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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number 0-20815
AVIRON
(Exact name of registrant as specified in its charter)
DELAWARE 77-0309686
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
297 North Bernardo Avenue, Mountain View, California 94043
(Address of principal executive offices including zip code)
(650) 919-6500
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $.001 par value 15,768,680 shares
---------------------------- ----------------------------
(Class) (Outstanding at May 7, 1999)
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AVIRON
TABLE OF CONTENTS
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PAGE NUMBER
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES (UNAUDITED).
Condensed Balance Sheets as of March 31, 1999
and December 31, 1998 3
Condensed Statements of Operations for the three-
month periods ended March 31, 1999 and 1998 4
Condensed Statements of Cash Flows for the three-
month periods ended March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 17
PART II. OTHER INFORMATION 18
ITEM 1. LEGAL PROCEEDINGS. 18
ITEM 2. CHANGES IN SECURITIES. 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 18
ITEM 5. OTHER INFORMATION. 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 18
SIGNATURES 19
EXHIBIT INDEX 20
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVIRON
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
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<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED) (NOTE 1)
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ASSETS
Current Assets:
Cash and cash equivalents ......................... $ 38,428 $ 28,164
Short-term investments ............................ 50,826 60,692
Prepaid expenses and other current assets ......... 1,387 1,303
--------- ---------
Total current assets ............................ 90,641 90,159
Long-term investments ............................... 3,911 6,002
Property and equipment, net ......................... 19,172 18,521
Deposits and other assets ........................... 7,020 6,303
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TOTAL ASSETS ........................................ $ 120,744 $ 120,985
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................. $ 3,011 $ 2,792
Accrued compensation .............................. 704 804
Accrued clinical trial costs ...................... 726 757
Accrued interest .................................. 2,859 1,445
Accrued expenses and other liabilities ............ 4,086 4,584
Current portion of capital lease obligations ...... 361 408
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Total current liabilities ....................... 11,747 10,790
Deferred rent ....................................... 1,378 1,116
Capital lease obligations, noncurrent ............... 66 113
Convertible debt .................................... 100,000 100,000
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Total liabilities ................................... 113,191 112,019
--------- ---------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, issuable in series; none outstanding
at March 31, 1999 and December 31, 1998 ......... -- --
Common stock, $0.001 par value; 30,000,000
shares authorized; 15,765,240 and 15,723,343
shares issued and outstanding at March 31, 1999
and December 31, 1998, respectively ............. 16 16
Additional paid-in capital ........................ 130,635 130,524
Notes receivable from stockholders ................ (83) (83)
Deferred compensation ............................. (193) (237)
Accumulated deficit ............................... (122,822) (121,254)
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Total stockholders' equity .......................... 7,553 8,966
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 120,744 $ 120,985
========= =========
</TABLE>
See accompanying notes.
3
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AVIRON
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1999 1998
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TOTAL REVENUES:
Contract revenues and grants .......... $ 15,531 $ 253
------------ ------------
OPERATING EXPENSES:
Research and development ............... 14,005 9,783
General, administrative and marketing .. 2,682 2,061
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TOTAL OPERATING EXPENSE .................. 16,687 11,844
------------ ------------
LOSS FROM OPERATIONS ..................... (1,156) (11,591)
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OTHER INCOME/(EXPENSE):
Interest income ........................ 1,211 953
Interest expense ....................... (1,574) (43)
------------ ------------
TOTAL OTHER INCOME (EXPENSE), net ........ (363) 910
------------ ------------
NET LOSS ................................. $ (1,519) $ (10,681)
============ ============
Basic and diluted net loss per share ..... $ (0.10) $ (0.67)
============ ============
Shares used in computing basic and
diluted net loss per share ............. 15,702,871 16,003,786
</TABLE>
See accompanying notes.
4
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AVIRON
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
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THREE MONTHS ENDED
MARCH 31,
------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................. $ (1,519) $(10,681)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ................. 1,107 354
Amortization of convertible debt offering costs 141 --
Amortization of deferred compensation ......... 44 119
Changes in assets and liabilities:
Prepaid expenses and other current assets ..... (84) (215)
Deposits and other assets ..................... (858) --
Accounts payable .............................. (731) (395)
Accrued expenses and other liabilities ........ 1,735 (2,653)
Deferred rent ................................. 262 132
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Net cash provided by (used in) operating activities .. 97 (13,339)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments ...................... (8,168) (1,764)
Maturities of investments ..................... 20,076 13,036
Expenditures for property and equipment ....... (1,758) (5,635)
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Net cash provided by investing activities ............ 10,150 5,637
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligation (94) (140)
Proceeds from convertible debt offering ....... -- 96,000
Repurchase of Common Stock .................... -- (13,337)
Proceeds from issuance of Common stock, net ... 111 164
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Net cash provided by financing activities ............ 17 82,687
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Net increase in cash and cash equivalents ............ 10,264 74,985
Cash and cash equivalents at beginning of period ..... 28,164 15,239
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 38,428 $ 90,224
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</TABLE>
See accompanying notes.
5
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AVIRON
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.
The financial information as of March 31, 1999 and for the three months ended
March 31, 1999 and 1998 are unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) which Aviron (the Company) considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. The balance sheet data at
December 31, 1998 is derived from the audited financial statements at that date,
but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying condensed financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. The results of the
Company's operations for any interim period are not necessarily indicative of
the results of the Company's operations for a full fiscal year.
Comprehensive Income (Loss)
Comprehensive income (loss) is not presented separately as it approximates
the net loss presented in the statement of operations for the three months ended
March 31, 1998 and 1999.
2. Net Loss Per Share
The Company calculates net loss per share in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
requires the presentation of basic earnings (loss) per share and diluted
earnings per share, if more dilutive, for all periods presented. Basic net loss
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted net loss per share has not been presented
separately as, given the Company's net loss position, the result would be
anti-dilutive.
3. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133),
which is required to be adopted for the year ending December 31, 2000.
Management does not anticipate that the adoption of SFAS 133 will have a
significant effect on the results of operations or the financial position of the
Company.
As of January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 requires companies to capitalize certain
qualifying computer software costs, which are incurred during the application
development stage, and amortize them over the software's estimated useful life.
Management does not expect the adoption of SOP 98-1 will have a significant
effect on the results of operations or the financial position of the Company.
4. Collaboration Agreement
On January 12, 1999, the Company announced a worldwide collaboration for the
marketing of FluMist(TM), the Company's live cold-adapted influenza virus
vaccine, with Wyeth Lederle Vaccines, a business unit of Wyeth-Ayerst
Laboratories, the pharmaceutical division of American Home Products Corporation
(Wyeth Lederle). On March 15,
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1999, the Federal Trade Commission granted early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvement Act of 1996 regarding
this collaboration.
Under the agreement, Aviron is granting Wyeth Lederle exclusive worldwide
rights to market FluMist(TM). Wyeth Lederle and Aviron will co-promote
FluMist(TM) in the United States, while Wyeth Lederle will have the exclusive
right to market the product outside the United States. In each case, Wyeth
Lederle will hold the marketing rights for up to eleven years. The collaboration
excludes Korea, Australia, New Zealand and certain South Pacific countries. The
companies will collaborate on the regulatory, clinical, and marketing programs
for the product.
As consideration under the agreement, the Company received a cash payment of
$15 million for the initial license that was recognized as revenue during the
quarter ended March 31, 1999. In addition, the Company will receive $15 million
upon acceptance for filing with the U.S. Food and Drug Administration (FDA), and
$20 million upon FDA marketing approval for FluMist(TM). Compensation for
achieving additional development and regulatory milestones is included in the
agreement terms. The granting of certain rights under the license would trigger
additional payments in excess of $140 million to the Company. Consideration for
the license also includes a commitment to provide up to $40 million in future
financing to the Company from Wyeth-Ayerst Laboratories, a portion of which is
contingent upon regulatory approval of the product, with the remaining amount to
come from participation in the Company's future securities offerings. The
potential value for the license fees, milestones and financing support that the
Company could receive under the collaboration exceeds $400 million. In addition
to the payments mentioned above, the Company anticipates that it will earn
product revenues from Wyeth Lederle, in the form of product transfer payments
and royalties, which increase at higher sales levels. The Company will incur
expenses to supply and co-promote the product.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains, in addition to historical information,
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in the Company's Annual Report on Form 10-K in the section entitled
"Business Risks."
OVERVIEW
Since its inception in April 1992, Aviron has devoted substantially all of
its resources to its research and development programs. To date, Aviron has not
generated any revenues from the sale of products and does not expect to generate
any such revenues until 2000 at the earliest. Aviron has incurred cumulative net
losses of approximately $122.8 million as of March 31, 1999, and it expects to
incur substantial operating losses over at least the next few years. Aviron has
financed its operations through proceeds from private placements of preferred
stock, two public offerings and a private placement of Common Stock, a private
placement of convertible subordinated notes, revenue from its collaborative
agreements, equipment lease financings and investment income earned on cash,
cash equivalent balances and marketable securities.
On June 30, 1998 Aviron submitted its first Product License
Application/Establishment License Application (PLA/ELA) to the U.S. Food and
Drug Administration (FDA) for FluMist(TM). On August 31, 1998 the Company
announced that it had received notice from the FDA that its submission was not
accepted for filing due to lack of data on manufacturing validation and
stability. The Company intends to resubmit its applications for U.S. licensure
for FluMist(TM) to prevent influenza and its complications in children and
adults in the summer or fall of 1999. The resubmission will be in the form of a
Biological License Application (BLA) in accordance with current FDA
requirements.
The Company expects its research and development expenditures to increase
substantially over the next several years as the Company expands its research
and development efforts, preclinical testing and clinical trials with respect to
certain of its programs, and manufacturing activities principally in regard to
FluMist(TM). In addition, general, administrative and marketing expenses are
expected to continue to increase as the Company expands its operations and
prepares for the potential commercial launch of FluMist(TM).
The Company announced in late 1998 positive preliminary results of a Phase 2
clinical trial for a live intranasal vaccine for Parainfluenza Virus Type 3
(PIV-3) to protect against croup. The Company intends to continue preparation
for further clinical trials for PIV-3. The Company also is developing a subunit
vaccine for Epstein-Barr Virus (EBV) to protect against infectious mononucleosis
in collaboration with SmithKline Beecham Biologicals, S.A. (SmithKline Beecham).
A Phase 1 clinical trial of this vaccine is being completed. In addition, the
Company expects to begin a clinical trial in the second half of 1999 for a
vaccine candidate for Cytomegalovirus (CMV) with the National Institute of
Allergy and Infectious Diseases (NIAID) of the National Institute of Health
(NIH). Aviron is also using its proprietary Rational Vaccine Design technologies
to develop vaccine candidates for diseases caused by Herpes Simplex Virus Type 2
(HSV-2) and Respiratory Syncytial Virus (RSV).
Influenza Clinical Trials
The Company has conducted and continues to conduct clinical trials to
evaluate safety and efficacy of its live cold-adapted influenza vaccine,
FluMist(TM), a trivalent vaccine. To date, the Company has tested FluMist(TM) in
over 11,000 children and adults. While the Company believes that it can use
previous trial data from others, including NIH and Wyeth-Ayerst Laboratories, a
division of American Home Products (Wyeth), to support its regulatory filings,
the Company's use of the previous data to establish safety and efficacy of its
proposed vaccine is limited because very few of the clinical trials involved a
trivalent vaccine delivered through a nasal spray device. The Company's clinical
trials relate to the safety and efficacy of the trivalent formulation as well as
the safety of its
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intranasal spray delivery method. The Company enrolled a total of 647 patients
in Phase 1 / Phase 2 clinical trials; 92 patients in a challenge efficacy study
in adults, in collaboration with the NIH; 1,602 children in Year 1 of the Phase
3 pediatric protective efficacy trial, approximately 85 percent of whom have
returned for Year 2 of the trial; and 5,758 adults and children in five
additional safety studies and in a healthy working adult effectiveness trial.
The Company has received limited data on the efficacy of FluMist(TM) against
culture-confirmed influenza from clinical trials in healthy adults. There can be
no assurance that data from such trials, in addition to prior trials, will be
sufficient to support the FDA approval in healthy adults. The Company's clinical
trials are being designed to support the planned BLA submission in the summer or
fall of 1999 seeking approval of FluMist(TM) in several target populations. The
estimated timing of submission of this BLA and potential commercialization of
FluMist(TM) are forward-looking statements subject to risks and uncertainties,
and there can be no assurance that such filing or such approval will not be
delayed materially or that such commercialization will occur as a result of
certain factors, including those set forth in "Uncertainties Related to Clinical
Trials," "-- Uncertainties Related to Early Stage of Development; Technological
Uncertainty" in the "Business Risks" section of the Company's Annual Report on
Form 10-K.
Phase 3 Clinical Trials in Children
The Company has completed a two-year pivotal Phase 3 clinical trial to evaluate
one-and two-dose regimens in children. The Company's clinical trial data suggest
that a repeat or booster dose may be required in young children without previous
exposure to influenza or influenza vaccines. Two doses of the inactivated
injectable influenza vaccine are recommended annually for young children
receiving influenza prophylaxis for the first time. The Company enrolled 1,602
children at 10 clinical sites in the pivotal Phase 3 clinical trial, of which
1,314 were vaccinated with a second dose 46 to 74 days after initial
vaccination. The primary endpoint of the first stage of the study was defined as
protection of children from culture-confirmed influenza during naturally
occurring epidemics of influenza.
The data were unblinded in July 1997 following a single year of patient
accrual due to the adequate incidence of influenza in the study population. The
Company and NIAID announced that, based on an initial analysis of the first year
of the Phase 3 trial, FluMist(TM) demonstrated a 93 percent protection rate
against culture-confirmed influenza in those children receiving two doses, the
primary endpoint of the study. Only 1 percent of children receiving two doses
experienced culture-confirmed influenza, compared to 18 percent of those
receiving the placebo. These results were statistically significant. No serious
adverse events attributable to FluMist(TM) were seen in any subjects to whom
FluMist(TM) was administered. There were no statistically significant
differences in other side effects between FluMist(TM) and placebo recipients,
except for a somewhat increased incidence of transient runny nose, mild fever
and decreased activity following immunization in children receiving FluMist(TM).
The investigators described these transient side effects as comparable to or
milder than those observed following many other childhood immunizations.
The clinical investigators presented the initial findings of this trial at a
scientific conference in the fall of 1997 and, in May 1998, data from the first
year of this trial of FluMist(TM) were published in The New England Journal of
Medicine. In the randomized, placebo-controlled study, results show that only 14
of the 1,070 children vaccinated with FluMist(TM) experienced culture-confirmed
influenza, while 95 of the 532 placebo recipients experienced culture-confirmed
influenza. Of the children who received FluMist(TM), only one child developed
influenza-associated otitis media (ear infection), while 20 of the placebo
recipients developed influenza-associated ear infections. Throughout the entire
cough, cold and flu season, 1,070 children vaccinated with FluMist(TM)
experienced 30 percent fewer ear infections with fever than children who
received placebo and a 35 percent reduction in related antibiotic use for ear
infections with fever.
The children who participated in the first year of this study were invited
back to participate for a second year of the trial during the 1997-98 flu
season, and they were vaccinated with either a single dose of FluMist(TM) or a
placebo spray. In September 1998, the results of Year 2 of the Phase 3 efficacy
trial of FluMist(TM) in children, conducted in collaboration with NIAID, were
presented at the Interscience Conference on Antimicrobial Agents and
Chemotherapy (ICAAC). The study showed that FluMist(TM) provided 100 percent
protection against culture-confirmed influenza strains included in the 1997 - 98
flu vaccine, and 86 percent protection against A/Sydney, an unexpected variant
which was the predominant strain of influenza circulating during the 1997-98 flu
season. Overall, FluMist(TM) provided 87 percent protection against all
culture-confirmed influenza. In the 1,358 participants, there
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were five cases of influenza due to influenza strains included in the vaccine
and 66 cases caused by A/Sydney. Only two percent of children vaccinated with
FluMist(TM) (15 out of 917) experienced culture-confirmed influenza, all of
which was attributable to the A/Sydney strain, while 13 percent of the placebo
recipients (56 out of 441) experienced culture-confirmed influenza. The
difference between these two influenza attack rates is used to calculate the
overall protection rate of 87 percent.
The incidence of pneumonia and other lower respiratory diseases was also
reduced in those children vaccinated with FluMist(TM), compared to placebo.
Eight children in the placebo group developed influenza-related wheezing,
bronchitis or pneumonia, all of which were due to the A/Sydney strain. No
children who received FluMist(TM) experienced lower respiratory complications.
In the 15 of the 917 children in the FluMist(TM) group who did contract
influenza, the illness appeared to be milder than in the control group, based on
frequency of complications and duration of fever.
The Company began a large scale clinical trial in August 1998 to assess the
impact of community-wide influenza immunization. The three-year trial, taking
place in Temple, Texas, is expected to enroll up to 15,000 children and is
funded by a $3 million grant from the NIAID awarded to the Baylor College of
Medicine. The trial will evaluate the impact of vaccinating pre-school and
school-age children with FluMist(TM) on the incidence of doctor visits for
flu-related illness.
On December 10, 1998, the Company reported on a meeting with the U.S. Food
and Drug Administration Center for Biologics Evaluation and Research (CBER)
regarding plans for submission of the Company's license applications for
FluMist(TM). Requirements for completion of the submission include data on
manufacturing validation and stability. In addition, the Company is conducting a
bridging study in children designed to evaluate clinical comparability of
vaccine blended and filled at the Company's new Pennsylvania facility as
compared to vaccine used in earlier clinical trials. This 225-person trial is
fully enrolled and underway in Australia in collaboration with CSL Limited, the
Company's Australian marketing partner for FluMist(TM). The Company will include
safety, tolerability and immunogenicity data from this clinical study in its
licensing applications for FluMist(TM). The Company's goal is to submit its
application in the summer or fall of 1999.
Clinical Trials in Healthy Adults
FluMist(TM) has been tested in a double-blind, placebo-controlled challenge
efficacy study at two Vaccine Treatment Evaluation Units (VTEUs) involving 92
healthy young adults. Subjects were randomized to receive either FluMist(TM),
the inactivated injectable vaccine or placebo. There were no serious adverse
events attributable to FluMist(TM) seen in any subjects, and there were no
statistically significant differences in the occurrence of any potential
reactions assessed in the study between either vaccine or placebo. Following
vaccination and subsequent intranasal administration of the wild-type challenge
virus, the incidence of laboratory-documented influenza, a prospectively defined
primary endpoint of the trial, was 7 percent in subjects vaccinated with
FluMist(TM), 13 percent in subjects vaccinated with the inactivated injectable
influenza vaccine and 45 percent in subjects who received placebo. The reduction
in laboratory-documented influenza compared to placebo was statistically
significant for FluMist(TM) and the inactivated vaccine. These data have not
been peer reviewed. No assurance can be given that the conclusions drawn from
this analysis will not change as a result of further study by the Company or
during the peer review process.
On December 5, 1998, preliminary results reported from a Phase 3 trial in
4,561 healthy working adults showed that those receiving FluMist(TM) experienced
reductions in illness-associated missed work days and health care provider
visits, as well as prescription and over-the-counter medication use associated
with illness. The study was conducted to assess the impact of immunization on
the frequency of influenza-like illness, utilization of health care services,
and absenteeism from work. These data are intended to support models of the
cost-effectiveness of immunization programs based on FluMist(TM).
Data from this trial were presented at the International Symposium on
Influenza and Other Respiratory Viruses. Those receiving FluMist(TM) missed
28.8 percent fewer days of work due to febrile upper respiratory illness and had
40.9 percent fewer days of health care provider visits. Participants also
experienced a 45.5 percent reduction in days
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of prescription antibiotic use, a 17.0 percent reduction in days of
non-antibiotic prescription drug use and 28 percent fewer days of OTC medicine
use.
Study results show FluMist(TM) recipients had reductions in the occurrence of
illness by multiple definitions measured in the study including severe
influenza-like illness (18 percent less) and febrile upper respiratory tract
illness (23 percent less). The number of days of illness was also reduced in
FluMist(TM) recipients by 23 to 28 percent, depending on the specific illness
definitions. The prospectively determined primary endpoint was occurrence of
illness using the broadest definition, which was reduced in FluMist(TM)
recipients by 9.8 percent, which did not reach statistical significance.
The trial was a double-blind, placebo-controlled study conducted in 13
clinical sites nationwide during the 1997 - 98 flu season. Most study subjects
self-administered FluMist(TM) under the supervision of investigators at their
worksite or nearby clinic. Study participants reported their symptoms and health
events monthly. Because laboratory tests were not performed to diagnose
influenza, several pre-specified illness definitions were used to identify
health events that could have been due to influenza virus infection. These
included a very broad definition of influenza-like illness, which did not
necessarily include respiratory tract symptoms, as well as more severe
influenza-like illness and febrile upper respiratory tract illness (upper
respiratory illness with fever).
Clinical Trials in High-Risk Adults
The Company has completed a clinical trial for safety in 200 elderly
high-risk adults for the use of FluMist(TM) for co-administration with the
currently available injectable vaccine. The Company intends to use this data to
support a label claim for safety for such co-administration in high-risk adults,
including the elderly. As this trial was not designed to generate efficacy data
on use of FluMist(TM) in high-risk adults, there can be no assurance that data
from this trial, combined with data from the Company's other clinical trials and
prior trials, will be sufficient to support FDA approval of an indication or
claim for use of FluMist(TM) in high-risk adults even if the FDA were satisfied
with the safety data submitted. Early in the fourth quarter of 1998, the
Cooperative Studies program of the Department of Veterans Affairs Office of
Research and Development began a one-year trial to evaluate the potential
additional benefit of co-administration of FluMist(TM) with the flu shot,
compared to the flu shot alone, in high-risk patients with chronic lung disease,
or chronic obstructive pulmonary disease and emphysema. This study involves over
2,000 volunteers at 20 participating VA Medical Centers in the United States.
Clinical Trials for Manufacturing Consistency and Process
In February 1998, the Company reported positive results from a manufacturing
consistency lot trial of bulk vaccine manufactured, blended, and filled into
sprayers at Medeva Pharma Limited (Medeva Pharma), formerly Evans Medical
Limited, a subsidiary of Medeva PLC. The Company conducted a randomized,
double-blind, placebo-controlled trial in 500 children, designed to evaluate the
safety and immunogenicity of three new manufacturing lots of FluMist(TM). The
children were vaccinated between April and September 1997. Analysis of patient
diary cards and antibody responses following two doses of FluMist(TM) showed
consistent safety and immunogenicity for the different lots according to the
pre-defined endpoints.
On June 30, 1998, the Company submitted a PLA/ELA for FluMist(TM) to the
FDA. On August 31, 1998, Aviron reported that it had received notice that its
license applications were not accepted for filing. Requirements for resubmission
include additional data in the areas of manufacturing validation and stability.
The Company is conducting a bridging study designed to evaluate clinical
equivalence of vaccine blended and filled at the Company's facility at Packaging
Coordinators, Inc., a division of Cardinal Health, Inc. (PCI) compared to
vaccine used in earlier clinical trials. This 225-person trial is in progress in
Australia in collaboration with CSL Limited, the Company's Australian marketing
partner for FluMist(TM). The Company will include safety and immunogenicity
data from this clinical study in its licensing applications for FluMist(TM).
There can be no assurance that the FDA will find these data sufficient to
demonstrate consistency of manufacture.
11
<PAGE> 12
Partnering Agreements
The Company has entered into several development and marketing agreements
with respect to its products. In June 1998, the Company announced the signing of
an agreement with CSL Limited to develop, sell and distribute FluMist(TM) in
Australia, New Zealand and certain countries in the South Pacific region. Under
the agreement, CSL Limited and Aviron will jointly carry out additional trials
in Australia for FluMist(TM). In January 1999, the Company announced a worldwide
collaboration for the marketing of FluMist(TM) with Wyeth Lederle Vaccines, a
business unit of Wyeth-Ayerst Laboratories, the pharmaceutical division of
American Home Products Corporation (Wyeth Lederle), under which Wyeth Lederle
and the Company will co-promote FluMist(TM) in the United States, while Wyeth
Lederle will have the exclusive right to market the product outside the United
States, except for Korea, Australia, New Zealand and certain countries in the
South Pacific region. Wyeth Lederle and the Company will collaborate on the
regulatory, clinical and marketing programs for FluMist(TM). Expenses associated
with these agreements are expected to increase as the Company continues
preclinical testing and clinical trials and prepares for the potential
commercial launch of FluMist(TM). No assurance can be given, however, that the
Company will receive any future payments from CSL Limited or Wyeth Lederle.
In October 1995, the Company signed an agreement with SmithKline Beecham
defining a collaboration on the Company's EBV vaccine technology. Under the
terms of this agreement, the Company granted SmithKline Beecham an exclusive
license to produce, use and sell non-live EBV vaccines incorporating the
Company's technology for prophylactic and therapeutic uses on a worldwide basis,
except in Korea. The Company retained U.S. co-marketing rights to a monovalent
EBV vaccine formulation which will be supplied by SmithKline Beecham. The
Company is entitled to royalties from SmithKline Beecham based on net sales of
the non-live EBV vaccine. No assurance can be given, however, that the Company
will receive any future payments from SmithKline Beecham or that SmithKline
Beecham will not terminate this agreement.
In May 1995, the Company entered into a Development and License Agreement
with Sang-A Pharm. Co., Ltd (Sang-A). The Company granted to Sang-A certain
exclusive clinical development and marketing rights in Korea for specified
products developed by the Company, including vaccines for influenza
(cold-adapted and recombinant), EBV, CMV, HSV-2 and RSV on meeting certain
conditions. However, the Company is under no obligation to develop any product.
Sang-A also will make payments to the Company upon Sang-A's meeting certain
regulatory milestones for each product in Korea and will pay a royalty to the
Company on net sales of such products in South and North Korea. No assurance can
be given, however, that the Company will receive any future payments from Sang-A
or that Sang-A will not terminate its agreement with the Company.
In January 1997, Sang-A declared bankruptcy. The Company is unable to predict
what, if any, long-term effect the bankruptcy will have on Sang-A and on the
Company's agreement with Sang-A. In March 1998, the Company repurchased 530,831
shares of its Common Stock from Sang-A at a price of $25.13 per share.
Manufacturing Facilities
In April 1997, the Company entered into an agreement with Medeva Pharma for
the commercial manufacture of FluMist(TM) through December 2001. The Company and
Medeva Pharma are discussing a potential agreement that would provide for
commercial supplies of bulk vaccine beyond 2001; however, there can be no
assurance that such an agreement will be reached. In October 1997, the Company
entered into an agreement with PCI for the blending, filling, labeling and
packaging of FluMist(TM) in the United States until October 2004. In 1998,
Aviron and PCI opened a 34,000-square-foot manufacturing suite in Philadelphia,
Pennsylvania at PCI's site, in which PCI has blended, filled and packaged doses
of FluMist(TM) for use in 1998 - 99 clinical trials. If regulatory approval is
received, the PCI facility is expected to be used for blending, filling,
packaging, labeling and storage of FluMist(TM). The agreements with Medeva
Pharma and PCI have required the Company to fund the construction of facilities,
improvements, and equipment and will continue to require the Company to incur
expenses for the duration of the agreements for facility space, utilities and
insurance.
In February 1999, the Company announced that it has leased a 69,000
square-foot building in Santa Clara, California. The facility will provide
additional manufacturing, laboratory, pilot plant and office space to
12
<PAGE> 13
accommodate growth. This additional space will require the commitment of
significant additional funds during 1999 and 2000 for renovation, equipment and
furnishings.
In the event of a better than expected market acceptance, the Company may be
capacity constrained in its supply of vaccine through at least the 2000 - 2001
influenza season. In order to secure future production capacity, the Company may
extend and expand its existing arrangements, collaborate with other third
parties, or establish its own manufacturing facilities. Using an alternative
supplier or building a proprietary facility would require a substantial amount
of funds and additional clinical trials and testing. There can be no assurance
that an alternative source of supply will be established on a timely basis, or
that the Company will have or be able to obtain funds sufficient for building or
equipping a new facility.
The Company is currently evaluating the costs and benefits of developing
internal manufacturing capabilities or contracting for expanded or alternative
sources of supply from third-party manufacturers for products other than
FluMist(TM).
Research Grants
In July 1998, the Company received notice from the NIAID of a Small Business
Innovation Research (SBIR) grant to support development of its live attenuated
vaccine for the prevention of disease caused by CMV. The $750,000 grant is the
second that Aviron has received for research on CMV. In September 1998, the
total grant amount was increased by an additional $200,000 to $950,000. A
portion of the award has been used to produce recombinant CMV vaccine candidates
for human testing. The remainder of the award will be used to determine the
safety and immunogenicity of these vaccine candidates in a Phase 1 clinical
trial in collaboration with the NIAID Vaccine Treatment and Evaluation Unit
network. No assurance can be given, however, that the Company will receive any
future grants to support its research or that such research will result in
commercially viable products.
Business Risks
The Company's business is subject to significant risks, including but not
limited to the risks inherent in its research and development efforts, including
preclinical testing and clinical trials; uncertainties associated both with
obtaining and enforcing its patents and with the patent rights of others; the
lengthy, expensive and uncertain process of seeking regulatory approvals;
uncertainties regarding government reforms and product pricing and reimbursement
levels; technological change and competition; manufacturing uncertainties and
dependence on third parties. Even if the Company's product candidates appear
promising at an early stage of development, they may not reach the market for
numerous reasons. Such reasons include the possibilities that the products will
be found unsafe or ineffective during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to manufacture on a commercial
scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and 1998
Revenues
The Company earned $15.5 million in revenue for the three months ended March
31, 1999, compared to $253,000 for the three months ended March 31, 1998. The
1999 revenues were comprised principally of a non-refundable initial payment in
the amount of $15.0 million from Wyeth Lederle under the FluMist(TM)
collaboration agreement, combined with other revenues from other contracts and
research grants. The 1998 revenue came from both a grant payment from the NIH
for research on the Company's CMV vaccine and from payments made for contract
services rendered to other biotechnology companies.
13
<PAGE> 14
Operating Expenses
Research and development expenses increased to $14.0 million in the three
months ended March 31, 1999 from $9.8 million for the three months ended March
31, 1998. The increase was due primarily to an increase in development
activities depreciation and other expenses associated with the documentation,
validation, and test production at manufacturing facilities associated with
FluMist(TM). The Company expects these expenses to increase in 1999 as
development and manufacturing activities expand in preparation for potential
commercialization of FluMist(TM). These expenses are expected to increase in the
future in continued support of these activities.
General, administrative and marketing expenses increased to $2.7 million in
the three months ended March 31, 1999 from $2.1 million for the three months
ended March 31, 1998. This increase was due to additional staffing, legal and
other infrastructure costs necessary to support the development of FluMist(TM)
and other products. These expenses are expected to increase in the future in
continued support of these activities.
Net Interest Income
Net interest income decreased to a net expense of $363,000 in the three
months ended March 31, 1999, as compared to net interest income of $910,000 for
the three months ended March 31, 1998. The decrease in net interest primarily
reflects the interest expense related to the Company's private placement of
convertible subordinated notes in March 1998, which expense is partially
offset by interest income on higher average balances of cash, cash equivalents,
and investment balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and marketable securities at March 31,
1999 of approximately $93.2 million. In order to preserve principal and maintain
liquidity, the Company's funds are invested in United States Treasury and agency
obligations, highly rated corporate obligations and other liquid investments.
The Company has financed its operations since inception primarily through
private placements of Preferred Stock from 1992 to 1995, an initial public
offering of Common Stock in November 1996, a private sale of Common Stock in
March 1997, a second public offering of Common Stock in August 1997, and a
private placement of convertible subordinated notes in March 1998. Through March
31, 1999, the Company had raised approximately $236.3 million from such
activities net of offering expenses. For the first three months of 1999, $97,000
was provided from operations as compared with the first three months of 1998,
during which period $13.3 million of cash was used in operations. The decrease
in cash used in operating activities was primarily due to the receipt of the
$15.0 million payment from Wyeth Lederle, which was partially offset by
increases in operating expenses. The Company expects expenditures for research
and development, clinical trials and general, administrative and marketing
expenses to continue to increase in 1999 as the Company develops its products,
expands its clinical trials and prepares for the potential commercial launch of
FluMist(TM). Cash expended for capital additions and to repay lease financing
arrangements amounted to approximately $1.9 million and $5.8 million for the
first three months of 1999 and 1998, respectively. Capital expenditures
decreased in 1999 primarily due to a decrease in the level of expenditures for
facilities and equipment at the Medeva Pharma and PCI manufacturing plants.
Capital expenditures are expected to increase during 1999, primarily in
connection with the renovation, equipping and furnishing of the Santa Clara
facility.
The Company anticipates that its existing cash, cash equivalents and
short-term investments, and revenues from existing collaborations will enable it
to maintain its current and planned operations into 2000. The Company's future
cash requirements will depend on numerous factors, including the time and costs
involved in obtaining regulatory approvals; the ability to successfully launch
FluMist(TM) in the United States during the 2000/2001 flu season; continued
scientific progress in the research and development of the Company's technology
and vaccine programs; the size and complexity of these programs; the ability of
the Company to establish and maintain collaborative arrangements; progress with
preclinical testing and clinical trials; the cost involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims; the cost of constructing
manufacturing facilities, should they be deemed necessary; and product
commercialization activities. In particular, if the Company were to construct
and equip such a
14
<PAGE> 15
manufacturing facility during this period, the Company anticipates that it would
likely begin to make substantial additional capital expenditures in 1999 and
beyond, which may require the Company to seek additional funding. In addition,
there can be no assurance that, should the Company require outside funding
through additional debt or equity financings, such funds will be available on
favorable terms, if at all. If adequate funds are not available, the Company may
be required to delay, reduce the scope of, or eliminate one or more of its
research or development programs or to obtain funds through collaborative
agreements with others that may require the Company to relinquish rights to
certain of its technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself, which could materially
adversely affect the Company's business, financial condition and results of
operations.
IMPACT OF "YEAR 2000"
Many older computer software programs refer to years in terms of their final
two digits only. Such programs may interpret the year 2000 to mean the year 1900
instead, the so-called "Year 2000" problem (Y2K). If not corrected, those
programs could cause date-related transaction failures.
The Company is in the process of assessing exposure for Y2K related problems
focusing on four potential areas of exposure -- internal information systems,
facility support systems, scientific equipment, and the readiness of significant
third parties with whom the Company has material business relationships.
INTERNAL INFORMATION SYSTEMS
The Company is using a number of computers and computer programs across its
entire operations. An inventory has been performed of computer equipment and
computer programs. During 1998, the Company began the process of upgrading its
older financial and accounting programs to Y2K compliant systems and to improve
functionality. To date, no other significant internal information systems have
been identified as non-Y2K compliant and procedures have been enacted to assure
that all purchases of new systems are believed to be Y2K compliant.
SCIENTIFIC EQUIPMENT
An inventory has been taken of the major pieces of scientific equipment. The
Company is currently making inquiries of its internal staff and third-party
vendors, including its suppliers of scientific equipment, to determine if Y2K
problems exist which may affect the Company's research and development
operations.
FACILITY SUPPORT SYSTEMS
The Company is currently making inquiries of its internal staff and
third-party vendors of utilities, communication and other facility support
systems, to determine if Y2K problems exist which may affect communications,
administrative or support functions.
THIRD PARTIES WITH MAJOR BUSINESS RELATIONSHIPS
The Company currently has no products available for commercial sale, and does
not anticipate FDA clearance for its lead product, FluMist(TM), until mid-2000
at the earliest. In preparation for the potential commercial launch of
FluMist(TM), the Company has contacted its third party manufacturers and its
marketing and distribution partners to determine their level of Y2K readiness.
These parties are in the process of conducting their own evaluations of the
potential impact of Y2K issues on their businesses. The failure of any of these
parties to successfully identify and remedy the impact of Y2K upon their
businesses could have a material adverse effect on the Company's business,
including delaying or adversely affecting the potential commercial launch of
FluMist(TM).
The Company's assessment of Y2K exposure areas is expected to be completed
during the second quarter of 1999.
15
<PAGE> 16
External and internal costs specifically associated with modifying internal
use software for Y2K compliance are expensed as incurred. To this point, these
costs have not been material, and the Company does not expect such costs to be
material in the future. There can be no assurance, however, that the Company's
assessment of Y2K's potential impact will not change as we complete our
assessment, or that Y2K will not ultimately cause a material disruption in the
business of the Company.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including changes to interest rates
and foreign currency exchange rates. The Company's exposure to such market risk
has not changed substantially since December 31, 1998 and reference is made to
the more detailed disclosures of market risk included in the Company's Annual
Report on Form 10K for such period.
Interest Rates -- The Company's investments and interest income are sensitive
to changes in the general level of interest rates, primarily U.S. interest
rates. In this regard, changes in U.S. interest rates primarily affect the
market value of the Company's cash equivalents and investments. To mitigate
market risk, the Company places its cash in investments that meet high credit
standards, as specified in the Company's investment policy guidelines, and
staggers the maturity of the investments to meet expected cash demands. The
policy also limits the amount of credit exposure to any one issue, issuer, or
type of investment and does not permit derivative financial instruments in its
investment portfolio. As a result, the Company does not expect any material loss
with respect to its investment portfolio.
Foreign Currency Exchange Rates -- The Company pays for the costs of
manufacturing and development activities, equipment, and facilities
modifications at Medeva Pharma, which is located in the United Kingdom (U.K.) in
British Pounds Sterling. As a result, the Company's financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the U.K. The Company is exposed to changes in exchange
rates in the United Kingdom. When the U.S. dollar strengthens against the
British Pounds Sterling, the U.S. dollar value of British Pounds Sterling-based
expenses decreases; when the U.S. dollar weakens, the U.S. dollar value of
British Pounds Sterling-based expenses increases. Accordingly, changes in
exchange rates, and in particular a weakening of the U.S. dollar, may adversely
affect the Company's financial position as expressed in U.S. dollars.
17
<PAGE> 18
AVIRON
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
ITEM DESCRIPTION
---- -----------
<S> <C>
++10.24 Letter Amendment to the Materials Transfer and
Intellectual Property Agreement between the
Registrant and the Regents of the University of
Michigan dated February 24, 1999.
27.1 Financial Data Schedules.
</TABLE>
----------
++ Confidential treatment has been requested for portions of
this exhibit.
(b) REPORTS ON FORM 8-K
None
18
<PAGE> 19
AVIRON
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
AVIRON
Date: May 13, 1999 By: /s/ J. Leighton Read, M.D.
-------------------- ------------------------------------
J. Leighton Read, M.D.
Chairman and
Chief Executive Officer
Date: May 13, 1999 By: /s/ Fred Kurland
-------------------- -------------------------------------
Fred Kurland
Senior Vice President and
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. OF EXHIBIT DESCRIPTION
- -------------- -----------
<S> <C>
++10.24 Letter Amendment to the Materials Transfer and Intellectual
Property Agreement between the Registrant and the Regents of
the University of Michigan dated February 24, 1999.
27.1 Financial Data Schedules.
</TABLE>
- ----------
++ Confidential treatment has been requested for portions of this exhibit.
20
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.24
February 24, 1999
Mr. Michael A. Kope, Esq.
Assistant to the Director and Legal Counsel
Technology Management Office
University of Michigan
Wolverine Tower, Room 2071
3003 South State Street
Ann Arbor, Michigan 48109-1280
RE: LETTER AMENDMENT TO THE MATERIALS TRANSFER AND INTELLECTUAL
PROPERTY AGREEMENT
Dear Mr. Kope;
On January 12, 1999 you signed a letter amendment (the "Letter Amendment") to
the Materials Transfer and Intellectual Property Agreement entered into between
Aviron and the University of Michigan on February 24, 1995 (the "Michigan
Agreement"). A copy of the Letter Amendment is attached as Exhibit A hereto. As
you know, the Letter Amendment amended the Michigan Agreement with respect to
certain [*]. Further to the Letter Amendment, we kindly request that the
University of Michigan agree that the Letter Amendment be hereby amended by
incorporating the following statements into the Letter Amendment:
1. Based upon:
(a) the provisions of [*], and
(b) the provisions of [*],
the requirement of Paragraph [*] of the Michigan Agreement that the [*] has
been met. The [*] referenced in this paragraph are attached as Exhibit B
hereto.
<PAGE> 2
2. The following provisions:
(a) [*], and
(b) [*], describe obligations [*] that meet the requirement, set forth in
of Paragraph [*] of the Michigan Agreement, that [*]. The [*]
referenced in this paragraph are attached as Exhibit C hereto.
We also request that the University of Michigan agree that the Letter Amendment
be hereby amended by replacing the current Section 3 with the following
language:
"3. [*]. In the event that [*] for any reason, [*] shall permit [*] in
full force and effect), by [*] as originally provided in [*], provided
that:
(a) [*] promptly negotiate in good faith and agree upon the [*] to be
received by [*] for the [*] will be equivalent to the [*]
provided for in the [*], but only to the extent that such [*]
will be allowed by [*] to exercise its [*] rights for [*], while
the negotiation of the [*] proceeds; and
(b) [*] as of the end of the [*] period described in [*]."
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 3
Please indicate your acknowledgement and acceptance of these terms by signing
and returning one of the two (2) enclosed copies of this letter to me.
Sincerely,
/s/ Carol A. Olson
- ----------------------------
Carol A. Olson
Aviron
Senior Vice President, Commercial Development
UNIVERSITY OF MICHIGAN
ACKNOWLEDGED AND AGREED:
/s/ Michael A. Kope
- ----------------------------
Michael A. Kope
Assistant to the Director and Legal Counsel
Technology Management Office
2/26/99
- ----------------------------
Date
Attachments
cc: Wendy Adams
Greg Abbott
Marjorie Wagman
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 4
EXHIBIT A
LETTER AMENDMENT OF JANUARY 12, 1999
<PAGE> 5
Aviron
297 N. Bernardo Ave.
Mountain View, CA
94043
Tel. 650-919-6500
FAX 650-919-6612
Mr. Michael A. Kope, Esq.
Technology Management Office
University of Michigan
Wolverine Tower, Room 2071
3003 South State Street
Ann Arbor, MI 48109-1280
Dear Mr. Kope:
In view of Aviron's [*], we request that the Materials Transfer Agreement and
Intellectual Property Agreement entered into by and between Aviron and the
University of Michigan ("Michigan") on February 24, 1995 (the "Michigan
Agreement") be hereby amended and supplemented as follows:
1. Definition of [*] Solely for the purpose of [*] for activities under the
[*] under the Michigan Agreement for those activities), the [*] definition
in Paragraph [*] of the Michigan agreement shall be deemed to read as
follows:
[*].
2. [*] Michigan agrees that [*] to obtain and maintain [*], as required [*]
under Paragraph [*] of the Michigan Agreement, will be deemed satisfied if
[*] reasonably managed [*], reasonably demonstrated to Michigan upon its
request.
3. [*] In the event that [*] under the Michigan Agreement is [*], Michigan
shall permit [*] granted to it [*] from Aviron to Michigan, for the [*]
provided in [*], provided that:
(a) [*] of any provision of [*];
(b) The [*] according to Paragraph [*] of the Michigan Agreement (or is
promptly [*] to comply with Paragraph [*]);
(c) [*] at least equivalent to those required of [*] under the Michigan
Agreement (or is promptly [*] to do so); and
(d) [*] promptly negotiate in good faith and agree upon the [*] to be
received by [*] for the [*] will be equivalent to the [*] provided for
in the [*], but only to the extent that such [*] will be allowed by
[*] to exercise its [*] rights for [*], while the negotiation of [*]
proceeds.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 6
4. [*] The deadline for the [*] under Paragraph [*] of the Michigan Agreement
shall be extended to [*]. (Note: This deadline will apply to all activities
[*], not solely activities under [*].)
Please indicate your acknowledgement and acceptance of these terms by signing
and returning one of the two enclosed copies of this letter to me. For your
convenience, I have also enclosed a stamped envelope.
Sincerely,
/s/ Carol A. Olson
- ----------------------------
Carol A. Olson
Aviron Senior Vice President
Commercial Development
University of Michigan
Acknowledged and agreed:
/s/ Michael A. Kope
- ----------------------------
Michael A. Kope
Assistant to the Director, and Intellectual Property Counsel
Technology Management Office
Jan. 12, 1999
- ----------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 7
EXHIBIT B
[*]
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
<PAGE> 8
EXHIBIT C
[*]
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 38,428
<SECURITIES> 54,737
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,641
<PP&E> 25,207
<DEPRECIATION> 6,035
<TOTAL-ASSETS> 120,744
<CURRENT-LIABILITIES> 11,747
<BONDS> 0
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