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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 December 31, 1996
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: 0-27066
PHARMACYCLICS, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 94-3148201
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
995 E. Arques Avenue, Sunnyvale, CA 94086-4521
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 774-0330
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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 ____________.
As of February 1, 1997, there were 9,150,276 shares of the Registrant's Common
Stock outstanding, par value $0.0001.
This quarterly report on Form 10-Q consists of 26 pages of which this is page
1. The Exhibit Index is located at page 25.
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PHARMACYCLICS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NUMBER
--------------------- -----------
Item 1. Financial Statements (unaudited)
Condensed Balance Sheet as of December 31, 1996 and
June 30, 1996 . . . . . . . . . . . . . . . . . . . . 3
Condensed Statement of Operations for the three and
six months ended December 31, 1996 and 1995 . . . . . 4
Condensed Statement of Cash Flows for the six
months ended December 31, 1996 and 1995 . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
and Facts that May Affect Future Operating Results . . 8
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 22
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . 22
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . 22
Item 4. Submission of Matters to a Vote of Security Holders . . 22
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHARMACYCLICS, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- -----------
ASSETS (unaudited)
- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,203 $13,950
Short-term investments 15,778 8,053
Prepaid expenses and other current assets 137 241
----------- -----------
Total current assets 25,118 22,244
Property and equipment, net 2,484 2,622
Other assets 56 149
----------- -----------
$27,658 $25,015
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 845 $ 753
Accrued liabilities 330 300
Current portion of capital lease obligations 1,015 917
----------- -----------
Total current liabilities 2,190 1,970
Capital lease obligations (less current portion) 628 941
Deferred rent 99 113
----------- -----------
Total liabilities 2,917 3,024
----------- -----------
Stockholders' equity:
Common Stock 1 1
Additional paid-in capital 58,173 49,948
Accumulated deficit (33,433) (27,958)
----------- -----------
Total stockholders' equity 24,741 21,991
----------- -----------
$27,658 $25,015
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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PHARMACYCLICS, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
(in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
License and grant revenues $ 25 $ 156 $ 25 $ 301
Operating expenses: ----------- ----------- ----------- -----------
Research and development 2,481 1,519 4,937 3,273
General and administrative 360 303 997 554
----------- ----------- ----------- -----------
Total operating expenses 2,841 1,822 5,934 3,827
----------- ----------- ----------- -----------
Loss from operations (2,816) (1,666) (5,909) (3,526)
Interest and other income/(expense), net 221 202 434 121
----------- ----------- ----------- -----------
Net loss $ (2,595) $ (1,464) $ (5,475) $ (3,405)
=========== =========== =========== ===========
Net loss per share (Note 2) $ (0.29) $ (0.18) $ (0.63) $ (0.48)
=========== =========== =========== ===========
Weighted average common and common equivalent
shares (Note 2) 8,885 7,904 8,718 7,131
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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PHARMACYCLICS, INC.
(a development stage company)
CONDENSED STATEMENT OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
-------------------------------------
Net loss $(5,475) $(3,405)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 391 328
Changes in assets and liabilities:
Prepaid expenses and other assets 197 47
Accounts payable 92 (161)
Accrued liabilities 30 214
Deferred rent (14) 23
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Net cash used in operating activities (4,779) (2,954)
----------- -----------
Cash flows from investing activities:
-------------------------------------
Purchases of property and equipment - (10)
Purchase of short-term investments (17,212) -
Proceeds from sale of short-term investments 9,487 -
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Net cash used in investing activities (7,725) (10)
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Cash flows from financing activities:
-------------------------------------
Payments under capital lease obligations (468) (362)
Proceeds from notes payable - 1,000
Proceeds from sale of stock, net of issuance costs 8,225 28,568
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Net cash provided by financing activities 7,757 29,206
----------- -----------
Net increase (decrease) in cash and cash equivalents (4,747) 26,242
Cash and cash equivalents at the beginning of the period 13,950 376
----------- -----------
Cash and cash equivalents at the end of the period $ 9,203 $ 26,618
=========== ===========
Supplemental disclosure of cash flow information:
-------------------------------------------------
Cash paid for interest $ 135 $ 157
Equipment acquired under capital lease obligations $ 253 $ 31
Conversion of notes payable and accrued interest
into convertible preferred stock $ - $ 3,051
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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PHARMACYCLICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Pharmacyclics,
Inc. (the Company or Pharmacyclics) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10- 01 of Regulation S-X.
Accordingly, they do not contain all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited condensed financial
statements reflect all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the Company's interim financial
information. These financial statements and notes should be read in
conjunction with the audited financial statements of the Company included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1996 filed
with the Securities and Exchange Commission on September 30, 1996.
The results of operations for the six months ended December 31, 1996 are not
necessarily indicative of the operating results that may be reported for the
fiscal year ending June 30, 1997 or for any other future periods.
NOTE 2 - NET LOSS PER SHARE
Net loss per share for the three months and six months ended December 31, 1996
and 1995 is computed using the weighted average number of shares of common
stock outstanding during the periods presented. In addition, the computation
includes the effect of the conversion of all shares of Series A, A1, B and C
Convertible Preferred Stock into 5,156,971 shares of common stock upon the
completion of the Company's initial public offering completed October 1995
using the if-converted method. Common stock equivalent shares arising from
stock options and warrants are excluded from the computation because their
effect is antidilutive, except that common stock equivalent shares arising from
stock options and warrants (using the treasury stock method and the initial
public offering price) issued from July 1, 1994 through the effective date of
the Company's initial public offering on October 23, 1995 are included in the
computation of net loss per share as if they were outstanding for all periods
prior to the initial public offering.
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NOTE 3 - ISSUANCE OF PREFERRED STOCK AND INITIAL PUBLIC OFFERING
On July 31, 1995, notes payable aggregating $3,000,000 ($2,000,000 outstanding
at June 30, 1995 plus additional borrowings of $1,000,000 entered into during
July 1995) plus accrued interest thereon were converted into 353,483 shares of
Series C Convertible Preferred Stock. The Company also issued an additional
295,649 shares of Series C Convertible Preferred Stock on July 31, 1995
resulting in net proceeds of $2,550,000.
The Company completed an initial public offering on October 23, 1995, issuing
2,150,000 shares of its common stock at $12.00 per share. Upon the closing of
the offering, all outstanding shares of Convertible Preferred Stock were
automatically converted into 5,156,971 shares of common stock. On November 6,
1995, the underwriters of the initial public offering exercised their
over-allotment option with respect to an additional 233,450 shares of common
stock. The Company received, net of underwriters' commissions and other
offering expenses, approximately $26 million in net proceeds from the initial
public offering.
NOTE 4 - PRIVATE PLACEMENT
On November 11, 1996, Pharmacyclics sold 580,000 shares of unregistered common
stock to a single purchaser in a private placement. The shares were sold at a
price of $14.00 per share and no commissions were paid on the transaction. The
Company is obligated to file, and have declared effective, a registration
statement of such shares within six months after the transaction date.
NOTE 5 - ADOPTION OF NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based
Compensation." Effective July 1, 1996, the Company adopted FAS 123 and elected
to continue to measure compensation cost for its employee stock compensation
plans using the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and provide the required pro forma footnote disclosures in its
Annual Report to stockholders.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS AND FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Form 10-Q contains, in addition to historical information, the Company's
position regarding liquity and capital resources, and forward looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from the results discussed in the forward looking
statements. Factors that could cause or contribute to such differences include
those discussed in this section as well as those discussed elsewhere in the
Form 10-Q.
RESULTS OF OPERATIONS
Revenues
To date, Pharmacyclics has received only limited revenues and no revenues from
product sales. For the quarter ended December 31, 1996, $25,000 of license
revenue was recognized from E-Z-EM, Ltd. upon execution of a European sales and
distribution agreement and marketing approval in the United Kingdom, both in
December 1996. The total recognized is net of licensing payments to The
University of Texas (UT) since the products covered by the E-Z-EM, Ltd.
Agreement incorporate the technology licensed by the Company from UT. No
revenues were recognized in the first fiscal quarter of 1997.
During the three months of fiscal 1996, $156,000 of revenue was recognized
including $150,000 in milestone payments from E-Z-EM, Inc. (E-Z-EM) net of
licensing fees paid to UT. In addition, $6,000 was recognized as final payment
under a Small Business Innovation Research (SBIR) grant from the National
Cancer Institute which expired in October 1995.
During the first six months of fiscal 1996, $301,000 of revenue was recognized.
This included $250,000 from E-Z-EM pursuant to the August 1995 agreement net of
licensing fees paid to UT. In addition $51,000 was recognized under the SBIR
grant during the same period.
Research and Development
Research and development expenses increased to $2.5 million for the three
months ended December 31, 1996 compared to $1.5 million during the same period
of the prior fiscal year. Approximately half of the 67% increase is related to
conducting clinical trials for both Lu-Tex
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and Gd-Tex. This includes the cost of clinical product supplies, payments to
clinical sites and internal support of the trials. During the three months
ended December 31, 1996, the Phase I trial for Lu-Tex was completed and the
Gd-Tex Phase Ib/II was expanded to eight sites in both the United States and
Europe. The remainder of the increase was growth throughout the research and
development group to support clinical trials and provision of clinical product.
During the six months ended on December 31, 1996, research and development
expenses increased to $4.9 million compared to $3.3 million during the same
period of the prior fiscal year. In addition to the factors which contributed
to the increase in research and development expenses for the three month period
ended December 31, 1996, a definitive agreement executed in September 1996 with
Hoechst Celanese (HCC), a manufacturer of chemicals and pharmaceutical
intermediates for the process optimization, scale up, and clinical and
commercial supply of Gd-Tex and Lu-Tex resulted in cost associated with
texaphyrin product scale up during the first six months of fiscal 1997.
General and Administrative
General and administrative expenses for the three months ended December 31,
1996 were $360,000 compared to $303,000 during the same period in the prior
fiscal year, an increase of 19%. The Company completed an initial public
offering (IPO) in late October 1995. This increase relates primarily to
insurance costs, professional services costs, and other expenses required to
conduct business as a public company.
During the six months ended December 31, 1996, general and administrative
expenses totaled $997,000 compared to $554,000 during the same period in the
prior fiscal year, an increase of 80%. The expenses for fiscal 1997 include
approximately $300,000 of financing costs during the first quarter. In
addition, the Company was public for only two of the six months in the prior
fiscal year.
Interest and Other Income/(Expense) Net
Interest income, net of interest expense, totaled $221,000 for the three months
ended December 31, 1996 compared to $202,000 for the same period in the prior
fiscal year. For the three month period, interest income exceeded interest
expense on borrowings under the Company's lease lines.
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During the six months ended December 31, 1996, interest income, net of interest
expense, totaled $434,000 compared to $121,000 for the same period of the prior
fiscal year. During the first four months of fiscal 1996 interest expense
under the Company's lease lines offset interest income generated on the
Company's cash and cash equivalent balances. The proceeds from the Company's
IPO in October 1995 provided cash balances which reversed this trend.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operation since inception through December 31,
1996 primarliy through the private and public sale of equity securities,
payments under third party agreements, and proceeds from lease lines of credit.
On November 11, 1996, Pharmacyclics sold 580,000 shares of unregistered common
stock to a single purchaser in a private placement. The shares were sold at a
price of $14.00 per share and no commissions were paid on the transaction. The
Company is obligated to file, and have declared effective, a registration
statement of such shares within six months after the transaction date.
As of December 31, 1996, the Company had approximately $25 million in cash,
cash equivalents and short-term investments. Net cash used in operating
activities of $4.8 million during the six months ended December 31, 1996
resulted primarily from the net loss incurred during that period partially
offset by reductions in prepaid expenses and other assets and by depreciation
and amortization expense.
In October 1995 the Company completed its IPO issuing 2,150,000 common shares
at $12.00. As a result of such offering, all outstanding shares of Convertible
Preferred Stock were automatically converted into 5,156,971 shares of common
stock. In November 1995, the underwriters of such offering exercised an option
to acquire an additional 233,450 common shares at the IPO price to cover
over-allotments. Proceeds received by the Company, net of underwriters'
commissions and expenses payable by the Company, totaled approximately $26
million.
In July 1995, notes payable aggregating $3 million ($2 million outstanding at
June 30, 1995 plus additional borrowings of $1 million entered into during
July, 1995) plus accrued interest
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thereon were converted into 353,483 shares of Series C Convertible Preferred
Stock. The Company also issued an additional 295,649 shares of Series C
Convertible Preferred Stock on July 31, 1995 resulting in net proceeds to the
Company of $2.6 million.
The Company expects to incur ongoing levels of expenditures which may not only
fluctuate from quarter to quarter but which are expected to increase as the
levels of clinical activity for the Company's products under development
increases. Additional expenditures may occur in commercializing the Company's
first product, GADOLITE(R) Oral Suspension (GADOLITE). As a result of both
these factors, the Company expects to report increased expenses for research
and development and general and administrative activities for at least the next
several years. The Company currently anticipates, based upon the current
status of its product development and commercialization plans, that its cash,
cash equivalents, and short-term investments will provide funding for the
Company's operations through at least mid calendar 1998.
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FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT AND EXTENSIVE GOVERNMENT
REGULATION
To achieve profitable operations on a continuing basis, the Company must
successfully research, develop, test, obtain regulatory approval for,
manufacture, introduce, market and distribute its products. The time frame
necessary to achieve these goals for any individual product is long and
uncertain. Most of the products currently under development by the Company will
require significant additional research and development, preclinical and
clinical testing and regulatory approval prior to commercialization.
Additionally, any product the Company succeeds in developing and for which it
gains regulatory approval must then compete for market acceptance and market
share. There can be no assurance that the Company's products will prove to be
effective or that physicians, patients, or clinical or hospital laboratories
will accept the Company's products as readily as other forms of diagnosis and
treatment or as readily as other newly developed therapeutic products and
diagnostic imaging techniques. There can be no assurance that the Company's
research and development efforts will be successful or that any given product
will be safe or effective, capable of being manufactured economically in
commercial quantities, developed in a timely fashion or successfully marketed.
The manufacturing and marketing of the Company's products and its research and
development activities are subject to extensive regulation for safety, efficacy
and quality by numerous government authorities in the U.S. and other countries.
Clinical trials, manufacturing and marketing of products are subject to the
rigorous testing and approval process of the Food and Drug Administration (FDA)
and equivalent foreign regulatory authorities. As a result, clinical trials and
regulatory approval can take a number of years to accomplish and require the
expenditure of substantial resources. To date, the Company has not received
regulatory approval for the commercial sale of its products, except for
GADOLITE in the United Kingdom. There can be no assurance that requisite FDA
approvals or those of foreign regulatory authorities will be obtained on a
timely basis, if at all, or that any approvals granted will cover the clinical
indications for which the Company may seek approval. The manufacture and
marketing of drugs are subject to continuing FDA and foreign regulatory review
and later discovery of previously unknown problems with a product, manufacturer
or facility may result in restrictions, including withdrawal of the product
from the market. Failure to obtain or maintain requisite governmental
approvals, failure to obtain
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approvals of the clinically intended uses or the identification of adverse side
effects of the Company's products under development could delay or preclude the
Company from further developing a particular product or from marketing its
products, or could limit the commercial use of its products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS
Pharmacyclics has conducted and plans to continue to undertake extensive and
costly clinical testing to assess the safety and efficacy of its potential
products. The rate of completion of the Company's clinical trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment
is a function of many factors, including the nature of the Company's clinical
trial protocols, existence of competing protocols, size of the patient
population, proximity of patients to clinical sites and eligibility criteria
for the study. Delays in patient enrollment will result in increased costs and
delays, which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the FDA may suspend
clinical trials at any time if it concludes that the subjects or patients
participating in such trials are being exposed to unacceptable health risks.
Success in preclinical or early stage clinical trials does not assure success
in later stage clinical trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or prevent regulatory approval. Further, there can be no assurance that
clinical testing will show any current or future product candidate to be safe
and effective for use in humans.
NO ASSURANCE OF PRODUCT APPROVAL
To date, the Company has approval to market only one of its products in the
United Kingdom. No other products have been approved for sale in the U.S. or
any other international market. Satisfaction of regulatory requirements of the
FDA, or similar requirements by foreign regulatory agencies, typically takes
several years, and the time needed to satisfy them may vary substantially based
upon the type, complexity and novelty of the pharmaceutical product. There can
be no assurance that the FDA or any other regulatory agency will grant approval
for any products being developed by the Company on a timely basis, if at all.
The Company submitted an NDA for GADOLITE in September 1995. In December 1996
the Company received an "approvable" letter from the FDA. Although this letter
indicated that GADOLITE was "approvable", it cited a series of issues which
must
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first be addressed by the Company. The Company is in the process of addressing
the issues it believes must be resolved before GADOLITE can be successfully
marketed. Although the Company believes it will be able to resolve all such
issues, there can be no assurance that the FDA will decide that the NDA
satisfies the criteria for approval. In any event, the Company does not expect
further FDA action until the end of its fiscal year at the earliest. In
addition, in June 1996 the Company filed a Market Authorization Application
(MAA) with the Medicines Control Agency in the United Kingdom for authorization
to market GADOLITE and has received approval to market GADOLITE in the U.K.
Although the process for regulatory approval in Western Europe is similar to
that in the United States, there are numerous and sometimes unique risks
associated with the approval of an MAA. There can be no assurance that
additional authorizations will be granted to market GADOLITE in other member
states under the European Union's mutual recognition procedure.
Delay in obtaining or failure to obtain regulatory approvals would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the policies of the FDA and foreign
regulatory bodies may change, and additional regulations may be promulgated
which could prevent or delay regulatory approval of the Company's potential
products. Even if regulatory approval of a product is granted, such approval
may impose limitations on the indicated uses for which a product may be
marketed. Further, later discovery of previously unknown problems with a
product may result in restrictions on the product, including withdrawal of the
product from the market.
In addition to the drug approval requirements applicable to the Company's
Lu-Tex product for photosensitization of certain cancers and atherosclerosis,
the Company will also need to obtain the approval of the FDA and other foreign
regulatory authorities for the laser, light emitting diode (LED) or associated
light delivery devices used in such treatments. Such device approval requires
additional regulatory submissions both by the Company and by the manufacturers
of such devices that must include clinical data obtained from the use of such
light delivery devices with Lu-Tex for photodynamic therapy, and may result in
additional delays or difficulties in obtaining approval for the use of Lu-Tex
as a photosensitizer. Such light delivery device manufacturers currently are
under no obligation to the Company to file or pursue such applications.
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HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has incurred operating losses since its inception in 1991 and, as
of December 31, 1996, had an accumulated deficit of approximately $33.4
million. The Company anticipates that such operating losses will continue over
the next several years, as it continues to incur increasing costs of research
and development, clinical and manufacturing activities. To date, the Company
has not generated revenue from the commercial sale of its products and does not
expect to recognize any such revenue until the latter half of calendar year
1997 at the earliest. All revenues to date have resulted from license and
milestone payments and funding from a government research grant.
LIMITED MANUFACTURING AND MARKETING EXPERIENCE
The Company must manufacture its products in commercial quantities either
directly or through third parties, in compliance with regulatory requirements
and at an acceptable cost. Except for Gd-Tex and Lu-Tex bulk drug substance,
which are the subject of a manufacturing and supply agreement with HCC, and
GADOLITE, which is the subject of a manufacturing and supply agreement with
Glaxo Wellcome, Inc., the Company does not have access to the manufacturing
capacity necessary to provide clinical and commercial quantities of the
Company's products. Access to such manufacturing capacity is necessary for the
Company to conduct clinical trials, obtain regulatory approval and
commercialize its products. The Company is engaged in preliminary discussions
with a number of manufacturers of parenteral products regarding process
development and validation, filling, labeling and packaging of the finished
dosage form of Gd-Tex and Lu-Tex. A failure to successfully complete such
agreement would, if the Company could not locate alternate manufacturing
capabilities, have a material adverse impact on the Company's business,
financial condition and results of operations. Prior to any regulatory approval
of the Company's other products under development, the Company intends to
negotiate supply agreements with manufacturers who will have the ability to
manufacture, fill, label and package such materials prior to commercial
introduction of such products. There are, however, a limited number of contract
manufacturers that operate under current federal and state Good Manufacturing
Practices (GMP) regulations and are capable of manufacturing the Company's
products. Accordingly, there can be no assurance that the Company will be able
to enter into supply agreements on commercially acceptable terms or with
manufacturers who will be able to deliver supplies in appropriate quantity and
quality to develop and commercialize its
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products. Any interruption of supply of its products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company also has entered into a sales and distribution agreement with
E-Z-EM for North American and European sales, marketing and distribution of
GADOLITE. The Company plans to enter into similar agreements to market GADOLITE
in Asia. To date, however, no such arrangements have been established, and
there can be no assurance that any such agreements will be entered into. To the
extent that the Company determines not to, or is unable to, enter into
co-promotion agreements or to arrange for third party distribution of its other
products or to the extent that the agreements with E-Z-EM are terminated
without a replacement agreement, significant additional resources will be
required to develop a sales force. There can be no assurance that the Company
will be able to establish such a sales force or enter into such co-promotion or
distribution agreements. In addition, the Company currently has no arrangement
for the sale and distribution of any of its other products under development.
The Company has no expertise in the development of light sources and associated
light delivery devices required for the Company's Lu-Tex photosensitizer
program. Successful development, manufacturing, approval and distribution of
the Company's photosensitization products will require third party arrangements
for the required light sources, associated light delivery devices and other
equipment. The Company currently obtains lasers from Coherent, Inc. and LEDs
from Quantum Devices, Inc. on a purchase order basis, and such entities are
under no obligation to continue to deliver light devices on an ongoing basis.
Failure to maintain such relationships may require the Company to develop
additional sources which may require additional regulatory approvals and could
delay commercialization of the Company's Lu-Tex products under development.
There can be no assurance that the Company will be able to establish or
maintain relationships with other sources on a commercially reasonable basis,
if at all, or that such devices will receive regulatory approval for use in
photodynamic therapy.
RELIANCE ON THIRD PARTY RELATIONSHIPS
The Company has no manufacturing facilities for commercial production of its
products under development, nor does the Company have experience in sales,
marketing or distribution. The Company's strategy for commercialization of its
products requires entering
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into various arrangements with corporate and other collaborators to conduct
clinical trials and to manufacture, distribute and market its products. The
Company will be dependent upon the success of these outside parties performing
their responsibilities. There can be no assurance that such parties will
perform their obligations as expected or that the Company's reliance on others
for the clinical development, manufacturing, distribution and marketing of its
products will not result in unforeseen problems. The Company does not have the
ability to conduct these development activities in house. If one or more of
these relationships were terminated or the organizations did not perform up to
expectations, the clinical development of the Company's product candidates
would likely be delayed and could be substantially impaired depending on the
availability and quality of substitute development capabilities.
RAPID TECHNOLOGICAL CHANGE AND SUBSTANTIAL COMPETITION
The pharmaceutical industry is subject to rapid and substantial technological
change. Technological competition in the industry from pharmaceutical and
biotechnology companies, universities, governmental entities and others
diversifying into the field is intense and is expected to increase. Many of
these entities have significantly greater research and development capabilities
than the Company, as well as substantially more marketing, manufacturing,
financial and managerial resources, and represent significant competition for
the Company. Acquisitions of, or investments in, competing pharmaceutical
companies by large collaborating partners could increase such competitors'
financial, marketing, manufacturing and other resources. There can be no
assurance that developments by others will not render the Company's products or
technologies noncompetitive or obsolete, or that the Company will be able to
keep pace with technological developments or other market factors. Competitors
have developed or are in the process of developing technologies that are, or in
the future may be, the basis for competitive products. Some of these products
may have an entirely different approach or means of accomplishing similar
diagnostic, imaging and/or therapeutic effects than products being developed by
the Company. The Company is aware that one of its competitors in the market for
photodynamic therapy drugs has received marketing approval for certain
indications in the U.S., Canada, The Netherlands, France and Japan for
Photofrin(R). There can be no assurance that the Company's competitors will not
develop products that are safer, more effective and less costly than the
products developed by the Company and, therefore, present a serious competitive
threat to the Company's product offerings.
17
<PAGE> 18
Further, the medical indications for which the Company is developing its
therapeutic products also can be treated, in the case of cancer, by surgery,
radiation and chemotherapy, and in the case of atherosclerosis, by surgery
(e.g., bypass), angioplasty, atherectomy, the use of stents and drug therapy.
These treatments are widely accepted in the medical community and have a long
history of use. In addition, technological advances with other therapies for
cancer and atherosclerosis could make such other therapies more efficacious or
cost-effective than Lu-Tex and could render the Company's technology
noncompetitive or obsolete. Also, there can be no assurance that physicians
will use either Gd-Tex as a radiation sensitizer or chemosensitizer in the case
of cancer or Lu-Tex as a photosensitizer in the case of cancer or
atherosclerosis to replace or supplement established treatments for such
diseases or that the therapeutic products the Company is developing will become
competitive with current or future treatments. Further, some companies
developing photodynamic therapy products are developing specialized light
delivery devices for such products, which when integrated with their product
offering may afford them a competitive advantage relative to the Company's
strategy of sourcing such devices from third parties.
The markets for MRI contrast agents are highly competitive. Other oral MRI
contrast agents have been or are about to receive FDA approval. Such
competition could adversely offset the sales of GADOLITE should it be approved.
REQUIREMENTS FOR ADDITIONAL FINANCING AND ACCESS TO CAPITAL MARKETS
The Company has expended and will continue to expend substantial funds to
complete the research, development and clinical testing of its products. The
Company will require additional funds for these purposes, to establish
additional clinical and commercial-scale manufacturing arrangements and to
provide for the marketing and distribution of its products. The Company
believes that its cash, cash equivalents and short-term investments and
amounts available under a capital lease agreement will be adequate to satisfy
its capital needs through mid calendar 1998. However, the actual amount of the
Company's capital requirements will depend on many factors, including the
status of the development of products, the time and costs involved in
conducting clinical trials, obtaining regulatory approvals, and filing,
prosecuting and enforcing patent claims; competing technological and market
developments; and the ability of the Company to market and distribute its
products and establish new collaborative and licensing arrangements. The
Company will attempt to raise any necessary additional funds through equity or
debt financings, collaborative
18
<PAGE> 19
arrangements with corporate partners or from other sources. No assurance can be
given that such additional funds will be available on acceptable terms, if at
all. If adequate funds are not available from operations or additional sources
of financing, the Company's business, financial condition and results of
operations, will be materially and adversely affected.
UNCERTAINTIES REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company's success depends in part on its ability to obtain patent
protection for its products and preserve its trade secrets. In the U.S., the
Company owns or has exclusive rights to 34 issued patents, 12 allowed, and 38
pending patent applications. Outside the U.S., the Company is the owner or
exclusive licensee of five counterpart patents, and 47 pending counterpart
patent applications. There can be no assurance that the Company's patent
applications will result in additional patents being issued or that issued
patents will afford protection against competitors with similar technology, nor
can there be any assurance that any patents issued to the Company will not be
infringed by or designed around by others. Even issued patents may later be
modified or revoked by the U.S. Patent and Trademark Office in proceedings
instituted by third parties or otherwise found to be invalid or unenforceable.
Moreover, the Company believes that obtaining foreign patents may be more
difficult than obtaining domestic patents because of differences in patent
laws, and believes the protection provided by foreign patents, if obtained, may
be weaker than that provided by domestic patents.
The Company has not conducted an extensive search of patents issued to other
companies, research or academic institutions or others, and no assurance can be
given that such patents do not exist, have not been filed, or could not be
filed, or issued which contain claims relating to the Company's technology,
products or processes. Because of the number of patents issued and patent
applications filed relating to biometallic and expanded porphyrin chemistries,
Pharmacyclics believes there is a significant risk that current and potential
competitors and other third parties have filed or in the future will file
applications for, or have received or in the future will receive, patents and
will obtain additional proprietary rights relating to materials or processes
used or proposed to be used by the Company. If such patents have been or become
issued, the holders of such patents may bring claims against the Company for
infringement, which may have a material adverse effect on the Company's
business, financial condition and results of operations. As a result, the
Company may be
19
<PAGE> 20
required to obtain licenses from others to develop, manufacture or market its
products. There can be no assurance that the Company will be able to obtain any
such licenses on commercially reasonable terms, if at all.
The Company is aware of several U.S. patents owned by or licensed to Schering
AG that relate to MRI contrast agents. Schering AG has sent communications to
the Company suggesting that GADOLITE may infringe certain of such Schering AG
patents. The Company has obtained advice of special patent counsel that the
technologies employed by the Company for its imaging products under development
do not infringe the claims of such patents. A determination of the infringement
of any such patents could have a material adverse effect on the Company's
business. There can be no assurance that Schering AG will not seek to assert
such patent rights against the Company, which would result in significant legal
costs and require substantial management resources. The Company is aware that
Schering AG has asserted such rights against at least one other company in the
contrast agent imaging market and that a number of companies have entered into
licensing arrangements with Schering AG with respect to one or more such
patents. There can be no assurance that the Company would be able to obtain a
license from Schering AG, if required, on commercially reasonable terms, if at
all.
The Company also relies on trade secrets and proprietary know-how that it seeks
to protect, in part, by confidentiality agreements with its employees,
consultants, suppliers and licensees. No assurance can be given that others
will not independently develop substantially equivalent proprietary information
and techniques, that others will not otherwise gain access to the Company's
proprietary technology, or disclose such technology, or that the Company can
meaningfully protect its rights in such unpatented proprietary technology.
PRODUCT LIABILITY EXPOSURE
The testing, manufacturing, marketing and sale of the products under
development by the Company entail an inherent risk that product liability
claims will be asserted against the Company. Although the Company is insured
against such risks up to a $3 million annual aggregate limit in connection with
human clinical trials and commercial sales of its products under development,
there can be no assurance that the Company's present product liability
insurance is adequate. A successful product liability claim in excess of the
Company's insurance coverage could have a material adverse effect on the
Company's business,
20
<PAGE> 21
financial condition and results of operations and may prevent the Company from
obtaining adequate product liability insurance in the future on commercially
reasonable terms. In addition, there can be no assurance that product liability
coverage will continue to be available in sufficient amounts or at an
acceptable cost. An inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise protect against potential product liability claims
could prevent or inhibit the commercialization of pharmaceutical products
developed by the Company. A product liability claim or recall would have a
material adverse effect on the Company's business, financial condition and
results of operations.
ENVIRONMENTAL REGULATION
In connection with its research and development activities and its
manufacturing materials and products, the Company is subject to federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal
of certain materials, biological specimens and wastes. Although the Company
believes that it has complied with these laws, regulations and policies in all
material respects and has not been required to take any significant action to
correct any material noncompliance, there can be no assurance that the Company
will not be required to incur significant costs to comply with environmental
and health and safety regulations in the future. The Company's research and
development involves the controlled use of hazardous materials, including but
not limited to certain hazardous chemicals and radioactive materials. Although
the Company believes that its safety procedures for handling and disposing of
such materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these
materials cannot be eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company.
CONTROL BY EXISTING STOCKHOLDERS
The Company's officers, directors and principal stockholders, and certain of
their affiliates beneficially own approximately half of the Company's
outstanding Common Stock. Such concentration of ownership may have the effect
of delaying or preventing a change in control of the Company. Additionally,
these stockholders will have significant influence over major corporate
transactions as well as the election of directors of the Company and control
over board decisions.
21
<PAGE> 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities.
On November 11, 1996, Pharmacyclics sold 580,000 shares of
unregistered common stock to a single purchaser in a private
placement. The shares were sold at a price of $14.00 per share and no
commissions were paid on the transaction. The Company is obligated to
file, and have declared effective, a registration statement of such
shares within six months after the transaction date.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders.
On December 6, 1996, at the Company's 1996 Annual Meeting of Security
Holders, the following matters were submitted and voted on by security
holders and were adopted:
A. The election of: Thomas D. Kiley, Joseph S. Lacob, Patrick F.
Latterell, Richard A. Miller, Joseph C. Scodari and Craig C. Taylor by
the stockholders to serve on the board of Directors.
The results of the vote are as follows:
<TABLE>
<CAPTION>
Total Vote for Total Vote Withheld
Each Director from Each Director
------------- ------------------
<S> <C> <C>
Thomas D. Kiley 8,096,251 550
Joseph S. Lacob 8,096,251 550
Patrick F. Latterell 8,096,251 550
Richard A. Miller, MD 8,096,301 500
Joseph C. Scodari 8,096,251 550
Craig C. Taylor 8,096,301 500
</TABLE>
B. The amendment and restatement of the Company's Certificate of
Incorporation to increase the number of authorized shares of common
stock thereunder from 12,000,000 shares to 24,000,000 shares.
The results of the vote are as follows:
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C>
8,083,757 12,044 400 600
</TABLE>
C. The amendment of the Company's 1995 Stock Option Plan in order
to increase the total number of shares of common stock authorized for
issuance over the term of the Plan by an additional 750,000 shares.
The results of the vote are as follows:
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C>
6,634,324 444,421 13,400 1,004,656
</TABLE>
22
<PAGE> 23
D. The ratification of the appointment of Price Waterhouse LLP as
the Company's independent accountants for the fiscal year ending June
30, 1997.
The results of the vote are as follows:
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C>
8,053,643 38,458 4,700 0
</TABLE>
Item 5. Other information. None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 10.10a - Amendment No. 1 to Supply Agreement, dated
November 1, 1996, by and between the Company and Burroughs
Wellcome Co.
Exhibit 10.22 - License and Supply Agreement, dated
December 1, 1996, by and between the Company and E-Z-EM,
Ltd.
Exhibit 11.1 - Computation of Net Loss Per Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K. None
23
<PAGE> 24
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.
PHARMACYCLICS, INC.
(Registrant)
Date: February 13, 1997 By: /s/ Richard A. Miller
---------------------------------
Dr. Richard A. Miller
President and Chief Executive Officer
Date: February 13, 1997 By: /s/ Cheryl B. Jaszewski
---------------------------------
Cheryl B. Jaszewski
Vice President, Finance and
Administration
24
<PAGE> 25
EXHIBIT INDEX
Exhibit
No.
Exhibit 10.10a - Amendment No. 1 to Supply Agreement, dated
November 1, 1996, by and between the Company and Burroughs
Wellcome Co.
Exhibit 10.22 - License and Supply Agreement, dated
December 1, 1996, by and between the Company and E-Z-EM,
Ltd.
Exhibit 11.1 - Computation of Net Loss Per Share
Exhibit 27 - Financial Data Schedule
25
<PAGE> 1
EXHIBIT 10.10(a)
EXECUTION
COPY
AMENDMENT NO. 1
TO SUPPLY AGREEMENT
THIS AMENDMENT (hereinafter, the "Amendment") effective as of November
1, 1996, amends the Supply Agreement, by and between Pharmacyclics, Inc.
("PCYC") and Burroughs Wellcome Co. ("BW") dated as March 1, 1995 (hereinafter,
the "Original Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Original Agreement, PCYC agreed to purchase
from BW, and BW agreed to manufacture and supply to PCYC, the pharmaceutical
product known as GADOLITE(R) Oral Suspension (gadolinium aluminosilicate);
WHEREAS, pursuant to a statutory merger of BW with Glaxo Wellcome Inc.
effective as of October 31, 1995, Glaxo Wellcome Inc. ("GW") became the legal
successor-in-interest to all the assets, liabilities, rights and obligations of
BW;
WHEREAS, each of PCYC and GW desire to amend the Original Agreement,
pursuant to the terms of Section 20.11 of the Original Agreement, as more
particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants set forth herein, PCYC and GW hereby agree as
follows:
SECTION 1 - DEFINITIONS AND REFERENCES
1.1 Unless otherwise specifically defined herein, each term used
herein which is defined in the Original Agreement shall have the meaning
assigned to such term in the Original Agreement.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
1
<PAGE> 2
1.2 The parties acknowledge and agree that GW is the legal
successor-in-interest to all the rights and obligations of BW contained in the
Original Agreement, and that therefore each and every reference to BW in the
Original Agreement shall instead be deemed to be to GW.
SECTION 2 - ANNUAL MINIMUM QUANTITIES
The parties hereby agree that chart with respect to the Minimum Units
and Maximum Units which appears in Section 2.1(a) of the Original Agreement is
hereby [deleted] in its entirety and the following is hereby substituted in
lieu thereof:
<TABLE>
<CAPTION>
Contract Year Minimum Units Maximum Units
------------- ------------- -------------
<S> <C> <C>
First * *
Second * *
Third * *
Fourth * *
Fifth * *
</TABLE>
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
SECTION 3 - COORDINATORS
GW hereby appoints Ms. Carol Lunney, Contract Manufacturing, as GW's
Coordinator (as such term is defined in Article 3 of the Original Agreement).
PCYC hereby appoints Jim Eldridge, Senior Director, QA & QC, as PCYC's
Coordinator (as such term is defined in Article 3 of the Original Agreement).
SECTION 4 - METHOD OF PAYMENT
The parties hereby agree that Section 8.4 of the Original Agreement is
hereby deleted in its entirety and the following is hereby substituted in lieu
thereof:
"8.4 Method of Payment. All payments due hereunder to GW shall be
sent to GW at the times set forth herein by wire transfer of funds via
the Federal Reserve Wire Transfer System to Wachovia Bank & Trust
Company, Winston-Salem, North Carolina, for the account of Glaxo
Wellcome Inc., Five Moore Drive, Research Triangle Park, North Carolina
27709, ABA Number: 053100494, Account Number: 6355047810, or such other
financial institution as GW may designate to Pharmacyclics in writing
from time to time in accordance with Section 20.9 hereof.
Pharmacyclics shall notify the following person prior to the value date
of each wire transfer, or such other person as GW may designate to
Pharmacyclics from time to time in accordance with Section 20.9 hereof:
2
<PAGE> 3
Ms. Carol Lunney
Contract Manufacturing
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park
North Carolina 27709
Tel: (919) 707-2747
Fax: (919) 707-7046
SECTION 5 - NOTICES
The parties hereby agree that the address for Wellcome which appears
in Section 20.9 of the Original Agreement is hereby deleted in its entirety and
the following is hereby substituted in lieu thereof:
<TABLE>
<S> <C>
"If to GW: Glaxo Wellcome Inc.
Intersection of US 12/NC 11 and US 264
Greenville, North Carolina 27834
Attn: Ms. Carol Lunney
Contract Manufacturing
Tel: (919) 707-2747
Fax: (919) 707-7046
With a required copy to: Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park
North Carolina 27709
Attn: General Counsel"
</TABLE>
SECTION 6 - SPECIFICATIONS
Attached hereto as Exhibit 4 is a copy of the Product Specifications
(as such term is defined in Section 1.25 of the Original Agreement) which as of
the date hereof, will supersede all other drafts and copies of the Product
Specifications.
3
<PAGE> 4
SECTION 7 - GENERAL PROVISIONS
Except as specifically set forth herein, each and every provision of
the Original Agreement shall remain in full force and effect in accordance with
its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective duly authorized representatives as of the day and
year first above written.
PHARMACYCLICS, INC.
By: /s/ MARC L. STEUER
-----------------------
Name: Marc L. Steuer
Title: VP/CFO
GLAXO WELLCOME INC.
By: /s/ Kenneth A. Palumbo
----------------------
Kenneth A. Palumbo
Vice President -
Logistics & Planning
4
<PAGE> 5
EXHIBIT 4
Product Specifications attached as
Exhibit 4 to Original Agreement
***
*Indicates that material has been omitted and
confidential treatment has been requested
therefor. All such omitted material has been
filed separately with the Commission pursuant
to Rule 24b-2.
<PAGE> 1
EXHIBIT 10.22
LICENSE AND SUPPLY AGREEMENT
THIS LICENSE AND SUPPLY AGREEMENT (the "Agreement") is made as
of December 1, 1996 (the "Effective Date") by and between PHARMACYCLICS, INC.,
a Delaware corporation ("Pharmacyclics") and E-Z-EM, LTD., an English company
organized and existing under the laws of England and Wales ("E-Z-EM").
RECITALS
WHEREAS Pharmacyclics is engaged in the development of and
owns or has a license to certain patent rights relating to an oral magnetic
resonance imaging ("MRI") contrast agent for the gastrointestinal tract based
upon its proprietary GADOLITE(R) Oral Suspension technology;
AND WHEREAS Pharmacyclics and E-Z-EM, Inc., a Delaware
corporation ("E-Z-EM US"), entered into a License and Supply Agreement dated as
of August 17, 1995 (the "North American Agreement") pursuant to which
Pharmacyclics granted certain rights to E-Z-EM US to import, market, sell,
offer for sale and distribute Licensed Products (as therein defined) in the
United States of America, including its territories and possessions, Canada and
Mexico (the "North American Territory");
AND WHEREAS Pharmacyclics and E-Z-EM now desire that
Pharmacyclics grant to E-Z-EM the exclusive right to import, market, sell,
offer for sale and distribute Licensed Products in the Territory on the terms
and conditions set forth herein;
AND WHEREAS Pharmacyclics has filed for the UK Marketing
Authorization and E-Z-EM intends to file for Marketing Authorizations with the
Competent Authorities within the Territory with respect to GADOLITE(R);
NOW THEREFORE, in consideration of the foregoing premises and
the covenants set forth below, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "ADDITIONAL MRI PRODUCTS" shall mean any Pharmacyclics product for use
in the Field, other than a Licensed Product.
1.2 "ADEQUATE SUPPLY" shall mean supply of Licensed Product in ordered
quantity that is delivered on a timely basis according to written purchase
orders pursuant to Article 6 and that meets the MRI Product Specifications but
does not exceed the Maximum Quantities.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
<PAGE> 2
1.3 "APPLICABLE LAWS" shall mean all applicable laws, rules, regulations
and guidelines within or without the Territory that may apply to the
development, marketing or sales of the Licensed Products in the Territory or
the performance of either party's obligations under this Agreement including
laws, regulations and guidelines governing the import, export, development,
marketing, distribution and sale of the Licensed Products in the Territory and
the United States, to the extent applicable and relevant, and including all
Good Manufacturing Practices or Good Clinical Practices standards or guidelines
promulgated by the FDA or the Competent Authorities and including trade
association guidelines, where applicable, as well as U.S. export control laws
and the U.S. Foreign Corrupt Practices Act ("FCPA").
1.4 "AUDIT" shall mean the rights of both parties to examine or have
examined not more often than once each year by a certified public accountant
selected by the other party and acceptable to the party whose records are to be
examined, which acceptance will not be unreasonably withheld or delayed, the
Records for the sole purpose of verifying for the inspecting party the
correctness of calculations reflected in the Records.
1.5 "BURROUGHS WELLCOME" shall mean Burroughs Wellcome Co., a North
Carolina corporation.
1.6 "CHANGE IN CONTROL" shall mean (i) a merger or consolidation in which
E-Z-EM US or E-Z-EM is not the surviving corporation or company; (ii) any
"person" (within the meaning of Section 13(d) and Section 14(d)(2) of the
Securities Exchange Act l934) (other than a Stern/Meyers Person) is or becomes
the beneficial owner, directly or indirectly, of securities of a party
representing 50% plus one vote or more of the combined voting power of such
party's then-outstanding securities.
1.7 "COMMISSION" shall mean the Commission of the European Union.
1.8 "CPMP" shall mean the Committee for Proprietary Medicinal Products of
the European Agency for the Evaluation of Medicinal Products.
1.9 "COMPETENT AUTHORITIES" shall mean the entities in the Territory
responsible for the regulation of medicinal products intended for human use.
1.10 "COMPETITIVE MRI PRODUCT" shall mean any product intended for use in
the Field other than (i) any Licensed Product, (ii) the oral contrast agents
which contain barium sulfate, bentonite, and other ingredients which have been
or are being developed by E-Z-EM or an E-Z-EM Affiliate as of the effective
date of the North American Agreement and (iii) any Additional MRI Product
licensed by E-Z-EM pursuant to Section 2.2.
1.11 "CONFIDENTIAL INFORMATION" shall mean, subject to the exceptions set
forth in Section 8.2, any information received by one party from the other
party after the
2
<PAGE> 3
effective date of the North American Agreement pertaining to the Pharmacyclics
Technology, all know-how, data, process, technique, or formula relating to
Licensed Products and any research project, work in process, future
development, scientific, engineering, manufacturing, marketing, business plan,
financial or personnel matter relating to either party, its present or future
products, sales, suppliers, customers, employees, investors or business,
whether in oral, written, graphic or electronic form.
1.12 "DECENTRALIZED APPLICATION" shall mean an application submitted by
E-Z-EM for mutual recognition of the UK Marketing Authorization by one or more
of the Competent Authorities using the Decentralized Procedures.
1.13 "DECENTRALIZED PROCEDURES" shall mean the decentralized procedures
established by Directive 93/39/EEC amending Directive 65/65/EEC, 75/3l8/EEC and
75/319/EEC in respect of Medicinal Products, l993 O.J. (L214) 22.
1.14 "DISTRIBUTOR RECEIPTS" shall mean all fees and other payments actually
received from distributors in respect of the granting of Licensed Product
rights in any country within the Territory, whether denominated as licensing
fees, marketing fees or otherwise, but shall not include amounts paid by
distributors for MRI Product Units.
1.15 "EU" shall mean the European Union.
1.16 "E-Z-EM US" shall have the meaning set forth in the Recitals.
1.17 "E-Z-EM AFFILIATE" shall mean any person or entity directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with E-Z-EM, where control means the direct or indirect
possession of greater than fifty percent (50%) of (i) the outstanding voting
securities of a corporation or (ii) a comparable equity interest in any other
type of entity.
1.18 "FDA" shall mean the United States Food and Drug Administration.
1.19 "FD&C ACT" shall mean the United States Federal Food, Drug and
Cosmetic Act and applicable regulations promulgated thereunder, as amended from
time to time.
1.20 "FIELD" shall mean positive and negative contrast agents which are
delivered to and which image the gastrointestinal tract using MRI.
1.21 "FIRST COMMERCIAL SALE" shall mean, (i) with respect to each country
in the Territory, the first sale of GADOLITE(R) for use, consumption or resale
to any third party customer by E-Z-EM or its sub-distributors in such country
subsequent to receipt of a Marketing Authorization and other approvals with
respect to such country obtained in order to comply with Applicable Laws and
(ii) with respect to the Territory, the First Commercial Sale in any country
within the Territory.
3
<PAGE> 4
1.22 "FIRST TIER MARKETING AUTHORIZATIONS" shall mean Marketing
Authorizations in Belgium, the Netherlands, France, Germany and Italy.
1.23 "FISCAL YEAR". The Fiscal Year shall mean E-Z-EM's fiscal year, which
is the year ending May 31st.
1.24 "GADOLITE(R)" shall mean that MRI contrast agent for use in the Field
known as GADOLITE(R) Oral Suspension.
1.25 "GADOLITE(R) LINE EXTENSION" shall mean any subsequent formulations or
dosages of, or indications for, GADOLITE(R), where the New Drug Application
("NDA") or the application for the new marketing authorization or abridged
application therefor is a supplement to the initial NDA for GADOLITE(R)
("Initial NDA") or the initial Marketing Authorization or where such NDA filing
package or application for a new marketing authorization or abridged
application incorporates or relies upon, to a material extent, data or
information contained in the Initial NDA or in the initial UK Marketing
Authorization submission package or the Decentralized Application submission
package for GADOLITE(R).
1.26 "GROSS PROFITS" shall mean Net Sales minus the sum of (a) amounts paid
to Pharmacyclics for MRI Product Units actually sold, as calculated in Section
6.3, plus (b) third party royalties paid to Pharmacyclics pursuant to Section
4.1(d).
1.27 "IMPROVEMENTS" shall mean any improved or modified element or feature
of Pharmacyclics Technology for use in the Field made during the term of this
Agreement which is applicable to a Licensed Product.
1.28 "LICENSED PRODUCT" shall mean any product for use in the Field which
is either (i) covered by one or more claims contained in the Pharmacyclics
Patents or (ii) incorporates or is based upon the Pharmacyclics Technology, and
includes GADOLITE(R), any GADOLITE(R) Line Extension and any Other Licensed
Products.
1.29 "MRI PACKAGING SPECIFICATIONS" shall mean the packaging and labeling
specifications for the MRI Product Unit as may be determined by E-Z-EM from
time to time, as such specifications may be amended from time to time as may be
required in accordance with Section 3.2(d), provided, however, that any such
specifications or amendments thereto shall be subject to the approval of
Pharmacyclics, which approval shall not be unreasonably withheld or delayed and
shall be in compliance with Applicable Laws.
1.30 "MRI PRODUCT SPECIFICATIONS" shall mean the specifications for the MRI
Product Unit which are attached hereto as Schedule 1.30 and made a part hereof,
as such specifications may be amended from time to time by mutual agreement of
the parties, including, without limitation, such amendments as may be necessary
to obtain any
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necessary or appropriate Marketing Authorizations or other approvals within the
Territory.
1.31 "MRI PRODUCT UNIT" shall mean one (1) bottle containing sixteen (16)
ounces of GADOLITE(R) or such other package size for GADOLITE(R) as may be
mutually agreed upon by the parties from time to time.
1.32 "MARKETING AUTHORIZATION" shall mean all necessary and appropriate
approvals, including Pricing and Reimbursement Approvals, where applicable, to
put GADOLITE(R) or a GADOLITE(R) Line Extension product on the market as
Licensed Product in a particular member state in the Territory.
1.33 "MAXIMUM QUANTITIES" shall mean the maximum quantities of MRI Product
Units which Pharmacyclics is entitled to purchase from Burroughs Wellcome
annually pursuant to Subsection 2.1(a) of the Supply Agreement (or a comparable
section of a substantially similar supply agreement).
1.34 "NET SALES" shall mean the gross receipts actually received by E-Z-EM
from the sale of Licensed Product, whether sold directly to third parties or to
a distributor, less the following deductions, without duplication:
(1) Prompt payment or other trade or quantity
discounts actually allowed and taken in such
amounts as are customary in the trade;
(2) Commissions or rebates paid or allowed by
E-Z-EM to distributors and agents who are
independent third parties;
(3) Amounts repaid or credited by reason of
timely rejections or returns;
(4) Taxes (other than franchise or income taxes
on the income of E-Z-EM) actually paid or
withheld or which E-Z-EM is obligated to pay;
(5) Transportation and delivery charges, including
insurance premiums, invoiced to the customer;
and
(6) All costs incurred in transporting, packaging
and labeling the MRI Product Units,
including, without limitation, insurance,
freight and duties, that are incurred before
MRI Product Units reach the Initial Entry
Point, except to the extent such costs are
included in the amounts paid to Pharmacyclics
for MRI Product Units, as calculated in
Section 6.3.
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Notwithstanding the foregoing, amounts received by E-Z-EM or its
permitted sub-licensees (which, for greater clarity, shall not include a
distributor, subdistributor or dealer that is not a sub-licensee) for the sale
of Licensed Product among E-Z-EM and its permitted sub-licensees (which, for
greater clarity, shall not include a distributor, subdistributor or dealer that
is not a sub-licensee) whether for their internal use or for resale or other
disposition will not be included in the computation of Net Sales hereunder.
1.35 "NORTH AMERICAN AGREEMENT" shall have the meaning set forth in the
Recitals.
1.36 "OBJECTIONS" shall mean any objections submitted by any member state
to mutual recognition of the UK Marketing Authorization during the
Decentralized Procedures.
1.37 "OTHER LICENSED PRODUCT" shall mean any product in the Field other
than GADOLITE(R) or a GADOLITE(R) Line Extension which is covered by or
incorporates Pharmacyclics Technology.
1.38 "PATENT LICENSE AGREEMENTS" shall mean (i) that certain Patent License
Agreement by and between Pharmacyclics and the Board of Regents of the
University of Texas System dated July 1, 1992, and (ii) that certain Patent
License Agreement by and between Pharmacyclics and Stuart Young dated October
15, 1992.
1.39 "PHARMACYCLICS PATENTS" shall mean U.S. Patents No. 5,122,363 and No.
5,429,814 and European Patent No. 0560910 and "Pharmacyclics EU Patent" shall
mean European Patent No. 0560910.
1.40 "PHARMACYCLICS TECHNOLOGY" shall mean (i) the Pharmacyclics Patents
and (ii) all know how, technology, trade secrets, processes, data, methods and
any physical, chemical or biological material or other information which
Pharmacyclics owns, controls or acquires or has or acquires a license to (with
the right to sub-license) relating to the use, marketing, sale, offer for sale,
importation and distribution of products in the Field.
1.41 "PRE-MARKETING EXPENSES" shall mean all expenses (other than U.K.
Registration Costs) incurred prior to the First Commercial Sale in each country
in the Territory.
1.42 "PRICING AND REIMBURSEMENT APPROVALS" shall mean any pricing and
reimbursement approvals which must be obtained before placing GADOLITE(R) on
the market in any country in the Territory.
1.43 "RECORDS" shall mean complete and accurate records showing clearly all
transactions which are relevant to any sales, costs, expenses and payments
under this Agreement kept in a manner to facilitate an Audit.
1.44 "REFERENCE MEMBER STATE" shall mean the UK.
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<PAGE> 7
1.45 "REGULATORY STRATEGY" shall mean a reasonably detailed written plan
prepared by E-Z-EM outlining its strategy for achieving Marketing
Authorizations in all member states in the Territory mutually agreed by the
parties, as amended from time to time by E-Z-EM, including lists of tasks to be
accomplished, time lines for completion of various tasks necessary to obtain
the Marketing Authorizations, including details of plans to obtain the national
licenses.
1.46 "RIGHTS" means the rights to import, market, sell and distribute any
Additional MRI Product.
1.47 "SOP" shall mean E-Z-EM's standard operating procedure for identifying
and reporting adverse drug experiences, as agreed to by the UK Department of
Health in connection with E-Z-EM's Wholesale Dealers License, in compliance
with Applicable Laws.
1.48 "STERN/MEYERS PERSON" means Howard Stern and Betty Meyers, and their
spouses, children (and their spouses), and grandchildren (and their spouses),
and any trust, corporation, partnership, limited liability company or other
entity established for the benefit of any such person or persons, or control of
which is held by any such person or persons.
1.49 "SUPPLY AGREEMENT" shall mean that Supply Agreement, dated March 1,
1995, between Pharmacyclics and Burroughs Wellcome, as may be amended from time
to time, a copy of which is attached hereto as Appendix 1.
1.50 "TERRITORY" means the following countries: Belgium, Italy, Denmark,
Luxembourg, France, the Netherlands, Germany, Portugal, Greece, Spain, Ireland,
United Kingdom, Sweden, Finland, Austria, Norway, Switzerland, Iceland,
Liechtenstein, South Africa, Albania, Armenia, Azerbaijan, Belarus,
Bosnia-Hercegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia,
Hungary, Kazakhstan, Kirghistan, Latvia, Lithuania, Macedonia, Moldova,
Montenegro, Poland, Romania, Russia, Serbia, Slovak Republik, Slovenia,
Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan and such other countries
as may in the future become members of the EU or the European Economic Area.
1.53 "UK" means the United Kingdom of Great Britain and Northern Ireland,
the Isle of Man and the Channel Islands.
1.54 "UK MARKETING AUTHORIZATION" means a marketing authorization from the
Competent Authority in the United Kingdom to place GADOLITE(R) on the market as
Licensed Product in the United Kingdom.
1.55 "UK REGISTRATION COSTS" means all costs incurred by Pharmacyclics in
seeking the UK Marketing Authorization.
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<PAGE> 8
1.56 "INITIAL ENTRY POINT" means a place of delivery specified by E-Z-EM in
each order for MRI Product Units as permitted by Applicable Laws.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE GRANT.
(a) PRODUCT. Subject to the terms and conditions of this
Agreement, Pharmacyclics hereby grants to E-Z-EM, and E-Z-EM hereby accepts,
(i) an exclusive (even as to Pharmacyclics) sub-license under the Pharmacyclics
Patents pursuant to the Patent License Agreements and (ii) an exclusive (even
as to Pharmacyclics) license under the other Pharmacyclics Technology and
Improvements, to import, market, sell, offer for sale and distribute Licensed
Products in the Territory and (iii) a non-exclusive license (and sub-license)
to use the Pharmacyclics Technology and Improvements solely in connection
therewith in the Territory for the term of this Agreement. E-Z-EM shall have
the right to sub-license the rights granted in this Section 2.1 only to (a) one
or more E-Z-EM Affiliates and (b) distributors, sub-distributors or dealers in
the Territory. E-Z-EM shall have the right to sell Licensed Product through
(a) one or more E-Z-EM Affiliates and (b) distributors, sub-distributors or
dealers in the Territory without in any such case sub-licensing the rights
granted in this Section 2.1.
(b) DEVELOPMENT OF IMPROVEMENTS. Subject to the terms
and conditions of this Agreement, Pharmacyclics hereby grants to E-Z-EM, and
E-Z-EM hereby accepts, a non-exclusive license under the Pharmacyclics
Technology to conduct, or to have conducted on its behalf, research and
development solely for the purpose of making Improvements. With respect to
each such Improvement and all inventions (whether or not patentable), know how,
technology, trade secrets, processes, data, methods and any physical, chemical
or biological material or other information pertaining thereto which are
developed or invented by E-Z-EM or which have been licensed by E-Z-EM, to the
extent E-Z-EM has the right to sub-license, E-Z-EM hereby agrees to grant and
grants to Pharmacyclics during the term of this Agreement a royalty-free,
non-exclusive license, to use the same in connection with Licensed Products in
the Field and within the Territory. With respect to any license hereunder
outside the Territory, the parties will meet and negotiate in good faith the
terms of such license.
(c) COOPERATION CONCERNING IMPROVEMENTS. Each party
agrees to keep the other party fully informed of Improvements which it
develops. E-Z-EM agrees to make no Improvements without Pharmacyclics' prior
written consent, which shall not be unreasonably withheld or delayed.
2.2 ADDITIONAL MRI PRODUCTS. If Pharmacyclics determines to grant the
Rights to any Additional MRI Product to one or more third parties in the
Territory, E-Z-EM shall have a first right of negotiation to obtain the Rights
in accordance with this Section 2.2.
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<PAGE> 9
Upon such a determination, Pharmacyclics shall notify E-Z-EM in writing of its
intent to grant the Rights to such Additional MRI Product. Such notice shall
identify the Additional MRI Product . Upon receipt of such notice, E-Z-EM shall
have 30 days to notify Pharmacyclics in writing of its interest. Upon receipt
by Pharmacyclics of such statement of interest, the parties shall negotiate in
good faith for an additional 180 days to reach agreement upon the principal
business and legal terms with respect to the Rights. If E-Z-EM expresses no
interest in pursuing the Rights within the 30 day period or the parties are
unable to agree on such principal terms within such 180 day period,
Pharmacyclics shall have the right to grant the Rights to any third party and
shall have no obligation or liability to E-Z-EM therefore.
2.3 COVENANT NOT TO LAUNCH COMPETITIVE MRI PRODUCT. E-Z-EM hereby
covenants not to develop, in-license, market, sell, distribute or have
marketed, have sold or have distributed any Competitive MRI Product in the
Territory during the term of this Agreement. Notwithstanding the foregoing, if
E-Z-EM or any E-Z-EM Affiliate acquires an entity or all or substantially all
of the assets of an entity and such entity distributes or such assets include a
Competitive MRI Product, E-Z-EM or such E-Z-EM Affiliate shall have one (1)
year in which to divest itself of such Competitive MRI Product or to otherwise
cease distribution of such Competitive MRI Product, and E-Z-EM shall not be in
breach of this Section 2.3 if it or the E-Z-EM Affiliate, as the case may be,
so divests or ceases distribution within such one (1) year period.
2.4 WARRANTY CONCERNING GRANT. Pharmacyclics warrants that, as of the
Effective Date, (i) it has no product, developed or in development, in the
Field that has not heretofore been disclosed to E-Z-EM, and (ii) it has no
product, developed or in development, in the Field other than GADOLITE(R).
Pharmacyclics further warrants that the Patent License Agreements are the only
license agreements pursuant to which the Pharmacyclics Patents has been
licensed to Pharmacyclics and the Patent License Agreements permit
Pharmacyclics to enter into this License and Supply Agreement with E-Z-EM.
Pharmacyclics further warrants that it has the right to license (or
sub-license, as the case may be) to E-Z-EM the Pharmacyclics Technology.
Pharmacyclics further warrants that it will undertake whatever payments and
other actions are required for it to maintain the Patent License Agreements in
good standing, provided that E-Z-EM complies with its obligations pursuant to
Section 5.1.
2.5 DEVELOPMENT OF GADOLITE(R) LINE EXTENSIONS AND OTHER LICENSED PRODUCTS.
(a) GADOLITE(R) LINE EXTENSIONS. If either party desires
to seek and obtain Marketing Authorization for a GADOLITE(R) Line Extension in
the Territory, the parties will consult. If both parties agree to seek such
Marketing Authorization for such GADOLITE(R) Line Extension, * * *. In
such event, such GADOLITE(R) Line Extension shall be subject to all other terms
and conditions of this Agreement, as though it were GADOLITE(R), unless
otherwise explicitly
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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<PAGE> 10
stated. Any regulatory filing with respect to any GADOLITE(R) Line Extension
will be made only if agreed to by both parties in writing.
(b) OTHER LICENSED PRODUCTS. If either party desires to
seek and obtain Marketing Authorization for any Other Licensed Product in the
Territory, the parties will consult. If both parties agree to seek Marketing
Authorizations for such Other Licensed Product, * * *. The parties agree
that the terms of this Agreement shall apply to such jointly developed Other
Licensed Product except the parties will meet and negotiate in good faith to
amend those sections of this Agreement which the parties deem appropriate, in
order to establish the relationship between the parties with respect to such
Other Licensed Product development and commercialization. Any regulatory
filings on such Other Licensed Products will be made only if agreed to by both
parties in writing.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
ARTICLE 3
COMMERCIALIZATION
3.1 PRODUCT LAUNCH. E-Z-EM shall initiate distribution or marketing of
GADOLITE(R) in each country in the Territory promptly upon receipt of all
Marketing Authorizations but in no event later than 120 days following receipt
of all Marketing Authorizations required by that country. E-Z-EM's obligation
under this Subsection 3.1 is subject to the availability of Adequate Supply.
If E-Z-EM does not initiate such distribution or marketing in any such country
within such period and there was Adequate Supply during all of such period,
Pharmacyclics shall have the right to invoke Section 10.2, provided, however,
that if E-Z-EM fails to cure such breach, Pharmacyclics' sole and exclusive
remedy shall be to remove such country from the Territory. The 120 days
provided for in this Section 3.1 shall be in lieu of the time periods provided
for in Section 10.2 for cure of any material breach. In the event
Pharmacyclics invokes 10.2, the removal of such country shall be carried out in
accordance with the provisions of Section 10.6 which are relevant to this
Agreement; provided, however, that E-Z-EM shall not have the option to sell off
existing inventory intended for sale in such country pursuant to Section
10.6(a)(iii) and the provisions of Section 10.6(a)(iv) shall be mandatory.
3.2 PROMOTION AND MARKETING OBLIGATIONS.
(a) MARKETING EFFORTS. E-Z-EM agrees to promote the
sale, marketing and distribution of the Licensed Product in the Territory,
consistent with accepted business practices devoting the same level of efforts
as it devotes to its own products of comparable market potential. "Comparable
market potential" shall be fairly determined by E-Z-EM in good faith and shall
be based upon market size, price, competition and general marketing parameters.
It is understood and agreed that E-Z-EM may market the Licensed Product in
certain countries in the Territory through third party distributors
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and agents. E-Z-EM shall promptly advise Pharmacyclics of any material issues
that materially and adversely affects E-Z-EM's ability to market the Licensed
Product in the Territory. In such event, senior executives of E-Z-EM and
Pharmacyclics shall meet and in good faith discuss what actions should be taken
in light of such issues.
(b) GENERAL CONDUCT. E-Z-EM hereby covenants that it
will not, without the prior written authorization of Pharmacyclics, actively
solicit sale of Licensed Product or advertise Licensed Product, outside of the
Territory. E-Z-EM shall not, directly or indirectly, without the prior written
authorization of Pharmacyclics, (i) contact any of Pharmacyclics' suppliers or
vendors of Licensed Product components relating to the Licensed Product, or
(ii) contact any Competent Authority or other entity about the Licensed
Product, except as required to do so by Applicable Laws or as may be necessary
or appropriate to carry out its obligations hereunder, or as provided in
Sections 6.9 and 6.11 and Article 7. However, if a problem arises with regard
to Adequate Supply, then E-Z-EM may, with notice to Pharmacyclics which may
join in the process, take whatever steps are necessary, including directly
contacting suppliers or vendors, to obtain Licensed Product. Pharmacyclics
will grant a right to make Licensed Product under the Pharmacyclics Patents to
any new supplier or vendor reasonably acceptable to Pharmacyclics selected
under this Section 3.2(b).
(c) TRADEMARKS. Pharmacyclics shall have the right to
select one or more trademarks for use in connection with the promotion,
marketing and sale of Licensed Product, which trademark shall be owned by
Pharmacyclics, and E-Z-EM is hereby granted an exclusive license to use such
trademark(s) solely for such purposes in the Territory. If a trademark other
than GADOLITE(R) is selected, E-Z-EM shall review such trademark for legal and
marketing suitability and may disapprove use of any such trademark. Approval
will not be unreasonably withheld or delayed. If either E-Z-EM or
Pharmacyclics desires that GADOLITE(R) be sold under a different name or if any
Competent Authority requires that GADOLITE(R) be sold under a different name,
the following provisions shall apply: (i) the different name (the "New
Trademark") must be acceptable to E-Z-EM, acting reasonably, (ii) the New
Trademark must be legally obtainable by Pharmacyclics or E-Z-EM, as the case
may be, in each jurisdiction where the New Trademark is sought, (iii) the New
Trademark must be acceptable to the Competent Authority in each jurisdiction
where a variation making the change to the applicable Marketing Authorization
is sought, (iv) all costs (including reasonable attorneys' fees) for obtaining
any change to a Marketing Authorization and for obtaining the right to use the
New Trademark in each jurisdiction are paid by (A) E-Z-EM if E-Z-EM requested
the New Trademark, (B) Pharmacyclics if Pharmacyclics requested the New
Trademark, (C) one-half by E-Z-EM and one-half by Pharmacyclics if a Competent
Authority required the New Trademark, and (D) one-half by E-Z-EM and one-half
by Pharmacyclics if the New Trademark is the same as the trademark used in the
United States for the Licensed Product, subject to Pharmacyclics being credited
with its documented out-of-pocket costs incurred in registering and maintaining
the name GADOLITE(R) in the Territory, and (v) any New Trademarks obtained or
authorized
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shall be the sole property of Pharmacyclics, other than New Trademarks
incorporating a variation of the E-Z-EM trademark, in which case the New
Trademarks shall be the sole property of E-Z-EM.
(d) PACKAGING. Packaging and labeling of the Licensed
Product shall comply with the MRI Packaging Specifications and Applicable Laws.
Pharmacyclics shall be responsible for assuring that such packaging and
labeling conform with all Applicable Laws, if any, of the FDA for export of the
Licensed Product to the countries in the Territory and that the MRI Product
Units comply with the MRI Product Specifications. E-Z-EM shall be responsible
for assuring that packaging and labeling comply with all Applicable Laws where
such Licensed Product is to be distributed for sale. Pharmacyclics shall have
the right to approve in writing any such labeling and packaging to monitor the
proper use of its trade name, trademark, and patent references, such approval
not to be unreasonably withheld or delayed. All additional incremental costs
resulting from changes to the MRI Packaging Specifications made at the request
of E-Z-EM that are not required to export the Licensed Product to the Initial
Entry Point under Applicable Laws shall be borne by E-Z-EM; provided, however,
that if it is reasonable for the supplier of the Licensed Product to do such
packaging and labeling, Pharmacyclics shall reasonably assist E-Z-EM in
obtaining, at E-Z-EM's cost, such packaging and labeling at the lowest possible
cost. The E-Z-EM name and trademark may be used and may be more prominent than
the GADOLITE(R) or other trademark selected by Pharmacyclics if permissible
according to Applicable Laws. In the event that a third party (such as
Burroughs Wellcome) is to package and label the Licensed Product, then E-Z-EM
shall provide Pharmacyclics or the third party with camera ready art work for
the packaging and labeling within the time periods necessary for Pharmacyclics
to comply with the timing requirements in the Supply Agreement.
(e) CONSULTATION REGARDING PRICING OF MRI PRODUCT UNITS.
Prior to the expected date of First Commercial Sale in any country within the
Territory, E-Z-EM shall provide Pharmacyclics notice of the expected selling
price schedule of the MRI Product Unit in such country (including any (i)
prompt payment or other trade or quantity discounts which E-Z-EM expects to
offer and (ii) commission rates or rebates which E-Z-EM expects to offer to
distributors and agents). If, at any time E-Z-EM intends to increase or
decrease the selling price of the MRI Product Unit by more then * or
substantially alter the discounts, commission rates or rebates referenced in
the previous sentence, E-Z-EM shall consult with Pharmacyclics prior to
implementing such change. The final decision on selling price, discounts,
commission rates and rebates shall be that of E-Z-EM.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
(f) MARKETING PLANS AND REPORTS. Prior to the expected
date of First Commercial Sale in any country in the Territory and at the
beginning of each Fiscal Year thereafter, E-Z-EM shall submit to Pharmacyclics
in writing, for Pharmacyclics' review and comment, the annual marketing, sales
and distribution plan for such country detailing E-Z-EM's proposed marketing,
sales and distribution strategy and tactics for
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Licensed Product during such Fiscal Year that has been developed by E-Z-EM for
Licensed Product. In addition, E-Z-EM shall submit to Pharmacyclics copies of
any market research reports relating to Licensed Product sales and Licensed
Product competition which E-Z-EM commissions or otherwise obtains to the extent
permissible by the agency preparing the report. To the extent the foregoing
information is contained in plans or reports which contain information about
other products or markets, E-Z-EM may submit to Pharmacyclics only those
excerpts from such plans or reports which relate to the Licensed Product and
Licensed Product competition.
(g) SALES FORECAST. No later than 90 days prior to the
expected date of First Commercial Sale and no later than 90 days prior to the
start of each Fiscal Year thereafter, E-Z-EM shall deliver to Pharmacyclics,
for review by Pharmacyclics, a forecast of the number of Licensed Products
which E-Z-EM expects it and its permitted sub-licensees to sell during each
quarter of such year.
(h) PHASE IV SURVEILLANCE; MARKETING TRIALS. E-Z-EM
shall be responsible for any Phase IV surveillance programs of Licensed
Product, which shall be conducted in accordance with Applicable Laws and which
may only be undertaken upon the prior written approval of E-Z-EM and
Pharmacyclics, which approval shall not be unreasonably withheld or delayed.
E-Z-EM shall be responsible for the conduct of any marketing trials that it
determines are necessary. All expenses incurred pursuant to this Section
3.2(h) shall be borne by E-Z-EM. Any interim data and results in written form
of such surveillance programs and marketing trials shall be promptly provided
to Pharmacyclics in writing, who shall have the right to incorporate, refer to
and cross-reference such results and underlying data in any regulatory filing
with respect to any Licensed Product. Further, E-Z-EM agrees that should
Applicable Laws require that any such interim data and results from such
programs and trials be prepared in written form, E-Z-EM shall comply with such
requirements and provide all such information in writing to Pharmacyclics or
the FDA or the Competent Authorities in accordance with Applicable Laws.
3.3 PRE-MARKETING EXPENSES. E-Z-EM shall bear all * Expenses. To the
extent that Pre-Marketing expenses are incurred by Pharmacyclics, E-Z-EM shall
reimburse Pharmacyclics on an as-invoiced basis at Pharmacyclics' cost;
provided that any such Pre-Marketing expenses incurred by Pharmacyclics
hereunder must be agreed to by E-Z-EM in writing in advance.
ARTICLE 4
PAYMENTS TO PHARMACYCLICS
4.1 PAYMENTS TO PHARMACYCLICS. E-Z-EM shall pay Pharmacyclics the
following amounts:
(a) * upon execution of this Agreement; plus
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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(b) * upon issuance of the UK Marketing Authorization; plus
(c) An amount equal to * of Net Sales until the such time
as Pharmacyclics has been paid an aggregate of * pursuant to this Section
4.1(c); plus
(d) Payments due to third parties pursuant to the Patent
License Agreements; plus
(e) In the case of sales through third party
distributors, * * * of the excess of Gross Profits with respect to such
sales over the amounts paid pursuant to Section 4.1(c), if any; plus
(f) In the case of direct sales by E-Z-EM or by E-Z-EM's
Affiliates, * of the excess of Gross Profits with respect to such sales over
the sum of (i) the amounts paid pursuant to Section 4.1(c), if any, plus (ii)
* * * of Net Sales with respect to such sales.
4.2 EXAMPLE. Schedule 4.2 illustrates how Section 4.1(a)-(f) is intended
to operate.
4.3 ALLOCATION OF DISTRIBUTOR RECEIPTS. E-Z-EM shall pay Pharmacyclics
* * * of Distributor Receipts received by E-Z-EM or by E-Z-EM's
Affiliates.
ARTICLE 5
PROCEDURE FOR PAYMENTS; RECORDS; AUDIT
5.1 MANNER AND PLACE OF PAYMENT. Within 45 days after the end of each
calendar quarter, E-Z-EM shall pay to Pharmacyclics the total amount due under
Sections 4.1 and 4.3, such payment to be accompanied by a written report by
E-Z-EM concerning Gross Profits and Distributor Receipts detailed
country-by-country in the Territory, including quantities of the Licensed
Product sold, and other such details as required to be provided pursuant to the
Patent License Agreements. All payments to Pharmacyclics shall be made by
check at such bank as Pharmacyclics shall specify from time to time and shall
be made in U.S. Dollars.
5.2 RECORDS AND AUDIT. Each party will maintain the Records. Such
Records shall be open during reasonable business hours for a period of five (5)
years from creation of any such Record for the purpose of permitting either
party to conduct any Audit. In the absence of material discrepancies
* * * in any request for reimbursement resulting from the Audit, the
accounting expense shall be paid by the party requesting the Audit. If material
discrepancies do result, the party which was the subject of the Audit shall bear
the accounting expense. Any Records received from the other party shall be
Confidential Information for purposes of Article 8. The terms of this Section
5.2 shall survive any termination or expiration of this Agreement for a period
of five (5) years. All Records not disputed as to correctness by the other
party within one (1) year
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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after receipt or Audit thereof shall thereafter conclusively be deemed correct
for all purposes.
5.3 WITHHOLDING TAXES. Payments to Pharmacyclics hereunder shall be made
without deduction other than such amount (if any) as E-Z-EM is required by law
to deduct or withhold. E-Z-EM shall obtain a receipt from the relevant taxing
authorities for all withholding taxes paid and forward such receipts to
Pharmacyclics to enable Pharmacyclics to claim any and all tax credits for
which it may be eligible. E-Z-EM shall use reasonable commercial efforts to
enable or assist Pharmacyclics to claim exemption from such deductions or
withholdings under any double taxation or similar agreement or treaty from time
to time in force.
5.4 EXCHANGE RATES. For purposes of determining amounts to be paid to
Pharmacyclics pursuant to Sections 4.1 and 4.3, the UK interbank rate for
buying dollars on the date that the payment is being made, shall be used.
5.5 PRODUCT BUNDLING. In the event E-Z-EM or any permitted sub-licensee
sells the MRI Product Unit in conjunction with any other E-Z-EM product and in
so doing sells the MRI Product Unit for an amount less than the lowest selling
price for the MRI Product Unit, for the purposes of determining Net Sales from
such sale, Net Sales shall be based upon the Net Sales price to a similar size
customer ordering a similar volume of MRI Product Unit under similar but
unbundled terms and conditions.
ARTICLE 6
MANUFACTURE AND SUPPLY OF GADOLITE(R)
6.1 SUPPLY OF MRI PRODUCT UNITS. Subject to the terms of the Agreement,
Pharmacyclics shall supply or cause to be supplied to E-Z-EM, and E-Z-EM shall
purchase from Pharmacyclics, E-Z-EM's requirements of MRI Product Units.
However, if a problem arises with regard to Adequate Supply, then E-Z-EM may,
with notice to Pharmacyclics, who may join in the process, take whatever steps
are necessary, including directly contacting suppliers or vendors, to obtain
MRI Product Units. Pharmacyclics shall grant a right to make under the
Pharmacyclics Patents to any new supplier or vendor reasonably acceptable to
Pharmacyclics selected under this Section 6.1. Pharmacyclics agrees to take
whatever action is appropriate, including allowing E-Z-EM or any supplier to
E-Z-EM the right to make reference to Competent Authorities any relevant and
applicable Pharmacyclics' regulatory filings, to allow E-Z-EM or any supplier
to E-Z-EM to obtain approval to manufacture GADOLITE(R). Approval to
manufacture GADOLITE(R) by a third party supplier shall be subject to execution
of a binding contract between Pharmacyclics and the third party supplier to
manufacture GADOLITE(R) on terms reasonably acceptable to Pharmacyclics.
6.2 DELIVERY. All MRI Product Units shall be shipped by Pharmacyclics as
directed by E-Z-EM to the Initial Entry Point. Subject to Section 3.2(d),
after the MRI Product
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Units have been delivered to the Initial Entry Point, E-Z-EM shall be
responsible for all labeling and packaging of MRI Product Units and for
shipping MRI Product Units within the Territory.
6.3 PRICE. E-Z-EM shall pay to Pharmacyclics such price, including the
cost of active ingredients at Pharmacyclics cost if supplied by Pharmacyclics,
shipping, duties and insurance costs, as Pharmacyclics pays for any MRI Product
Unit purchased from a third-party supplier for sale and use in the Territory,
plus * * * of the direct costs (net of insurance and freight) of the
MRI Product Units; provided, however, that (i) the * * * of the direct
costs (net of insurance and freight) shall in no case exceed * * * per
MRI Product Unit and (ii) the amount paid by Pharmacyclics to a third-party
supplier shall in no case include amounts paid due to the failure of
Pharmacyclics to meet minimum purchase requirements or due to any other breach
of such third-party supply agreement by Pharmacyclics unless such breach is
caused by E-Z-EM. The initial price to be paid by Pharmacyclics for the MRI
Product Units is based on Sections 8.1 and 8.2 of the Supply Agreement. The
"minimum purchase requirements" mentioned in paragraph 8.1 of the Supply
Agreement are not applicable to this Agreement. Pharmacyclics agrees that
Pharmacyclics will continue to supply or cause to be supplied the active
ingredient of MRI Product Units to any third-party supplier, including to
E-Z-EM, if E-Z-EM becomes the supplier. Concurrently with each shipment of MRI
Product Units, Pharmacyclics shall invoice E-Z-EM, which invoice shall specify
the amount payable by Pharmacyclics to the third-party supplier with respect to
such MRI Product Units. The portion of the invoice representing amounts owed
to the third-party supplier shall be due and payable upon receipt by E-Z-EM of
the MRI Product Units at the Initial Entry Point, or at such time as
Pharmacyclics is required to pay the third-party supplier for such MRI Product
Units, and the balance of the invoice shall be due and payable thirty days
after receipt by E-Z-EM of the MRI Product Units at the Initial Entry Point.
6.4 MRI PRODUCT UNIT MAXIMUMS. During each Contract Year (as such term is
defined in the Supply Agreement), under this Agreement and the North American
Agreement, E-Z-EM shall be entitled to purchase no more than the Maximum
Quantities.
6.5 SUPPLY FORECASTS.
(a) LONG-TERM FORECAST SCHEDULE. E-Z-EM shall deliver to
Pharmacyclics such information as will allow Pharmacyclics to meet its
obligations under Section 6.1 (a) of the Supply Agreement (or a comparable
section of a substantially similar supply agreement) with respect to the
Territory. All such information shall be delivered to Pharmacyclics promptly,
but in any event no later than 30 days prior to the date Pharmacyclics is
obligated to deliver corresponding information to Burroughs Wellcome (or a
comparable supplier).
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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<PAGE> 17
(b) DETAILED FORECAST SCHEDULE. E-Z-EM shall deliver to
Pharmacyclics such information as will allow Pharmacyclics to meet its
obligations under Section 6.1(b) of the Supply Agreement (or a comparable
section of a substantially similar supply agreement) with respect to the
Territory and all such information shall be delivered to Pharmacyclics
promptly, but in any event no later than 30 days prior to the date
Pharmacyclics is obligated to deliver corresponding information to Burroughs
Wellcome (or a comparable supplier).
(c) FORECAST VARIANCES. The forecasts provided under
this Section 6.5 shall be non-binding; provided, however, that the total number
of MRI Product Units ordered during any Calendar Quarter (as such term is
defined in the Supply Agreement) shall be in conformance with the provisions of
Section 6.2 of the Supply Agreement (or a comparable section of a substantially
similar supply agreement) as if E-Z-EM had submitted its detailed forecasts
directly to Burroughs Wellcome (or a comparable supplier).
6.6 ORDERS. MRI Product Units shall be ordered by E-Z-EM pursuant to
written purchase orders which shall be received by Burroughs Wellcome or other
supplier or Pharmacyclics between 90 and 120 days prior to the delivery date
specified in such purchase order. All orders shall be in accordance with the
terms of Article 7 and Section 8.4 of the Supply Agreement (or comparable
sections of a substantially similar supply agreement), other than minimum
purchase requirements. Copies of all orders and payments from E-Z-EM to
Burroughs Wellcome shall be sent to Pharmacyclics by FAX.
6.7 PRODUCT SPECIFICATIONS. All MRI Product Units manufactured and
supplied by or on behalf of Pharmacyclics under this Agreement shall conform to
the MRI Product Specifications.
6.8 PACKAGING SPECIFICATIONS. Packaging and labeling of all MRI Product
Units manufactured and supplied by or on behalf of Pharmacyclics under this
Agreement shall conform to the MRI Packaging Specifications and to Applicable
Laws.
6.9 DIRECT COMMUNICATIONS AND PAYMENTS BETWEEN E-Z-EM AND THIRD PARTY
SUPPLIER. After signing this Agreement, E-Z-EM may communicate directly with
or make payment directly to Burroughs Wellcome or such other third party
supplier with respect to orders, forecasts and reports under this Article 6.
In the event of such direct communication or payment, Pharmacyclics shall
receive copies of all such communication and receipts for such payment at the
same time that the receiving party receives such communication or receipt.
6.10 MODIFICATIONS OF SUPPLY AGREEMENT. [Intentionally Deleted]
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<PAGE> 18
6.11 GOVERNMENTAL REGULATION.
6.11.1 Pharmacyclics shall produce or have produced all GADOLITE(R)
materials provided under this Agreement according to Applicable Laws.
6.11.2 Pharmacyclics will permit E-Z-EM or its designated
representative, to perform vendor audits of Pharmacyclics' facilities and
procedures on reasonable advance notice to Pharmacyclics during normal business
hours.
6.11.3 The parties agree to notify each other immediately upon
receipt of any communication indicating a possible inspection or visit
requested by FDA or a Competent Authority related to the Licensed Product and
will provide each other with copies of any communications made between the
other party and FDA or the Competent Authority relating to the Licensed Product
to the extent relevant to this Agreement.
6.11.4 Pharmacyclics will provide E-Z-EM a Certificate of Compliance
for each batch lot of any materials sold hereunder.
6.11.5 Pharmacyclics will notify E-Z-EM of any proposed material
changes in raw materials, components, processes, or labeling, at least ninety
(90) days prior to such actions.
6.11.6 Pharmacyclics guarantees that no materials manufactured by or
on behalf of Pharmacyclics pursuant to this Agreement will be adulterated or
misbranded within the meaning of the FD&C Act or any other Applicable Law and
further guarantees that no materials supplied by or on behalf of Pharmacyclics
pursuant to this Agreement will be barred from introduction into inter-state
commerce under the provisions of Section 404, 505 or 512 of the FD&C Act or any
other Applicable Law. Pharmacyclics agrees to take whatever action is
necessary to assure that any Pharmacyclics contractor for the supply of
GADOLITE(R) or, to the extent Pharmacyclics can reasonably do so, any component
thereof, will comply with the requirement of this Section 6.11.6.
6.11.7 E-Z-EM will permit Pharmacyclics or its designated
representative to perform vendor audits or other audits required by Applicable
Laws on the facilities, procedures and records which are relevant to such
audits of E-Z-EM and E-Z-EM's Affiliates and, to the extent reasonably
obtainable by E-Z-EM, on facilities, procedures and records which are relevant
to such audits of unaffiliated parties with responsibility for distribution,
testing, analyzing, labeling or packaging the Licensed Product on reasonable
advance notice to E-Z-EM during normal business hours.
6.11.8 E-Z-EM agrees to assume all responsibility for importing,
selling and distributing the Licensed Product, including obtaining all
necessary permits and licenses therewith, and including performance of all
testing necessary for batch release, analytical testing, and/or labeling
(except to the extent necessary to export the Licensed Product to
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<PAGE> 19
the Initial Entry Point) required to place the Licensed Product on the market
in the Territory and any other requirement relating to the import, sale and
distribution of the Licensed Product imposed by Applicable Laws, at E-Z-EM's
sole cost.
ARTICLE 7
MARKETING AUTHORIZATIONS; OTHER REGULATORY COMPLIANCE ISSUES
7.1 U.K. MARKETING AUTHORIZATION. Pharmacyclics made an application for a
UK Marketing Authorization for the Licensed Product on June 26, l996. In its
application, Pharmacyclics indicated that, when the UK Marketing Authorization
is received, Pharmacyclics intends to use the UK Marketing Authorization to
follow the Decentralized Procedures to obtain the First Tier Marketing
Authorizations. Pharmacyclics has turned the dossier and related documentation
for the U.K. Marketing Authorization over to E-Z-EM. All costs and expenses in
connection with obtaining the UK Marketing Authorization and any other
Marketing Authorizations are to be borne according to the provisions of Section
7.11.
7.2 REGULATORY STRATEGY. Within thirty (30) days after the Effective
Date, E-Z-EM shall submit its Regulatory Strategy to Pharmacyclics for its
review and comment.
7.3 USE OF DECENTRALIZED PROCEDURES. The parties have agreed that, unless
advised to the contrary by the Reference Member State, within sixty (60) days
of receipt of the UK Marketing Authorization, E-Z-EM will file Decentralized
Applications for the First Tier Marketing Authorizations. E-Z-EM will provide
Pharmacyclics with any Objections promptly after receipt and shall afford
Pharmacyclics the opportunity to consult with E-Z-EM concerning such matters.
In no event will Pharmacyclics communicate directly with the Reference Member
State, members of the CPMP, the Commission and/or the Competent Authority
during the Decentralized Procedures relating to GADOLITE(R). In the event that
one or more member states indicates that it will not grant mutual recognition
to the Decentralized Application, the parties agree to consult to decide
whether to withdraw the Decentralized Application or proceed to binding
arbitration. The parties agree that, should a decision be made to withdraw the
Decentralized Application from one or more member states, or a positive opinion
of the CPMP not be obtained, or the Commission not ratify the opinion of the
CPMP so as to make the CPMP opinion into a binding Commission decision, the
parties agree to consult.
7.4 OBTAINING MARKETING AUTHORIZATIONS. Promptly after receipt of notice
from MCA that MCA intends to issue the UK Marketing Authorization within a
thirty day period, E-Z-EM shall promptly begin taking all acts and activities
necessary to obtain the national licenses from each member state that will be
required as a condition to receipt of a Marketing Authorization. E-Z-EM agrees
to notify Pharmacyclics within fifteen (15) days of receipt of each Marketing
Authorization. In the event that E-Z-EM has not received a Marketing
Authorization (including any applicable Pricing and Reimbursement Approvals
necessary for placing the Licensed Product on the market in a
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<PAGE> 20
member state) in each member state which has mutually recognized the
Decentralized Application, within one year of that member state mutually
recognizing the Decentralized Application, then the Chief Executive Officers of
the parties or their representatives or designees agree to meet within ten days
to discuss further options for the Decentralized Applications, including having
Pharmacyclics take over the responsibilities for designing and implementing the
Regulatory Strategy at the reasonable expense of E-Z-EM. E-Z-EM shall follow
such procedures as it deems appropriate and shall comply with Applicable Laws
with respect to obtaining Marketing Authorizations for states in the Territory
that are not subject to the Decentralized Procedures.
7.5 ONGOING CONSULTATIONS. The parties shall consult on the U.K.
Marketing Authorization and the First Tier Marketing Authorizations on a
regular basis and also about authorizing E-Z-EM to obtain additional Marketing
Authorizations in addition to the First Tier Marketing Authorizations and the
U.K. Marketing Authorization using the procedures specified in this Article 7.
7.6 MARKETING AUTHORIZATION HOLDER. Unless otherwise required by
Applicable Laws, Pharmacyclics shall be the holder of the UK Marketing
Authorization and all other Marketing Authorizations and E-Z-EM shall be named
as Pharmacyclics' distributor in the Territory with respect to the Marketing
Authorizations. In the event that the parties determine that it is desirable,
for legal or administrative reasons, for E-Z-EM to hold the Marketing
Authorizations, E-Z-EM understands and agrees that E-Z-EM will hold the
Marketing Authorizations in trust for the benefit of Pharmacyclics and that,
therefore, E-Z-EM will not transfer, assign, mortgage, charge or sub-contract
any of the Marketing Authorizations other than to Pharmacyclics or to a
third-party distributor appointed by E-Z-EM to distribute the Licensed Product,
and that E-Z-EM will not do anything intentionally to adversely affect a
Marketing Authorization. E-Z-EM agrees that Pharmacyclics shall be free from
time to time to inform the Competent Authorities that the Marketing
Authorizations are held in trust for Pharmacyclics. Any transfer of the
Marketing Authorization by E-Z-EM to a third party distributor shall be
contingent upon the execution by the third party distributor of a written
agreement pursuant to which the third party distributor agrees to hold the
Marketing Authorization on the same terms and conditions as set forth in this
Section 7.6. E-Z-EM agrees to provide Pharmacyclics with copies of any
agreements with third parties entered into by E-Z-EM and such third party in
order to comply with this Section 7.6 within 30 days of the effective date of
any transfer of any Marketing Authorization, along with appropriate evidence
from the Competent Authorities documenting the transfer of the Marketing
Authorization. Any transfers of any Marketing Authorizations made in violation
of this Section 7.6 shall be null, void and unenforceable. For the avoidance
of doubt, the term "transfer" shall include, but not be limited to, transfers
from E-Z-EM to a third party distributor of an existing Marketing Authorization
as well as cases in which the third party distributor rather than E-Z-EM makes
an application for a Marketing Authorization.
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<PAGE> 21
7.7 MAINTENANCE OF MARKETING AUTHORIZATIONS E-Z-EM agrees to maintain
the Marketing Authorizations including obtaining any variations or renewals
thereof, at E-Z-EM's sole cost.
7.8 PRICING AND REIMBURSEMENT APPROVALS. E-Z-EM shall be responsible for
obtaining any Pricing and Reimbursement Approvals that are required to obtain
Marketing Authorizations.
7.9 PROVISION OF REGULATORY FILINGS. E-Z-EM will provide Pharmacyclics
with copies of all filings made to the FDA or the Competent Authorities
relating to GADOLITE(R), any GADOLITE(R) Line Extension or to any Other
Licensed Product filed in accordance with this Article.
7.10 ASSISTANCE. Each party shall provide reasonable assistance to the
other at the other's request, in connection with their obligations pursuant to
this Section 7, subject to reimbursement of its out-of-pocket costs.
7.11 COSTS. * * *
7.12 COMPLIANCE. E-Z-EM and Pharmacyclics shall comply with all Applicable
Laws within the Territory including the provision of information by E-Z-EM and
Pharmacyclics to each other necessary for Pharmacyclics and E-Z-EM to comply
with any applicable reporting requirements.
7.13 ADVERSE REACTION REPORTING. Each party shall advise the other party,
by telephone or facsimile, within such time as is required to comply with
Applicable Laws after it becomes aware of any adverse reaction involving the
Licensed Product. Such advising party shall provide the other party with a
written report delivered by confirmed facsimile of any adverse reaction,
stating the full facts known to it, including but not limited to customer name,
address, telephone number, batch, lot and serial numbers, as required by
Applicable Laws. To the extent permitted by Applicable Laws, E-Z-EM shall have
full responsibility for monitoring such adverse reactions and making any
reports to the Competent Authorities, with a complete copy provided to
Pharmacyclics at the same time the report is made to the Competent Authorities.
Within thirty (30) days before the First Commercial Sale or any test or trial
conducted on GADOLITE(R) by E-Z-EM or its designee, the parties agree to agree
upon and finalize the SOP, provided that such SOP shall be E-Z-EM's current
SOP, modified only to the extent necessary to provide a mechanism for E-Z-EM to
provide information to Pharmacyclics that is necessary under Applicable Laws
for Pharmacyclics to provide to the FDA. The parties agree to follow the SOP.
In the event responsibilities exist with respect to compliance with Applicable
Laws pursuant to this section which cannot be delegated to E-Z-EM by
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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<PAGE> 22
Pharmacyclics and some or all of the information needed to fulfill the
responsibility is not within Pharmacyclics' control, E-Z-EM agrees to provide
such information to Pharmacyclics to the extent such information can be
reasonably obtained by E-Z-EM, with such information to provided within such
time limits as is required for Pharmacyclics to comply with Applicable Laws.
7.14 POST - FIRST COMMERCIAL SALE TESTING AND REPORTING. If, after the
date of First Commercial Sale in any country in the Territory, adverse events
or other issues arise with respect to the safety or efficacy of GADOLITE(R)
which jeopardize GADOLITE(R)'s performance or are deemed by the parties to
potentially limit its approved indications, the parties shall consult with each
other with respect to such events or other issues. If the parties determine
that the situation requires clinical testing after First Commercial Sale in any
country in the Territory, modifications to any Marketing Authorization or other
communication with any Competent Authority or entity, Pharmacyclics shall
design and the parties shall implement any such testing, modifications or
communication as shall be agreed upon by the parties; provided, however, that
E-Z-EM may communicate with any Competent Authority to the extent it deems
necessary or appropriate to fulfill its obligations hereunder. * * *
7.15 PRODUCT RECALL. E-Z-EM and Pharmacyclics each shall notify the other
promptly if any MRI Product Unit is the subject of a recall, market withdrawal
or correction, and the parties shall cooperate in the handling and disposition
of such recall, market withdrawal or correction; provided, however, in the
event of a disagreement as to any matters related to such recall, market
withdrawal or correction, other than the determination of who shall bear the
costs as set forth in the immediately following sentence, each party shall have
the right to cause a recall, market withdrawal or correction to be made.
* * * E-Z-EM shall in all events be responsible for conducting any
recalls, market withdrawals or corrections with respect to the MRI Product Units
in consultation with Pharmacyclics. E-Z-EM shall maintain Records of all sales
and distribution of MRI Product Units and customers sufficient to adequately
administer a recall, market withdrawal or correction for a period of five (5)
years after the date the Record is created.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
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7.16 REPORTS. On a quarterly basis, E-Z-EM shall provide Pharmacyclics
with an updated version of the Regulatory Strategy, including changes in time
lines and a written report on the status of all efforts by E-Z-EM to obtain
Pricing and Reimbursement Approvals. Each party shall keep the other fully
informed of all governmental activities and plans which potentially or actually
affect the sale of the Licensed Product in the Territory to the extent that
each such party has knowledge of such activities and plans.
7.17 BLOCK EXEMPTION. Immediately prior to the expiration of Regulation
l983/83 of the Commission of the EU (the "Block Exemption"), the parties agree
to examine the Agreement to determine whether the Agreement will fall within
the new Block Exemption. Should any of the provisions of the Agreement not
fall within the Block Exemption or the new Block Exemption, during the term of
this Agreement, the parties agree either to amend the Agreement to fall within
the Block Exemption or the new Block Exemption or to notify the Agreement to
the Commission, with each party to bear one-half of the reasonable costs of
making the notification.
ARTICLE 8
CONFIDENTIALITY
8.1 NONDISCLOSURE OBLIGATIONS. During the term of this Agreement, and for
a period of 5 years after termination hereof, each party will maintain all
Confidential Information in trust and confidence and will not disclose any
Confidential Information to any third party or use any Confidential Information
for any unauthorized purpose. Each party may use such Confidential Information
only to the extent required to accomplish the purposes of this Agreement.
Confidential Information shall not be used for any purpose or in any manner
that would constitute a violation of any Applicable Laws. Confidential
Information shall not be reproduced in any form except as required to
accomplish the intent of this Agreement. Each party will use at least the same
standard of care as it uses to protect proprietary or confidential information
of its own confidential information. Each party will promptly notify the other
upon discovery of any unauthorized use or disclosure of the Confidential
Information. All information that is to be held confidential shall be given
only to individuals who are made aware of the confidential nature of the
information and who have signed a confidentiality agreement or who have a
fiduciary responsibility to E-Z-EM and who have a need to know.
8.2 EXCEPTIONS. Confidential Information shall not include any
information which:
(a) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party,
generally known or available;
(b) is known by the receiving party at the time of
receiving such information, as evidenced by its
written records;
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(c) is hereafter furnished to the receiving party by a
third party, as a matter of right and without
restriction on disclosure;
(d) is independently developed by the receiving party
without any breach of Section 8.1;
(e) is the subject of a written permission to disclose
provided by the disclosing party; or
(f) is of such inconsequential nature as to render it
valueless.
The parties agree that the material financial terms of this Agreement
will be considered Confidential Information of both parties. However, each
party shall have the right to disclose the material financial terms of this
Agreement to any potential acquiror, merger partner, or other bona fide
potential financial partner, subject to a requirement to secure confidential
treatment of such information or if it is prudent or proper to make such
disclosure to comply with Applicable Laws or to meet Generally Accepted
Accounting Principles. Notwithstanding the foregoing, the parties agree that
the initial press releases regarding this Agreement shall be mutually agreed
upon by the parties.
8.3 AUTHORIZED DISCLOSURE. Notwithstanding any other provision of this
Agreement, each party may disclose Confidential Information if such disclosure:
(a) is in response to a valid order of a court or other
governmental body of the United States or the EU or
any state of the Territory or of any political
subdivision thereof; provided, however, that the
responding party shall first have given notice to the
other party hereto and shall have made a reasonable
effort to obtain a protective or other appropriate
forms of order requiring that the Confidential
Information so disclosed be used only for the
purposes for which the order was issued;
(b) is otherwise required by Applicable Laws; or
(c) is otherwise necessary to file or prosecute patent
applications, prosecute or defend litigation or
comply with Applicable Laws or otherwise establish
rights or enforce obligations under this Agreement,
but only to the extent that any such disclosure is
necessary.
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ARTICLE 9
INTELLECTUAL PROPERTY
9.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Pharmacyclics shall retain all of
its rights, title and interest in and to all Pharmacyclics Technology,
copyrights, trade marks, trade name, and all other industrial and intellectual
property embodied in or appurtenant to the Licensed Product. Except as
otherwise expressly provided in this Agreement, E-Z-EM shall have no right,
title or interest in any industrial or intellectual property relating to the
Licensed Product, except to marketing and promotional materials and reports and
all marketing data and all intellectual property relating thereto.
9.2 VALIDITY AND INFRINGEMENT OF PHARMACYCLICS PATENTS.
(a) In the event E-Z-EM or Pharmacyclics becomes aware of
any actual or threatened infringement of any Pharmacyclics Patents in the
Territory, that party shall promptly notify the other.
(b) To validate the proprietary rights licensed herein,
Pharmacyclics shall have the first right, but not the obligation, to bring and
control any infringement action against any person or entity materially
infringing the Pharmacyclics Patents directly or contributorily in the
Territory and shall have the first right, but not the obligation, to defend the
Pharmacyclics Patents against any challenge to the validity and enforceability
of those patents in the Courts of the United States or in the United States
Patent and Trademark Office and the and/or the appropriate agencies or Courts
in the Territory, as the case may be. If Pharmacyclics does not take steps
within 120 days of the date of Pharmacyclics becoming aware of such material
infringement to abate the infringement or does not bring litigation within six
months of said 120 days, then E-Z-EM may, but shall not be required, to
prosecute and control the infringement or threatened infringement and to defend
the Pharmacyclics Patents. If, within 120 days of the date on which E-Z-EM may
first prosecute and control the infringement or threatened infringement or
defend the Pharmacyclics Patents, E-Z-EM has not commenced such prosecution,
control or defense, E-Z-EM's right to do so shall expire and the right to
prosecute and control the infringement or threatened infringement and to defend
the Pharmacyclics Patents shall revert to Pharmacyclics.
(c) Pharmacyclics shall bear the full cost of any action
brought by Pharmacyclics to validate the proprietary rights licensed herein.
During the course of such litigation, all payments due to Pharmacyclics under
this Agreement shall continue to be made. Pharmacyclics will receive all
damages that may be awarded to Pharmacyclics under such litigation.
(d) E-Z-EM shall bear the full cost of any action brought
by E-Z-EM to validate the proprietary rights licensed herein and shall receive
all damages that may be awarded to E-Z-EM under such litigation; provided,
however, that if E-Z-EM, acting
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reasonably, determines that there is a reasonable expectation that the results
of such litigation (including both damages and the value of injunctive relief)
are greater than the anticipated costs of such litigation, E-Z-EM may, by
notice to Pharmacyclics, require Pharmacyclics to pay * of the costs incurred
by E-Z-EM in connection therewith and in such case Pharmacyclics shall be
entitled to receive * of the damages recovered. During the course of such
litigation, all payments due to Pharmacyclics under this Agreement shall
continue to be made.
(e) In the event either party brings an infringement
action, the other party shall cooperate as reasonably requested, including, if
requested, furnishing a power of attorney. No settlement or consent judgment
or other voluntary final disposition of a suit under this Section 9.2 may be
entered into without the joint consent of Pharmacyclics and E-Z-EM, such
consent not to be unreasonably withheld or delayed.
(f) If the Pharmacyclics EU Patent shall be held invalid
in a Court or Patent Office or other action and such holding is upheld on
appeal or the appeal period has passed without an appeal being taken, and if
the above occurs prior to the tenth anniversary of First Commercial Sale in the
Territory, the following shall occur:
(i) Pharmacyclics shall continue to provide MRI
Product Units in accordance with Article 6
until the termination of the North American
Agreement;
(ii) Article 4 payments shall be made to
Pharmacyclics until the termination of the
North American Agreement;
(iii) This Agreement shall terminate in accordance
with Section 10.1.
9.3 INFRINGEMENT OF THIRD PARTY PATENTS. Pharmacyclics represents that to
the best of its knowledge, the manufacture, use or sale of GADOLITE(R), as
configured as of the Effective Date, does not infringe any United States or EU
patent or other proprietary rights held by any third party. If a third party
asserts that a patent or other proprietary right owned by it is infringed by
the manufacture, use or sale of the Licensed Product, the party against whom
such a claim was asserted shall immediately provide the other party notice of
such claim and the related facts in reasonable detail. The party against whom
a claim is asserted shall control the defense of such claim and if a claim is
asserted against both parties they shall jointly cooperate in controlling the
defense of such claim. The party (whether Pharmacyclics or E-Z-EM) that
controls the defense of a given claim with respect to the Licensed Product
shall also have the right to control settlement of such claim; provided,
however, that (i) no settlement shall be entered into without the consent of
the other party if such settlement would adversely affect the interests of such
other party in a manner different from the interests of the party controlling
the defense and (ii) if a claim is asserted against both parties, both parties.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
26
<PAGE> 27
must consent to such settlement. Each party shall pay * of the expenses
incurred in defending the litigation, regardless of against which party the
claim is asserted; provided, however, that if the representation and warranty
made by Pharmacyclics in the first sentence of this Section 9.3 is determined
by a court of competent jurisdiction to be untrue with respect to the claim
that is the subject of the infringement action (or a claim related thereto),
Pharmacyclics shall pay all of such expenses.
9.4 RESPONSIBILITY FOR PATENTS AND TRADEMARKS.
(A) PROSECUTION. Pharmacyclics shall be responsible for
the filing of and all prosecution and maintenance of the Pharmacyclics Patents
and all trademarks, including GADOLITE(R), in the Territory, other than
trademarks incorporating a variation of the name E-Z-EM, with respect to which
E-Z-EM shall have such responsibility.
(B) COSTS. Subject to Section 3.2(c), the out-of-pocket
costs incurred pursuant to Section 9.4(a) shall be paid by Pharmacyclics, other
than trademarks incorporating a variation of the name E-Z-EM, with respect to
which E-Z-EM shall pay such costs.
ARTICLE 10
TERM AND TERMINATION OF AGREEMENT
10.1 TERM. The Agreement shall expire on the date the North American
Agreement terminates, unless such termination is pursuant to Section 11.3 of
the North American Agreement, in which case this Agreement shall extend for the
period provided in Section 11.1 of the North American Agreement.
10.2 TERMINATION FOR MATERIAL BREACH. If either party is in material
breach of any obligation hereunder, the party contending there is a breach (the
charging party) may give a first written notice to the accused party of the
nature of the breach and shall provide sixty (60) days after the giving of such
first notice for the breach to be cured to the reasonable satisfaction of the
charging party or for the accused party to commence action which is calculated
to result in the cure of the default to the reasonable satisfaction of the
charging party. If, however during the sixty (60) day period, the accused
party requests an additional sixty (60) days to cure, such additional time
shall be granted. If the charging party believes that adequate action has not
been taken to cure the default or that the default has not been cured, then at
the end of the initial sixty (60) day time period, or at the end of the
additional sixty (60) day time period if such has been requested, the charging
party may give a second written notice that the Agreement is to be terminated
within sixty (60) days after the second notice, if the default is not cured
within such extended time.
* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.
27
<PAGE> 28
10.3 TERMINATION BY E-Z-EM. At any time upon six months prior written
notice to Pharmacyclics, E-Z-EM may terminate this Agreement for any or no
reason; provided, however, that such termination shall be subject to the
following terms and conditions: E-Z-EM shall cooperate, at its own expense and
as reasonably requested by Pharmacyclics, with any one or more third parties
selected by Pharmacyclics to distribute, market or sell Licensed Product in the
Territory following such early termination. Such cooperation shall include,
but not be limited to, to promptly transferring the Marketing Authorizations,
inventory, providing customer lists and delivering any promotional materials to
such third parties.
10.4 TERMINATION BY PHARMACYCLICS.
10.4.1 If the UK Marketing Authorization is not received by
Pharmacyclics on or before eighteen months from the date Pharmacyclics files
for the UK Marketing Authorizations or if Pharmacyclics determines to abandon
seeking the UK Marketing Authorization (which it may do for good cause,
including, without limitation, UK Registration Costs materially in excess of
those estimated by its regulatory consultants), Pharmacyclics may terminate
this Agreement. Notwithstanding anything herein to the contrary, if
Pharmacyclics terminates this Agreement pursuant to this Section 10.4.1,
Section 2.2 of the North American Agreement shall remain in full force and
effect.
10.4.2 The parties agree that E-Z-EM's violation of Section 7.6 will
cause irreparable injury to Pharmacyclics and, that in the event of any
violation or threatened violation of Section 7.6 by E-Z-EM, Pharmacyclics will
be entitled to seek temporary and permanent injunctive relief, and other
equitable remedies against E-Z-EM. This section shall not limit any other
legal or equitable remedies that Pharmacyclics may have against E-Z-EM for
violation of the restrictions herein. The parties agree that, notwithstanding
Section 14.8, Pharmacyclics shall have the right to seek relief for any
violation or threatened violation of Section 7.6 from any court of competent
jurisdiction in any jurisdiction authorized to grant the relief necessary to
prohibit the violation or threatened violation of Section 7.6. This Section
shall apply with equal force to E-Z-EM's Affiliates and to any third party
distributors used by E-Z-EM to distribute the Licensed Product, if any of them
is the holder of the Marketing Authorization at the time the violation or
threatened violation of Section 7.6 takes place.
10.5 ACCRUED RIGHTS. Termination or expiration of this Agreement shall not
affect any accrued rights of either party.
10.6 EFFECT OF TERMINATION.
(a) Upon early termination by E-Z-EM under Section 10.3
or upon termination by Pharmacyclics because of material breach by E-Z-EM under
Section 10.2, the following shall occur:
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<PAGE> 29
(i) All licenses granted to E-Z-EM shall
terminate immediately, including the
trademark license granted to E-Z-EM
pursuant to Section 3.2(c) and
E-Z-EM shall have no further rights
in the trademarks or the
Pharmacyclics Patents or the
Pharmacyclics Technology (other than
a non-exclusive license to any
Improvements made by E-Z-EM and
subject to E-Z-EM's option to sell
off existing inventory for six (6)
months after the termination date
under (iii)), and E-Z-EM shall not,
either directly or indirectly, use
or permit the use of the same or of
the promotional procedures, methods
or documentation relating to the
Licensed Products, except to sell
off existing inventory under (iii).
(ii) E-Z-EM will immediately transfer to
Pharmacyclics, to the extent
permitted by Applicable Laws,
without further consideration, any
Marketing Authorizations held in the
name of E-Z-EM. E-Z-EM will also
use its reasonable efforts to cause
any Marketing Authorizations held by
its Affiliates or distributors to be
immediately transferred to
Pharmacyclics, to the extent
permitted by Applicable Laws.
Because E-Z-EM agrees that the
Marketing Authorizations held by
E-Z-EM and by its Affiliates and its
distributors are held in trust for
Pharmacyclics, at the cost of
E-Z-EM, E-Z-EM will fully cooperate
with Pharmacyclics and all Competent
Authorities and do all things and
acts necessary to cause both the
legal and equitable ownership of the
Marketing Authorizations to vest in
Pharmacyclics or its designee as
soon as possible after termination
of the Agreement.
(iii) E-Z-EM may sell off any existing
inventory during a period not to
exceed six (6) months following such
termination. If E-Z-EM chooses this
option, E-Z-EM shall:
(a) within thirty days of issuance
of a notice of termination by any
party, notify Pharmacyclics that it
intends to sell off existing
inventory;
(b) continue to comply with its
payment obligations;
29
<PAGE> 30
(c) continue to sell off existing
inventory for six (6) months after
the notice of termination but at the
expiration of the six (6) months, at
Pharmacyclics' election, either (A)
sell all existing inventory to
Pharmacyclics or (B) destroy all
remaining inventory in accordance
with Applicable Law, providing
Pharmacyclics with proof of
destruction in writing sufficient to
comply with Applicable Laws;
provided that in either case,
Pharmacyclics shall pay to E-Z-EM
the actual landed cost paid by
E-Z-EM for such remaining inventory.
If E-Z-EM sells any inventory to
Pharmacyclics pursuant to this
subsection, it shall warrant that
such inventory has been stored in
compliance with all Applicable Laws,
has not been adulterated and has
otherwise been maintained according
to the MRI Product Specifications.
(iv) In the event that E-Z-EM notifies
Pharmacyclics that E-Z-EM does not
intend to sell off any existing
inventory, E-Z-EM shall, at
Pharmacyclics' election, either (A)
sell all existing inventory to
Pharmacyclics or (B) destroy all
remaining inventory in accordance
with Applicable Law, providing
Pharmacyclics with proof of
destruction in writing sufficient to
comply with Applicable Laws;
provided that in either case,
Pharmacyclics shall pay to E-Z-EM
the actual landed cost paid by
E-Z-EM for such remaining inventory.
If E-Z-EM sells any inventory to
Pharmacyclics pursuant to this
subsection, it shall warrant that
such inventory has been stored in
compliance with all Applicable Laws,
has not been adulterated and has
otherwise been maintained according
to the MRI Product Specifications.
(v) Any sales of Licensed Product made
by E-Z-EM to Pharmacyclics pursuant
to this Article 10 shall be made by
E-Z-EM within thirty (30) days of
the end of the time period specified
by Section 10.6(a)(iii)(c)(A) or
upon the occurrence of Section
10.6.(a)(iv)(B), and shall be
shipped to Pharmacyclics
appropriately packaged and stored.
All transportation costs in
connection with such sale, including
without limitation, insurance,
freight and duties, shall be paid by
Pharmacyclics. Amounts owed by
Pharmacyclics
30
<PAGE> 31
pursuant to this Section 10.6(a) for
the Licensed Products and the
transportation costs shall be paid
by Pharmacyclics within sixty (60)
days of receipt of an appropriately
detailed invoice.
(b) Upon termination by E-Z-EM because of material breach
by Pharmacyclics under Section 10.2 other than failure of supply under Article
6 not caused by Pharmacyclics, E-Z-EM shall be granted a royalty free
non-exclusive license under the Pharmacyclics Patents to make, use, have made
and sell Licensed Product. In such event, Pharmacyclics may sub-license one
other third party in each country within the Territory, who shall have no right
to further sub-license, to make, use, have made and sell Licensed Product.
10.7 SURVIVING OBLIGATION. Termination or expiration of this Agreement
shall not relieve either party of its obligations under Sections 5.2, 7.6,
7.13, 7.15, 14.1, 14.2 and Articles 8, 9 (other than Section 9.2(a)), 10 and
11.
ARTICLE 11
INDEMNITY
11.1 INDEMNIFICATION BY PHARMACYCLICS. Pharmacyclics agrees to indemnify
and hold E-Z-EM harmless from and against all claims, damages, losses, costs
and expenses, including reasonable attorney's fees, which E-Z-EM may incur by
reason of (i) any Licensed Product furnished by Pharmacyclics which result in
injury, illness or death of any person, to the extent that such claims arise
out of or result from the negligence, recklessness or wilful misconduct of
Pharmacyclics or its officers, employees or agents, (ii) violation by
Pharmacyclics of the provisions of this Agreement, (iii) violation by
Pharmacyclics of any Applicable Laws, or (iv) any representation made or
warranty given by Pharmacyclics. In addition, Pharmacyclics agrees to and
hereby does indemnify and hold E-Z-EM harmless from and against all claims,
damages, losses, costs and expenses, including reasonable attorney's fees, for
which Pharmacyclics is indemnified and held harmless pursuant to the Supply
Agreement or any third party supply agreement.
11.2 INDEMNIFICATION BY E-Z-EM. E-Z-EM agrees to indemnify and hold
Pharmacyclics harmless from and against all claims, damages, losses, costs and
expenses, including attorney's fees, which Pharmacyclics may incur to the
extent that such claims arise out of or result from (i) violation by E-Z-EM of
the provisions of this Agreement; (ii) violation by E-Z-EM or any third party
distributor licensed by E-Z-EM to distribute the Licensed Product of any
Applicable Laws; (iii) any representation made or warranty given by E-Z-EM or
any third party distributor licensed by E-Z-EM to distribute the Licensed
Product with respect to Licensed Product (other than the labeling for Licensed
Product as approved by a Competent Authority or, (iv) the manufacture, sale or
use of any product which is not supplied by Pharmacyclics and which is sold or
combined by E-Z-EM or any third party distributor licensed by E-Z-EM to
distribute the Licensed
31
<PAGE> 32
Product with a Licensed Product, (v) repairs or services rendered by E-Z-EM or
(vi) injury, illness or death of any person, to the extent such injury, illness
or death arises out of or results from the negligence, recklessness or wilful
misconduct of E-Z-EM or E-Z-EM's officers, employees or agents.
11.3 INDEMNIFICATION PROCEDURE. Subject to Section 9.3, the party seeking
indemnification under this Article 11 (the "Indemnified Party") shall (i) give
the other party (the "Indemnifying Party") notice of the relevant claim, (ii)
cooperate with the Indemnifying Party, at the Indemnifying Party's expense, in
the defense of such claim, and (iii) give the Indemnifying Party the right to
control the defense and settlement of any such claim, except that the
Indemnifying Party shall not enter into any settlement that affects the
Indemnified Party's rights or interest without the Indemnified Party's prior
written approval. The Indemnified Party shall have no authority to settle any
claim on behalf of the Indemnifying Party.
11.4 INSURANCE. Each party shall carry product liability insurance of five
million dollars ($5,000000) during the term of the Agreement and for three
years after the expiration of the term of the Agreement or its earlier
termination.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATION AND WARRANTIES OF PHARMACYCLICS. Pharmacyclics hereby
represents and warrants as follows:
(A) CORPORATE POWER. Pharmacyclics is duly organized and
validly existing under the laws of the state of
Delaware and has full corporate power and authority
to enter into this Agreement and to carry out the
provisions hereof.
(B) DUE AUTHORIZATION. Pharmacyclics is duly authorized
to execute and deliver this Agreement and to perform
its obligations hereunder.
(C) BINDING AGREEMENT. This Agreement is a legal and
valid obligation binding upon Pharmacyclics and is
enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement
by Pharmacyclics does not conflict with any
agreement, instrument or understanding, oral or
written, to which it is a party or by which it may be
bound, nor violate any Applicable Laws of any court,
governmental body or administrative or other agency
having authority over it.
12.2 REPRESENTATIONS AND WARRANTIES OF E-Z-EM. E-Z-EM hereby represents
and warrants as follows:
32
<PAGE> 33
(A) CORPORATE POWER. E-Z-EM is duly organized and
validly existing under the laws of England and Wales
and has full corporate power and authority under
Applicable Laws to enter into this Agreement and to
carry out the provisions hereof.
(B) DUE AUTHORIZATION. E-Z-EM is duly authorized to
execute and deliver this Agreement and to perform its
obligations hereunder.
(C) BINDING AGREEMENT. This Agreement is a legal and
valid obligation binding upon E-Z-EM and is
enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement
by E-Z-EM does not conflict with any agreement,
instrument or understanding, oral or written, to
which it is a party or by which it may be bound, nor
violate any Applicable Laws of any court,
governmental body or administrative or other agency
having authority over it.
(D) E-Z-EM will not transfer, assign, mortgage nor charge
any of the rights under the Marketing Authorizations
other than to Pharmacyclics or to a person designated
by Pharmacyclics or to a third-party distributor
appointed by E-Z-EM to distribute the Licensed
Product that has entered into a written agreement as
provided in Section 7.6.
(E) E-Z-EM will not intentionally do anything to
adversely affect the Marketing Authorizations.
(F) E-Z-EM will not knowingly do anything to prejudice
the ability of Pharmacyclics or any entity designated
by Pharmacyclics to act as holder of any Marketing
Authorization.
ARTICLE 13
ASSIGNMENT
13.1 NON-ASSIGNMENT. Except as set forth in Section 13.2 or 13.3, neither
party shall assign its rights or delegate its duties under the Agreement
without the prior written consent of the other.
13.2 PHARMACYCLICS EXCEPTION. Notwithstanding Section 13.1, Pharmacyclics
may assign this Agreement to any successor by merger or sale of substantially
all of its business units to which the Agreement relates.
13.3 E-Z-EM EXCEPTION. Subject to compliance with Section 12.2(d),
notwithstanding Section 13.1, E-Z-EM may assign this Agreement to any E-Z-EM
Affiliate or to any
33
<PAGE> 34
successor by merger or sale of substantially all of its business unit to which
the Agreement relates, provided, however, E-Z-EM may not make such assignment
to any then-competitor in Licensed Product of Pharmacyclics, without the prior
written consent of Pharmacyclics, such consent not to be unreasonably withheld
or delayed. If Pharmacyclics refuses to give any consent pursuant to this
Section 13.3, Pharmacyclics and its affiliates shall not, directly or
indirectly, enter into any agreement or understanding, written or oral,
concerning the Licensed Product with such competitor or its affiliates for a
period of three years from the date Pharmacyclics notifies E-Z-EM that it will
not consent to such assignment. E-Z-EM shall cause Pharmacyclics to be
notified about any Change in Control within 15 days after such Change in
Control. In the event the Change in Control means that E-Z-EM has been
acquired by a company with a Competitive MRI Product, upon thirty (30) days
notice to the entity controlling E-Z-EM given not later than sixty (60) days
after Pharmacyclics is given notice of such Change in Control, Pharmacyclics
may terminate this Agreement, with such termination to have the effect of a
material breach by E-Z-EM under Section 10.6 of this Agreement.
13.4 ASSIGNMENT OR DELEGATION NULL AND VOID. Any attempted assignment or
delegation in contravention of this Article shall be void and of no effect.
ARTICLE 14
MISCELLANEOUS
14.1 EXPORT LAW COMPLIANCE. E-Z-EM understands and recognizes that the
Licensed Product and other materials made available to it hereunder may be
subject to the export administration regulations of the United States
Department of Commerce and other United States government regulations related
to the export of drugs. E-Z-EM represents that it is familiar with and agrees
to comply with all such regulations, including any future modifications
thereof, in connection with the distribution of Licensed Product. E-Z-EM
agrees that it will not export or reexport outside the Territory, directly or
indirectly, any Licensed Product or clinical data relating to License Product
without the prior written consent of Pharmacyclics and without complying with
all Applicable Laws. E-Z-EM agrees to obtain the same agreement from each of
its subsidiaries and sub-licensees. E-Z-EM hereby agrees to indemnify and hold
Pharmacyclics harmless from any breach of this Section.
14.2 FOREIGN CORRUPT PRACTICES ACT. E-Z-EM hereby agrees that it shall
comply with the requirements of the FCPA and shall refrain from any payments to
third parties which would cause Pharmacyclics or E-Z-EM to violate the Act.
E-Z-EM hereby agrees to indemnify and hold harmless Pharmacyclics from any
breach of this Section.
14.3 BENEFITS AND BINDING NATURE OF AGREEMENT. In the case of any
permitted assignment of this Agreement, this Agreement or the relevant
provisions shall be binding upon, and inure to the benefit of, the successors,
executors, heirs, representatives, administrators and assigns of the parties
hereto.
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<PAGE> 35
14.4 ENTIRE AGREEMENT. This Agreement, together with any exhibits and
schedules attached and referenced herein, embodies the final, complete and
exclusive understanding between the parties, and replaces and supersedes all
previous agreements, understandings or arrangements between the parties with
respect to its subject matter. No modification or waiver of any terms or
conditions hereof, nor any representations or warranties shall be of any force
or effect unless such modification or waiver is in writing and signed by an
authorized officer of each party hereto.
14.5 NO OTHER TERMS AND CONDITIONS. The parties intend that this Agreement
expresses all of the terms and conditions applicable to the sale of Licensed
Product and accordingly agree that all provisions, terms and conditions of any
purchase order, sales or order acknowledgment, invoice or other business form
or document (a "Form"), unless an amendment to this Agreement in accordance
with Section 14.4 hereof, shall be superseded hereby and therefore shall be
disregarded and have no force and effect. If a Form purports to be conditioned
in any manner on agreement to and/or acceptance of any provisions, terms and
conditions other than those set forth herein, then such condition is hereby
waived. In no event shall either party be bound by any provisions, terms or
conditions relating to the subject matter of this Agreement not set out herein.
14.6 FORCE MAJEURE. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because of, or rendered impracticable or impossible due to, circumstances
beyond its reasonable control (including any force majeure failure of a
third-party supplier to supply Licensed Product under the terms of a supply
agreement entered into between Pharmacyclics and such third-party supplier),
provided that the party experiencing the delay promptly notifies the other of
the delay.
14.7 NOTICE. All notices concerning this Agreement shall be written in the
English language and shall be deemed to have been received (a) two (2) days
after being properly sent by commercial overnight courier, or (b) one (1) day
after being transmitted by confirmed facsimile, in each case addressed to the
address below:
If to Pharmacyclics:
Pharmacyclics, Inc.
995 East Arques Avenue
Sunnyvale, California 94086
Attention: President
Telephone: (408) 774-0330
Facsimile: (408) 774-0430
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<PAGE> 36
If To E-Z-EM:
E-Z-EM, Ltd.
1230 High Road
London N20 OLH
Attention: Managing Director
Telephone: 44 181 446 9714
Facsimile: 44 181 446 9810
with a copy to
E-Z-EM, Inc.
717 Main Street
Westbury, New York
Attention: President
Telephone: (516) 333-8230
Facsimile: (516) 333-8278
14.8 ENGLISH LANGUAGE; GOVERNING LAW; JURISDICTION; VENUE. This Agreement
has been prepared in the English language and the English language shall
control its interpretation. This Agreement shall be governed by the laws of
the State of New York as applied to agreements executed and performed entirely
in New York by New York residents. Any claim or controversy arising out of or
related to this Agreement or any breach hereof shall be submitted to a court of
applicable jurisdiction in the State of New York, and each party hereby
consents to and submits to the jurisdiction and venue of such court.
14.9 ALLOCATIONS. E-Z-EM and Pharmacyclics agree that in determining Net
Sales and Gross Profits, E-Z-EM shall be entitled to in good faith use
reasonable allocation methods.
14.10 WAIVER. Any waiver (express or implied) by either party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach.
14.11 SEVERABILITY. In the event that any provision of this Agreement shall
be unenforceable or invalid under any applicable law or be so held by
applicable court decision, such enforceability or invalidity shall not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted
36
<PAGE> 37
so as to best accomplish the objectives of such unenforceable or invalid
provision within the limits of applicable law or applicable court decisions.
14.12 RIGHTS AND REMEDIES CUMULATIVE. Except as expressly provided herein,
the rights and remedies provided in this Agreement shall be cumulative and not
exclusive of any other rights and remedies provided by law or otherwise.
14.13 INDEPENDENT CONTRACTORS. Each party shall act as an independent
contractor under the terms of this Agreement. Neither party is, nor shall it
be deemed to be, an employee, agent, co-venturer, partner or legal
representative of the other for any purpose. Neither party shall be entitled
to enter into any contracts in the name of, or on behalf of the other, nor
shall either party be entitled to pledge the credit of the other in any way or
hold itself out as having authority to do so.
14.14 CAPTIONS AND SECTION REFERENCES. The section headings appearing in
this Agreement are inserted only as a matter of convenience and in no way
define, limit, construe or describe the scope or extent of such section or in
any way affect such section.
14.15 COUNTERPARTS. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
14.16 PRESS RELEASES. The parties agree that the material terms of this
Agreement will be considered Confidential Information of both parties.
However, each party shall have the right to disclose the material terms of this
Agreement to any potential acquiror, merger partner or other bona fide
potential financial partner, subject to a requirement to secure confidential
treatment of such information or if it is prudent or proper to make such
disclosure to comply with SEC rules and regulations or meet Generally Accepted
Accounting Principles. Notwithstanding the foregoing, the parties agree that
the initial press releases regarding this Agreement shall be mutually agreed by
the parties.
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<PAGE> 38
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by their duly authorized representatives as of the date
first written above.
PHARMACYCLICS, INC.
By: /s/ MARC L. STEUER
---------------------------------
Title: VP/CFO
-----------------------------
E-Z-EM, LTD.
By: /s/ JOHN BONNAN
---------------------------------
Title: Managing Director
-----------------------------
38
<PAGE> 39
SCHEDULE 1.30
PRODUCT SPECIFICATIONS
(see attached pages)
Pages 1 through 36
***
*Indicates that material has been omitted and
confidential treatment has been requested
therefor. All such omitted material has been
filed separately with the Commission pursuant
to Rule 24b-2.
<PAGE> 40
SCHEDULE 4.2
SALES THROUGH THIRD PARTY DISTRIBUTOR FOR TWO BOTTLE UNITS
***
*Indicates that material has been omitted and
confidential treatment has been requested
therefor. All such omitted material has been
filed separately with the Commission pursuant
to Rule 24b-2.
<PAGE> 1
EXHIBIT 11.1
PHARMACYCLICS, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF NET LOSS AND PRO FORMA NET LOSS PER SHARE
(in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
------------------------- --------------------------
1996 1995 1996 1995
------------------------- --------------------------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 8,885 6,536 8,718 3,712
Convertible preferred stock (1) 1,289 3,223
Common stock equivalent arising from options and
warrants issued subsequent to June 30, 1994 through
October 23, 1995 (2) 79 196
--------- --------- --------- ---------
Weighted average common and
common equivalent shares 8,885 7,904 8,718 7,131
========= ========= ========= =========
Pro forma weighted average common and common
equivalent shares
Net Loss (2,595) $ (1,464) (5,475) $ (3,405)
Net loss per share (0.29) $ (0.18) (0.63) $ (0.48)
</TABLE>
(1) Shares of convertible preferred stock issued from July 1, 1994
through the effective date of the Company's initial public offering
on October 23, 1995 have been included in the calculation of net loss
per share as if they were outstanding for all periods prior to the
initial public offering (using the if-converted method).
(2) Stock options and warrants granted from July 1, 1994 through the
effective date of the Company's initial public offering on October
23, 1995 have been included in the computation of net loss per share
as if they were outstanding for all periods prior to the initial
public offering (using the treasury stock method and the initial
public offering price).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED BALANCE SHEET AND UNAUDITED CONDENSED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,203
<SECURITIES> 15,778
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,118
<PP&E> 4,513
<DEPRECIATION> (2,029)
<TOTAL-ASSETS> 27,658
<CURRENT-LIABILITIES> 2,190
<BONDS> 628
0
0
<COMMON> 1
<OTHER-SE> 24,740
<TOTAL-LIABILITY-AND-EQUITY> 27,658
<SALES> 0
<TOTAL-REVENUES> 25
<CGS> 0
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221
<INCOME-PRETAX> (2,595)
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,595)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> 0
</TABLE>
