<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21699
VIROPHARMA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2347624
(State or other jurisdiction of (I.R.S. Employer
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
405 Eagleview Boulevard
EXTON, PENNSYLVANIA 19341
(Address of Principal Executive Offices and Zip Code)
610-458-7300
(Registrant's Telephone Number, Including Area Code)
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
requirement for the past 90 days: Yes X NO
--------- ------
Number of shares outstanding of the issuer's Common Stock, par value $.002 per
share, as of August 12, 1998: 11,485,483 shares.
1
<PAGE>
VIROPHARMA INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
Page
----------
Item 1. Financial Statements:
Balance Sheets at December 31, 1997 and June 30, 1998 3
Statements of Operations for the three months ended June 30, 1997
and 1998, the six months ended June 30, 1997 and 1998, and the
period from December 5, 1994 (inception) to June 30, 1998 4
Statements of Cash Flows for the six months ended June 30, 1997
and 1998 and the period from December 5, 1994 (inception)
to June 30, 1998 5
Notes to Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 7
AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
- ---------------------------------
ITEM 1. FINANCIAL STATEMENTS
ViroPharma Incorporated
(A Development Stage Company)
Balance Sheets
December 31, 1997 and June 30, 1998
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
----------------- ----------------
ASSETS Audited Unaudited
----------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,204,330 1,104,230
Short-term investments 39,164,132 31,410,391
Notes receivable from officers - current 33,691 39,205
Other current assets 461,631 706,129
----------------- ----------------
Total current assets 43,863,784 33,259,955
Equipment and leasehold improvements, net 1,084,720 2,412,124
Construction in progress 860,975 -
Restricted investment 300,000 300,000
Notes receivable from officers - noncurrent 84,102 81,958
Other assets 81,899 81,899
----------------- ----------------
Total assets $ 46,275,480 36,135,936
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 919,970 852,384
Loan payable - current 100,000 100,000
Obligation under capital lease - current 61,487 59,119
Deferred revenue 1,000,000 1,000,000
Accrued expenses and other current liabilities 4,573,299 4,693,877
----------------- ----------------
Total current liabilities 6,654,756 6,705,380
Loan payable - non-current 416,667 366,667
Obligation under capital lease - noncurrent 53,186 25,724
----------------- ----------------
7,124,609 7,097,771
----------------- ----------------
Stockholders' equity:
Preferred stock, par value $.001 per share. Authorized 5,000,000
shares at December 31, 1997 and June 30, 1998; none issued or
outstanding - -
Common stock, par value $.002 per share. Authorized 27,000,000
shares at December 31, 1997 and June 30, 1998; issued and
outstanding 11,464,106 shares at December 31, 1997 and 11,484,909
shares at June 30, 1998 22,928 22,970
Additional paid-in capital 61,322,384 61,355,432
Deferred compensation (451,721) (349,446)
Unrealized gains on available for sale securities 276,126 90,263
Deficit accumulated during the development stage (22,018,846) (32,081,054)
----------------- ----------------
Total stockholders' equity 39,150,871 29,038,165
----------------- ----------------
Commitments
Total liabilities and stockholders' equity $ 46,275,480 36,135,936
================= ================
See accompanying notes to financial statements.
</TABLE>
3
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VIROPHARMA INCORPORATED
(A Development Stage Company)
Statements of Operations
(unaudited)
Three months ended June 30, 1997 and 1998,
the six months ended June 30, 1997 and 1998, and the
period from December 5, 1994 (inception) to June 30, 1998
<TABLE>
<CAPTION>
Period
December 5,
1994
Three months ended Six months ended (inception) to
June 30, June 30, June 30,
1997 1998 1997 1998 1998
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
License fee and milestones revenue $ - 750,000 $ 750,000 750,000 3,250,000
Grant revenue - - - - 526,894
-------------------------------------------------------------------------------------------
Total revenues - 750,000 750,000 750,000 3,776,894
-------------------------------------------------------------------------------------------
Operating expenses incurred in the
development stage:
Research and development 2,640,585 5,819,081 4,548,837 9,636,927 30,266,491
General and administrative 785,951 945,372 1,550,519 1,878,645 7,975,867
-------------------------------------------------------------------------------------------
Total operating expenses 3,426,536 6,764,453 6,099,356 11,515,572 38,242,358
-------------------------------------------------------------------------------------------
Loss from operations (3,426,536) (6,014,453) (5,349,356) (10,765,572) (34,465,464)
Interest income, net 263,678 382,589 455,084 703,364 2,384,410
-------------------------------------------------------------------------------------------
Net loss $(3,162,858) (5,631,864) $(4,894,272) (10,062,208) (32,081,054)
===========================================================================================
Basic and diluted net loss per share: (0.35) (0.49) (0.54) (0.88)
========================================================================
Shares used in computing basic and diluted
net loss per share: 9,083,428 11,481,927 9,080,238 11,478,646
========================================================================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
VIROPHARMA INCORPORATED
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
Six months ended June 30, 1997 and 1998 and the
period from December 5, 1994 (inception) to June 30, 1998
<TABLE>
<CAPTION>
Period
December 5, 1994
Six months ended (inception) to
June 30, June 30,
1997 1998 1998
--------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,894,272) (10,062,208) (32,081,054)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-cash compensation expense 107,791 102,275 483,640
Non-cash warrant value 7,968 7,968 133,824
Non-cash consulting expense - 6,650 36,700
Depreciation and amortization expense 109,784 191,347 537,647
Changes in assets and liabilities:
Other current assets (60,597) (244,498) (706,129)
Notes receivable from officers - (3,370) (121,163)
Other assets (112,480) - (81,899)
Accounts payable (15,563) (67,586) 852,384
Accrued expenses and other current liabilities 1,862,150 120,578 4,693,877
--------------------------------------------------
Net cash used in operating activities (2,995,219) (9,948,844) (26,252,173)
Cash flows from investing activities:
Purchase of equipment (334,025) (657,776) (2,949,772)
Purchase of short-term investments (11,834,797) (16,045,675) (103,508,604)
Sales of short-term investments 1,279,134 - 9,680,414
Maturities of short-term investments 6,557,243 23,613,553 62,208,062
--------------------------------------------------
Net cash (used in) provided by investing activities (4,332,445) 6,910,102 (34,569,900)
Cash flows from financing activities:
Net proceeds from issuance of preferred stock - - 13,931,243
Net proceeds from issuance of common stock 50 18,472 45,799,425
Proceeds from deferred revenue - - 1,000,000
Proceeds from loan payable 600,000 - 600,000
Payment of loan payable - (50,000) (133,333)
Proceeds received on notes receivable - - 1,625
Proceeds from notes payable - - 692,500
Payment of notes payable (41,667) - (50,000)
Obligation under capital lease (14,736) (29,830) 84,843
--------------------------------------------------
Net cash provided by (used in) financing activities 543,647 (61,358) 61,926,303
Net increase (decrease) in cash and cash equivalents (6,784,017) (3,100,100) 1,104,230
Cash and cash equivalents at beginning of period 10,810,310 4,204,330 -
--------------------------------------------------
Cash and cash equivalents at end of period $ 4,026,293 1,104,230 1,104,230
==================================================
Supplemental disclosure of noncash transactions:
Conversion of Note Payable to Series A and
Series B Preferred Stock $ - - 642,500
Conversion of mandatorily redeemable convertible
preferred stock to common shares - - 16,264,199
Notes issued for 828,750 common shares - - 1,625
Deferred compensation - - 833,086
Accretion of redemption value attributable to
mandatorily redeemable convertible preferred stock - - 1,616,445
Unrealized gains (losses) on available for sale securities 84,173 (185,863) 90,263
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
VIROPHARMA INCORPORATED
(A Development Stage Company)
Notes to Financial Statements
June 30, 1997 and 1998
(unaudited)
(1) ORGANIZATION AND BUSINESS ACTIVITIES
ViroPharma Incorporated (a development stage company) (the "Company") commenced
operations on December 5, 1994. The Company is a development stage
pharmaceutical company engaged in the discovery and development of new antiviral
medicines.
The Company is devoting substantially all of its efforts towards conducting drug
discovery, raising capital, conducting clinical trials, manufacturing bulk
drug substance and drug product, pursuing regulatory approval for products under
development, marketing and market research activities and building
infrastructure. In the course of such activities, the Company has sustained
operating losses and expects such losses to continue for the foreseeable future.
The Company has not generated any significant revenues or product sales and has
not achieved profitable operations or positive cash flow from operations. The
Company's deficit accumulated during the development stage aggregated
$32,081,054 through June 30, 1998. There is no assurance that profitable
operations, if ever achieved, could be sustained on a continuing basis.
The Company plans to continue to finance its operations with a combination of
stock issuances, license payments, payments from strategic research and
development arrangements and, in the longer term, revenues from product sales.
There are no assurances, however, that the Company will be successful in
obtaining an adequate level of financing needed for the long-term development
and commercialization of its planned products.
BASIS OF PRESENTATION
The information at June 30, 1998 and for the six months ended June 30, 1997 and
1998, is unaudited but includes all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary to
state fairly the financial information set forth therein in accordance with
generally accepted accounting principles. The interim results are not
necessarily indicative of results to be expected for the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1997 included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
(2) COMPREHENSIVE LOSS
In 1998 the Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires that all
items defined as comprehensive income, including changes in the amounts of
unrealized gains and losses on available for sale securities, be shown as a
component of comprehensive loss. In the Company's annual financial statements,
comprehensive loss will be required to be presented either in a separate
financial statement or as part of either the statement of operations or
statement of stockholders' equity. For interim financial statements, the
Company is permitted to disclose the information in the footnotes to the
financial statements. The disclosures are required for comparative purposes.
The only comprehensive income item the Company has is unrealized gains and
losses on available for sale securities.
The following reconciles net loss to comprehensive loss for the quarter and six-
month period ended June 30, 1997 and 1998:
<TABLE>
<CAPTION>
Quarter ended Six-month period ended
June 30, June 30,
1997 1998 1997 1998
-------- ------ ------ ------
<S> <C> <C> <C> <C>
Net loss $(3,162,858) (5,631,864) (4,894,272) (10,062,208)
Other comprehensive income:
Unrealized gains (losses) on
available for sale securities 44,228 (154,783) 84,173 (185,863)
----------- ----------- ----------- ------------
Comprehensive loss $(3,118,630) (5,786,647) (4,810,099) (10,248,071)
=========== =========== =========== ============
</TABLE>
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that are not statements
of historical facts or statements of current condition. Such forward-looking
statements may be identified by, among other things, the use of forward-looking
terminology such as "expects," "estimates," "may," "will," or "should" or the
negative thereof or other variations of such terminology, or by discussions of
strategy or intentions. These forward-looking statements, such as statements
regarding present or anticipated scientific progress, development of potential
pharmaceutical products, future revenues, capital expenditures, research and
development expenditures, collaborations and future financings involve
predictions, and are subject to risks and uncertainties. The Company's actual
results, performances or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Factors
contributing to such risks and uncertainties that might affect the Company's
actual results, performance or achievements include, but are not limited to,
those discussed in "Important Factors Regarding Forward-Looking Statements"
attached as Exhibit 99 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 that is filed with the Securities and Exchange
Commission. Given these risks and uncertainties, current or prospective
investors are cautioned not to place undue reliance on any such forward-looking
statements. Furthermore, the Company disclaims any obligation or intent to
update any such forward-looking statements to reflect future events or
developments.
Since inception, the Company has devoted substantially all of its resources
to its research and product development programs. The Company has generated no
revenues from product sales and has been dependent upon funding primarily from
equity financing. The Company does not expect any revenues from product sales
for at least the next two-year period. The Company has not been profitable
since inception and has incurred a cumulative net loss of $ 32,081,054 through
June 30, 1998. Losses have resulted principally from costs incurred in research
and development activities and general and administrative expenses. The Company
expects to incur additional operating losses over at least the next several
years. The Company expects such losses to increase over historical levels,
primarily due to expected increases in the Company's research and development
expenses for the manufacture of bulk drug substance and drug product, and for
further clinical development of the Company's most advanced drug candidate,
pleconaril (including milestone payments that may be payable, and any
significant additional studies for approval in the European Union, if any are
required, under the terms of the Company's agreement with Sanofi, S.A.). Also,
the Company expects to incur expenses related to its marketing and market
research activities for pleconaril, its development of a marketing and sales
staff and further research and development related to other product candidates.
The Company's ability to achieve profitability is dependent on developing and
obtaining regulatory approvals for its product candidates, successfully
commercializing such product candidates, which may include entering into
collaborative agreements for product development and commercialization, and
securing contract manufacturing services.
LIQUIDITY AND CAPITAL RESOURCES
The Company commenced operations in December 1994. The Company is a
development stage company and to date has not generated revenues from product
sales. The cash flows used in operations are primarily for research and
development activities and the supporting general and administrative expenses.
Through June 30, 1998, the Company has used approximately $ 26.2 million in
operating activities. The Company invests its cash in short-term investments.
Through June 30, 1998, the Company has used approximately $ 34.6 million in
investing activities, including $ 31.6 million in short-term investments and
$ 2.9 million in equipment purchases and new construction. Through June 30,
1998, the Company has financed its operations primarily through public offerings
of common stock, private placements of redeemable preferred stock, a bank loan,
equipment lease lines and a milestone advance totaling approximately $61.9
million. At June 30, 1998, the Company had cash and cash equivalents and short-
term investments aggregating approximately $ 32.5 million.
The Company leases its corporate and research and development facilities
under an operating lease expiring in 2008. The Company moved to its current
location in March 1998. The annual rent at the new location will be
approximately $400,000 higher than historical amounts. The Company also has the
right to expand the facility and, under certain circumstances, to purchase the
new facility at a purchase price based on a predetermined formula. The Company
has financed substantially all of its equipment under two master lease
agreements and one bank loan. The bank loan is for $600,000, is payable in
equal annual installments over 72 months and bears interest at approximately 9%.
7
<PAGE>
The Company is required to repay amounts outstanding under the two leases within
periods ranging from 32 to 48 months. As of June 30, 1998, outstanding
borrowings under these three arrangements are approximately $550,000. The
Company is currently negotiating with a bank for a second term loan for $700,000
to finance new equipment purchased in 1998. There can be no assurance that the
Company will successfully consummate this loan transaction. The Company
anticipates that aggregate equipment purchases for the next two quarters will be
less than the amount of such purchases in the prior two quarters.
Under the Company's agreement with Sanofi S.A. ("Sanofi"), the Company was
required to make a milestone payment of either $1.2 million or $2 million,
depending on whether or not Sanofi elected to participate in the development of
pleconaril. During 1997, the Company deemed it probable that Sanofi would elect
to participate in the development of pleconaril and accordingly, at December 31,
1997, had accrued $2 million. In March 1998, the Company paid Sanofi $1.2
million, the minimum milestone payment that ultimately would be due. In June
1998, Sanofi chose to have the Company be solely responsible for all development
and development costs of pleconaril. As a result of this decision by Sanofi,
the Company will receive a higher royalty on sales of pleconaril by Sanofi
outside of the United States and Canada, and Sanofi will reimburse the Company
$400,000 for a license fee previously paid by the Company. Accordingly, the
Company reduced the milestone payable to Sanofi by $800,000 and recorded the
$400,000 reimbursement of the previously paid license fee. These amounts were
recorded as a reduction of research and development expenses. Also, the Company
is required to make certain additional payments to Sanofi, including royalties,
as defined, should agreed-upon future milestones be attained. The milestone
events contemplate regulatory submissions of new drug applications and
regulatory approvals in various jurisdictions. There can be no assurance that
any such milestones will be attained.
The Company and SELOC France entered into an Addendum to their Development
Agreement for the manufacture of validation batches of bulk drug substance and
the preparation of certain documentation that will be required in connection
with the Company's new drug application for pleconaril. The Company estimates
that $1.9 million will be payable under the Addendum over the next twelve
months.
On October 9, 1997, the Company received $1,000,000 from Boehringer
Ingelheim Pharmaceuticals, Inc. ("BI") as an advance on a future milestone in
connection with a Collaborative Research Agreement (the "Agreement"). Such
amount will be creditable against the milestone, if achieved, or would become
due and payable two years after termination or expiration of the Agreement. The
advance bears interest at 8.5% and is evidenced by a convertible promissory
note. If amounts due under the note are not paid as described in the note, BI
may convert the then outstanding principal balance and accrued interest thereon
into shares of the Company's common stock based on the last sale price of such
common stock on the date immediately prior to the date on which the Company is
notified of BI's intention to convert the promissory note. Unless extended by
the parties, the Agreement will expire in August 1998.
The Company has incurred losses from its operations since inception. The
Company expects to incur additional operating losses over at least the next
several years. The Company expects such losses to increase over historical
levels, primarily due to expected increases in the Company's research and
development expenses for the manufacture of bulk drug substance and drug
product, and for further clinical development of the Company's most advanced
drug candidate, pleconaril (including milestone payments that may be payable,
and any significant additional studies for approval in the European Union, if
any are required, under the terms of the Company's agreement with Sanofi).
Also, the Company expects to incur expenses related to its marketing and market
research activities for pleconaril, its development of a marketing and sales
staff and further research and development related to other product candidates.
The Company has suspended its hand-foot-and-mouth clinical trial to reevaluate
the entrance criteria used for such trial and to focus its resources on clinical
trials for other disease indications, including pediatric and adult viral
meningitis, viral respiratory infection and rhinovirus in asthmatics. The
Company does not expect the suspension of the hand-foot-and-mouth trial to have
a material impact on research and development expenses. The Company will require
additional financing for operations and expansion of its facilities prior to
achieving positive cash flows from its commercial activities. The Company
expects that it will need additional financing to complete all clinical studies
for pleconaril, for the development and required testing of the Company's other
product candidates, and to develop its marketing and sales staffs. To obtain
this financing, the Company expects to access the public or private equity
markets or enter into additional arrangements with corporate collaborators. To
the extent the Company raises additional capital by issuing equity securities,
ownership dilution to existing stockholders may result. There can be no
assurance, however, that additional financing will be available on acceptable
terms from any source.
8
<PAGE>
RESULTS OF OPERATIONS
Quarters ended June 30, 1998 and 1997
The Company earned and received one milestone payment for $750,000 in the
quarter ended June 30, 1998 from BI and no revenues in the quarter ended June
30, 1997. Net interest income increased to $382,589 for the quarter ended June
30, 1998 from $263,678 for the quarter ended June 30, 1997, principally due to
larger invested balances provided by the proceeds of a follow-on public offering
in July 1997.
Research and development expenses increased to $5,819,081 for the quarter
ended June 30, 1998 from $2,640,585 for the quarter ended June 30, 1997. The
increase was principally due to the cost of ongoing multiple clinical trials
related to pleconaril being conducted in the quarter ended June 30, 1998
compared to the cost of completing one clinical trial related to pleconaril in
the quarter ended June 30, 1997. The Company recorded $1,200,000 as a reduction
to research and development expenses in the quarter ended June 30, 1998 for the
adjustment to the Sanofi milestone payable and the reimbursement due from Sanofi
for a previously paid license fee. Such amounts were recorded as research and
development expenses in prior periods. Also, the Company had more scientists
conducting discovery research in the quarter ended June 30, 1998 compared to the
quarter ended June 30, 1997 in the area of advancement of drug candidates for
the Company's RSV pneumonia, influenza, and hepatitis C programs. In addition,
the Company incurred increased expenses for pre-clinical activities for the RSV
pneumonia discovery research program in the quarter ended June 30, 1998 versus
the quarter ended June 30, 1997.
General and administrative expenses increased to $945,372 for the quarter
ended June 30, 1998 from $785,951 for the quarter ended June 30, 1997. The
increase was principally due to increased salary expenses and facilities costs
related to the Company's move to its current facilities in March 1998.
The net loss increased to $5,631,864 for the quarter ended June 30, 1998
from $3,162,858 for the quarter ended June 30, 1997.
Six-months ended June 30, 1998 and 1997
The Company earned and received one milestone payment for $750,000 from BI
in each of the six-month periods ended June 30, 1998 and 1997. Net interest
income increased to $703,364 for the six-month period ended June 30, 1998 from
$455,084 for the six-month period ended June 30, 1997, principally due to larger
invested balances provided by the proceeds of a follow-on public offering in
July 1997.
Research and development expenses increased to $9,636,927 for the six-month
period ended June 30, 1998 from $4,548,837 for the six-month period ended June
30, 1997. The increase was principally due to the cost of ongoing multiple
clinical trials related to pleconaril being conducted in the six-month period
ended June 30, 1998 compared to the cost of completing one clinical trial
related to pleconaril in the six-month period ended June 30, 1997. The Company
recorded $1,200,000 as a reduction to research and development expenses in the
six-month period ended June 30, 1998 for the adjustment to the Sanofi milestone
payable and the reimbursement due from Sanofi for a previously paid license fee.
Such amounts were recorded as research and development expenses in prior
periods. Also, the Company had more scientists conducting discovery research in
the six-month period ended June 30, 1998 compared to the six-month period ended
June 30, 1997 in the area of advancement of drug candidates for the Company's
RSV pneumonia, influenza, and hepatitis C programs. In addition, the Company
incurred increased expenses for pre-clinical activities for the RSV pneumonia
discovery research program in the six-month period ended June 30, 1998 versus
the six-month period ended June 30, 1997.
General and administrative expenses increased to $1,878,645 for the six-
month period ended June 30, 1998 from $1,550,519 for the six-month period ended
June 30, 1997. The increase is principally due to increased salary expenses and
facilities costs related to the Company's move to its current facilities in
March 1998.
The net loss increased to $10,062,208 for the six-month period ended June
30, 1998 from $4,894,272 for the six-month period ended June 30, 1997.
9
<PAGE>
PART II - OTHER INFORMATION
----------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 21, 1998, the Company held its annual stockholders meeting (the
"Meeting"). In connection with the Meeting, the Company solicited proxies for
the election of Ms. Ann Lamont as a director of the Company, and to approve the
amendment and restatement of the Company's 1995 Stock Option Plan. The record
date for determining the stockholders entitled to receive notice of, and vote
at, the Meeting was April 10, 1998 (the "Record Date"). The Company had
11,480,820 shares of its Common Stock outstanding as of the Record Date, of
which 9,222,789 were represented at the Meeting by proxy. Such shares were
voted at the Meeting in respect of the election of Ms. Lamont to the Company's
board of directors, and the approval of the amendment and restatement of the
Company's 1995 Stock Option Plan, as follows:
<TABLE>
<CAPTION>
Number of Votes
BROKER
FOR AGAINST WITHHELD ABSTAIN NON-VOTES
<S> <C> <C> <C> <C> <C>
Election of Ms. Lamont to the Board: 9,221,389 1,400
Approval of Amendment and 6,245,337 2,491,283 9,300 476,869
Restatement of 1995 Stock
Option Plan
</TABLE>
Frank Baldino, David Glaser, Claude Nash and David Williams each continued his
term of office as a director after the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
10.28 Addendum to Development Agreement dated as of March 1, 1998
between the Company and SELOC France.
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June
30, 1998.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIROPHARMA INCORPORATED
Date: August 12, 1998 By: /s/ Claude H. Nash
---------------------------------------
Claude H. Nash
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
By: /s/ Vincent J. Milano
----------------------------------
Vincent J. Milano
Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
11
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
10.28 Addendum to Development Agreement dated as of March 1, 1998
between the Company and SELOC France.
27 Financial Data Schedule
12
<PAGE>
EXHIBIT 10.28
ADDENDUM TO DEVELOPMENT AGREEMENT
---------------------------------
This ADDENDUM TO DEVELOPMENT AGREEMENT (this "Addendum") is made as of this
1st day of March, 1998 between ViroPharma Incorporated ("ViroPharma") and SELOC
France (formerly SICOR, S.A.) ("Developer").
WHEREAS, ViroPharma, Developer and SELOC AG ("SELOC AG") are parties to
that certain Development Agreement dated April 16, 1997 (the "Development
Agreement"); and
WHEREAS, Developer has assumed all of the obligations of SELOC AG under the
Development Agreement; and
WHEREAS, Paragraph 3.8 of the Development Agreement refers to certain
"Additional Services" that ViroPharma may desire Developer to provide; and
WHEREAS, ViroPharma and Developer desire to enter into this Addendum to
supplement the Development Agreement and to set forth the terms and conditions
pursuant to which Developer shall provide the Additional Services, as more
particularly described below (the "Additional Services").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Addendum, and intending to be legally bound, the parties agree
as follows:
Article 1. Definitions; Incorporation by Reference; Authorization; Starting
----------------------------------------------------------------
Materials.
- ---------
1.1 Capitalized terms used herein that are not defined in this Addendum
shall have meanings ascribed to them in the Development Agreement; provided that
as used below or as incorporated by reference herein, (a) the term "Project"
shall include all activities undertaken by or on behalf of ViroPharma or
Developer in connection with the Development Agreement and the Additional
Services, and (b) the term "Bulk Drug Substance Manufacturing Process" shall
mean (except as for the discussion of such process in Secession 1.4 below) a
three step synthesis, starting with the synthesis of WIN 61834, a written
description of which shall be finalized and communicated to Developer after the
date of this Addendum, and when so finalized, shall be deemed to be a supplement
to this Addendum.
1.2 The following provisions of the Development Agreement are incorporated
herein by reference: Paragraphs 2.2 and 2.3; Paragraphs 3.7 and 3.9; Articles 4
through 6 in their entirety; Paragraph 7.5; and Articles 8 and 9, Articles 11
through 18 in their entirety; provided that all references to "this Agreement"
in Article 11 of the Development Agreement shall mean this Addendum and the
Development Agreement, and all other references to "this Agreement" in the
provisions incorporated by reference herein shall mean this Addendum.
1.3 Developer warrants that it has assumed all of the rights and
obligations of SELOC AG under the Development Agreement, and is authorized to
sign this Addendum and perform its obligations hereunder.
1.4 Unless otherwise notified by ViroPharma that ViroPharma has found an
alternative supplier for the Starting Materials, Developer shall manufacture 4-
Hydroxyl-3,5-dimethylbenzonitrile ("Dimethyl") and 5-(3 Chloropropyl)-3-
methylisoxazole ("Methylisoxazole"), the two key starting materials referenced
by the Bulk Drug Substance Manufacturing Process, as such process is referred to
and defined in the Development Agreement (the "Original Bulk Drug Substance
Manufacturing Process"). Dimethyl and Methylisoxazole, previously referred to
in the Original Bulk Drug
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Manufacturing Process as WIN 50665 and WIN 61986, respectively, are collectively
referred to below as the "Starting Materials." Developer may manufacture the
Starting Materials itself or acquire the Starting Materials from P.C.A.S.,
Developer's parent company ("P.C.A.S."), or another third party, provided that
Developer shall ensure that the Starting Materials (a) are manufactured in
accordance with the Original Bulk Drug Substance Manufacturing Process, and (b)
meet or exceed the specifications for such Starting Materials as described in
the Bulk Drug Substance Specifications, and upon ViroPharma's request Developer
shall promptly obtain from P.C.A.S. or such other third party and deliver to
ViroPharma the batch records used in connection with the manufacture of the
Starting Materials, and such batch records shall demonstrate to ViroPharma's
reasonable satisfaction that the Starting Materials were manufactured in
accordance with the Original Bulk Drug Substance Manufacturing Process and meet
or exceed the specifications for such Starting Materials as described in the
Bulk Drug Substance Specifications. In all documentation and correspondence
received from Developer hereunder that references the Starting Materials,
Developer shall only refer to the Starting Materials as 4-Hydroxyl-3,5-
dimethylbenzonitrile and 5-(3 Chloropropyl)-3-methylisoxazole, respectively, and
shall not refer to the Starting Materials as WIN 50665 or WIN 61986. Developer
shall not modify, in any respect, the specifications for either of the Starting
Materials without the advance, written consent of ViroPharma in its sole
discretion.
1.5 On or before November 30, 1998, Developer shall list the Starting
Materials in its catalogue of commercially available chemicals and shall deliver
to ViroPharma a copy of such listing promptly after it first appears in
Developer's catalogue (the "Catalogue Entry").
Article 2. Process Validation Protocol; Interim Batches; Validation Batch I.
----------------------------------------------------------------
2.1 On or before March 31, 1998 (the "Protocol Date") Developer shall
provide to ViroPharma, in a form reasonably acceptable to ViroPharma, for its
review and approval a written description of: (a) the specifications and test
methods for all Starting Materials and intermediates used by Developer to
manufacture the Bulk Drug Substance; (b) the Bulk Drug Substance Specifications
and test methods; (c) the Bulk Drug Substance Manufacturing Process; and (d) a
draft validation protocol, as each of the foregoing is constituted on the
Protocol Date. Developer shall make such modifications to each of the foregoing
that are requested by ViroPharma from time to time hereafter, and shall not
otherwise make any modifications to any of the foregoing without the advance,
written consent of ViroPharma (all of the foregoing, together with all of such
modifications, are collectively hereinafter referred to as the "Process
Validation Protocol").
2.2 (a) On or before May 1, 1998 (the "Interim Batch Date"), Developer
shall:
(i) deliver to ViroPharma or its designee two batches yielding
in the aggregate at least 115 kilograms of Bulk Drug Substance manufactured
under cGMP conditions using the Bulk Drug Substance Manufacturing Process and
meeting or exceeding the Bulk Drug Substance Specifications (each, an "Interim
Batch" and collectively, the "Interim Batches");
(ii) perform analytical tests on the Interim Batches and on the
raw materials, Starting Materials, intermediates and Bulk Drug Substance used in
manufacturing the Interim Batches, and shall provide ViroPharma with a
certificate of analysis ("COA") and all supporting raw data with each Interim
Batch that demonstrates to ViroPharma's reasonable satisfaction that such
Interim Batch meets or exceeds the Bulk Drug Substance Specifications
(ViroPharma may, at its option, require confirmation of release testing by
Developer or a third party); and
(iii) deliver to ViroPharma 5 gram samples of each Starting
Material and intermediate used in manufacturing the Interim Batches, and a 100
gram sample of the final Bulk Drug Substance produced in connection with the
manufacture of each of the Interim Batches (collectively, the
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<PAGE>
"Interim Batch Samples"). Developer shall retain the Interim Batch Samples for a
period of not less than two (2) years, and after the expiration of such period
shall notify ViroPharma, and shall either dispose of the Interim Batch Samples
or return them to ViroPharma, as requested by ViroPharma.
(b) Developer shall promptly notify ViroPharma in writing of any condition
or event that causes any Starting Material or intermediate used in manufacturing
an Interim Batch, or final Bulk Drug Substance included in an Interim Batch, to
deviate from its applicable specifications.
(c) On or before June 15, 1998 (the "Interim Batch Documentation Date"),
Developer shall provide to ViroPharma the executed batch records used in the
manufacture of the Interim Batches in French with English translation, and such
batch records shall demonstrate to ViroPharma's reasonable satisfaction that
Interim Batches were manufactured in accordance with the Bulk Drug Substance
Manufacturing Process and meet or exceed the Bulk Drug Substance Specifications
(the "Interim Batch Documentation");
2.3 (a) On or before June 15, 1998 (the "Validation Batch I Date"),
Developer shall:
(i) deliver to ViroPharma or its designee a batch of at least
150 kilograms of Bulk Drug Substance manufactured under cGMP conditions using
the Bulk Drug Substance Manufacturing Process and otherwise in accordance with
the Process Validation Protocol, including but not limited to the Bulk Drug
Substance Specifications ("Validation Batch I");
(ii) perform analytical tests on Validation Batch I and on the
raw materials, Starting Materials, intermediates and Bulk Drug Substance used in
manufacturing Validation Batch I, and shall provide ViroPharma with a COA and
all supporting raw data that demonstrates to ViroPharma's reasonable
satisfaction that Validation Batch I was manufactured in accordance with the
Process Validation protocol and meets or exceeds the Bulk Drug Substance
Specifications (ViroPharma may, at its option, require confirmation of release
testing by Developer or a third party); and
(iii) deliver to ViroPharma 5 gram samples of each batch of
Starting Materials and intermediate used in manufacturing Validation Batch I,
and a 100 gram sample of the final Bulk Drug Substance produced in connection
with the manufacture of Validation Batch I (collectively, the "Batch I
Samples"). Developer shall retain the Batch I Batch Samples for a period of not
less than two (2) years, and after the expiration of such period shall notify
ViroPharma, and shall either dispose of the Batch I Samples or return them to
ViroPharma, as requested by ViroPharma.
(b) Developer shall promptly notify ViroPharma in writing of any
condition or event that causes any Starting Material or intermediate used in
manufacturing Validation Batch I, or final Bulk Drug Substance included in
Validation Batch I, to deviate from its applicable specifications prior to
recrystalization.
(c) One or before July 31, 1998 (then "Validation Batch I
Documentation Date"), Developer shall:
(i) deliver to ViroPharma the executed batch records used in the
manufacture of Validation Batch I in French with English translation, and such
batch records shall demonstrate to ViroPharma's reasonable satisfaction that
Validation Batch I was manufactured using the Bulk Drug Substance Manufacturing
Process and meets or exceeds the Bulk Drug Substance Specifications, as each is
described in the Process Validation Protocol (the "Validation Batch I
Documentation");
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<PAGE>
(ii) identify in writing the critical steps in the Process
Validation Protocol that could lower the cost per kilogram to ViroPharma for
manufacturing Bulk Drug Substance (the "Cost Reduction Plan") and covenant in a
written instrument substantially in the form attached hereto as Exhibit A (the
"Preliminary Addendum Letter Agreement") that, in the event that Developer is
selected by ViroPharma to provide the Commercial Requirements, then the terms of
a Supply Agreement between ViroPharma and Developer shall include provisions
pursuant to which Developer shall sell Bulk Drug Substance to ViroPharma at a
cost to ViroPharma not to exceed the amount per kilogram to be stated in the
Preliminary Addendum Letter Agreement;
(iii) provide to ViroPharma in writing for its review and
approval the details of how Developer will prepare for the FDA's pre-approval
inspection ("PAI"), including the documents that Developer shall have available
for FDA review, and Developer's plan for managing the PAI (collectively, the
"PAI Plan"). The PAI Plan shall include such information or data reasonably
requested by ViroPharma, and may include, without limitation: (i) a quality
assurance internal audit of the cGMP issues related to manufacturing Bulk Drug
Substance; (ii) a quality assurance internal audit of batch records of all
batches of Bulk Drug Substance to be included in or referenced by the NDA for
VP63843 and all developmental batches pertaining to the development and scale-up
of the Bulk Drug Substance Manufacturing Process; and (iii) conducting a mock
PAI with the participation of ViroPharma or its designee. Developer shall
promptly correct deficiencies noted by such internal audits and mock PAI. The
results of the foregoing audits shall include information about all out-of-
specification results from Developer's efforts to date in manufacturing the Bulk
Drug Substance. Developer also shall deliver to ViroPharma a development history
report that describes in reasonable detail all development, scale-up and
validation work performed by Developer, such report to be presented in two
sections, the first section discussing the foregoing activities undertaken in
respect of chemical processes and the second section discussing the foregoing
activities undertaken in respect of analytical chemistry (the "Development
History Report").
Article 3. Drug Master File; Preinspection Document Package. On or before
------------------------------------------------
December 31, 1998 (the "DMF Date"), Developer shall deliver to ViroPharma, for
ViroPharma's review and approval, hardcopy and electronic versions of: (a) the
drug master file for the Bulk Drug Substance, which shall include the
information described in Paragraph 3.1 below (the "Drug Master File"), and (b) a
preinspection document package containing a description of Developer's
manufacturing facility, such description to summarize the information that
manufacturers of bulk drug substance previously were required to provide in a
Type I Drug Master File, and a summary of the Bulk Drug Substance Manufacturing
Process (the "Preinspection Document Package"). Each of the forgoing shall be
in form and substance reasonably satisfactory to ViroPharma. Developer shall
make such changes to the to the Drug Master File and Preinspection Document
Package that are requested by ViroPharma. Developer acknowledges that
ViroPharma shall reference the Drug Master File in its NDA for VP63843, and
shall use the Stability Data (as defined below) to prepare the CMC section of
such NDA.
3.1 The Drug Master File shall contain:
(a) a description of the material process controls, including but not
limited to a list of Starting Materials, reagents, solvents, auxiliary
materials, specifications, analytical methods and characterization of Starting
Materials and intermediates;
(b) a description of the in-process controls and test methods used,
including but not limited to a full description of the control checks performed
at each stage of the manufacture, processing and packaging of Bulk Drug
Substance;
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(c) a flow chart and narrative description of the Bulk Drug Substance
Manufacturing Process as constituted on the DMF Date, including but not limited
to a description of the specific reaction conditions (such as temperature, time,
pressure, etc.), scale quantities (weights, volumes and measures, as well as
yield ranges), information regarding the reprocessing of intermediates and the
Bulk Drug Substance, and alternate methods or variations in the Bulk Drug
Substance Manufacturing Process with an explanation of the circumstances under
which such alternate methods or variations would be used, and data to support
equivalency in the event that such alternate methods or variations are used;
(d) a description of Developer's actual practice in manufacturing the
Bulk Drug Substance in more detail than would be provided through batch records,
including a description of the equipment to be used for the manufacture of a
commercial batch of the Bulk Drug Substance;
(e) appropriate information about the characteristics of, and the test
methods used for, the container proposed for use in shipping and holding Bulk
Drug Substance (the "Container"), including but not limited to data that
demonstrates to ViroPharma's reasonable satisfaction that the Container conforms
to the applicable requirements set forth in Title 21 of the United States Code
of Federal Regulations (i.e., 21 C.F.R.); and
(f) a full description of the test methods used to ensure that the
Bulk Drug Substance meets or exceeds the requirements of the Bulk Drug Substance
Specifications set forth in the Process Validation Protocol.
3.2 ViroPharma shall review the Drug Mater File and provide comments
and requested changes to Developer. Developer shall revise the Drug Master File
based upon such comments and requested changes that are mutually agreed to by
the parties, such agreement not to be unreasonably withheld by Developer, and
shall deliver the revised Drug Mater File to ViroPharma within two (2) weeks
after Developer's receipt of such comments and requested changes. Upon
ViroPharma's review and approval of the final Drug Master File, and after
notification from ViroPharma, Developer shall file the Drug Master File with the
FDA, provided that ViroPharma shall give Developer reasonable advance notice of
the date that ViroPharma expects such filing to be made. Developer shall
provide the FDA with updates to the Drug Master File on an annual basis.
3.3 Developer shall permit ViroPharma and third parties expressly
authorized by ViroPharma in writing to reference the Drug Master File in any
filing that ViroPharma or such authorized third parties may make with any
governmental or regulatory agency anywhere in the world, and Developer shall
promptly provide ViroPharma or such third party with a letter of permission or
other documentation deemed reasonably necessary by ViroPharma or such authorized
third party to evidence such right. Developer shall not permit any third party
to reference the Drug Master File without the advance written authorization of
ViroPharma, which ViroPharma may grant or withhold in its sole discretion.
3.4 ViroPharma shall provide Developer with stability data for the Bulk
Drug Substance from time to time ("Stability Data"). Developer shall provide
the Stability Data in the original Drug Master File and shall update the Drug
Master File in its annual reports regarding the Drug Master File.
3.5 Without limiting the generality of Articles 1, 4 and 5 of the
Development Agreement as incorporated herein, Developer acknowledges that the
Drug Master File, the Stability Data and the information described in Paragraph
6.6 below are specifically included within the definitions of "Intellectual Work
Product" and "Confidential Information," as such terms are used in the
Development
5
<PAGE>
Agreement and as incorporated by reference herein, and are subject to all of the
restrictions, limitations and requirements on use, disclosure and return to
ViroPharma as set forth therein.
Article 4. Validation Batch II
-------------------
4.1 Unless this Addendum is sooner terminated as set forth herein, on or
before October 31, 1998 (the "Validation Batch II Date"), Developer shall:
(a) prior to manufacturing Validation Batch II (as defined below),
deliver to ViroPharma master batch records that shall describe Developer's
proposed manufacturing activities for Validation Batch II for ViroPharma's
review and approval prior to initiating such activities, and shall make such
changes to such master batch records that are reasonably requested by ViroPharma
(as approved by ViroPharma, the "Approved Validation Batch II Master Batch
Records");
(b) deliver to ViroPharma or its designee a second batch of at least
three hundred (300) kilograms of the Bulk Drug Substance manufactured under cGMP
conditions using the Bulk Drug Substance Manufacturing Process and otherwise in
accordance with the Process Validation Protocol, including but not limited to
the Bulk Drug Substance Specifications ("Validation Batch II");
(c) perform the analytical tests described in the Process Validation
Protocol on Validation Batch II on the raw materials, Starting Materials,
intermediates and Bulk Drug Substance used in manufacturing Validation Batch II,
and shall provide ViroPharma with a COA and all supporting raw data that
demonstrates to ViroPharma's reasonable satisfaction that Validation Batch II
was manufactured in accordance with the Process Validation protocol and meets or
exceeds the Bulk Drug Substance Specifications (ViroPharma may, at its option,
require confirmation of release testing by Developer or a third party);
(d) deliver to ViroPharma 5 gram samples of each Starting Material and
intermediate used in manufacturing Validation Batch II, and a 100 gram sample of
the final Bulk Drug Substance produced in connection with the manufacture of
Validation Batch II (collectively, the "Batch II Samples"). Developer shall
retain the Batch II Batch Samples for a period of not less than two (2) years,
and after the expiration of such period shall notify ViroPharma, and shall
either dispose of the Batch II Samples or return them to ViroPharma, as
requested by ViroPharma; and
(e) covenant in a written instrument substantially in the form
attached hereto as Exhibit A (the "Final Addendum Letter Agreement") that, in
the event that Developer is selected by ViroPharma to provide the Commercial
Requirements, then the terms of a Supply Agreement between ViroPharma and
Developer shall include provisions pursuant to which Developer shall sell Bulk
Drug Substance to ViroPharma at a cost to ViroPharma not to exceed the amount
per kilogram to be stated in the Final Addendum Letter Agreement
4.2 Developer shall promptly notify ViroPharma in writing of any condition
or event that causes any Starting Material or intermediate used in manufacturing
Validation Batch II, or final Bulk Drug Substance included in Validation Batch
II, to deviate from its applicable specifications prior to recrystalization.
4.3 On or before December 31, 1998 (the "Validation Batch II Documentation
Date"), Developer shall:
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(a) provide to ViroPharma the executed batch records used in the
manufacture of Validation Batch II in French with English translation, and such
batch records shall demonstrate to ViroPharma's reasonable satisfaction that
Validation Batch II was manufactured in accordance with the Approved Validation
Batch II Master Batch Records, using the Bulk Drug Substance Manufacturing
Process and that Validation Batch II meets or exceeds the Bulk Drug Substance
Specifications, as each of the Bulk Drug Substance Manufacturing Process and the
Bulk Drug Substance Specifications is described in the Process Validation
Protocol (the "Batch II Documentation"); and
(b) deliver to ViroPharma reasonably detailed information on all
vendors of Starting Materials, reagents and solvents used by Developer from the
date of the Development Agreement through December 31, 1998 as well as a
description on how Developer qualified each of the vendors from whom Developer
obtained the foregoing materials ("Vendor Data").
Article 5. Validation Batch III
--------------------
5.1 Unless this Addendum is sooner terminated as set forth herein, on or
before a date to be mutually agreed to by the parties (the "Validation Batch III
Date") Developer shall:
(a) prior to manufacturing Validation Batch III (as defined below),
deliver to ViroPharma master batch records that shall describe Developer's
proposed manufacturing activities for Validation Batch III for ViroPharma's
review and approval prior to initiating such activities, and shall make such
changes to such master batch records that are reasonably requested by ViroPharma
(as approved by ViroPharma, the "Approved Validation Batch III Master Batch
Records");
(b) deliver to ViroPharma or its designee a third batch of at least
three hundred (300) kilograms of the Bulk Drug Substance manufactured under cGMP
conditions using the Bulk Drug Substance Manufacturing Process and otherwise in
accordance with the Process Validation Protocol, including but not limited to
the Bulk Drug Substance Specifications ("Validation Batch III");
(c) perform the analytical tests described in the Process Validation
Protocol on Validation Batch III on the raw materials, Starting Materials,
intermediates and Bulk Drug Substance used in manufacturing Validation Batch
III, and shall provide ViroPharma with a COA and all supporting raw data that
demonstrates to ViroPharma's reasonable satisfaction that Validation Batch III
was manufactured in accordance with the Process Validation protocol and meets or
exceeds the Bulk Drug Substance Specifications (ViroPharma may, at its option,
require confirmation of release testing by Developer or a third party); and
(d) deliver to ViroPharma 5 gram samples of each Starting Material and
intermediate used in manufacturing Validation Batch III, and a 100 gram sample
of the final Bulk Drug Substance produced in connection with the manufacture of
Validation Batch III (collectively, the "Batch III Samples"). Developer shall
retain the Batch III Batch Samples for a period of not less than two (2) years,
and after the expiration of such period shall notify ViroPharma, and shall
either dispose of the Batch III Samples or return them to ViroPharma, as
requested by ViroPharma.
5.2 Developer shall promptly notify ViroPharma in writing of any condition
or event that causes any Starting Material or intermediate used in manufacturing
Validation Batch III, or final Bulk Drug Substance included in Validation Batch
III, to deviate from its applicable specifications prior to recrystalization.
5.3 On or before the end of the second month immediately following the
Validation Batch III Date (the "Validation Batch III Documentation Date"),
Developer shall provide to ViroPharma the
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executed batch records used in the manufacture of Validation Batch III in French
with English translation, and such batch records shall demonstrate to
ViroPharma's reasonable satisfaction that Validation Batch III was manufactured
in accordance with the Approved Validation Batch III Master Batch Records, using
the Bulk Drug Substance Manufacturing Process, and that Validation Batch III
meets or exceeds the Bulk Drug Substance Specifications, as each of the Bulk
Drug Substance Manufacturing Process and the Bulk Drug Substance Specifications
is described in the Process Validation Protocol (the "Validation Batch III
Documentation").
Article 6. Delivery and Payment
--------------------
6.1 Within thirty (30) days after the full execution of this Addendum,
ViroPharma shall pay Developer the amount of $80,500. Provided that ViroPharma
or its designee receives the deliverables set forth below (each, a
"Deliverable") on or before the delivery date set forth opposite the applicable
Deliverable (each, a "Delivery Date"), then ViroPharma shall pay SELOC the
amounts set forth below for the applicable Deliverable:
<TABLE>
<CAPTION>
Deliverable Delivery Date Payment Amount
- ----------------------------------------------- ----------------------------- --------------
<S> <C> <C>
Process Validation Protocol the Protocol Date $ 80,500
Interim Batches, analytical results and the Interim Batch Date $248,400
COA, Interim Batch Samples
Interim Batch Documentation the Interim Batch $ 62,100
Documentation Date
Validation Batch I, analytical results and the Validation Batch I Date $322,000
COA, Batch I Samples
Validation Batch I Documentation, the Validation Batch I $ 80,500
Cost Reduction Plan, Preliminary Addendum Documentation Date
Letter Agreement, PAI Plan, Development
History Report
Drug Master File, the Catalogue Entry,
Preinspection Document Package the DMF Date $ 80,500
Validation Batch II, analytical results, COA, the Validation Batch II Date $289,800
Batch II Samples and Final Addendum
Letter Agreement
Validation Batch II Documentation, the Validation Batch II $ 80,500
Vendor Data Documentation Date
Validation Batch III, analytical results and the Validation Batch III Date $289,800
COA, Batch III Samples
Validation Batch III Documentation the Validation Batch III $ 80,500
Documentation Date
</TABLE>
6.2 If this Addendum is not terminated prior to Developer's manufacture and
delivery to ViroPharma all of the Deliverables set forth above, then ViroPharma
shall pay Developer the amount of $225,400 upon the earlier of the satisfaction
of the condition described in Article 8 below or the date that the FDA approves
the NDA in respect of VP63843.
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6.3 Developer shall deliver all Deliverables constituting items other than
Bulk Drug Substance to ViroPharma DDP Exton, PA, USA, or to such other place
designated by ViroPharma in writing. Developer shall deliver all Deliverables
constituting Bulk Drug Substance DDP to the party and location identified by
ViroPharma in writing, which initially shall be to Patheon, Inc. at Mississauga,
Ontario, Canada. The foregoing delivery terms shall have the meaning as defined
in Incoterms 1990. Developer shall be solely responsible for all freight,
insurance, customs duties and other shipping charges, and for acquiring all
import and export licenses, documentation and approvals.
6.4 In no event shall ViroPharma be obligated to pay SELOC in excess
of $1,920,500 for activities undertaken by Developer hereunder (the "Total
Fee"). All payments due and owing from ViroPharma hereunder shall be made to
Developer's Designee (as defined in Article 10 below), unless otherwise
instructed by Developer in writing. Payment on all invoices issued under this
Addendum shall be due and payable within thirty (30) days after ViroPharma's
receipt of the invoice. Any and all payments to be made by ViroPharma under this
Addendum shall be made in U.S. Dollars.
6.5 If any item of Bulk Drug Substance is not manufactured in accordance
with the applicable standards set forth in this Addendum, or if Developer fails
to deliver to ViroPharma or its designee any Deliverable by the Delivery Date
applicable to such Deliverable, then ViroPharma may, at its option, either:
(a) terminate this Addendum pursuant to Paragraph 7.1(b) below; or
(b) in the event that any Deliverable consisting of Bulk Drug
Substance is not manufactured in accordance with the Bulk Drug Substance
Manufacturing Process, the Bulk Drug Substance Specifications or other standard
set forth in the Process Validation Protocol, (i) require Developer to rerun the
Interim Batch, Validation Batch I, Validation Batch II or Validation Batch III
(each, a "Rerun Batch"), as the case may be, at Developer's sole cost and
expense, and deliver to ViroPharma the applicable Rerun Batch within 45 days
after the date that ViroPharma notifies Developer of ViroPharma's election to
proceed under this Section 6.5(b); (ii) purchase the Interim Batches, Validation
Batch I, Validation Batch II or Vaidation Batch III, as the case may be, at a
price equal to seventy-five percent (75%) of the "Payment Amount" listed
opposite such Deliverable in Section 6.1, and (iii) continue under this
Addendum; or
(c) in the event that any Deliverable consisting of Bulk Drug
Substance is not delivered on or before the applicable Delivery Date for such
Deliverable (subject to Paragraph 9.4 below), purchase the Interim Batches,
Validation Batch I, Validation Batch II or Validation Batch III, as the case may
be, when finally delivered to ViroPharma at a price equal to seventy-five
percent (75%) of the "Payment Amount" listed opposite such Deliverable in
Section 6.1 above, and continue under this Addendum; or
(d) require Developer to take such additional steps, at its sole
expense and within a time period to be mutually agreed to by ViroPharma and
Developer (such agreement not to be unreasonably withheld by Developer and such
time period not to exceed 45 days after the date that ViroPharma notifies
Developer of ViroPharma's election to proceed under this Section 6.5(d)), that
ViroPharma and Developer agree are necessary (the "Additional Documentation
Steps") to permit Developer to complete any Deliverable constituting an item
other than Bulk Drug Substance, and either (i) continue under this Addendum, or
(ii) terminate this Addendum pursuant to Article 7 below, provided that, in
either case, the amount payable by ViroPharma in respect of the Deliverables to
which the Additional Documentation Steps relate shall be reduced by an amount
equal to two and one-half percent (2.5%) of the Total Fee.
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6.6 Developer shall provide ViroPharma copies of all Project Materials
generated in connection with the activities performed by Developer hereunder
upon ViroPharma's request, but in any event not more frequently than once every
two (2) weeks.
Article 7. Termination
-----------
7.1 This Addendum may be terminated as set forth in this Paragraph 7.1:
(a) ViroPharma may terminate this Addendum for any reason other than
as described in Paragraphs 7.1(b), (c) or (d) after the Validation Batch I Date
upon sixty (60) days advance written notice to Developer (a "Termination Without
Cause").
(b) ViroPharma may terminate this Addendum immediately upon written
notice to Developer if any item of Bulk Drug Substance is not manufactured in
accordance with the applicable standards set forth in this Addendum, or if
(subject to Paragraph 9.4 below) Developer fails to deliver to ViroPharma or its
designee any Deliverable by the applicable Delivery Date for such Deliverable.
(c) The nondefaulting party may terminate this Addendum immediately
upon written notice to the defaulting party if any of the events described in
Paragraph 7.2(c) of the Development Agreement occurs with respect to the
defaulting party.
(d) Any party may terminate this Addendum upon sixty (60) days written
notice to the other party if performance of this Addendum in accordance with its
terms by the party giving notice would violate any law or regulation applicable
to such party.
7.2 Upon a termination of this Addendum, ViroPharma's obligations shall be
as set forth in this Paragraph 7.2.
(a) Upon a Termination Without Cause by ViroPharma, ViroPharma's sole
obligation to Developer shall be to pay Developer (i) all amounts incurred by
Developer in respect of noncancelable obligations for the purchase of raw
materials that were to be used in manufacturing Bulk Drug Substance for
ViroPharma ("Raw Materials"), provided that Developer shall deliver such Raw
Materials, at ViroPharma's sole expense, to such location as is designated by
ViroPharma, plus (ii) all amounts then unpaid and due in accordance with the
terms of this Addendum for all Deliverables shipped to or received by ViroPharma
prior to the date that ViroPharma notified Developer of such Termination Without
Cause; plus (iii) $21,252, if a Termination Without Cause occurs prior to the
Validation Batch II Date, or $122,199, if a Termination Without Cause occurs
after the Validation Batch II Date but before the Validation Batch III Date.
(b) If this Addendum is terminated by ViroPharma pursuant to Paragraph
7.1(b) above or Paragraph 9.4 below, then ViroPharma's sole obligation to
Developer shall be to pay all amounts then unpaid and due in accordance with the
terms of this Addendum for all Deliverables accepted by ViroPharma prior to the
date of the written notice of such termination.
(c) Upon a termination of this Addendum by ViroPharma pursuant to
Paragraph 7.1(c) above, then ViroPharma's shall have no further obligation to
pay any further amount to Developer; provided that any termination by ViroPharma
of this Addendum due to any event affecting Developer that is described in
Paragraph 7.2(c)(i) of the Development Agreement shall not affect ViroPharma's
obligation to pay to Developer all amounts then unpaid and due in accordance
with the terms of this Addendum.
10
<PAGE>
(d) Upon termination of this Addendum by any party pursuant to
Paragraph 7.1(d) above, ViroPharma's sole obligation shall be to pay Developer
for the Deliverable(s) delivered to ViroPharma through the effective date of
such termination.
7.3 The termination or expiration of this Addendum through any means and
for any reason shall not relieve the parties of any obligation accruing prior
thereto. The following provisions of this Addendum shall survive the termination
or expiration of this Addendum: Article 1 in its entirety; Paragraphs 3.3, 3.5,
6.6, 7.2, 7.3 and Articles 8, 9 and 10 in their entirety. The following
provisions of the Development Agreement, as incorporated herein as set forth
above, shall survive the termination or expiration of this Addendum: Paragraphs
3.1(d), 3.6, and 4.2 through 4.4, Articles 5 and 6 in their entirety, Paragraphs
7.3 through 7.6, and Articles 8 through 18 in their entirety.
Article 8. Covenants, Representations and Warranties. In addition to the
-----------------------------------------
covenants, representations and warranties of Developer as set forth herein or as
incorporated by reference herein, Developer covenants, represents and warrants
that Developer's facility, the Process Validation Protocol and all other
processes and procedures used by Developer in connection with its manufacture of
Bulk Drug Substance, shall meet or exceed the requirements of the FDA, and that
Developer will satisfy the requirements of the FDA's PAI in respect of the Bulk
Drug Substance.
Article 9. General.
--------
9.1 ViroPharma shall not be deemed to have accepted any shipment of Bulk
Drug Substance, and shall not be obligated to make any payment with respect
thereto, until ViroPharma or its designee has confirmed that such Bulk Drug
Substance meets or exceeds the Bulk Drug Substance Specifications; provided that
if ViroPharma does not so confirm that the applicable shipment of Bulk Drug
Substance meets or exceeds the Bulk Drug Substance Specifications within forty-
five (45) days after its receipt of such Bulk Drug Substance, then ViroPharma
shall be deemed to have accepted such Bulk Drug Substance.
9.2 Except as specifically stated herein, all Project Materials delivered
to ViroPharma shall be in English, and all communications and notices delivered
to by either party hereunder shall be in English.
9.3 Notwithstanding anything to the contrary set forth in the Development
Agreement, all notices hereunder or under the Development Agreement shall be in
writing and shall be delivered personally, mailed by overnight delivery,
registered or certified mail, postage prepaid, or given by facsimile to the
following addressees or facsimile numbers of the respective parties:
If to Developer: SELOC France
19, route de Meulan
F-78520
Limay, France
Attn: Didier Bensoussan, Ph.D.
Fax Number: 011 33 1 30 92 03 46
11
<PAGE>
If to ViroPharma: ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Attn: Dr. Mark McKinlay
Fax Number: 610-458-7380
with a copy to: ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Attn: Vice President, General Counsel
Fax Number: 610-458-7380
Notices shall be effective upon receipt if personally delivered, on the fifth
business day following the date of mailing if sent by certified or registered
mail, on the second business day following the date of delivery to the express
mail service if sent by express mail, and in the case of facsimile transmission,
when confirmed by facsimile machine report. A party may change its address
listed above by notice to the other party given in the manner described in this
Paragraph 9.3.
9.4 Neither party shall be liable for the failure to perform or delay in
performing with respect to any provision of this Addendum to the extent
performance in the required manner shall be prevented, hindered or delayed in
whole or in part by power failures, earthquakes, floods or other acts of God, or
compliance with an act or request of a governmental authority or persons
purporting to act with governmental authority; provided that the affected party
shall use its best efforts to avoid or remove such causes of non-performance and
shall continue performance with the utmost dispatch whenever such causes are
removed; and provided further that if either party is unable to fulfill any
relevant obligation under this Addendum due to any such cause, and this
situation continues for a period of thirty (30) days, then the other party
hereto shall have the right to terminate this Addendum by written notice.
Article 10. Developer Designee. Developer may use InterChem Corporation, or
------------------
such other third party designated by Developer in writing (the "Designee"), to
assist Developer in shipping the Deliverables to ViroPharma. All sums due
hereunder from ViroPharma shall be paid to Designee on behalf of Developer, and
upon such payment, ViroPharma shall have no further obligations in respect of
such payment to Developer. Notwithstanding the foregoing, the use of Designee
by Developer, and the acceptance of any Deliverable by ViroPharma delivered to
it by Designee, shall in no way diminish any rights that ViroPharma may enforce
against Developer, and shall not act as a waiver or estoppel of any claim that
ViroPharma may have at any time against Developer arising from or relating to
this Addendum. The parties expressly acknowledge that the use of Designee is
for the convenience of Developer.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the day and
year first-above written.
SELOC FRANCE VIROPHARMA INCORPORATED
By: By:
----------------------- ---------------------
Name: Name:
--------------------- -------------------
Title: Title:
-------------------- ------------------
12
<PAGE>
EXHIBIT A
[DATE]
ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Gentlemen:
Reference is hereby made to that certain Addendum to Development Agreement
dated as of March 1, 1998 (the "Addendum") between SELOC France (formerly SICOR
SA) ( the "Developer") and ViroPharma Incorporated ("ViroPharma"). All
capitalized terms used in this letter and not defined below shall have the
meanings ascribed to them in the Addendum or the Development Agreement dated
April 16, 1997 among Developer, SELOC AG and ViroPharma. This letter supercedes
Letter Agreement between the parties dated December 22, 1997.
In the event that Developer is selected by ViroPharma to provide ViroPharma's
Commercial Requirements, then the terms of a Supply Agreement between Developer
and ViroPharma shall include provisions pursuant to which: (a) if Developer
improves the synthetic process for manufacturing Bulk Drug Substance, realizes
cost saving for raw materials or Starting Materials or otherwise reduces its
manufacturing costs for Bulk Dug Substance, then ViroPharma shall realize the
benefit of such costs savings in a reduced per-kilogram price charged by
Developer to ViroPharma for Bulk Drug Substance by a pricing method to be agreed
to by the parties in the Supply Agreement; and (b) in any event, Developer shall
sell Bulk Drug Substance to ViroPharma at a price per kilogram (including
shipping costs, customs duties and taxes) not to exceed those set forth below
(provided that ViroPharma purchases the annual quantity of Bulk Drug Substance
set forth opposite each price), and each such price shall include the per
kilogram cost of the Starting Materials set forth opposite each such price:
Starting Material Cost Per Kilogram
-----------------------------------
Quantity Bulk Drug Price Per
--------
Kilogram Not To Exceed Dimethyl Methylisoxazole
---------------------- -------- ---------------
100 kilograms--1 metric ton
In excess of 1 metric ton--3 metric tons
In excess of 3 metric tons--10 metric tons
In excess of 10 metric tons
Sincerely,
SELOC France
___________________________
By:
Its:
ACKNOWLEDGED:
VIROPHARMA INCORPORATED
____________________________
By:
Its:
13
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