from issuance of stock, net 1,358,086 32,326,264 5,548,125 57,011,580
Proceeds from issuance of warrants - - - 65,000
Other 39,184 (5,628) (151,032) (147,598)
------------ ------------ ----------- ------------
Net cash provided by financing activities 59,056 33,086,545 12,033,854 71,939,027
------------ ------------ ----------- ------------
Effect of exchange rate changes on cash and cash equivalents (766,427) 1,647,473 (348,775) 627,057
------------ ------------ ----------- ------------
Net (decrease) increase in cash and cash equivalents (15,587,459) 17,105,454 2,803,928 4,915,077
Cash and cash equivalents, beginning of period 20,502,536 3,397,082 593,154 -
------------ ------------ ----------- ------------
Cash and cash equivalents, end of period $ 4,915,077 $20,502,536 $ 3,397,082 $ 4,915,077
============ =========== =========== ============
Supplemental cash flow disclosures:
Cash payments for interest (net of amount capitalized) $ 1,017,000 $ 1,142,738 $ 250,616 $ 1,738,516
============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS OF THE COMPANY:
Therapeutic Antibodies Inc. (the Company) was incorporated on August
10, 1984 for the purpose of engaging in the research, development,
production and marketing of therapeutic antibodies that provide
protection against venoms, drugs, toxins and infectious diseases. The
Company is a development stage company as defined in Statement of
Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting
by Development Stage Enterprises, and is devoting substantially all of
its present efforts to research and development, including
pre-production activities. Certain of the Company's research and
development and product testing activities are carried out through
affiliations with scientists at academic institutions around the world.
These affiliations include preclinical and clinical research
agreements, consulting agreements, patent and royalty agreements and
facility leases. Inherent in the development stage is a range of risks
including the need for, and uncertainty of, future financing. The
Company also faces risks stemming from the nature of the
biopharmaceutical industry, such as the risk of competition, the risk
of regulatory change, including potential changes in health care
coverage, uncertainties associated with obtaining and enforcing patents
and proprietary technology, uncertainty of the approval of products by
governmental agencies and risks related to fluctuations in interest
rates and foreign currencies.
Net losses have been incurred each year since its inception and the
Company expects to incur operating losses during at least the next year
due to continued spending on research, product development and
increasing requirements for process development, preclinical and
clinical testing, regulatory affairs, initial manufacturing activities,
and administration. The Company will require additional financing until
product sales or licensing fees are sufficient to generate positive
cash flows from operations.
The Company is currently exploring raising additional financing in 1998
in the form of either secured debt, equity or a convertible debt
security. Furthermore, the Company may consider an additional equity
offering in 1998 or 1999.
On July 23, 1996, the Company completed an initial public offering of
4,190,477 shares of its Common Stock on the London Stock Exchange at
(pound)5.25 ($8.14) per share raising total gross and net proceeds of
approximately $34,100,000 and $30,400,000, respectively. Approximately,
$4,750,000 was used to repay the Company's 15% Notes and certain other
indebtedness. The remainder of the net proceeds is being utilized to
fund working capital, operations and capital expenditures.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements of the Company include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
b. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign
subsidiaries denominated in foreign currencies are translated to
U.S. dollars at period-end exchange rates. Revenues and expenses
denominated in foreign currencies are translated at average
exchange rates for the period. Translation adjustments are
reported as a separate component of stockholders' equity. The
effects of translation of intercompany loans to international
subsidiaries which have been designated as long-term investments
are also included in the separate component of stockholders'
equity. The Company's initial public offering on the London Stock
Exchange raised total proceeds of(pound)22,000,000 of
which(pound)8,000,000 was converted to U.S. dollars in
1996,(pound)1,565,000 to Australian dollars in early 1997 and the
balance was left in sterling. At December 31, 1997, the Company
had approximately(pound)1,794,000 in British sterling and
$534,000 in Australian dollars which were translated to U.S.
dollars at the year end currency rates of 1.65 and 0.65,
respectively. Since the exchange rate for British sterling fell
during the year, from 1.71 at December 31, 1996, the Company
recognized significant foreign currency losses for 1997. Foreign
currency transaction losses for the year ended December 31, 1997
were $913,119 and foreign currency transaction gains for the
years ending December 31, 1996 and 1995 were $1,733,357 and
$3,054, respectively.
c. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: All highly-liquid
investments with an original maturity of three months or less
when purchased are classified as cash equivalents.
Financial instruments which potentially subject the Company to
concentrations of credit risk consists principally of cash and
temporary cash investments. The Company places substantially all
of its cash and temporary cash investments with one major
financial institution. As of December 31, 1997, and at times
throughout the period, cash balances were in excess of Federal
Deposit Insurance Corporation (FDIC) insurance limits. The
Company has not experienced any losses in such accounts and
believes no significant exposure from this concentration exists
with respect to cash and temporary cash investments. The Company
also maintains balances at a U.S. institution denominated in
British sterling pounds and Australian dollars.
Short-term investments consists of governmental and corporate
debt instruments. The carrying values of these short-term
investments approximates fair value at December 31, 1997.
d. INVENTORIES: Inventories are stated at the lower of cost
(first-in, first-out) or market.
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
e. PROPERTY AND EQUIPMENT: Property and equipment is stated at cost
and is depreciated using the straight-line method over the
estimated useful life of the asset as follows:
Buildings and improvements - 10 to 20 years Furniture, fixtures
and equipment - 2 to 10 years Livestock - 5 years
Leasehold improvements are amortized over the shorter of their
estimated life or the period of the related leases, including
anticipated renewals for which the Company has an option.
f. CARRYING VALUE OF LONG LIVED ASSETS: The carrying value of long
lived assets is reviewed if the facts and circumstances suggest
that they may be impaired. If this review indicates that the
carrying value will not be recoverable, the carrying value is
reduced to fair value.
g. PATENT AND TRADEMARK COSTS: Patent costs consist of legal fees
associated with patent applications and filings and trademark
costs consists of legal fees associated with trademark
procurement. Once a patent is granted, costs are amortized using
the straight-line method over 17 years from the patent grant
date. Accumulated amortization was $27,282, $22,059 and $10,539
as of December 31, 1997, 1996 and 1995, respectively. Trademark
costs are amortized using the straight-line method over 10 years.
Accumulated amortization was $34,790, $18,358 and $6,838 as of
December 31, 1997, 1996 and 1995, respectively.
h. REVENUE RECOGNITION: Revenues from sales of products are
recognized at the time of shipment. Revenues from licensing
agreements are recognized when earned based upon signing the
agreement, if applicable, and upon reaching predefined milestones
in the development program.
The Company has received grants from the United Kingdom and
Australia as a result of reaching certain employment levels and
constructing production facilities. Grants related to employment
levels and conducting clinical trials are recognized as income at
the point in time that the conditions of the grant are satisfied.
Grants related to construction of production facilities are
recognized over the life of the facility.
i. RESEARCH AND DEVELOPMENT COSTS: Research and development costs,
costs for developing and improving manufacturing processes, pilot
plant operations and inventories of products not yet approved for
sale by governmental regulatory authorities are expensed when
incurred.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
j. BASIC AND DILUTED EARNINGS PER COMMON SHARE: The basic and
diluted earnings per common share calculation was based on
Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (SFAS No. 128), which the Company adopted during the
fourth quarter of 1997. Application of SFAS No. 128 to the years
ended December 31, 1996 and 1995 did not change the previously
disclosed per share amounts.
The calculations are based upon the weighted average number of
shares of common stock outstanding during each period. Common
equivalent shares from stock options, warrants and other dilutive
securities are excluded from the computations as their effect is
antidilutive.
k. VALUE-ADDED TAX RECEIVABLE: The Company's operations in the
United Kingdom (U.K.) are subject to value-added tax (VAT)
whereby the Company pays tax at a rate of 17.5% on most goods and
services purchased. These VAT taxes are subject to refund based
on returns which are filed quarterly with U.K. taxing
authorities.
l. FINANCIAL STATEMENTS ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could
differ from those estimates.
m. RECLASSIFICATIONS: Certain reclassifications were made to the
1996 and 1995 financial statements to conform with the 1997
presentation. The reclassifications had no effect on total assets,
liabilities, net loss or stockholders' equity.
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
During June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") and Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The Company will
adopt SFAS No. 130 and SFAS No. 131 in 1998 as required. Because these
standards require only disclosure of certain additional information,
the effect of adoption will not have a significant impact on the
Company's financial position, results of operations or cash flows.
38
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Land $ 614,429 $ 639,266
Buildings and improvements 7,976,570 6,420,062
Construction in progress 64,571 1,420,018
Furniture, fixtures and 7,141,732 7,078,837
equipment
Livestock 870,323 861,286
----------- -----------
16,667,625 16,419,469
Accumulated depreciation 5,210,935 3,736,789
----------- -----------
$11,456,690 $12,682,680
=========== ===========
</TABLE>
Buildings and improvements includes $10,120 and $38,288 of capitalized
interest associated with the construction of a building in Australia in
1997 and 1996, respectively and $491,408 with the construction of
buildings in the United Kingdom in 1995.
39
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE:
Notes payable at December 31 consist of:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
6% convertible notes payable, principal due
October 1, 2000, interest due semi-annually
on April 1 and October 1 $2,905,000 $ 2,905,000
Capital lease payable to Aberlyn Capital
Management Limited Partnership,
interest at 14.5%-18%, collateralized by
equipment in the United Kingdom with a net
book value of $2.6 million with monthly payments
of $113,000 required through January 2000 1,697,708 2,714,413
11.5% note payable to Equitas, LP, principal due
July 2000, interest due quarterly
in November, February, May, and August,
collateralized by various assets of the
Company's subsidiaries and common shares of the
Company's subsidiary, Polyclonal
Antibodies, Ltd. 800,000 800,000
12% and 15% unsecured notes payable to an officer
of the Company, interest due monthly
and/or quarterly, principal due December 1998 1,000,000 1,000,000
Notepayable to Bank of Wales PLC, collateralized by
certain real property in the United Kingdom,
interest at 2.5% over Bank of Wales lending
rate (effective rate of 7.25% at December 31, 1997),
principal and interest due monthly over 10
years beginning February 1995 395,363 450,239
11% note payable to South Australian Minister for
Primary Industries, collateralized
by building and equipment, principal repayable
in annual installments over ten years
beginning in 1997 1,217,177 1,576,193
Capital equipment leases, interest rates from 10.6% to
19.5%, principal and interest payable
monthly through 2001 327,172 266,682
8% unsecured note payable to Avantec, Inc., interest
due monthly, principal due October 100,000 100,000
6% note payable to CATO, Inc., interest due
semi-annually, principal due December 31, 2000 100,000 100,000
Other 62,353 126,555
---------- -----------
8,604,773 10,039,082
Less current portion 2,545,701 1,446,327
---------- -----------
$6,059,072 $ 8,592,755
========== ===========
</TABLE>
40
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE, CONTINUED:
In August 1995, the Company initiated a private placement of its 6%
Convertible Notes due October 1, 2000 (the "6% Notes"). Interest on the
6% Notes is payable semi-annually and the notes are convertible into
shares of the Company's common stock at $8.00 per share at any time
prior to maturity upon the election of the holder. The 6% Notes are not
collateralized. In January 1996, the Company offered each holder of the
6% Notes the opportunity to exchange all or a portion of their 6% Notes
for shares of the Company's common stock at the rate of $5.50 per share
until February 9, 1996. Pursuant to this offer, the holders of
$2,565,105 aggregate amount of principal and accrued interest on the 6%
Notes elected to tender their 6% Notes to the Company in exchange for
466,383 shares of common stock. This exchange conversion resulted in a
non-cash debt conversion expense of $801,597.
The Company has entered into capital lease agreements with Aberlyn
Capital Management Limited Partnership under which it has financed
$1,000,000 at 18% and $3,203,573 at 14.5%. The borrowings are
collateralized by certain of the Company's equipment located in the
United Kingdom. Principal amounts mature from October 1998 through
January 2000. Payments of $113,000 are due monthly. In connection with
the agreement, the Company issued warrants in 1995 and 1994 to purchase
a total of 102,514 shares of the Company's common stock at $5.00 per
share. In addition, if the Company chooses to retire early any of the
$1,000,000 financed under the agreements, the Company is required to
issue warrants to Aberlyn to purchase up to 12,500 shares at $8.00 per
share.
In 1995, the Company obtained the proceeds of an $800,000 loan from
Equitas, LP. The loan agreement provides for interest at an annual rate
of 11.5% to be paid quarterly. Principal is due in full at maturity on
July 24, 2000. The lender received warrants to purchase 22,198 shares
of the Company's common stock at $8.00 per share. The loan is
collateralized by accounts receivable, antisera inventory, and
livestock from certain of the Company's subsidiaries as well as limited
guarantees from those subsidiaries. This loan is additionally
collateralized by the common shares of the Company's subsidiary,
Polyclonal Antibodies, Limited (PAL).
In April 1996, an officer of the Company made a short-term unsecured
loan to the Company of $1,000,000. Interest was charged at 12%. In May,
the officer converted $750,000 principal amount of the 12% Note into an
equal amount of the Company's 15% Notes. The $250,000 principal balance
on the 12% Note is payable in full together with accrued interest in
December 1998.
41
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE, CONTINUED:
In January 1995, financing of $465,900 was obtained from Bank of Wales
PLC collateralized by certain property in the United Kingdom. The note
is repayable over 10 years beginning in February 1995. Interest is paid
at 2.5% over Bank of Wales base lending rate (effective rate of 7.25%
at December 31, 1997).
The Company's subsidiary, TAb Australia Pty. Ltd., has a loan agreement
with the South Australian Minister for Primary Industries. The
agreement allowed TAb Australia Pty. Ltd. to draw up to $2,000,000
Australian dollars ($1,300,600 U.S. dollars at December 31, 1997) to
assist with construction and equipment of buildings at its Turretfield
location in South Australia. The loan is to be repaid over ten years in
equal annual installments of principal beginning in 1997. Interest is
due annually at 11% per annum. The loan is collateralized by a mortgage
on the building and equipment purchased.
In June 1996, the Company completed a private placement of $5,000,000
principal amount of the Company's 15% Subordinated Promissory Notes due
May 1, 1997, of which $4,250,000 were issued for cash and $750,000 were
issued upon conversion of existing indebtedness. Each $250,000 unit of
the 15% Notes was accompanied by a Stock Purchase Warrant to purchase
18,000 shares of Common Stock at $8.00 per share. Warrants to purchase
360,000 shares of Common Stock were issued in connection with the 15%
Notes. On August 24, 1996, the Company redeemed, for cash, $4,250,000
principal amount of the 15% Notes and accrued interest thereon.
The Company has available lines of credit at December 31, 1997 totaling
200,000 British pounds sterling with the Bank of Scotland and its
subsidiary, Bank of Wales PLC, in the United Kingdom. These lines of
credit are collateralized by the guarantee of the Company and are due
on demand. Interest is paid at 2.5% over the relevant bank's base
lending rate (effective rate of 7.25% at December 31, 1997). At
December 31, 1997, the Company had outstanding borrowings on these
lines of credit in the amount of $62,353 (37,770 British pounds
sterling). The weighted average interest rate on these lines of credit
outstanding at December 31, 1997 and 1996 was 9% and 11.6%,
respectively.
42
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE, CONTINUED:
Aggregate maturities of fixed payment on notes payable for the next
five years follow:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31:
--------------
<S> <C>
1998 $2,545,701
1999 846,772
2000 4,020,614
2001 144,856
2002 141,427
Thereafter 905,403
----------
$8,604,773
==========
</TABLE>
At December 31, 1997 and 1996, $1,868,967 and $2,250,896, respectively,
of the Company's debt obligations were denominated in British pounds
sterling or Australian dollars and were translated to U.S. dollars at
year-end exchange rates. The Company is subject to foreign currency
risk to the extent that exchange rates between the U.S. dollar and the
foreign currencies change. For accounting purposes, changes in exchange
rates for the debt obligations result in translation adjustments which
are reported as part of the separate component of stockholders' equity.
At December 31, 1997 and 1996, the amount included in the cumulative
translation adjustment related to the Company's debt obligations was
$403,900 and $97,019 of loss, respectively. The Company does not hedge
its exposure to foreign currency risks.
43
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. INCOME TAXES:
Under SFAS No. 109, Accounting for Income Taxes, deferred income taxes
are recognized for future tax consequences of differences between the
tax bases of assets and liabilities and their financial reporting
amounts based on enacted laws and statutory rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. The Company
determined that at December 31, 1997 and 1996 its ability to realize
future benefits of deferred tax assets did not meet the "more likely
than not" criteria in SFAS No. 109. The components of the net deferred
tax liability recognized in the accompanying consolidated balance
sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------ -----------
<S> <C> <C>
Deferred tax liability $ (643,339) $ (409,636)
Deferred tax asset 19,214,452 13,587,078
Valuation allowance (18,297,080) 13,177,442)
------------ -----------
$ (274,033) $ --
============ ===========
</TABLE>
The deferred tax liability arose due to tax differences in the bases of
assets and liabilities relative to the acquisition of Polyclonal
Antibodies, Ltd and the temporary difference in capital allowance in
U.K. assets. The deferred tax asset arises primarily from the Company's
net operating loss carryforwards of approximately $55,702,000. The
Company has approximately $232,000 of research and development tax
credits available to offset future federal income tax. United States
net operating losses carryforwards (NOLs) and research and development
tax credits (R&D credits) expire as follows:
<TABLE>
<CAPTION>
R&D
YEARS ENDING DECEMBER 31, NOL CREDITS
---------------------------- ------------ ---------
<S> <C> <C>
1999 $ 74,000
2000 148,000
2001 52,000
2002 225,000
thereafter through 2012 44,401,000 $232,000
----------- --------
$44,900,000 $232,000
=========== ========
</TABLE>
44
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. INCOME TAXES, CONTINUED:
United Kingdom NOLs of $9,304,729 and Australian NOLs of $1,659,000,
which are not included in the table above, may be carried forward
indefinitely.
7. STOCK WARRANTS AND STOCK OPTIONS:
At December 31, 1997 there were warrants outstanding to purchase
737,374 shares of the Company's common stock at prices ranging from
$2.50 to $8.00 (average price of $6.09) per share. All outstanding
warrants expire from 1998 to 2000.
Activity in stock warrants is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF
PER SHARE WARRANTS
------------- -----------
<S> <C> <C>
Outstanding at December 31, 1994 $ .50-$5.00 2,161,583
Granted $4.00-$8.00 241,287
Forfeited - -
Exercised $ .50-$ .75 (99,735)
-----------
Outstanding at December 31, 1995 $ .60-$8.00 2,303,135
Granted $8.00 366,500
Forfeited - -
Exercised $ .75-$4.50 (942,897)
-----------
Outstanding at December 31, 1996 $ .60-$8.00 1,726,738
Granted $1.25 5,000
Forfeited $1.25-$3.50 (105,648)
Exercised $ .60-$3.50 (888,716)
-----------
Outstanding at December 31, 1997 $2.50-$8.00 737,374
===========
</TABLE>
On April 26, 1996, the Board of Directors of the Company amended the
Therapeutic Antibodies Inc. 1990 Stock Incentive Plan (the 1990 Plan).
Up to 1,650,000 shares of the Company's common stock may be subject to
incentives under the 1990 Plan. The 1990 Plan provides for the grant to
key employees, advisors, officers and directors of the Company of stock
options complying with Section 422A of the Internal Revenue Code
(qualified options) or options not qualifying under such provision
(nonqualified options) as well as stock appreciation rights (SARs). The
1990 Plan provides for adjustment of the number of shares under the
Plan in the event of stock splits, stock dividends and certain other
events. This Plan also provides that if the Company shall not be the
surviving corporation in a business combination, the holder of an
outstanding option will be entitled to purchase stock in the surviving
corporation on the same terms and conditions as the options. Options
are nontransferable, and options and SARs are subject to any
restrictions contained in the grant and applicable securities laws.
45
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. STOCK WARRANTS AND STOCK OPTIONS, CONTINUED:
On April 27, 1997, shareholders of the Company voted in favor of
adopting the Company's 1997 Stock Option Plan (the 1997 Plan). The 1997
Plan states that 1,100,000 shares of the Company's common stock will be
reserved for issuance, at the discretion of the Compensation Committee,
to any director, employee, consultant or advisor of the Company or any
of its subsidiaries. The 1997 Plan provides for adjustment of the
number of shares available under the 1997 Plan in the event of stock
splits, stock dividends and certain other events.
Between the 1990 Plan and the 1997 Plan, options to purchase 2,032,388
shares of the Company's common stock were outstanding at December 31,
1997 at prices ranging from $1.25 to $8.18 (average price of $4.46).
Options granted under the 1990 Plan have a contractual life of five
years. All options granted under the 1997 Plan have a ten year
contractual life. The average remaining contractual life of outstanding
options under both plans at December 31, 1997 is approximately 4.6
years. Generally, the Company grants options with a graded vesting
requirement which typically vests ratably over one to five years. The
options are issued at or above the fair value of the underlying stock
at date of grant. At December 31, 1997, 1,259,013 options were
exercisable at a weighted average price of $3.72. All options expire
from 1998 to 2007.
Activity in stock options is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF WEIGHTED
PER SHARE OPTIONS AVERAGE PRICE
-------------- ----------- -------------
<S> <C> <C> <C>
Outstanding at December 31, 1994 $1.25-$4.50 935,647
Granted $4.50-$6.00 245,550
Forfeited $2.40-$4.50 (72,571)
Exercised - -
----------
Outstanding at December 31, 1995 $1.25-$6.00 1,108,626 $3.10
Granted $6.00-$8.18 538,050 $6.12
Forfeited $ 6.00 (1,300) $6.00
Exercised $2.40-$3.00 (33,000) $2.49
----------
Outstanding at December 31, 1996 $1.25-$8.18 1,612,376 $4.12
Granted $4.00-$6.00 504,450 $5.49
Forfeited $3.00-$6.00 (84,438) $4.18
Exercised - - -
----------
Outstanding at December 31, 1997 $1.25-$8.18 2,032,388 $4.46
==========
</TABLE>
46
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. STOCK WARRANTS AND STOCK OPTIONS, CONTINUED:
As permitted by Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock Based Compensation", the Company follows
the provisions of Accounting Principles Board (APB) Opinion 25
"Accounting For Stock Issued to Employees", and related
interpretations in accounting for its stock option grants.
Compensation expense for employees has not been recognized for options
issued under the plan. Had compensation been determined based on the
fair value of the awards at the grant date consistent with the
provisions of SFAS No. 123, the Company's net loss and basic and
diluted net loss per share would have been increased to the pro forma
amounts which follow:
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Net Loss
As reported $(16,847,718) $(12,746,117)
Pro forma $(17,249,174) $(12,922,164)
Basic and diluted net
loss per share
As reported $ (0.74) $ (0.68)
Pro forma $ (0.75) $ (0.69)
</TABLE>
During 1997 and 1996, the Company granted options to non-employees to
purchase 290,650 and 107,550 shares, respectively, of the Company's
common stock. The expense related to these grants recognized during
1997 and 1996 was approximately $469,000 and $62,000, respectively.
The weighted average fair value of options granted during 1997 and
1996 was $2.88 and $0.97, respectively.
Fair value estimates were determined using a variation of the Black
Scholes model with the following weighted average assumptions for 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
------ ----
<S> <C> <C>
Risk-free interest rate 6.0% 6.0%
Volatility factor 30% 25%
Expected term of 10 5
options (in years)
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of the future amounts. SFAS No. 123 does not apply to awards made
prior to December 31, 1995, and the Company anticipates making awards in the
future under its stock-based compensation plan.
47
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. NET LOSS PER COMMON SHARE COMPUTATIONS:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Net loss amount used for basic and
diluted per share computations (numerator) $(16,847,718) $(12,746,117) $ (9,100,038)
Shares used for basic and diluted per share
computations (denominator) 22,888,226 18,821,524 15,938,219
Net loss per share amount $ (0.74) $ (0.68) $ (0.57)
</TABLE>
9. COMMITMENTS:
ROYALTY COMMITMENT: In 1992, the Company entered into a patent sale and
royalty agreement with scientists who at the time worked at the
University of Arizona. Under the agreement, the Company purchased the
scientists' rights under their U.S. patent and certain U.S. patent
applications. The Company agreed to pay royalties to the sellers with
respect to products developed and sold under the patents. Currently, no
royalty payments have yet been required under this agreement.
LEASES: The Company leases laboratory and office space under operating
leases. Aggregate rent expense incurred under these leases was
approximately $475,209 in 1997, $190,248 in 1996 and $126,000 in 1995.
Future minimum rental commitments under noncancelable operating leases
as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1998 $ 535,918
1999 525,608
2000 471,827
2001 383,019
2002 384,147
Thereafter 815,694
----------
$3,116,213
==========
</TABLE>
48
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. RELATED PARTY TRANSACTIONS:
The Company incurred interest expense and loan guarantee fees of
$142,500, $115,241 and $17,380 in the years ended December 31, 1997,
1996 and 1995, respectively, on notes payable to certain directors of
the Company and loan guarantees made by certain directors on behalf of
the Company in order to obtain short-term loan financing.
49
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. INTERNATIONAL OPERATIONS:
The Company conducts its activities in the U.S., the United Kingdom, New
Zealand and Australia. International operations are primarily located in
the United Kingdom. Intercompany sales between regions are made at cost
plus markup. Summarized financial data by region are as follows:
<TABLE>
<CAPTION>
1997 U.S. INTERNATIONAL ELIMINATIONS NET
- ---- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Trade $ 2,255,334 $ 422,597 $ -- $ 2,677,931
Intercompany (a) 779,507 10,912,302 (11,691,809) --
------------ ------------ ---------- ------------
$ 3,034,841 $ 11,334,899 $(11,691,809) $ 2,677,931
============ ============ ============ ============
R&D expense (a) $ 13,458,565 $ 8,871,785 $(10,867,998) $ 11,462,352
============ ============ ============ ============
Foreign Currency Loss $ 913,119 $ 696,969 $ (696,969) $ 913,119
============ ============ ============ ============
Net loss $(15,763,860) $ (1,819,741) $ 735,883 $(16,847,718)
============ ============ ============ ============
Capital expenditures $ 54,712 $ 1,202,736 $ -- $ 1,257,448
============ ============ ============ ============
Identifiable assets $ 8,697,748 $ 12,114,317 $ (12,000) $ 20,800,065
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1996 U.S. INTERNATIONAL ELIMINATIONS NET
- ---- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Trade $ 1,184,619 $ 350,392 $ -- $ 1,535,011
Foreign Currency Gain 1,733,357 -- -- 1,733,357
Intercompany (a) 1,301,702 5,318,319 (6,620,021) --
------------ ------------ ------------ ------------
$ 4,219,678 $ 5,668,711 $ (6,620,021) $ 3,268,368
============ ============ ============ ============
R&D expense (a) $ 5,279,302 $ 6,860,712 $ (2,954,888) $ 9,185,126
============ ============ ============ ============
Net loss $ (5,468,662) $ (5,223,305) $ (2,054,150) $(12,746,117)
============ ============ ============ ============
Capital expenditures $ 99,035 $ 3,194,179 4 -- $ 3,293,214
============ ============ ============ ============
Identifiable assets $ 24,048,275 $ 13,143,715 $ (12,000) $ 37,179,990
============ ============ ============ ============
</TABLE>
50
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. INTERNATIONAL OPERATIONS, CONTINUED:
<TABLE>
<CAPTION>
1995 U.S. INTERNATIONAL ELIMINATIONS NET
- ---- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Trade $ 466,945 $ 283,545 $ -- $ 750,490
Intercompany (a) 1,017,517 3,415,826 (4,433,343) --
------------ ------------ ---------- ------------
$ 1,484,462 $ 3,699,371 $ (4,433,343) $ 750,490
============ ============ ============ ============
R & D expense (a) $ 4,455,668 $ 5,308,297 $ (3,442,291) $ 6,321,674
============ ============ ============ ============
Net loss $ (5,039,977) $ (4,108,795) $ 48,734 $ (9,100,038)
============ ============ ============ ============
Capital expenditures $ 705,302 $ 1,785,718 $ -- $ 2,491,020
============ ============ ============ ============
Identifiable assets $ 5,049,705 $ 10,385,116 $ (277,722) $ 15,157,099
============ ============ ============ ============
</TABLE>
(a) Intercompany revenues include interest income earned by the U.S.
parent company on loans made to international subsidiaries and
sales of product to, and the performance of contract research and
development for, the U.S. parent company by international
subsidiaries on a cost plus markup basis. The intercompany account
associated with this activity is eliminated in consolidation.
12. NONCASH INVESTING AND FINANCING ACTIVITIES:
During 1997 the Company purchased equipment in the amount of $227,000
which was financed under capital lease agreements.
On February 9, 1996, the Company issued 466,383 shares of common stock in
exchange for $2,500,000 of principal and $65,105 of accrued interest on
the 6% Notes.
In May, 1996 an officer of the Company converted $750,000 principal of
the 12% Note into an equal principal amount of the Company's 15%
Notes.
On October 21, 1996 the Company issued 150,000 shares of common stock in
exchange for (pound)250,000 of principal on the two notes payable to the
Welsh Development Agency.
51
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents and short-term
investments approximates fair value due to the short maturities of these
instruments. The Company believes that it is not practicable to estimate
the fair value of its long-term debt because these instruments were
generally issued in a convertible form or in conjunction with warrants to
purchase the Company's stock. The Company would be required to obtain an
independent valuation of each specific instrument.
52
<PAGE> 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
53
<PAGE> 56
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers and
directors of the Company is incorporated by reference from the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on April 27,
1998.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to the compensation of the Company's
executive officers is incorporated by reference from the Company's Proxy
Statement relating to the Annual Meeting of Shareholders to be held on April 27,
1998, except that the Comparative Performance Graph and the Compensation
Committee Report on Executive Compensation included in the Proxy Statement are
expressly not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain
beneficial owners of the Company's common stock and management is incorporated
by reference from the Company's Proxy Statement relating to the Annual Meeting
of Shareholders to be held on April 27, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Company's
Proxy Statement relating to the Annual Meeting of Shareholders to be held on
April 27, 1998.
54
<PAGE> 57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a). The following documents are being filed as part of this Report.
1. Financial Statements.........................See Item 8 herein.
2. Financial Statement Schedules
Independent Auditors Report..................See Item 8 herein.
All schedules are omitted, because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<S> <C> <C>
3.1 - Amended and Restated Certificate of Incorporation of
Therapeutic Antibodies Inc. (6)
3.2 - Amended and Restated Bylaws of Therapeutic Antibodies Inc.
(6)
10.1 - Marketing Agreement, as amended, dated January 1, 1990,
between Swedish Orphan AB and the Company. (1)
10.2 - Contract for the Production of Sheep Anti-Human IgG, dated
October 5, 1992, between Baxter Germany and the Company. (1)
10.3 - Distribution Agreement, as amended, dated April 1, 1993,
among Helena Laboratories and the Company. (1)
10.4 - Contract Services Agreement, dated December 16, 1991,
between Ministry of Agriculture and Fisheries and the
Company. (1)
10.5 - Agreement, dated December 16, 1991, between Ministry of
Fisheries (now AgResearch) and the Company. (1)
10.6 - Office Lease Agreement. as amended, dated August 28, 1990,
between Summit Place Limited and the Company. (1)
10.7 - Lease, dated January 9, 1992, between The Medical College of
St. Bartholomew's Hospital in the City of London and the
Company. (1)
</TABLE>
55
<PAGE> 58
<TABLE>
<S> <C> <C>
10.8 - Lease Agreement, dated January 29, 1997, between Vanderbilt
University and the Company. (7)
10.9 - Sublease, dated January 29, 1997, between Platinum
Entertainment, Inc. as Sublessor, and the Company, as
Sublessee.(7)
10.10 - Assignment of 14/15 Newbury Street London EC1A 7HU, dated
February 1, 1996, between Immunogen International Limited,
as Assignor, and TAb London Limited, as Assignee. (7)
10.11 - 1990 Stock Incentive Plan as amended. (6)
10.12 - 1997 Stock Option Plan*
10.13 - Basic Cooperation/Joint Program Agreement, dated August 30,
1995, between Nigerian Federal Ministry of Health and
Therapeutic Antibodies Inc. (2)
10.14 - Memorandum of Lease, dated August 1, 1995, between Minister
for Primary Industries, as Lessor, and TAb Australia Pty.
Limited, as Lessee (Turretfield lease). (2)
10.15 - Registration and Distribution Agreement, dated August 31,
1995, between Therapeutic Antibodies Inc. and F.H. Faulding
& Co. Limited. (2)
10.16 - Loan Agreement, dated July 10, 1995, between Minister for
Primary Industries and TAb Australia Pty. Ltd. and Deed of
Charge, dated July 10, 1995, between Minister for Primary
Industries and TAb Australia Pty. Ltd. (2)
10.17 - Lease Assignment, dated February 1, 1996, between Immunogen
International Limited and TAb London Limited (3)
10.18 - Assignment, dated April 29, 1996, between Minister for
Industry, Manufacturing, Small Business and Regional
Development and TAb Australia, Pty. Ltd. (4)
10.19 - Agistment Agreement, dated August 29, 1996, between
Martindale Holdings Pty Ltd. and TAb. Australia Pty Ltd. (5)
10.20 - Clinical Trials and Registration Agreement, dated October 4,
1996, between Therapeutic Antibodies Inc. and F.H. Faulding
& Co. Limited. (7)
10.21 - Clinical Trials, Registration, Manufacturing and
Distribution Agreement dated February 21, 1997, between the
Company and CSL Limited A.C.N. (8)
10.22 - Distribution Agreement, dated October 2, 1997, between the
Company and Altana, Inc.*
10.23 - Service Agreement, dated July 5, 1996 between Professor John
Landon and the Company. (7)
</TABLE>
56
<PAGE> 59
<TABLE>
<S> <C> <C>
10.24 - Service Agreement, dated July 5, 1996 between Professor
Timothy Chard and the Company. (7)
21.1 - List of subsidiaries of the Registrant.*
27 - Financial Data Schedule (for SEC use only)*
</TABLE>
57
<PAGE> 60
(1) Incorporated by reference to exhibits filed with the
Company's Registration Statement on Form 10, filed on May
1, 1995, File No. 0-25978.
(2) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on From 10-Q for the quarter by
period ended September 30, 1995.
(3) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on From 10-Q for the quarter by
period ended March 31, 1996.
(4) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on From 10-Q for the quarter by
period ended June 30, 1996.
(5) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on From 10-Q for the quarter by
period ended September 30, 1996.
(6) Incorporated by reference to appendices filed with the
Company's Proxy Statement relating to the Special Meeting
of Shareholders held on July 5, 1996.
(7) Incorporated by reference to exhibits filed with the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
(8) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997.
* Filed herewith.
58
<PAGE> 61
(b). Reports on Form 8-K.
None.
(c). Compensatory Plans or Arrangements.
The following is a list of all executive compensation plans and arrangements
filed as exhibits to this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<S> <C>
10.11 1990 Stock Incentive Plan, as amended. (6)
10.12 1997 Stock Option Plan.*
10.23 Service Agreement, dated July 5, 1996,
between Professor John Landon and the
Company (7)
10.24 Service Agreement, dated July 5, 1996,
between Professor Tim Chard and the Company.
(7)
27 Financial Data Schedule (SEC Use only)
</TABLE>
(6) Incorporated by reference to appendices filed with
the Company's Proxy Statement relating to the Special
Meeting of Shareholders to be held on July 5, 1996.
(7) Incorporated by reference to exhibits to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996.
* Filed herewith.
(d). Financial Statement Schedules Excluded from Annual Report to
Shareholders.
None.
59
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
THERAPEUTIC ANTIBODIES INC.
By: /s/ Martin S. Brown
---------------------------------
Martin S. Brown
Chairman of the Board
Date: MARCH 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Martin S. Brown Chairman of the Board March 30, 1998
- -------------------------
Martin S. Brown
/s/ Andrew J. Heath, M.D. Vice Chairman of the Board, March 30, 1998
- ------------------------- Chief Executive Officer
Andrew J. Heath, M.D. and Director
/s/ A. J. Kazimi President, Chief Operating March 30, 1998
- ------------------------- Officer, and Director
A.J. Kazimi (Principal Financial Officer and
Principal Accounting Officer)
/s/ Harry G. Browne, M.D. Vice Chairman of the Board, March 30, 1998
- ------------------------- Director, and Secretary
Harry G. Browne, M.D.
/s/ John Landon, M.D. Executive Vice President-Research March 30, 1998
- ------------------------- and Development and Director
John Landon, M.D.
/s/ Tim Chard, M.D. Senior Vice President-Research and March 30, 1998
- ------------------------- Development Administration
Tim Chard, M.D. and Director
/s/ Thomas G. Andrews Director March 30, 1998
- -------------------------
Thomas G. Andrews
/s/ Robert C. Hilton Director March 30, 1998
- -------------------------
Robert C. Hilton
/s/ Steven L. Stroup, M.D. Director March 30, 1998
- -------------------------
Steven L. Stroup, M.D.
/s/ Joseph D. Williams Director March 30, 1998
- -------------------------
Joseph D. Williams
</TABLE>
60
<PAGE> 1
Exhibit 10.12
THERAPEUTIC ANTIBODIES INC.
1997 STOCK OPTION PLAN
EFFECTIVE APRIL 28, 1997
<PAGE> 2
THERAPEUTIC ANTIBODIES INC. 1997 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I.
DEFINITIONS .................................................................1
1.1 Affiliate..................................................1
1.2 Agreement..................................................1
1.3 Board......................................................1
1.4 Code.......................................................1
1.5 Committee..................................................1
1.6 Company....................................................1
1.7 Date of Exercise...........................................1
1.8 Exchange Act...............................................2
1.9 Fair Market Value..........................................2
1.10 Incentive Option...........................................2
1.11 Nonqualified Option........................................2
1.12 Option.....................................................2
1.13 Participant................................................2
1.14 Plan.......................................................2
1.15 SAR........................................................2
1.16 Stock......................................................2
1.17 Ten Percent Shareholder....................................2
ARTICLE II.
PURPOSE OF PLAN .............................................................3
ARTICLE III.
ADMINISTRATION ..............................................................3
3.1 Administration of Plan.....................................3
3.2 Authority to Grant Options.................................3
3.3 Persons Subject to Section 16(b)...........................4
ARTICLE IV.
ELIGIBILITY AND LIMITATIONS ON GRANTS........................................4
4.1 Participation..............................................4
4.2 Grant of Options...........................................4
4.3 Limitations on Grants......................................4
4.4 Limitation on Incentive Options............................4
4.5 Stock Appreciation Rights..................................4
ARTICLE V.
STOCK SUBJECT TO PLAN........................................................5
5.1 Source of Shares...........................................5
5.2 Maximum Number of Shares...................................5
5.3 Forfeitures................................................5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI.
EXERCISE OF OPTIONS..........................................................5
6.1 Exercise Price.............................................5
6.2 Right to Exercise..........................................5
6.3 Maximum Exercise Period....................................6
6.4 Transferability............................................6
6.5 Employee Status............................................6
ARTICLE VII.
METHOD OF EXERCISE...........................................................6
7.1 Exercise...................................................6
7.2 Payment....................................................6
7.3 Federal Withholding Tax Requirements.......................6
7.4 Shareholder Rights.........................................7
7.5 Issuance and Delivery of Shares............................7
ARTICLE VIII.
ADJUSTMENT UPON CORPORATE CHANGES............................................7
8.1 Adjustments to Shares......................................7
8.2 Substitution of Options on Merger or Acquisition...........7
8.3 Effect of Certain Transactions.............................8
8.4 No Adjustment Upon Certain Issuances.......................8
8.5 Fractional Shares..........................................8
ARTICLE IX.
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES........................8
9.1 General....................................................8
9.2 Representations by Participants............................9
ARTICLE X.
GENERAL PROVISIONS...........................................................9
10.1 Effect on Employment.......................................9
10.2 Unfunded Plan..............................................9
10.3 Rules of Construction......................................9
10.4 Governing Law.............................................10
10.5 Compliance With Section 16 of the Exchange Act............10
10.6 Amendment.................................................10
10.7 Duration of Incentive Options.............................10
10.8 Effective Date of Plan....................................11
</TABLE>
SCHEDULE A Rules of the Therapeutic Antibodies, Inc. 1997 Stock Option Plan as
it Applies to Grants of UK Options to Participants
ii
<PAGE> 4
THERAPEUTIC ANTIBODIES INC. 1997 STOCK OPTION PLAN
PREAMBLE
WHEREAS, Therapeutic Antibodies Inc. (the "Company") desires to
establish a plan through which the Company may award options to purchase the
common stock of the Company, or the right to receive compensation due to the
increase in the value of the common stock of the Company, to directors,
officers, employees, and consultants of the Company and its affiliates;
WHEREAS, the Company desires to grant options that qualify as
"incentive stock options" within the meaning of section 422 of the Internal
Revenue Code of 1986, and options that are not so qualified; and
WHEREAS, the Company intends that this stock option plan and the
options granted hereunder (i) qualify as "performance-based compensation"
described in section 162(m)(4)(C) of the Code, and (ii) conform to the
provisions of Rule 16b-3 of the Securities Exchange Act of 1934, as amended;
NOW, THEREFORE, the Company hereby establishes the Therapeutic
Antibodies Inc. 1997 Stock Option Plan (the "Plan"), effective April 28, 1997:
ARTICLE I. DEFINITIONS
1.1 Affiliate. A "parent corporation," as defined in section 424(e) of
the Code, or "subsidiary corporation," as defined in section 424(f) of the
Code, of the Company.
1.2 Agreement. A written agreement (including any amendment or
supplement thereto) between the Company or Affiliate and a Participant
specifying the terms and conditions of an Option granted to such Participant.
1.3 Board. The board of directors of the Company.
1.4 Code. The Internal Revenue Code of 1986, as amended.
1.5 Committee. A committee composed of at least two individuals (or
such number that satisfies section 162(m)(4)(C) of the Code and Rule 16b-3 of
the Exchange Act) who are members of the Board and are not employees of the
Company or an Affiliate, and who are designated by the Board as the
"compensation committee" or are otherwise designated to administer the Plan.
1.6 Company. Therapeutic Antibodies Inc. and its successors.
1.7 Date of Exercise. The date that the Company accepts tender of the
Option exercise price of an Incentive Option or Nonqualified Option, or accepts
an election to exercise rights under an SAR.
1.8 Exchange Act. The Securities Exchange Act of 1934, as amended.
1.9 Fair Market Value. On any given date, Fair Market Value shall be
the average of the closing prices of the Stock on the London Stock Exchange on
the
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<PAGE> 5
trading day immediately preceding the date as of which Fair Market Value is
being determined, or on the next preceding day on which such Stock is traded if
no Stock was traded on such trading day (unless, where appropriate, the
Committee determines in good faith the fair market value of the Stock to be
otherwise).
1.10 Incentive Option. The right that is granted hereunder to a
Participant to purchase from the Company a stated number of shares of Stock at
the price set forth in an Agreement and that is subject to certain provisions
herein and to "incentive stock options" that are described in section 422 of the
Code. An Incentive Option, or a portion thereof, shall not be invalid for
failure to qualify under section 422 of the Code, but shall be treated as a
Nonqualified Option to the extent that it does not satisfy such conditions.
1.11 Nonqualified Option. The right that is granted hereunder to a
Participant to purchase from the Company a stated number of shares of Stock
at the price set forth in an Agreement, but is not subject to the conditions of
an Incentive Option.
1.12 Option. The right that is granted hereunder to a Participant
under the terms of an Incentive Option, a Nonqualified Option or an SAR.
1.13 Participant. A Board member, employee, consultant or advisor of
the Company or of an Affiliate who: either satisfies the requirements of Article
IV and is selected by the Committee to receive an Option, or receives an Option
pursuant to grant specified in this Plan.
1.14 Plan. The Therapeutic Antibodies Inc. 1997 Stock Option Plan.
1.15 SAR. A right to receive compensation hereunder calculated by
reference to the increase in the value of a certain number of shares of Stock
from the date of an award, as described in Section 4.5. An SAR is an unfunded,
unsecured promise of the Company to the Participant. Unless otherwise stated in
an Agreement, or unless the Committee in its discretion honors the exercise of
an SAR by issuing Stock, the holder of an SAR has no beneficial rights of Stock
ownership or to receive shares of Stock.
1.16 Stock. The common stock of the Company.
1.17 Ten Percent Shareholder. An individual who owns more than 10% of
the total combined voting power of all classes of stock of the Company or an
Affiliate at the time he is granted an Incentive Option. For the purpose of
determining if an individual is a Ten Percent Shareholder, he shall be deemed to
own any voting stock owned (directly or indirectly) by or for his brothers and
sisters (whether by whole or half blood), spouse, ancestors or lineal
descendants and shall be considered to own proportionately any voting stock
owned (directly or indirectly) by or for a corporation, partnership, estate or
trust of which such individual is a shareholder, partner or beneficiary.
ARTICLE II. PURPOSE OF PLAN
The purpose of the Plan is to provide a performance incentive and to
encourage stock ownership by officers, directors, consultants and advisors of
the
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<PAGE> 6
Company and its Affiliates, and to align the interests of such individuals
with those of the Company, its Affiliates and its shareholders. It is intended
that Participants may acquire or increase their proprietary interests in the
Company and be encouraged to remain in the employ or directorship of the Company
or of its Affiliates. The proceeds received by the Company from the sale of
Stock pursuant to this Plan may be used for general corporate purposes.
ARTICLE III. ADMINISTRATION
3.1 Administration of Plan. The Plan shall be administered by the
Committee. The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. Any
decision made or action taken by the Committee to administer the Plan shall be
final and conclusive. No member of the Committee shall be liable for any act
done in good faith with respect to this Plan or any Agreement or Option. The
Company shall bear all expenses of Plan administration. In addition to all other
authority vested with the Committee under the Plan, the Committee shall have
complete authority to:
(a) Interpret all provisions of this Plan;
(b) Prescribe the form of any Agreement and notice and manner for
executing or giving the same;
(c) Make amendments to all Agreements;
(d) Adopt, amend, and rescind rules for Plan administration; and
(e) Make all determinations it deems advisable for the administration
of this Plan.
3.2 Authority to Grant Options. The Committee shall have authority to
grant Options upon such terms the Committee deems appropriate and that are not
inconsistent with the provisions of this Plan. Such terms may include conditions
on the exercise of all or any part of an Option.
3.3 Persons Subject to Section 16(b). Notwithstanding anything in the
Plan to the contrary, the Committee, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of any provision of the
Plan to participants who are officers and directors subject to section 16(b) of
the Exchange Act, without so restricting, limiting or conditioning the Plan with
respect to other Participants.
ARTICLE IV. ELIGIBILITY AND LIMITATIONS ON GRANTS
4.1 Participation. The Committee may from time to time designate
directors, employees, consultants and advisors to whom Options are to be granted
and who are eligible to become Participants. Such designation shall specify the
number of shares of Stock, if any, subject to each Option. All Options granted
under this Plan shall be evidenced by Agreements which shall be subject to
applicable provisions of this Plan or such other provisions as the Committee may
adopt that are not inconsistent with the Plan.
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<PAGE> 7
4.2 Grant of Options. An Option shall be deemed to be granted to a
Participant at the time that the Committee designates in a writing that is
adopted by the Committee as the grant of an Option, and that makes reference to
the name of the Participant and the number of shares of Stock that are subject
to the Option. Accordingly, an Option may be deemed to be granted prior to the
approval of this Plan by the shareholders of the Company and prior to the time
that an Agreement is executed by the Participant and the Company.
4.3 Limitations on Grants. A person who is not an employee of the
Company or an Affiliate is not eligible to receive an Incentive Option.
4.4 Limitation on Incentive Options. To the extent that the aggregate
Fair Market Value of Stock with respect to which Incentive Options are
exercisable for the first time by a Participant during any calendar year (under
all incentive stock option plans of the Company and its Affiliates) exceeds
$100,000 (or the amount specified in section 422 of the Code), determined as of
the date an Incentive Option is granted, such Options shall be treated as
Nonqualified Options. This provision shall be applied by taking Incentive
Options into account in the order in which they were granted.
4.5 Stock Appreciation Rights. The Committee may grant an SAR to a
Participant either in tandem with the grant of an Incentive Option or a
Nonqualified Option, or as an award that is separate from any other Option
granted under the Plan. Subject to the terms of an Agreement, a Participant who
receives an SAR shall have the right, upon written request, to surrender any
exercisable Incentive Option or Nonqualified Option, or portion thereof, in
exchange for cash, whole shares of Stock, or a combination thereof, as
determined by the Committee, with a value equal to the excess of the Fair Market
Value, as of the date of such request, of one share of Stock over the Fair
Market Value of the Stock on the Date of Grant (or such other value specified in
the Agreement), multiplied by the number of shares covered by the SAR or portion
thereof to be surrendered. In the case of any SAR which is granted in connection
with an Incentive Stock Option, such SAR shall be exercisable only when the Fair
Market Value of the Stock exceeds the price specified therefor in the SAR or
portion thereof to be surrendered. In the event of the exercise of any SAR
granted hereunder, the number of shares reserved for issuance under the Plan
shall be reduced only to the extent that shares of Stock are actually issued in
connection with the exercise of such SAR. Additional terms and conditions
governing any such SARs may from time to time be prescribed by the Committee in
its sole discretion.
ARTICLE V. STOCK SUBJECT TO PLAN
5.1 Source of Shares. Upon the exercise of an Incentive Option or
Nonqualified Option, the Company shall deliver to the Participant authorized
but unissued Stock.
5.2 Maximum Number of Shares. The maximum aggregate number of shares of
Stock that may be issued under the Plan pursuant to the exercise of Incentive
Options and Nonqualified Options, or with respect to which SARs may be
exercised, is 1,100,000, subject to increases and adjustments as provided in
this Article V and Article VII hereof.
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<PAGE> 8
5.3 Forfeitures. If any Option granted hereunder expires or terminates
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for issuance under this Plan.
ARTICLE VI. EXERCISE OF OPTIONS
6.1 Exercise Price. The exercise price of an Incentive Option shall be
not less than 100% of the Fair Market Value of a share of Stock on the date the
Incentive Option is granted. In the case of a Ten Percent Shareholder, however,
the exercise price of an Incentive Option shall not be less than 110% of the
Fair Market Value of a share of Stock on the date the Incentive Option is
granted. The exercise price of a Nonqualified Option or an SAR shall be the
price determined by the Committee at the time the Nonqualified Option or SAR is
granted. If the exercise price of an Option is changed after the date it is
granted, such change shall be deemed to be a termination of the existing Option
and the issuance of a new Option.
6.2 Right to Exercise. An Option shall be exercisable on the date of
grant or on any other date established by the Committee or provided for in an
Agreement; provided, however, that Options granted to officers or directors
subject to section 16 of the Exchange Act must not be exercisable until at least
six months after the Option is granted. A Participant must exercise an Incentive
Option while he is an employee of the Company or an Affiliate or within the
periods that may be specified in the Agreement after termination of employment,
death, disability or a "change of control" (as defined in any change of control
agreement to which the Company and any such Participant are parties).
6.3 Maximum Exercise Period. The maximum period in which an Option may
be exercised shall be determined by the Committee on the date of grant except
that no Incentive Option shall be exercisable after the expiration of 10 years
(five years in the case of Incentive Options granted to a Ten Percent
Shareholder) from the date it was granted. The terms of any Option may provide
that it is exercisable for a shorter period. All Incentive Options shall
terminate on the date the Participant's employment with the Company terminates,
except as otherwise provided in the Agreement with respect to termination of
employment, death, disability or a "change of control" (as defined in any change
of control agreement to which the Company and any such Participant are parties).
6.4 Transferability. Any Option granted under this Plan shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the Participant only by the
Participant; provided, however, that any Nonqualified Option granted under this
Plan may be transferable to the extent provided in an Agreement. No right or
interest of a Participant in any Option shall be liable for, or subject to, any
lien, obligation or liability of such Participant.
6.5 Employee Status. The Committee shall determine the extent to which
a leave of absence for military or government service, illness, temporary
disability, or other reasons shall be treated as a termination or interruption
of employment for purposes of determining questions of forfeiture and exercise
of an Option after termination of employment; provided, however, that if the
period treated as
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<PAGE> 9
employment with respect to an Incentive Option exceeds 90 days, such Option
shall be deemed a Nonqualified Option.
ARTICLE VII. METHOD OF EXERCISE
7.1 Exercise. An Option granted hereunder shall be deemed to have been
exercised on the Date of Exercise. Subject to the provisions of Articles VI, 8
and IX, an Option may be exercised in whole or in part at such times and in
compliance with such requirements as the Committee shall determine.
7.2 Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or (except in the case of UK Options, as
defined in Schedule A hereto), to the extent approved by the Committee, Stock
that was acquired prior to the exercise of the Option, other consideration
acceptable to the Committee, or a combination thereof.
7.3 Federal Withholding Tax Requirements. Upon exercise of a
Nonqualified Option or an SAR by a Participant who is an employee of the Company
or an Affiliate, the Participant shall, upon notification of the amount due and
prior to or concurrently with the delivery of the certificates representing the
shares, pay to the Company amounts necessary to satisfy applicable federal,
state and local withholding tax requirements or shall otherwise make
arrangements satisfactory to the Company for such requirements. Such withholding
requirements shall not apply to the exercise of an Incentive Option, or to a
disqualifying disposition of Stock that is acquired with an Incentive Option,
unless the Committee gives the Participant notice that withholding described in
this Section is required.
7.4 Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option prior to the Date of
Exercise of such Option. No Participant shall acquire rights as a stockholder
through the grant or exercise of an SAR, except to the extent which the
Committee, in its sole discretion, issues Stock to the Participant as payment
upon the exercise of the SAR.
7.5 Issuance and Delivery of Shares. Shares of Stock issued pursuant to
the exercise of Options hereunder shall be delivered to Participants by the
Company (or its transfer agent) as soon as administratively feasible after a
Participant exercises an Option hereunder and executes any applicable
shareholder agreement or agreement described in Section 9.2 that the Company
requires at the time of exercise.
ARTICLE VIII. ADJUSTMENT UPON CORPORATE CHANGES
8.1 Adjustments to Shares. The maximum number of shares of stock with
respect to which Options hereunder may be granted and which are the subject of
outstanding Options shall be adjusted as the Committee determines (in its sole
discretion) to be appropriate, in the event that:
(a) the Company or an Affiliate effects one or more stock dividends,
stock splits, reverse stock splits, subdivisions, consolidations,
capitalization issue, rights issue or other similar events;
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<PAGE> 10
(b) the Company or an Affiliate engages in a transaction to which
section 424 of the Code applies; or
(c) there occurs any other event which in the judgment of the
Committee necessitates such action;
provided, however, that if an event described in paragraph (a) or (b) occurs,
the Committee shall make adjustments to the limits on Options specified in
Section 4.3 that are proportionate to the modifications of the Stock that are on
account of such corporate changes. Notwithstanding the foregoing, the Committee
may not modify the Plan or the terms of any Options then outstanding or to be
granted hereunder to provide for the issuance under the Plan of a different
class of stock or kind of securities.
8.2 Substitution of Options on Merger or Acquisition. The Committee may
grant Options in substitution for stock awards, stock options, stock
appreciation rights or similar awards held by an individual who becomes an
employee of the Company or an Affiliate in connection with a transaction to
which section 424(a) of the Code applies. The terms of such substituted Options
shall be determined by the Committee in its sole discretion, subject only to the
limitations of Article V.
8.3 Effect of Certain Transactions. Upon a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
the Company, as a result of which the shareholders of the Company receive cash,
stock or other property in exchange for their shares of Stock (but not a public
offering of Stock by the Company), and the Company is not the surviving entity,
any Option granted hereunder shall terminate, provided that the Participant
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise his Options in whole or in part whether or not the vesting requirements
set forth in any Agreement have been satisfied, unless the Committee elects to
convert all Options hereunder into options to purchase stock of an acquiring
corporation. Provided, however, that, notwithstanding the foregoing, a portion
of the acceleration of exercisability of Options shall not occur with respect to
any holder to the extent that such portion of acceleration would cause the
grantee or holder of such Option to be liable for the payment of taxes pursuant
to section 4999 of the Code. If the Committee so elects to convert the Options,
the amount and price of such converted options shall be determined by adjusting
the amount and price of the Options granted hereunder in the same proportion as
used for determining the number of shares of stock of the acquiring corporation
the holders of the Stock receive in such merger, consolidation, acquisition of
property or stock, separation or reorganization, and the vesting schedule set
forth in the Agreement shall continue to apply to the converted options.
8.4 No Adjustment Upon Certain Issuances. The issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services rendered, either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, outstanding Options.
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8.5 Fractional Shares. Only whole shares of Stock may be acquired
through the exercise of an Option. Any amounts tendered in the exercise of an
Option remaining after the maximum number of whole shares have been purchased
will be returned to the Participant.
ARTICLE IX. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
9.1 General. No Option shall be exercisable, no Stock shall be issued,
no certificates for shares of Stock shall be delivered, and no payment shall be
made under this Plan except in compliance with all federal or state laws and
regulations (including, without limitation, withholding tax requirements),
federal and state securities laws and regulations and the rules of all
securities exchanges or self-regulatory organizations on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any certificate issued to evidence shares of
Stock for which an Option is exercised may bear such legends and statements as
the Committee upon advice of counsel may deem advisable to assure compliance
with federal or state laws and regulations. No Option shall be exercisable, no
Stock shall be issued, no certificate for shares shall be delivered and no
payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from any regulatory
bodies having jurisdiction over such matters.
9.2 Representations by Participants. As a condition to the exercise of
an Option, the Company may require a Participant to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares,
if, in the opinion of counsel for the Company, such representation is required
by any relevant provision of the laws referred to in Section 9.1. At the option
of the Company, a stop transfer order against any shares of stock may be placed
on the official stock books and records of the Company, and a legend indicating
that the stock may not be pledged, sold or otherwise transferred unless an
opinion of counsel was provided (concurred in by counsel for the Company) and
stating that such transfer is not in violation of any applicable law or
regulation may be stamped on the stock certificate in order to assure exemption
from registration. The Committee may also require such other action or agreement
by the Participants as may from time to time be necessary to comply with federal
or state securities laws. This provision shall not obligate the Company or any
Affiliate to undertake registration of Options or stock hereunder.
ARTICLE X. GENERAL PROVISIONS
10.1 Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
10.2 Unfunded Plan. The Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to segregate any assets that
may at any time be represented by grants under this Plan. Any liability of the
Company
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to any person with respect to any grant under this Plan shall be based solely
upon contractual obligations that may be created hereunder. No such obligation
of the Company shall be deemed to be secured by any pledge of, or other
encumbrance on, any property of the Company.
10.3 Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and feminine. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
10.4 Governing Law. The laws of the State of Tennessee shall apply to
all matters arising under this Plan, to the extent that federal law does
not apply.
10.5 Compliance With Section 16 of the Exchange Act. With respect to
persons subject to section 16 of the Exchange Act, transactions under this Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of this Plan or
action by Committee fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Committee.
10.6 Amendment. The Board may amend or terminate this Plan at any time;
provided, however, an amendment that would have a material adverse effect on the
rights of a Participant under an outstanding Option is not valid with respect to
such Option without the Participant's consent, except as necessary for Incentive
Options to maintain qualification under the Code; and provided, further, that
the shareholders of the Company must approve, in general meeting prior to the
effective date of adoption, any amendment that:
(a) changes the number of shares in the aggregate which may be issued
pursuant to Options granted under the Plan or the maximum number
of shares with respect to which any individual may receive
Options in any calendar year, except pursuant to Article VIII;
(b) changes the Participants (or class of Participants) eligible to
receive Options under the Plan;
(c) increases the period during which Options may be granted or
exercised;
(d) reduces the exercise price of outstanding Incentive Options or
reduces the price at which future Incentive Options may be
granted;
(e) alters the basis for determining a Participant's entitlement to
and the terms of Stock to be provided and for the adjustment
thereof upon the occurrence of any event specified in Section 8.1
hereof; or
(f) alters the Plan so that Options intended to qualify as Incentive
Options under the Code would not do so, or changes the provisions
of this Section 10.6.
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Notwithstanding the foregoing, shareholder approval shall not be
required for minor amendments to the Plan pursuant to Section 3.1 hereof
intended to benefit the administration of the Plan, for amendments necessitated
by changes in legislation governing the Plan, or for amendments that the
Committee deems necessary to obtain or maintain favorable tax, exchange control
or regulatory treatment of the Plan for future Participants or for Participating
Companies (as defined in Schedule A hereto).
10.7 Duration of Incentive Options. No Incentive Option may be granted
under this Plan more than 10 years after the earlier of the date that the Plan
is adopted by the Board or the date that the Plan is approved by shareholders as
provided in Section 10.8. Incentive Options granted before such date shall
remain valid in accordance with their terms.
10.8 Effective Date of Plan. This Plan shall be effective on the date
of its adoption by the Board, and Options may be granted hereunder at any time
after such adoption; provided, however, that the effectiveness of this Plan will
be retroactively revoked if it is not approved by the shareholders of the
Company in a manner that satisfies Treasury Regulation section 1.422-5 within 12
months of the date that the Board took action to adopt the Plan. All Options
granted under the Plan will become void immediately following the 12-month
anniversary of the date the Board adopted the Plan if such approval by
shareholders has not yet been obtained.
IN WITNESS WHEREOF, the undersigned officer has executed this Plan on
this the 28th day of April, 1997.
THERAPEUTIC ANTIBODIES INC.
By: /s/ MARTIN S. BROWN
----------------------------------------
Its: Chairman and Chief Executive Officer
----------------------------------------
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SCHEDULE A
RULES OF THE THERAPEUTIC ANTIBODIES INC. 1997 STOCK OPTION PLAN AS IT
APPLIES TO GRANTS OF UK OPTIONS TO PARTICIPANTS (AS HEREIN DEFINED)
The Plan shall apply to grants of UK Options to Participants with the following
amendments:
PREAMBLE
The following additional recital shall apply:
WHEREAS the Company intends that the Sub-Plan (as defined below)
becomes an approved share option scheme under the provisions of Schedule 9 to
the Income and Corporation Taxes Act of 1988.
1. DEFINITIONS
The definitions contained in the Plan shall apply where the contexts
permits with the following amendments:
1.1 The definition of "Affiliate" shall not apply but shall be
replaced by "Associated Company" which shall have the same
meaning as in Section 416 of ICTA 1988.
1.2 The definition of "Fair Market Value" shall not apply but shall
be replaced by "Market Value" which shall mean on any day the
average of the middle market quotations of Stock as derived from
the Daily Official List of The London Stock Exchange for the
three immediately preceding Dealing Days.
1.3 The definition of "Participant" shall be modified and in relation
to the Sub-Plan shall only include a director of any
Participating Company who is required to devote to his duties not
less than 25 hours per week (excluding meal breaks) or any
employee (other than one who is a director) of any Participating
Company, provided that the director or employee is not precluded
by paragraph 8 of Schedule 9 (defined or referred to in
sub-paragraph 1.4 below) from participating in the Sub-Plan.
1.4 The following additional definitions shall apply:
<TABLE>
<S> <C>
"Announcement Date" the date on which the annual or half
yearly results of the Company are announced
"Appropriate Period" the meaning given in Paragraph 15(2)
of Schedule 9
"Approval Date" the date on which the Sub-Plan is
approved by the Board of Inland
Revenue under Schedule 9
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
"Control" has the same meaning as in Section
840 of ICTA 1988
"Dealing Day" a day on which the London Stock Exchange
is open for the transaction of business
"ICTA 1988" The Income and Corporation Taxes Act of
1988
"UK Option" a right to subscribe for Stock granted
(or to be granted) in accordance with
the Rules of the Plan as amended by
this Sub-Plan
"Option Holder" an individual to whom a UK Option
has been granted or his personal
representatives
"Participating Company" the Company and any other company
of which the Company has Control and
which is for the time being nominated by the
Committee to be a Participating Company
"Schedule 9" Schedule 9 ICTA 1988
"Sub-Plan" the Plan as amended by this Schedule
"Subscription Price" the price at which each share of Stock
subject to a UK Option may be acquired
on the exercise of that UK Option
"Subsisting UK Options" a UK Option which has neither lapsed
nor been exercised
</TABLE>
References to Rules in this Sub-Plan are to the Rules of this
Sub-Plan.
2. ADMINISTRATION
In the event that the Committee impose performance conditions on the
exercise of all or part of a UK Option, such conditions shall be
objective and if having been set the conditions are capable of
amendment or waiver by the Committee then events must happen which
cause the Committee to consider acting fairly and reasonably that the
amended condition is no more difficult to satisfy than the condition it
replaced.
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3. ELIGIBILITY AND LIMITATIONS ON GRANTS
The provisions of Article IV of the Plan shall apply subject to the
following additional amendments and limitations:
3.1 The Committee shall only grant UK Options after the Approval Date
and only to persons who are Participants at the date of grant and
subject also to the following limitations:
3.1.1 the maximum number of shares of Stock over which an
individual may be granted a UK Option shall be determined
at the absolute discretion of the Committee save that any
UK Option granted to a Participant shall be limited and
take effect so that the aggregate Market Value of Stock
subject to that UK Option, when aggregated with the Market
Value of Stock subject to Subsisting UK Options, shall not
exceed L.30,000; and
3.1.2 the Subscription Price shall not be less than the nominal
value (par value) of shares of Stock nor, subject to Rule
6, the Market Value of shares of Stock on the date of
grant.
3.2 For the purposes of Rule 3.1.1:
3.2.1 UK Options shall include all UK Options granted under this
Sub-Plan and all options granted under any other scheme,
not being a savings related share option scheme, approved
under Schedule 9 and established by the Company or any
Associated Company thereof.
3.2.2 the Market Value of shares of Stock shall be calculated as
at the time the Options in relation to the shares of Stock
were granted or such earlier time as may have been agreed
in writing with the Board of Inland Revenue.
4. EXERCISE OF UK OPTIONS
The provisions of Article VI of the Plan shall not apply but shall be
replaced by the following provisions:
4.1 Any UK Option which has not lapsed may be exercised in whole or
in part at any time following the earliest of the following
events:
4.1.1 the third anniversary of the date of grant;
4.1.2 the death of the Option Holder; and
4.1.3 the Option Holder ceasing to be a director or employee of
any Participating Company by reason of injury, disability,
redundancy or retirement.
3
<PAGE> 17
4.2 A UK Option shall lapse on the earliest of the following events:
4.2.1 the tenth anniversary of the date of grant or such earlier
date as the Committee shall decide at the time of grant;
4.2.2 the first anniversary of the Option Holder's death;
4.2.3 six months following the Option Holder ceasing to be a
director or employee of any Participating Company, other
than by reason of his death;
4.2.4 unless a release has been effected under Rule 7.1, upon the
occurrence of any of the events set out in Article 8.3
although an Option Holder may exercise his UK Options in
whole or in part immediately prior to any such event; or
4.2.5 the Option Holder being adjudicated bankrupt.
4.3 No UK Option may be transferred, assigned or charged and any
purported transfer, assignment or charge shall cause the UK
Option to lapse forthwith. Each option certificate shall carry a
statement to this effect.
5. METHOD OF EXERCISE
Payment of the Option price shall be made only in cash and the other
provisions of Article 7.2 shall not apply to the Sub-Plan.
6. ADJUSTMENT UPON CORPORATE CHANGES
The provisions of Article 8.1 shall apply save that in relation to any
adjustments to the terms of UK Options the Committee shall apply the
following to the terms of any adjustment:
6.1 the aggregate amount payable on the exercise of a UK Option in
full shall not be increased;
6.2 the Subscription Price for shares of Stock shall not be reduced
below its nominal value (par value);
6.3 no adjustment shall be made without the prior approval of the
Board of Inland Revenue;
6.4 following the adjustment the shares of Stock continue to satisfy
the conditions specified in paragraphs 10 to 14 inclusive of
Schedule 9; and
6.5 no adjustment shall be made by the Committee which alters the
kind of shares of Stock with respect to which UK Options
hereunder may be granted nor may the Committee increase the
number of shares of Stock the subject of Subsisting UK Options.
4
<PAGE> 18
7. TAKEOVERS AND LIQUIDATIONS
7.1 In the event of the Committee electing to convert the UK Options
into options in the acquiring corporation as referred to in
Article 8.3, in the case of UK Options, the Option Holder may, by
agreement with the acquiring corporation, within the Appropriate
Period, release each Subsisting UK Option (the "Old Option") for
an option (the "New Option") which satisfies the conditions that
it:
7.1.1 is over stock or shares in the acquiring corporation or
some other company falling within paragraph (b) or
paragraph (c) of Paragraph 10, Schedule 9 which satisfy the
conditions specified in Paragraphs 10 to 14 inclusive of
Schedule 9;
7.1.2 is a right to acquire such number of stock or shares as has
on acquisition of the New Option an aggregate Market Value
equal to the aggregate Market Value of the Stock subject to
the Old Option on its release;
7.1.3 has a subscription price per stock or share such that the
aggregate price payable on the complete exercise equals the
aggregate price which would have been payable on complete
exercise of the Old Option; and
7.1.4 is otherwise identical in terms to the Old Option.
7.2 The New Option shall, for all other purposes of this Plan, be
treated as having been acquired at the same time as the Old
Option.
7.3 Where any New Options are granted pursuant to this Rule 7.1,
Rules 4, 6, 7, and 8 shall, in relation to the New Option, be
construed as if references to the Company and to the Stock were
references to the Acquiring Corporation or as the case may be, to
the other company to whose stock or shares the New Option
relates, and to the stock or shares in that other company, but
references to Participating Company shall continue to be
construed as if references to the Company were references to
Therapeutic Antibodies, Inc.
7.4 The exercise of an Option pursuant to the preceding provisions of
this Rule 7 shall be subject to the provisions of Rule 8 below.
8. MANNER OF EXERCISE OF UK OPTIONS
8.1 No UK Option may be exercised by an individual at any time when
he is precluded by paragraph 8 of Schedule 9 from participating
in the Plan.
8.2 No UK Option may be exercised at any time when the Stock which
may be thereby acquired does not satisfy the conditions specified
in paragraphs 10 to 14 of Schedule 9.
5
<PAGE> 19
9. ADMINISTRATION AND AMENDMENT
The provisions of Article III of the Plan shall apply save that no
amendment made by the Committee to the Plan shall have effect until
approved by the Board of Inland Revenue.
10. SAR
The Company will not award SARs to Participants pursuant to the
Sub-Plan. The reference in the preamble to the right to receive
compensation due to the increase in the value of the Common Stock of
the Company and Clause 4.5 shall not apply to the Sub-Plan.
6
<PAGE> 1
EXHIBIT 10.22
ALTANA, INC.
THERAPEUTIC ANTIBODIES INC
DISTRIBUTION AGREEMENT
October 2, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. RECITALS............................................................ 1
2. DEFINITIONS......................................................... 1
3. CLINICAL TRIALS..................................................... 4
4. REGISTRATION........................................................ 4
5. MANUFACTURING....................................................... 4
6. APPOINTMENT OF AUTHORIZED DISTRIBUTOR............................... 5
7. DISTRIBUTION OF PRODUCTS............................................ 5
8. PAYMENTS............................................................ 7
9. RECORDS AND REPORTING............................................... 7
10. ORDER PROCEDURE..................................................... 8
11. SHIPMENT, RISK OF LOSS, AND DELIVERY................................ 10
12. PRODUCT MANAGEMENT ASSISTANCE....................................... 10
13. COMPLIANCE.......................................................... 10
14. TRADEMARKS AND PROPRIETARY RIGHTS................................... 10
15. DURATION AND TERMINATION OF AGREEMENT............................... 12
16. INDEMNIFICATION..................................................... 14
17. REPRESENTATIONS AND WARRANTIES...................................... 15
18. DISCLAIMER OF WARRANTIES; LIMITED LIABILITY......................... 15
19. CONFIDENTIALITY..................................................... 16
20. ENFORCEMENT......................................................... 17
21. GENERAL............................................................. 17
</TABLE>
<PAGE> 3
DISTRIBUTION AGREEMENT
This Distribution Agreement is made and entered into this ____ day of
October, 1997, by and between ALTANA, INC., a New York corporation located in
Melville, New York ("Altana") and THERAPEUTIC ANTIBODIES INC, a Delaware
corporation located in Nashville, Tennessee ("TAb").
W I T N E S S E T H:
1. Recitals.
1.1 TAb has developed and is the sole owner of all worldwide
right, title, and interest in and to certain antibody products.
1.2 TAb is seeking to obtain registration and marketing
approval for certain products from the United States Food and Drug
Administration so that such products may be distributed in the United States of
America and its territories and possessions.
1.3 Altana has agreed to distribute certain antibody products
of TAb on the terms and subject to the conditions set forth herein.
2. Definitions.
2.1 "Clinical Trials" shall mean any and all investigations,
evaluations, or experiments that are conducted on human beings in relation to
the potential use of each Product.
2.2 "Commencement Date" means, with respect to each Product
within the Territory, the date on which TAb receives Product Approval (as
defined herein).
2.3 "Confidential Information of TAb" means all information
obtained or developed by Altana which relates to TAb's business or the Products,
regardless of the form in which such information is transmitted, including,
without limitation, all such information previously obtained by Altana pursuant
to the Confidentiality Agreement dated April 1, 1995, between TAb and Altana
(the "Confidentiality Agreement"), all information furnished to Altana by TAb in
relation to the Products or to TAb, all Results, and all Trade Secrets. The
following shall not be considered Confidential Information of TAb for purposes
hereof:
(a) Information that is already in the possession of Altana at
the time it is received from TAb or developed on TAb's behalf, so long as Altana
can provide satisfactory written documentation of such;
(b) Information received by Altana from a Person which has the
right to disclose the same, so long as the receiving party promptly notifies TAb
of its belief that the information is excepted under the terms of this
subsection;
(c) Information that is or becomes publicly available without
the fault of Altana; or
<PAGE> 4
(d) Information that Altana is obligated to produce pursuant
to an order of a court of competent jurisdiction or a valid administrative
order; provided that if Altana is subject to such an order, it must promptly
notify TAb and cooperate with TAb's efforts to contest or limit the scope of
such order.
In the event of a dispute regarding the applicability of the above exceptions to
the definition of Confidential Information of TAb, Altana shall have the burden
of producing clear and convincing proof that the information should be excepted
from the definition of Confidential Information of TAb.
2.4 "Confidential Information of Altana" means all information
obtained by TAb which relates to Altana's business, existing or potential
customers of Altana, and product marketing data of Altana, regardless of the
form in which such information is transmitted. Neither the Confidential
Information of TAb nor the following shall be considered the Confidential
Information of Altana for purposes hereof:
(a) Information that is already in the possession of TAb at
the time it is received from Altana, so long as TAb can provide satisfactory
written documentation of such;
(b) Information received by TAb from a Person which has the
right to disclose the same, so long as the receiving party promptly notifies
Altana of its belief that the information is excepted under the terms of this
subsection;
(c) Information that is or becomes publicly available without
the fault of TAb; or
(d) Information that TAb is obligated to produce pursuant to
an order of a court of competent jurisdiction or a valid administrative order;
provided that if TAb is subject to such an order, it must promptly notify Altana
and cooperate with Altana's efforts to contest or limit the scope of such order.
In the event of a dispute regarding the applicability of the above exceptions to
the definition of Confidential Information of Altana, TAb shall have the burden
of producing clear and convincing proof that the information should be excepted
from the definition of Confidential Information of Altana.
2.5 "Confidential Information" means collectively Confidential
Information of TAb and Confidential Information of Altana.
2.6 "Documentation" means any and all labels, instructions
(including without limitation instructions for storage and handling), manuals,
specifications, warnings and similar documentation regarding the Products
prepared by or for TAb.
2.7 "End User" means a Person who purchases the Product for
such Person's own use or for administration to patients, and not for
redistribution.
2.8 "FDA" means the United States Food and Drug Administration
or any successor governmental agency performing similar functions.
2
<PAGE> 5
2.9 "Net Sales Revenue" means the aggregate amount billed by
Altana, directly or indirectly, for the sale of the Products, provided that Net
Sales Revenue shall not include cash discounts, allowances, sales tax (if any),
and returns actually credited. If, as a result of governmental action, customs
clearance costs should materially increase over levels as of the date of this
Agreement, then such customs clearance costs shall be included as a reduction of
Net Sales Revenue for purposes of determining the Altana purchase price of the
Products.
2.10 "Person" means an individual, corporation, company,
partnership, trust, association, governmental authority or other entity.
2.11 "Product" or "Products" means certain antibody products
that were developed and are owned by TAb, each of which is described in Schedule
1.1.
2.12 "Product Approval" means final FDA approval to market and
sell each Product commercially in the Territory for use in humans.
2.13 "Proprietary Rights" means the rights and properties
described in Section 14.9.
2.14 "Regulatory Filing" shall mean any filing of or
equivalent to Notice of Claimed Investigational Exemption for a New Drug
("IND"), Product License Application("PLA"), Establishment License Application
("ELA"), or New Drug Application ("NDA") in the United States pursuant to the
regulations and procedures required by any regulatory authority in the Territory
for the testing, manufacture, distribution, sale, or specific use of the
Products.
2.15 "Results" means all technology, ideas (whether or not
copyrightable), know-how, data, improvements, modifications, innovations,
inventions, methodology, processes, techniques, and results, tangible and
intangible, developed or discovered by TAb or Altana in connection with the
clinical trials, registrations, and approvals contemplated by Sections 3 and 4,
or otherwise in connection with the Products or this Agreement.
2.16 "Territory" means the United States of America and its
territories and possessions.
2.17 "Trademarks" means all trademarks, trade names, and other
designations of origin used on or in connection with the Products, including,
without limitation, CroTAb(R), DigiTAb(TM), and TriTAb(TM).
2.18 "Trade Secrets" means all techniques, technology,
processes, and know-how related to production and purification of polyclonal
antibodies developed by or on behalf of TAb, including (a) the design and
syntheses of immunogens which can produce high affinity antibodies in large
quantities, (b) the selection, immunization, and handling of animals to produce
therapeutic polyclonal antibodies (including breed comparison studies), (c) the
aseptic collection and handling of antisera, and (d) closed systems for fully
processing and purifying antibodies; types and configuration of processing
equipment; lists of suppliers; development plans; methods of operation and
management; cost control methods; methods of setting prices; reporting methods;
quality assurance programs; information systems; training manuals; databases;
production solutions; financial information; customer and prospective customer
lists; and all other trade secrets of TAb.
3
<PAGE> 6
3. Clinical Trials.
3.1 TAb has completed Phase II/III Clinical Trials for its
antivenom product known as CroTAb(R). As of the date hereof, TAb is conducting
Phase II/III Clinical Trials for its digoxin antibody product known as
DigiTAb(TM) and is planning to conduct Clinical Trials for its tricyclic
antibody product known as TriTAb(TM). TAb is solely responsible for paying for,
conducting, monitoring and using commercially reasonable efforts to complete all
Clinical Trials necessary for Product Approval for each of the Products in the
Territory.
3.2 TAb shall at its cost promptly provide Altana with
relevant safety and efficacy information in relation to each Product, as it
becomes aware of the same from time to time, including information relating to
any adverse reactions to a Product.
4. Registration.
4.1 TAb shall use all commercially reasonable efforts to
obtain and maintain Product Approvals for each Product. TAb shall be responsible
for the preparation and filing with the FDA of all Regulatory Filings required
by the FDA for each Product at its own expense, including the payment of FDA
user fees. TAb shall provide Altana an opportunity to review the PLA for each
Product prior to submission thereof to the FDA. TAb shall provide Altana with
written certification that the Product has obtained Product Approval, promptly
upon receipt of the respective Product Approval. Altana agrees that it shall not
modify or alter the Products or their packaging and promotional materials in any
respect, whether in relation to design, content, manufacture, use or otherwise,
without the prior written consent of TAb.
4.2 All registrations and approvals obtained for the Products
hereunder shall be the sole and exclusive property of TAb. All registrations and
approvals shall be held in the name of TAb. All Results shall be the sole and
exclusive property of TAb, and Altana hereby assigns to TAb any and all right,
title, and interest it may now or in the future have in the Results.
5. Manufacturing.
5.1 At its own expense, TAb has developed production
facilities in the United Kingdom and Australia for the manufacture of the
Products.
5.2 The Products supplied by TAb to Altana shall not be
adulterated or misbranded within the meaning of the Federal Food, Drug, and
Cosmetic Act and shall be manufactured in compliance with (i) current Good
Manufacturing Practices as promulgated by the FDA under the Federal Food, Drug
and Cosmetic Act, as amended, (ii) specifications formulated by TAb and approved
by the FDA (the "Specifications") to be attached hereto as Schedule 5.2
following such approval, and (iii) the Product Approvals. The Product will be
manufactured, packaged, and labeled entirely by TAb and/or a third party
designated by TAb. TAb shall provide Altana an opportunity to review and advise
TAb in regard to the proposed package design for the Product prior to use of
such package design for sales pursuant to this Agreement.
4
<PAGE> 7
6. Appointment of Authorized Distributor.
6.1 TAb appoints Altana as an exclusive distributor for each
Product solely within the Territory and solely for human use so long as Altana
meets the minimum sales requirements set forth on Schedule 7.4; provided,
however, that TAb and its designees shall maintain the right to market and
distribute CroTAb(R) to zoos and military purchasers in the Territory. The
appointment shall be effective on the respective Commencement Dates, and shall
terminate in accordance with the provisions of Section 15 below. Subject to the
provisions of Section 14 below, Altana is authorized by TAb to use the Trademark
which corresponds to the approved Product following each Commencement Date and
for the term of this Agreement thereafter solely in connection with Altana's
advertisement, marketing, promotion, distribution and sale of such Product in
the Territory. No rights are granted to Altana with respect to non-human Product
applications; nothing herein shall restrict TAb's ability to develop,
manufacture, market, and sell Products for non-human applications.
6.2 The rights and licenses granted to Altana under this
Agreement are personal, non-transferable, non-assignable, are limited solely to
the Products, and in all cases are granted without the right to assign or
sublicense. Altana's appointment only grants to Altana a right to market,
advertise, promote, sell, and distribute Products in the Territory and does not
transfer any right, title, or interest in the Proprietary Rights to Altana.
6.3 Altana agrees that it shall not advertise, promote,
distribute, sell, or otherwise utilize the Products and/or Trademarks outside of
the Territory, and TAb agrees that it will not authorize any of its distributors
to supply the Products into the Territory; provided, however, that TAb and its
designees retain the right to market and distribute CroTAb(R) to zoos and
military purchasers in the Territory. Altana shall take such reasonable measures
as TAb requests to ensure that the customers of Altana do not sell CroTAb(R) to
zoos and military purchasers in the Territory, and TAb shall take such
reasonable measures as Altana requests to ensure that its designees and
customers do not sell Products within the Territory except for sales of
CroTAb(R) to zoos and the military.
6.4 Altana pricing practices for Products shall not include
lower prices or concessions designed to enhance sale of other Altana products.
Altana agrees that it shall not employ any of the Products as a premium or
give-away without the prior written consent of TAb. Any cash discount of greater
than two percent (2%) and/or any allowance other than initial stocking
allowances must be reviewed and approved by TAb.
7. Distribution of Products.
7.1 Altana agrees that, beginning on the respective
Commencement Dates for the Products in the Territory and continuing through the
term of this Agreement, it shall vigorously and diligently, advertise, market,
promote, sell and distribute the Products throughout the Territory in strict
accordance and conformity with the terms of this Agreement. Without limiting the
foregoing, the distribution efforts of Altana hereunder shall be at least as
great as the efforts exerted by Altana to distribute and sell its own products.
Altana shall advertise, promote, sell and distribute the Products in the
Territory through all sales channels appropriate for pharmaceutical products as
chosen by Altana and reviewed by TAb in accordance with Section 7.3.
5
<PAGE> 8
7.2 Except as expressly set forth in this Agreement, TAb shall
not supply the Products to any Person located within the Territory other than
Altana for the term of this Agreement. Altana agrees that it shall not, within
the Territory, develop, manufacture, assemble, advertise, promote, sell or
distribute any products or goods competitive with any Product or which by reason
of their design, or packaging may be reasonably confused with any Product after
the corresponding Commencement Date.
7.3 Altana shall be solely responsible for its marketing plan,
but shall review the plan with TAb each calendar quarter. TAb acknowledges that
customer lists are Altana's property and are confidential except that TAb shall
have unrestricted use of the customer lists (without reference or liability to
Altana) in the event of uncured breach of this Agreement by Altana.
7.4 The annual minimum acceptable Net Sales Revenue for each
Product ("Minimums") shall be fifty percent (50%) of the Product sales estimates
agreed by TAb and Altana, as specified in Schedule 7.4. Failure to meet the
Minimums on any Product at any time after the second anniversary of the
Physicians Launch Date (defined herein) for such Product shall entitle TAb to
terminate this Agreement with respect to the Product for which the Minimums were
not met, following thirty (30) days' written notice, unless (a) Altana pays TAb,
within the notice period of thirty (30) days, the difference between (i) the
amount TAb would have received in royalty and other payments hereunder if the
Minimums for such period had been met, and (ii) the amount actually received by
TAb for such period, or (b) TAb fails to meet its supply obligations for the
Product at issue as set forth in Section 10 in the two successive Purchase
Periods (defined herein) preceding Altana's failure to meet the Minimums. The
Physicians Launch Date for each Product shall be three (3) months following the
initial receipt by Altana of stock of such Product that has received Product
Approval and that is supplied in accordance with Section 5.2. The Minimums for
the period that begins on the second anniversary of the Physicians Launch Date
and ends on the next anniversary of the Commencement Date shall be reduced pro
rata to reflect the proportionate amount of the year at issue. Thereafter, the
full Minimums shall apply. The parties hereto shall review and may modify the
Minimums on each anniversary of the Physicians Launch Date for a Product if
there is mutual agreement. Any modification of the Minimums must be in writing
and must be signed by an authorized representative of both parties. The parties
agree that the occurrence of any of the following events or conditions may
negatively affect the marketability of the Products: (1) the introduction of
directly competitive products, (2) final labeling for CroTAb(R) that does not
specifically allow for the promotion of an improved safety profile (but only if
the Wyeth Crotalid antivenom is commercially available in the Territory), and
(3) final labeling for DigiTAb(TM) that is not at least equal to the DigiBind
labeling regarding safety, efficacy, and indications. If any of these things
occur, the parties will promptly negotiate new Minimums which will become
effective on the date of the occurrence, provided, that the newly negotiated
Minimum for each Product shall not be less than twenty-five percent (25%) of the
Product sales estimates specified for such Product on Schedule 7.4.
7.5 Altana shall insure that its distribution of the Products
and its use of the Trademarks complies with all applicable laws and regulations
within the Territory.
6
<PAGE> 9
7.6 Altana shall provide its sales force with training,
technical support and other assistance appropriate in promoting the Products
based upon product management assistance provided by TAb including attendance by
at least one TAb representative at at least one Altana training meeting covering
each Product. TAb shall supply Altana with one (1) copy of Documentation and
other TAb literature so that Altana may carry out such training. Altana sales
representatives will be conversant with the technical language conventional to
the Products and similar products in general pursuant to documentation supplied
by TAb.
7.7 Altana shall not make representations, warranties, or
guarantees with respect to the specifications, features or efficacy of the
Products that are inconsistent with the literature distributed by TAb, including
all warranties and disclaimers contained in the Documentation.
7.8 TAb will advise Altana promptly concerning any market
information that comes to TAb's attention regarding the Products or the
continued competitiveness of the Products in the marketplace outside the
Territory. Altana will advise TAb promptly concerning any market information
that comes to Altana's attention regarding the Product, its market position or
the continued competitiveness of the Products within the Territory.
7.9 Altana shall transport and store the Products in
accordance with instructions provided by TAb and all applicable laws and
regulations.
7.10 Altana agrees not to promote, sell, distribute, or use
for any purpose whatsoever any Products which Altana knows are damaged or
spoiled. Altana shall not jeopardize the integrity of the container closure
system for the Products.
7.11 Altana shall assign responsibility for the promotion,
distribution, and sale of the Products to at least eighty-five percent (85%) of
its Savage Laboratories division sales representatives at all times following
the initial Commencement Date. From the initial Commencement Date until the
second anniversary of the initial Physicians Launch Date, each such sales
representative shall make sales calls to emergency rooms to promote and sell the
Products an average of at least four times per year and to poison control
centers to promote and sell the Products an average of at least six times per
year, and during such sales calls, the Products shall be the primary detail.
7.12 Altana shall store, handle, and use the Products in
accordance with the Documentation.
7.13 Altana shall be the primary contact for receipt of
post-marketing adverse event reports from the medical community. TAb and Altana
will jointly evaluate each such adverse event. TAb shall be responsible for
reporting such events to the FDA.
8. Payments.
Each party shall make payments as specified on Schedule 8.1.
7
<PAGE> 10
9. Records and Reporting.
9.1 Altana shall furnish TAb within thirty (30) days
following each March 31, June 30, September 30, and December 31 of each calendar
year, a complete and accurate statement for the immediately preceding quarterly
period, said statement to be certified as accurate by the Senior Financial
Officer of the division of Altana which manages distribution of the Products,
and to include the following information: (a) total Net Sales Revenue on an
aggregate basis; (b) number and gross selling price of Product sold; (c)
information as to returns actually credited; (d) current inventory levels for
Products; and (e) such other information as TAb reasonably may request. All
amounts shall be stated in U.S. dollars.
9.2 Altana agrees that at all times during the existence of
this Agreement, and for a period of seven (7) years thereafter, it will keep
accurate books of account and other records containing all details relating to
the distribution and sale of Products, and the calculation of Net Sales Revenue.
Altana agrees that these books of account and other records shall be kept in
accordance with the legal regulations in existence in the Territory and
carefully preserved for at least seven (7) years.
9.3 Where TAb is not satisfied that statements made to it by
Altana are accurate, TAb may give Altana written notice requesting Altana to
confirm the accuracy of the statements made to TAb by conducting an internal
review. Altana must provide a written response which confirms or corrects the
statements within thirty (30) days. If Altana fails to provide its response or
if TAb is still not satisfied, Altana agrees that TAb may inspect the books of
account of Altana for the purpose of ascertaining or confirming the accuracy of
the statements rendered hereunder. TAb shall also have the right to have an
independent audit conducted by any national firm of independent public
accountants ("Independent Auditors") of the books of account of Altana for the
purpose of ascertaining or confirming the accuracy of the statements rendered
hereunder. If an inspection by Independent Auditors reveals that Net Sales
Revenue and/or corresponding payments have been understated in any report, then
Altana shall pay to TAb the amount understated, immediately upon demand, plus
interest accrued thereon from the date due at a rate equal to the prime rate
announced by Citibank, N.A., New York, New York, on the date that the
Independent Auditors inform TAb the amount has been understated. The cost of
these inspections by the Independent Auditors shall be borne by TAb; provided,
however, that if an inspection reveals that a statement rendered hereunder has
understated Net Sales Revenue and/or corresponding payments by greater than five
percent (5%), then the costs of such inspection shall be borne by Altana.
10. Order Procedure.
10.1 Purchase Orders in the First Two Years of Distribution.
Within thirty (30) days of the Commencement Date for each Product, Altana shall
submit a written order for the amount of each corresponding Product that it
commits to purchase within one (1) year (a "Purchase Order in the First Two
Years") from each respective Commencement Date. Once during each calendar
quarter thereafter (each calendar quarter is herein referred to as a "Purchase
Period") until the second anniversary of each Commencement Date, Altana shall
provide TAb any additional Purchase Order in the First Two Years. Each Purchase
Order in the First Two Years shall be accompanied by a standard form of purchase
order indicating the quantity of each Product to be purchased, a non-refundable
payment of thirty-three percent (33%) of the Purchase Price (defined herein) for
the purchase order, and an estimated delivery schedule for such Product. TAb
shall use its best efforts to supply each Product in accordance with any
Purchase Order in the First Two Years made by Altana. Because of supply
variables, no Purchase Order in the First
8
<PAGE> 11
Two Years shall be binding upon TAb unless and until accepted by TAb in writing.
All orders shall be subject to delays in production or delays due to causes
beyond TAb's control. Should TAb not accept any one particular Purchase Order in
the First Two Years, TAb (a) shall credit the payment accompanying the purchase
order toward future orders, or (b) at the request of Altana, shall refund the
entire payment accompanying the purchase order or the proportionate part thereof
requested by Altana if Altana cancels a purchase order in its entirety or in
part due to such delays. Such purchase orders and any acknowledgment thereof,
whether printed, stamped, typed, or written shall be governed by the terms of
this Agreement, and none of the provisions of such purchase orders or
acknowledgments shall be enforceable except those specifying quantity ordered,
delivery dates, and invoice information, and only if such provisions do not
conflict with the terms hereof. All nonrefundable payments shall be credited in
full against the Purchase Price on the corresponding Purchase Order in the First
Two Years.
10.2 Preliminary Forecasts for Subsequent Purchase Orders.
Within thirty (30) days of each Commencement Date, Altana shall provide TAb with
a good-faith estimate of the amount of the corresponding Product which Altana
shall purchase from TAb in the first calendar quarter beginning after the second
anniversary of such Commencement Date (the "Preliminary Forecasts"). Within
ninety (90) days after each such forecast is given and on the first day of each
calendar quarter thereafter, Altana shall provide TAb with a forecast for the
quarter that follows the last quarter of the preceding forecast and shall,
within the limitations set forth herein, revise and update each quarterly
forecast provided earlier, and deliver such updated and revised forecast to TAb
prior to the start of each quarter during the term of this Agreement. Each such
revised and updated forecast shall include Altana's good-faith estimate of the
amount of each Product Altana shall purchase from TAb during each Purchase
Period beginning one (1) year from the date such forecast is due to TAb (each
quarterly forecast required by this Section 10.2, including all Preliminary
Forecasts, is herein referred to as a "Forecast").
10.3 Subsequent Purchase Orders. Altana may revise the amount
of Product estimated for purchase in any Preliminary Forecast, until one year
prior to the start of each Purchase Period. In the Forecast which is due to TAb
on or before one year prior to the start of a given Purchase Period, Altana
shall indicate the amount of each Product which it thereby commits to purchase
from TAb within one (1) year from the start of such Purchase Period (the
"Purchase Order"). The quantity of any Product to be ordered pursuant to a
Purchase Order shall not be less than seventy-five percent (75%), nor greater
than one hundred twenty-five percent (125%) of the quantity indicated in the
Preliminary Forecast for such Product; provided, however, that TAb shall use its
best efforts to supply the Products for orders by Altana in excess of such
amounts. Each Purchase Order shall be accompanied by a standard form of purchase
order indicating the quantity of each Product to be purchased, a nonrefundable
payment of thirty-three percent (33%) of the Purchase Price (defined herein) for
the Purchase Order, and an estimated delivery schedule for such Product, which
shall not commence sooner than one (1) year from the date of such Purchase
Order. Such purchase orders and any acknowledgment thereof, whether printed,
stamped, typed, or written shall be governed by the terms of this Agreement, and
none of the provisions of such purchase orders or acknowledgments shall be
enforceable except those specifying quantity ordered, delivery dates, and
invoice information, and only if such provisions do not conflict with the terms
hereof. Any nonrefundable payments shall be credited in full against the
Purchase Price on the corresponding Purchase Order.
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10.4 Delivery Instructions. On or before six (6) months prior
to the start of a given Purchase Period, Altana shall indicate the amount of
each Product which it requires to be delivered to Altana during the Purchase
Period (the "Initial Delivery Amount"). The Initial Delivery Amount shall not be
less than fifty percent (50%), nor greater than one hundred percent (100%), of
the quantity indicated in the Purchase Order in the First Two Years or Purchase
Order for such Product. Altana reserves the right to reject, in whole or in
part, any shipments of Products that have a shelf life of less than eighteen
(18) months (as indicated on the corresponding FDA-approved label). To the
extent that the Initial Delivery Amount is less than the amount indicated in the
Purchase Order in the First Two Years or Purchase Order (such difference being
the "Delayed Delivery Amount"), Altana hereby commits to accept delivery of the
Delayed Delivery Amount prior to the end of one (1) year from the start of the
Purchase Period to which such Delayed Delivery Amount pertains and to pay TAb
for such Delayed Delivery Amount in accordance with the terms hereof. Altana
shall indicate an acceptable delivery date for the Delayed Delivery Amount not
less than ninety (90) days prior to such delivery date.
11. Shipment, Risk of Loss, and Delivery.
11.1 Altana shall take delivery of all Product C.I.F. the John
F. Kennedy Airport at New York, New York ("JFK") or C.I.F. such other location
as the parties may agree. TAb will be responsible for and pay all shipping,
freight, and insurance charges for delivery to JFK or such other agreed
location, and Altana will be responsible for and pay all customs clearance
costs.
11.2 All risk of loss, spoilage, or damage shall pass to
Altana upon delivery by TAb to JFK or to Altana, whichever first occurs. Unless
Altana advises TAb to the contrary in writing, TAb may make partial shipments of
Altana's orders, to be separately invoiced and paid for when due.
12. Product Management Assistance.
TAb shall provide Altana with reasonable product management
assistance based on TAb's experience with the Product, its business contacts,
and its relationships with opinion leaders, subject to availability of
appropriate personnel. Such assistance shall be for informational purposes only,
and Altana shall have sole responsibility for determining the adequacy of such
information.
13. Compliance.
13.1 TAb agrees that its conduct in performing its obligations
under this Agreement shall conform in all material respects to all applicable
laws and regulations of the U.S. and foreign governments (and political
subdivisions thereof).
13.2 Altana agrees that its conduct in performing its
obligations under this Agreement shall conform in all material respects to all
applicable laws and regulations of the U.S. and foreign governments (and
political subdivisions thereof).
14. Trademarks and Proprietary Rights.
14.1 "CroTAb(R)" is a registered trademark of TAb. TAb has
made application to register the trademarks, DigiTAb(TM) and TriTAb(TM) in the
United States.
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14.2 Altana shall not use any alternative trademark or other
designation of origin on or in connection with Products unless and until Altana
has given at least ninety (90) days' prior written notice to TAb and TAb has
approved the use of such trademark in writing.
14.3 For the purpose of protecting its trademark rights and
any registrations of the Trademarks, TAb shall have the right to supervise and
control Altana's use of TAb's Trademarks. Altana shall not have any right,
title, or interest, express or implied, in the Trademarks. Altana's right to use
any Trademarks developed by TAb for use with the Product shall be nonassignable
and nonexclusive as to distribution of CroTAb(R) to zoos and military purchasers
in the Territory and as to distribution of any Product outside of the Territory.
14.4 Altana agrees to use only those labels, imprints, and
other devices, and only the format or formats and design or designs of the
Trademarks which are approved by TAb in writing. TAb shall have the right to
restrict the use of a particular design or format of the Trademarks to a
particular use, within the scope of this Agreement, and require that said format
or design of the Trademarks be put to no other use.
14.5 Altana shall submit to TAb for its written approval,
which shall not be unreasonably withheld or delayed, prior to any use or
dissemination thereof, two (2) copies of all labels, designs, cartons,
containers, or other packaging or wrapping, and all related advertising,
promotional, and display material (collectively, "Packaging and Promotional
Material"). TAb's trade name and relevant Trademarks shall be prominently
displayed on all labels and other Packaging and Promotional Material. Altana
shall make no use whatsoever of any Packaging and Promotional Material prior to
receiving TAb's written approval pursuant hereto. After samples of Packaging and
Promotional Material have been approved as provided herein, Altana shall not
depart therefrom in any material respect without TAb's prior written consent.
14.6 TAb shall respond to all requests for approval required
by this Section 14 within fourteen (14) days of receipt of Altana's written
request and accompanying Product and/or accompanying materials. No approval
shall be effective unless in writing and signed by a TAb officer. If TAb has not
responded within fourteen (14) days, the material will be deemed to have been
approved.
14.7 Altana agrees that it shall not adopt or use for any
purpose any variation of the Trademarks or any word, design, or mark likely to
be confused with the Trademarks. Altana further agrees not to register during
the term of the Agreement and thereafter, in any country any name, word, design,
logo, or mark resembling or confusingly similar to any of the Trademarks.
14.8 Altana agrees not to advertise, promote, sell,
distribute, or use for any purpose whatsoever any Product or Packaging and
Promotional Material which Altana knows are damaged or spoiled. Altana shall not
jeopardize the integrity of the container closure system for the Products.
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<PAGE> 14
14.9 Altana acknowledges that all Trademarks and all rights
and goodwill pertaining thereto are the exclusive property of TAb. Altana
further acknowledges that TAb is the sole and exclusive owner of all present and
future right, title, and interest in and to the Products, including, without
limitation, (a) all worldwide patent rights, including registrations and
applications, Product Approvals, Regulatory Filings, copyrights, and related
rights, in or related to the Products and any present and future renewals
thereof, (b) all rights (including copyrights) in the appearance, packaging,
design, trade dress, and other identifying features of the Products and the
Packaging and Promotional Materials, (c) the Trade Secrets and the Results, (d)
any adaptations, additions, derivatives, translations, and/or improvements to
any of the foregoing, and (e) all other intangible or intellectual property
rights in the Products. The Trademarks and other rights and properties described
in this Section 14.9 are referred to collectively as the "Proprietary Rights."
14.10 Altana agrees it will not challenge, oppose or cancel,
or permit any act or thing that would endanger any right of TAb in any Product
or the Proprietary Rights, nor will Altana claim any proprietary interest in any
Product or the Proprietary Rights. Altana agrees that its use of Trademarks
shall inure to the benefit of TAb, and that Altana shall not, at any time,
acquire any rights in Trademarks by virtue of any use it may make hereunder.
Altana shall not apply to register rights in the Product or the Proprietary
Rights with any governmental authority.
14.11 During the term of this Agreement, each party shall
promptly give the other notice of:
(a) any claim or allegation that the exercise of the rights
under this Agreement constitutes an infringement of the rights of any third
party; and
(b) any third party's infringement or threatened
infringement of any of the Proprietary Rights of which it becomes aware.
14.12 Altana will cooperate with TAb at TAb's expense in any
actions taken against any Person infringing any of TAb's patents and trademarks
related to the Products. TAb shall promptly enforce its rights against any
Person that is believed to be infringing TAb's patents and trademarks related to
the Products in a manner that has a substantial negative impact on Altana's
ability to market the Product. TAb shall have control over any related
prosecution or proceeding and shall bear all costs in connection with such
prosecution or proceeding.
14.13 As both a covenant by Altana and a condition of TAb's
authorization of Altana's distribution, Altana will include on all Packaging and
Promotional Material, all patent, trademark, and other notices of proprietary
rights reasonably required by TAb. Altana, at all times when it uses a
Trademark, shall conspicuously note that the Trademark is used under license
from TAb, and shall indicate TAb's ownership of the Trademark along with the
registration symbol "(R)" for registered trademarks (or the designation TM where
applicable as specified by TAb). Altana agrees not to alter, erase, deface or
overprint any such notice on any item provided by TAb. Altana agrees that all
Packaging and Promotional Material shall identify TAb as the source of the
Product, and agrees to comply with TAb's reasonable instructions in this regard.
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<PAGE> 15
15. Duration and Termination of Agreement.
15.1 This Agreement is effective on the date first written
above and, unless earlier terminated in accordance with the provisions hereof,
this Agreement shall terminate five (5) years from the last of the three (3)
Commencement Dates, but in any event, no later than September 30, 2005. On such
expiration date of the initial term, the term of this Agreement shall be
automatically continued for a successive period of five (5) additional years for
all Products except for any Product previously terminated by Altana pursuant to
Section (8) of Schedule 8.1; provided, if Altana has failed to meet the Minimums
for any Product pursuant to Section 7.4, this Agreement shall not be renewed if
either party provides sixty (60) days' notice prior to expiration of the term of
its intent not to renew.
15.2 If either party materially breaches any of its
obligations under this Agreement, the other party may give notice of such
material breach in accordance with the provisions of Section 21.2 hereof. If the
breaching party does not cure the material breach within thirty (30) days from
the date of receipt of the notice, then the notifying party may terminate this
Agreement.
15.3 Either party hereto shall have the right to terminate
this Agreement immediately and without prior notice in the event that the other
party files a petition for voluntary bankruptcy, has a petition for involuntary
bankruptcy filed against it (which petition is not withdrawn within sixty (60)
days of such filing), is adjudicated to be or becomes bankrupt, places any of
its property in liquidation for the purpose of meeting claims of its creditors,
is otherwise unable to pay its debts as such debts become due (including, but
not limited to, payments due hereunder), or ceases to function as a going
concern.
15.4 The obligations of both parties under Sections 8, 9, 11,
13, 14, 15, 16, 18, 19, 20 and 21 hereof shall survive the expiration or
termination of this Agreement.
15.5 Upon termination of this Agreement as a result of an
uncured breach by TAb of its obligations as set forth in Section 15.2, TAb shall
promptly reimburse Altana any payments by Altana of thirty-three percent (33%)
of the Purchase Price for any unfilled Purchase Orders. Upon termination or
expiration of this Agreement for any reason, TAb shall not have any liability
for actual or alleged loss of goodwill, or on account of any leases or overhead
allocated to any Product. Altana acknowledges and agrees that it has no
expectation and has received no assurances that its business relationship with
TAb will continue beyond the stated term of this Agreement or its earlier
termination in accordance with this Section 15.
15.6 Upon expiration or termination of this Agreement (a)
Altana may continue to sell and distribute the Products to the extent necessary
to fulfill all orders placed by End Users prior to the date of such termination,
and (b) if Altana has existing inventory of the Products in excess of orders
placed prior to the date of such termination, Altana shall have a period of six
(6) months from the date of such termination (in either case, the "Sell-Off
Period") to advertise, promote, sell and distribute such existing inventory. All
terms and conditions of this Agreement shall remain in full force and effect
during any such Sell-Off Period. Immediately upon such expiration or termination
or, if applicable, upon the expiration of the Sell-Off Period, (i) Altana shall
cease all use of the Products, the Packaging and Promotional Materials, the
Trademarks, and all other Proprietary Rights, including all advertisement,
promotion, sale, and distribution of the Products, (ii) all rights granted by
TAb herein shall revert to TAb, (iii) Altana shall destroy all Packaging and
Promotional Material and certify the same to TAb, and (iv) Altana shall prepare
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<PAGE> 16
and deliver to TAb a final accounting. Any and all amounts shown on such
inventory statement and final accounting shall be due and payable no later than
thirty (30) days following the date of termination or expiration, or if
applicable, the expiration of the Sell-Off Period.
15.7 Notwithstanding the above, should TAb terminate this
Agreement pursuant to Section 15.2 or 15.3, Altana shall not be entitled to a
Sell-Off Period, the provisions of subparts (i)-(iv) of Section 15.6 shall be
effective immediately, and TAb shall have the right, in its sole discretion,
subject to applicable bankruptcy law in the event of termination pursuant to
Section 15.3, to either (a) purchase all or a portion of the Products in
Altana's possession at the Purchase Price paid by Altana, which inventory shall
be returned to TAb or destroyed by Altana at TAb's direction, or (b) permit
Altana to sell such Products in Altana's possession.
16. Indemnification.
16.1 Altana shall indemnify and hold harmless TAb, its
subsidiaries, and affiliates, and their officers, directors, employees, agents,
and shareholders, notwithstanding termination of this Agreement, against any
liability, damage, loss, cost, or expense (including reasonable attorneys' fees)
relating to any third party claims arising from:
(a) default under any provision of the Agreement by Altana;
(b) any alleged negligence, gross negligence, or intentional
misconduct of Altana; or
(c) promotion, distribution, and sale of the Products by
Altana;
provided that upon receipt of notice by TAb of any such claims, TAb shall
promptly notify Altana. TAb shall permit Altana to handle such claims at
Altana's sole cost, and TAb shall give Altana all reasonable assistance (except
financial assistance) in the conduct of any such claims. In no event is Altana
authorized to settle or compromise any claim, or to consent to the entry of any
order or judgment, without the prior written consent of TAb. Altana shall
maintain products liability insurance with limits of liability of not less than
$20,000,000 and naming TAb as additional insured under said policy from the
commencement of marketing through termination of this Agreement on an occurrence
basis. Altana shall provide a Certificate of Insurance to TAb evidencing said
coverage annually.
16.2 TAb shall indemnify and hold harmless Altana, its
subsidiaries and affiliates, and their officers, directors, employees, agents,
and shareholders, notwithstanding termination of this Agreement from all
liability, damage, cost, or expense (including reasonable attorneys' fees)
relating to any third party claims arising from:
(a) default under any provision of the Agreement by TAb; or
(b) any alleged negligence, gross negligence, or intentional
misconduct of TAb; or
(c) any claim of an inherent defect in a Product;
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<PAGE> 17
(d) any alleged infringement of a third party patent or
trademark as a result of the manufacture, use, or sale of
a Product;
provided that upon receipt of notice by Altana of any such claims, Altana shall
promptly notify TAb. Altana shall permit TAb to handle such claims at TAb's sole
cost, and Altana shall give TAb all reasonable assistance (except financial
assistance) in the conduct of any such claims. In no event is TAb authorized to
settle or compromise any claim, or to consent to the entry of any order or
judgment, without the prior written consent of Altana. TAb shall maintain
products liability insurance with limits of liability of not less than
$20,000,000 and naming Altana as additional insured under said policy from the
commencement of marketing through termination of this Agreement on an occurrence
basis. TAb shall provide a Certificate of Insurance to Altana evidencing said
coverage annually.
17. Representations and Warranties.
17.1 TAb represents and warrants that to the best of its
knowledge as of the date hereof, the manufacture, use, or sale of the Products
do not infringe any patent, trademark, or other rights held in the Territory by
a third party.
17.2 Altana represents and warrants that (a) it is a company
duly organized and validly existing under the laws of New York; (b) the
execution and delivery by Altana of this Agreement, the performance by Altana of
all the terms and conditions thereof to be performed by it and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action, and no other act or approval of any person or entity is
required to authorize such execution, delivery, and performance; (c) the
Agreement constitutes a valid and binding obligation of Altana, enforceable in
accordance with its terms; (d) this Agreement and the execution and delivery
thereof by Altana, does not, and the fulfillment and compliance with the terms
and conditions hereof and the consummation of the transactions contemplated
hereby will not, (i) conflict with any of, or require the consent of any person
or entity under, the terms, conditions, or provisions of the organizational
documents of Altana, (ii) violate any provision of, or require any consent,
authorization, or approval under, any law or administrative regulation or any
judicial, administrative, or arbitration order, award, judgment, writ,
injunction, or decree applicable to Altana, or (iii) conflict with, result in a
breach of, or constitute a default under, any material agreement or obligation
to which Altana is a party.
17.3 TAb represents and warrants that (a) it is a corporation
duly organized and validly existing under the laws of the State of Delaware; (b)
the execution and delivery by TAb of this Agreement, the performance by TAb of
all the terms and conditions thereof to be performed by it and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action, and no other act or approval of any person or entity is
required to authorize such execution, delivery, and performance; (c) the
Agreement constitutes a valid and binding obligation by TAb, enforceable in
accordance with its terms; (d) this Agreement and the execution and delivery
thereof by TAb, does not, and the fulfillment and compliance with the terms and
conditions hereof and the consummation of the transactions contemplated hereby
will not (i) conflict with any of, or require the consent of any person or
entity under, the terms, conditions, or provisions of the organizational
documents of TAb, (ii) violate any provision of, or require any consent,
authorization, or approval under, any law or administrative regulation or any
judicial, administrative, or arbitration order, award, judgment, writ,
injunction, or decree applicable to TAb, or (iii) conflict with, result in a
breach of, or constitute a default under, any material
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<PAGE> 18
agreement or obligation to which TAb is a party.
18. Disclaimer of Warranties; Limited Liability.
18.1 Under no circumstances shall either party be liable to
the other party on account of any claim (whether based upon principles of
contract, warranty, negligence or other tort, breach of any statutory duty,
principles of indemnity, the failure of any limited remedy to achieve its
essential purpose, or otherwise) for any special, consequential, incidental or
exemplary damages, including but not limited to lost profits, or for any damages
or sums paid by a party to third parties, even if the other party has been
advised of the possibility of such damages, except for breach by TAb of the
warranty in Section 17.1 above.
18.2 TAb disclaims all implied warranties, including, without
limitation, any warranty of merchantability or fitness for a particular purpose.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, TAB MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NOT EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
18.3 Except as expressly set forth in this Agreement, TAb's
sole liability to Altana for breach of warranty or for negligence or otherwise
shall be to replace promptly, free of charge, any nonconforming Products (i.e.
any Products that do not conform to the Specifications at the time of delivery
to Altana). Altana shall destroy or return to TAb all such nonconforming
Products, as instructed by TAb.
18.4 If either of the parties hereto is required by judicial
or administrative order to recall any Product, such party shall promptly notify
the other party. In such event, TAb shall develop a compliance plan for both
parties hereto, and at TAb's sole expense, TAb and Altana shall make best
efforts to comply with such compliance plan.
19. Confidentiality.
19.1 In consideration of the mutual exchange and disclosure of
Confidential Information, each party undertakes in relation to the other party's
Confidential Information:
(a) to treat the Confidential Information as strictly
confidential and not permit Confidential Information to be disclosed to third
persons;
(b) to use the Confidential Information only for the purpose
of this Agreement and not to use the Confidential Information for any commercial
purpose other than under a further agreement with the other party;
(c) not to copy or reduce to writing the Confidential
Information except as reasonably necessary for the purposes of this Agreement.
Any copies or reductions to writing so made and data storage media containing
Confidential Information shall be owned by the disclosing party;
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<PAGE> 19
(d) to take all reasonable steps to insure that recipients of
Confidential Information comply with the terms of this Agreement, including all
restrictions on use, disclosure, and dissemination of Confidential Information.
Such steps shall include, without limitation, measures to insure that each
recipient has read, understands, and agrees to the provisions hereof. Each party
shall notify the other immediately upon becoming aware of any breach hereof and
shall take all reasonable steps to prevent any further disclosure or
unauthorized use;
(e) only to permit Confidential Information or any part
thereof to be disclosed to those of its employees and Third Parties authorized
by the disclosing party to whom it is strictly necessary to disclose
Confidential Information for the purpose of undertaking and satisfactorily
completing its obligations under this Agreement. The receiving party is
responsible for the performance of the obligations in this Agreement on the part
of its employees; and
(f) to maintain the Confidential Information in a way which
provides adequate protection of such information from unauthorized disclosure,
copying, or use.
19.2 Upon termination or expiration of this Agreement, TAb
shall deliver to Altana (a) all Confidential Information of Altana, all copies
thereof, and all documents and storage media containing Confidential Information
of Altana, (b) the names and addresses of all recipients of Confidential
Information of Altana, and (c) a written certification that TAb has complied
with its obligations under this Section 19.2.
19.3 Upon termination or expiration of this Agreement, Altana
shall deliver to TAb (a) all Confidential Information of TAb, all copies
thereof, and all documents and storage media containing Confidential Information
of TAb, (b) the names and addresses of all recipients of Confidential
Information of TAb, and (c) a written certification that Altana has complied
with its obligations under this Section 19.3.
19.4 Each recipient of Confidential Information shall keep
confidential and not use, except as provided herein, all Confidential
Information.
20. Enforcement.
Each party acknowledges that in the event of breach of its covenants
under this Agreement, actual damages will be impossible to calculate, the other
party's remedies at law will be inadequate, and the other party will suffer
irreparable harm. Therefore, each party agrees that any of the covenants
contained in this Agreement may be specifically enforced through injunctive
relief, but such right to injunctive relief shall not preclude the other party
from other remedies which may be available to it.
21. General.
21.1 No waiver or modification of the Agreement shall be
effective unless in writing and signed by the party against whom such waiver or
modification is asserted. Waiver by either party in any instance of any breach
of any term or condition of this Agreement shall not be construed as a waiver of
any subsequent breach of the same or of any other term or condition hereof. None
of the terms or conditions of this Agreement shall be deemed to have been waived
by course of dealing or trade
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usage.
21.2 All notices and demands hereunder shall be in writing and
shall be served by personal delivery, by registered mail, by recognized national
courier, or by facsimile transmission at the address of the receiving party set
forth below (or at such different address as may be designated by such party by
written notice to the other party).
TAb: Altana:
Therapeutic Antibodies Inc. Altana, Inc.
1207 17th Avenue South, Suite 103 60 Baylis Road
Nashville, Tennessee 37212 Melville, New York 11747
Attention: President Attention: President
Fax: 1-615-320-1212 Fax: 1-516-454-6389
All notices or demands shall be deemed received on the earlier of actual receipt
or seven (7) days after posting if sent by mail, three days after delivery to
national courier, or upon receipt of fax-back confirmation if sent by facsimile.
21.3 (a) If any dispute arising out of the subject matter of
this Agreement cannot be resolved by discussion between the parties, the parties
agree first to try in good faith to settle the dispute by mediation administered
by the American Arbitration Association under its Commercial Mediation Rules
before resorting to arbitration or any other dispute resolution procedure.
(b) Any dispute not resolved in accordance with Section (a) above
shall be settled by arbitration proceedings administered in accordance with
Section (c) below, and judgment on the award rendered by the arbitrator(s) shall
be entered in any court having jurisdiction thereof. The parties shall jointly
select an arbitrator. In the event the parties fail to agree upon an arbitrator
within ten (10) days, then each party shall select an arbitrator, and such
arbitrator shall then select a third arbitrator to serve as the sole arbitrator;
provided, that if either party, in such event, fails to select an arbitrator
within seven (7) days, such arbitrator shall be selected by the American
Arbitration Association, as applicable, upon application of either party.
(c) Arbitration shall be administered in Atlanta, Georgia, by the
American Arbitration Association in accordance with its Commercial Arbitration
Rules. Notwithstanding the foregoing, this agreement to arbitrate shall not bar
TAb and/or Altana from seeking temporary, provisional, or injunctive relief
against conduct or threatened conduct that will cause it loss or damages, under
the usual equity rules, including the applicable rules for obtaining restraining
orders and preliminary injunctions. In any such action, suit, or proceeding,
both parties hereby consent to the jurisdiction of any state or federal court in
Nashville, Tennessee, for each of them personally in connection with such
litigation, and waive any objection to venue in such courts and any claim that
such forum is an inconvenient forum.
21.4 This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee.
21.5 In the event that any provision of this Agreement shall
be held by a court or other
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<PAGE> 21
tribunal of competent jurisdiction to be unenforceable, such provision will be
enforced to the maximum extent permissible and the remaining portions of this
Agreement shall remain in full force and effect.
21.6 Neither party shall be responsible for any failure or
delay in performing its obligations under this Agreement due to unforeseen
circumstances or to causes beyond such party's control, including but not
limited to acts of God, war, riot, embargoes, acts of civil or military
authorities, governmental decrees or regulations, fire, floods, accidents, or
strikes.
21.7 This Agreement and the Schedules hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersedes in their entirety and any and all written or oral agreements
previously existing between the parties with respect to such subject matter. The
terms of this Agreement may be modified only by a writing which is signed by
both parties.
21.8 The terms of this Agreement are intended solely for the
benefit of the parties hereto. They are not intended to confer upon any Person
the status of a third party beneficiary. Except as otherwise provided for by
this Agreement, the terms hereto shall inure to the benefit of, and be binding
upon, the respective successors and assigns of the parties hereto.
21.9 This Agreement shall not be assigned by either party
without the prior written consent of the other party, and the performance of its
duties shall not be delegated; provided, however, that either party may assign
this Agreement to any entity which acquires substantially all of its assets and
business.
21.10 Neither party hereto shall issue a press release or
otherwise make a public statement with respect to the subject matter hereof
without the prior consent of the other party, except as may be required by law.
21.11 The parties expressly acknowledge and agree that Altana
shall act only as an independent contractor of TAb and that this Agreement shall
not be deemed to create an agency, partnership, employment, or joint venture
relationship between TAb and Altana. Nothing in this Agreement shall be
construed as a grant of authority to Altana to accept any order, waive any
right, incur any obligation or liability, enter into any agreement, grant any
release or otherwise purport to act in the name of TAb. Nothing in this
Agreement shall be construed as a grant of authority to TAb to accept any order,
waive any right, incur any obligation or liability, enter into any agreement,
grant any release or otherwise purport to act in the name of Altana. Except as
expressly set forth herein, the parties agree that TAb shall neither exercise
control over Altana's method of operations nor provide assistance to Altana.
21.12 Neither party hereto shall solicit or hire any employee
or agent of the other party hereto without the prior written consent of the
other party for a period of at least one year after termination of such
employee's employment or agent's agreement with the other party.
21.13 The operations, policies and procedures of TAb,
including those related to TAb's performance of this Agreement, are subject to
the sole management and control of TAb. The operations, policies, and procedures
of Altana, including those related to Altana's performance of this Agreement,
are subject to the sole management and control of Altana.
19
<PAGE> 22
21.14 This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
21.15 Nothing contained herein shall be construed as
conferring by implication, estoppel, or otherwise any license or right under any
patent, whether or not the exercise of any right herein granted necessarily
employs an invention or any existing or later issued patent.
20
<PAGE> 23
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representative effective
on the date first set forth above.
Altana, Inc. Therapeutic Antibodies Inc
By: By:
---------------------------------- ----------------------------------
Name: Name:
-------------------------------- --------------------------------
Title: Title:
------------------------------- -------------------------------
21
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION DOING
NAME OF SUBSIDIARY OF INCORPORATION BUSINESS AS
- ------------------- ---------------- ------------
<S> <C> <C>
Therapeutic Antibodies UK Ltd. United Kingdom Same
Therapeutic Antibodies
Australasia Pty. Ltd. Australia Same
TAb New Zealand Ltd. New Zealand Same
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THERAPEUTIC ANTIBODIES INC. FOR THE PERIOD ENDED
DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,915,077
<SECURITIES> 1,997,240
<RECEIVABLES> 594,267
<ALLOWANCES> 0
<INVENTORY> 489,138
<CURRENT-ASSETS> 8,585,280
<PP&E> 16,343,421
<DEPRECIATION> 4,886,731
<TOTAL-ASSETS> 20,800,065
<CURRENT-LIABILITIES> 4,149,148
<BONDS> 6,059,072
0
0
<COMMON> 23,253
<OTHER-SE> 9,735,092
<TOTAL-LIABILITY-AND-EQUITY> 20,800,065
<SALES> 392,888
<TOTAL-REVENUES> 2,677,931
<CGS> 110,740
<TOTAL-COSTS> 725,338
<OTHER-EXPENSES> 18,800,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,001,959
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,847,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,847,718
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
