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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 September 30, 1997
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: 000-27066
PHARMACYCLICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-3148201
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
995 E. Arques Avenue, Sunnyvale, CA 94086-4521
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code:(408) 774-0330
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 September 30, 1997, there were 10,140,287 shares of the Registrant's
Common Stock outstanding, par value $0.0001.
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PHARMACYCLICS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheet as of September 30, 1997 and
June 30, 1997........................................................ 3
Condensed Statement of Operations for the three months ended
September 30, 1997 and 1996.......................................... 4
Condensed Statement of Cash Flows for the three months ended
September 30,1997 and 1996........................................... 5
Notes to Condensed Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations and Factors that May Affect
Future Operating Results............................................. 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 20
Item 2. Changes in Securities............................................... 20
Item 3. Defaults Upon Senior Securities..................................... 20
Item 4. Submission of Matters to a Vote of Security Holders................. 20
Item 5. Other Information................................................... 20
Item 6. Exhibits and Reports on Form 8-K.................................... 20
SIGNATURES.......................................................................... 21
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHARMACYCLICS, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(in thousands, unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $21,212 $15,869
Short-term investments 3,025 14,958
Prepaid expenses 202 216
------- -------
Total current assets 24,439 31,043
Long-term investments 9,605 6,103
Property and equipment, net 2,296 2,504
Other assets 57 57
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$36,397 $39,707
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 830 $ 1,323
Accrued liabilities 298 311
Current portion of capital lease obligations 559 768
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Total current liabilities 1,687 2,402
Capital lease obligations 478 530
Deferred rent 69 79
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Total liabilities 2,234 3,011
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Stockholders' equity:
Convertible preferred stock - -
Common stock 1 1
Additional paid-in capital 75,033 74,911
Accumulated deficit (40,871) (38,216)
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Total stockholders' equity 34,163 36,696
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$36,397 $39,707
======= =======
</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
September 30,
-------------------------
1997 1996
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<S> <C> <C>
Revenues:
License and grant revenues $ - $ -
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Operating expenses:
Research and development 2,765 2,456
General and administrative 388 637
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Total operating expenses 3,153 3,093
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Loss from operations (3,153) (3,093)
Interest income/(expense), net 498 213
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Net loss (2,655) $(2,880)
======= =======
Net loss per share (Note 2) $ (0.26) $ (0.34)
======= =======
Weighted average common and
common equivalent shares (Note 2) 10,117 8,552
======= =======
</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>
Three Months Ended
September 30,
-------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,655) $ (2,880)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 203 193
Write-down of equipment 188 -
Changes in assets and liabilities:
Prepaid expenses and other assets 14 206
Accounts payable (493) 34
Accrued liabilities (13) 18
Deferred rent (10) (4)
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Net cash used in operating activities (2,766) (2,433)
Cash flows from investing activities:
Purchase of equipment (183) -
Purchase of short-term investments - (11,571)
Purchase of long-term investments (3,502)
Proceeds from the sale of short-term investments 11,933 4,039
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Net cash provided by (used in) investing activities 8,248 (7,532)
Cash flows from financing activities:
Payments under capital lease obligations (261) (259)
Issuance of common stock, net of issuance costs 122 21
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Net cash provided by (used in) financing activities (139) (238)
Net increase (decrease) in cash and cash equivalents 5,343 (10,203)
Cash and cash equivalents at the beginning of the period 15,869 13,950
------- --------
Cash and cash equivalents at the end of the period $21,212 $ 3,747
======= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 33 $ 67
Equipment acquired under capital lease obligations $ - $ 178
</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 should be read in conjunction with the
audited financial statements of the Company included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
September 30, 1997.
The results of operations for the three months ended September 30, 1997 are not
necessarily indicative of the operating results that may be reported for the
fiscal year ending June 30, 1998 or for any other future period.
NOTE 2 - NET LOSS PER SHARE
Net loss per share for the three months ended September 30, 1997 and 1996 is
computed using the weighted average number of shares of common stock outstanding
during the period. Common stock equivalents have been excluded from this
computation as their effect would be antidilutive.
NOTE 3 - PRIVATE EQUITY 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. On
February 21, 1997, Pharmacyclics sold 862,190 shares of unregistered common
stock to four purchasers in a private placement. The shares were sold at $19.05
per share and no commission was paid on the transaction. Resale of shares
acquired in both placements were registered through a registration statement on
Form S-3 declared effective on April 22, 1997.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OR OPERATIONS AND FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to historical information, this report contains predictions,
estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. Actual results could differ materially from
any future performance suggested on this report as a result of the risk factors
set forth below under the caption "Factors That May Affect Future Operating
Results" and elsewhere in this report and in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1997.
RESULTS OF OPERATIONS
Revenues
Since inception, Pharmacyclics has received only limited revenues and no
revenues from product sales. For the quarters ended September 30, 1997 and 1996,
no revenue was recognized.
Research and Development Research and Development expenses increased 13% for the
three months ended September 30, 1997 compared to the same period of the prior
fiscal year. Spending totaled $2.8 million, $309,000 higher than the three
months ended September 30, 1996. The increase is the result of costs incurred
related to the development of light supply and delivery devices for use with the
Company's photosensitizing drugs, as well as a write down of certain R&D
equipment.
Spending on clinical trials was basically similar during the first quarter of
both fiscal years. During the first quarter of fiscal 1998, the Phase Ib portion
of the Gd-Tex radiation sensitizer clinical trial was completed and the Phase II
portion began. The Lu-Tex Phase II trial for recurrent breast cancer began
during the quarter. During the same period ending on September 30,1996, the
Phase I clinical trial for Gd-Tex was completed and the Phase I clinical trial
for Lu-Tex was initiated.
General and Administrative
General and administrative expenses for the three months ended September 30,
1997 were $388,000 compared to $637,000 during the same period in the prior
fiscal year, a decrease of 39%. The expenses during the prior fiscal year
include approximately $300,000 of financing costs incurred during the first
quarter.
Interest and Other Income
Interest income, net of interest expense, totaled $498,000 for the three months
ended September 30, 1997 compared to $213,000 for the same period in the prior
fiscal year. Interest expense decreased over $30,000 as the Company's equipment
lease lines matured. This interest expense reduction
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plus earnings on proceeds from private placements completed in November 1996 and
February 1997 yielded the increase in interest income.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through September 30,
1997 primarily through the private and public sale of equity securities,
payments under third party agreements, and proceeds from lease lines of credit.
As of September 30, 1997, the Company had approximately $33.8 million in cash,
cash equivalents and investments. Net cash used in operating activities of $2.8
million during the three months ended September 30, 1997 resulted primarily from
the net loss incurred during that period net of decreases in prepaid expenses
and depreciation expense and accounts payable.
Net cash used in operating activities of $2.4 million during the three months
ended September 30, 1996 reflects the net loss of $2.9 million, partially offset
by non-cash depreciation charges and a decrease in prepaid expenses and other
assets.
Cash provided by investing activities of $8.2 million for the three months ended
September 30, 1997 consisted primarily of sales of short-term investments
partially offset by purchases of long-term investments. Cash used in investing
activities of $7.5 million for the three months ended September 30, 1996 consist
primarily of purchases of short-term investments, net of sales.
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 increases. As a result,
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
investments will provide funding for the Company's operating expenses through at
least mid-calendar 1999.
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FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
To achieve profitable operations, the Company, alone or with collaborative
partners, must successfully research, develop, 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 or that the costs thereof will be reimbursed by
health care payors. There can be no assurance that any of the Company's product
development efforts will be successfully completed, that regulatory clearances
will be obtained, that the Company's products will be capable of being produced
in commercial quantities at reasonable cost or that any products, if introduced,
will achieve market acceptance.
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS
Pharmacyclics has conducted and plans to continue extensive and costly clinical
testing to assess the safety and efficacy of its potential products. There can
be no assurance that the Company will be permitted to undertake or continue its
intended clinical trials for any of its products, or if permitted, that such
products will be shown to be safe and efficacious. 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 Food and Drug Adminstraton ("FDA") may suspend clinical trials at
any time if, among other reasons, 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 may not be predictive of results that will be obtained in later stage
trials and such data are susceptible to varying interpretations which could
delay, limit or prevent regulatory approval.
NO ASSURANCE OF PRODUCT APPROVAL
To date, none of the Company's products has been approved for sale, or marketed,
in the U.S. or any
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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 New Drug Application ("NDA") for GADOLITE in September 1995
and received an "approvable" letter in December 1996 which included a number of
issues that must be addressed by the Company. The Company is in the process of
addressing these issues, which are expected to require at least 18 months to
resolve before GADOLITE can be successfully manufactured and marketed. There can
be no assurance that the FDA will decide that the NDA satisfies the criteria for
approval. In addition, in June 1996 the Company filed a Market Authorization
Application ("MAA") with the Medicines Control Agency in the United Kingdom
("UK") for authorization to market GADOLITE. The Company will not market
GADOLITE in Europe until all issues with the product are resolved with the FDA.
Although the process for regulatory approval in Western Europe is similar to
that in the United States ("U.S."), there are numerous and sometimes unique
risks associated with the approval of an MAA. There can be no assurance that
authorization to market GADOLITE in other member states would be granted 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
and ANTRIN(TM) products 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 for photodynamic therapy,
and may result in additional delays or difficulties in obtaining approval for
the use of Lu-Tex or ANTRIN(TM) as photosensitizers. Manufacturers of such light
delivery devices currently are under no obligation to the Company to file or
pursue such applications and any delay or refusal on their part to do so could
have a material adverse affect on the Company.
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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
September 30, 1997, had an accumulated deficit of approximately $40.9 million.
The Company expects to continue to incur significant operating losses over the
next several years, as it continues to incur increasing costs of research and
development, clinical and manufacturing activities. The Company's ability to
achieve profitability is dependent upon its ability, alone or with others, to
successfully complete the development of its proposed products, obtain the
required regulatory clearances and manufacture and market its proposed products.
To date, the Company has not generated revenue from the commercial sale of its
products and does not expect to receive any such revenue in the near future. All
revenues to date have resulted from license and milestone payments and funding
from a government research grant.
GOVERNMENT REGULATION
The manufacture 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 abroad. Before
receiving FDA clearance to market a product, the Company will have to
demonstrate that the product is safe and effective. Clinical trials,
manufacturing and marketing of products are subject to the rigorous testing and
approval process of the 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. Data obtained
from clinical trials are susceptible to varying interpretations which could
delay, limit or prevent regulatory clearances. In addition, delays or rejections
may be encountered based upon additional government regulation from future
legislation or administrative action or changes in FDA policy during the period
of product development, clinical trials and FDA regulatory review. Similar
delays also may be encountered in foreign countries. 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 issues 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 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, any of which would have a material adverse
effect on the Company's business, financial condition and results of operations.
Manufacturers of drugs also are required to comply with the applicable FDA good
manufacturing
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practice ("GMP") regulations, which include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection by
the FDA, including unannounced inspection, and must be licensed before they can
be used in commercial manufacturing of the Company's products. There can be no
assurance that the Company or its present or future suppliers will be able to
comply with the applicable GMP regulations and other FDA regulatory
requirements.
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, Lu-Tex and ANTRIN(TM) bulk drug
substances, which are the subject of a manufacturing and supply agreement with
Celanese, and GADOLITE, which has been the subject of a manufacturing and supply
agreement with Glaxo, which agreement is subject to termination because of delay
in FDA approval and is currently being renegotiated, the Company does not have
access to the manufacturing capacity necessary to provide clinical and
commercial quantities of the Company's products. The Company may choose to
change manufacturing sources for GADOLITE, however, no assurance can be given
that such a manufacturing change can be effected without a material adverse
effect on the Company's approval and commercialization plans for GADOLITE.
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 , Lu-Tex and
ANTRIN(TM). A failure to successfully complete such agreement, or the GADOLITE
agreement, could, 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 regulatory approval of
the Company's 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, only a limited number of contract manufacturers
that operate under current federal and state 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 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, Ltd. and E-Z-EM, Inc., respectively, for European and North American
sales, marketing and distribution of GADOLITE. This agreement may be terminated
by E-Z-EM at its election and if so terminated without a replacement
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agreement, significant additional resources would be required to develop a
GADOLITE sales force. There can be no assurance that the Company will be able to
establish such a sales force or enter into other 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 except for an
agreement with Nycomed Imaging AS signed in October 1997. The agreement relates
to sales and marketing of Lu-Tex for cancer therapy in Europe and certain other
countries.
The Company has no expertise in the development of light sources and associated
light delivery devices required for the Company's photoangioplasty and
photodynamic therapy products under development. Successful development,
manufacturing, approval and distribution of the Company's photosensitization
products will require third party participation for the required light sources,
associated light delivery devices and other equipment. The Company currently
obtains lasers from Coherent and Laserscope, LEDs from Quantum, and
cylindrically diffusing light fibers from Rare Earth Medical ("REM") 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 materially delay
commercialization of the Company's Lu-Tex and ANTRIN(TM) 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 the enabling devices will receive
regulatory approval for use in photoangioplasty or photodynamic therapy.
RELIANCE ON THIRD PARTY RELATIONSHIPS
The Company's strategy for product commercialization requires arrangements with
corporate and other collaborators to conduct clinical trials and to manufacture,
distribute and market the Company's products. The Company will be dependent upon
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
difficulties. The Company does not have the ability to conduct these development
activities in-house. If one or more collaborative relationships were terminated
or the collaborators 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. In addition to its collaborations in the
manufacturing area and in the development of light delivery devices and other
equipment, the Company is also dependent upon its recent collaboration with
Nycomed for development of its Lutetium texaphyrin product.
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
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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 or biotechnology
companies by large collaborating partners could increase such competitors'
financial, marketing, manufacturing and other resources. There can be no
assurance that developments of 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 Photofrin for
certain indications in the U.S. and other countries. There can be no assurance
that the Company's competitors will not develop products that are safer, more
effective or less costly than the products developed by the Company and,
therefore, present a serious competitive threat to the Company's product
offerings.
Further, the medical indications for which the Company is developing its
therapeutic products can also 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 Gd-Tex, Lu-Tex or ANTRIN(TM)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
ANTRIN(TM) in the case of photoangioplasty of 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.
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF 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's future capital requirements will
depend
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on many factors, including, among others, continued scientific progress of its
research and development programs, the ability of the Company to establish
collaborative arrangements, progress with preclinical and clinical trials, the
time and costs involved in obtaining regulatory clearance, the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims,
competing technological and market developments, and changes in its existing
collaborative relationships. The Company believes that its cash, cash
equivalents, short-term and long-term investments will be adequate to satisfy
its capital needs through the middle of calendar year 1999. However, the
Company's actual capital requirements will depend on many factors, including the
status of the product development; the time and cost involved in conducting
clinical trials; obtaining regulatory approvals; 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
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 may be required to delay, reduce the scope of or
eliminate one or more of its research or development programs which would
materially and adversely affect the Company's business, financial condition and
results of operations.
DEPENDENCE UPON QUALIFIED AND KEY PERSONNEL
The Company's ability to maintain its competitive position depends on its
ability to attract and retain qualified management and scientific personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to continue to attract or retain such persons. The loss
of key personnel or the failure to recruit additional personnel or to develop
needed expertise could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company relies
on consultants and advisors to assist in formulating its research and
development strategy. All of the Company's consultants and advisors are employed
by entities other than the Company and may have commitments to, or consulting or
advisory contracts with, other entities that may affect their ability to
contribute to the Company.
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 47 issued patents, eight allowed patents and 30
pending patent applications. Outside the U.S., the Company is the owner or
exclusive licensee of five counterpart patents and 71 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
15
<PAGE> 16
assurance that any patents issued to the Company will not be infringed by or
designed around by others. Issued patents may later be modified, revoked or
otherwise found to be invalid or unenforceable by the U.S. Patent and Trademark
Office or in proceedings instituted by third parties. Moreover, the Company
believes that obtaining foreign patents may be more difficult than obtaining
domestic patents because of differences in patent laws, and believes that 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 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 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
that relate to the use of contrast agents that enhance MRI scans. The Company
has obtained advice of special patent counsel that the technologies employed by
the Company for its imaging product or MRI detectable drugs under development do
not infringe the claims of such patents. A determination of the infringement of
any such patents by any Company product having image-enhancing properties could
have a material adverse effect on the Company's business. There can be no
assurance that Schering will not seek to assert such patent rights against the
Company, which would, at a minimum, result in significant legal costs and
require substantial management resources. Schering has sent communications to
the Company suggesting that GADOLITE may infringe certain of such Schering
patents. The Company is aware that Schering 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 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, 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,
16
<PAGE> 17
through 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.
UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM
The future revenues and profitability of pharmaceutical and related companies as
well as the availability of capital to such companies may be affected by the
continuing efforts of government and third party payors to contain or reduce
costs of health care through various means. For example, in certain foreign
markets pricing or profitability of prescription pharmaceuticals is subject to
government control. In the U.S., given recent federal and state government
initiatives directed at lowering the total cost of health care, it is likely
that the U.S. Congress and state legislatures will continue to focus on health
care reform and the cost of prescription pharmaceuticals and on the reform of
the Medicare and Medicaid systems. While the Company cannot predict whether any
such legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's ability to commercialize its products successfully will depend in
part on the extent to which appropriate reimbursement levels for the cost of
such products and related treatment are obtained by governmental authorities,
private health insurers and other organizations, such as HMOs. Third party
payors are increasingly challenging the prices charged for medical products and
services. Also, the trend toward managed health care in the U.S. and the
concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for the Company's products.
Consequently, the cost containment measures that health care payors and
providers are instituting and the effect of any health care reform could
materially adversely affect the Company's ability to operate profitably.
PRODUCT LIABILITY EXPOSURE
The testing, manufacture, 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 $5 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,
17
<PAGE> 18
financial condition and results of operations and may prevent the Company from
obtaining adequate product liability insurance in the future on commercially
desirable or 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 manufacture
of 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 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 occurrence, 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, principal stockholders and certain of their
affiliates beneficially own approximately 39% 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.
VOLATILITY OF STOCK PRICE; NO DIVIDENDS
The market prices for securities of pharmaceutical and biotechnology companies
(including the Company) have historically been highly volatile, and the market
has from time to time experienced significant price and volume fluctuations
unrelated to the operating performance of particular companies. Future
announcements concerning the Company, its competitors or other pharmaceutical
and biotechnology companies, including the results of testing and clinical
trials, technological innovations or new therapeutic
18
<PAGE> 19
products, governmental regulation, developments in patent or other proprietary
rights, litigation or public concern as to the safety of products developed by
the Company or others and general market conditions may have a significant
effect on the market price of the Common Stock. The Company has not paid any
cash dividends on its Common Stock to date and does not anticipate paying any
dividends in the foreseeable future.
ANTI-TAKEOVER PROVISIONS
The ability of the Board of Directors of the Company to issue shares of
Preferred Stock without stockholder approval and a stockholder rights plan
adopted by the Company may alone or in combination, have certain anti-takeover
effects. The Company is also subject to provisions of the Delaware General
Corporation Law which may make certain business combinations more difficult.
19
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities and Use of Proceeds. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to Vote of Security holders. None
Item 5. Other information. None
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
10.35 Form of Severance Agreement between the Company and certain
executive officers
10.36* Development, License and Commercialization Agreement, dated
October 17, 1997, by and between the Company and Nycomed
Imaging AS
10.37 Employment Agreement, dated October 14, 1997, by and
between the Company and Michael J. Hensley, M.D.
11.1 Computation of Net Loss Per Share.
27 Financial Data Schedule
b. Reports on Form 8-K. None
20
<PAGE> 21
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: November 12, 1997 By: /s/ Dr. Richard A. Miller
---------------------------------------
Dr. Richard A. Miller
President and Chief Executive Officer
Date: November 12, 1997 By: /s/ Cheryl B. Jaszewski
---------------------------------------
Cheryl B. Jaszewski
Vice President,
Finance and Administration
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No.
- -------
<S> <C>
10.35 Form of Severance Agreement between the Company and certain
executive officers
10.36* Development, License and Commercialization Agreement, dated October
17, 1997, by and between the Company and Nycomed Imaging AS
10.37 Employment Agreement, dated October 14, 1997, by and between the
Company and Michael J. Hensley, M.D.
11.1 Computation of Net Loss Per Share
27 Financial Data Schedule
</TABLE>
22
<PAGE> 1
EXHIBIT 10.35
PHARMACYCLICS, INC.
, 1997
------------------------
- ------------------------------
- ------------------------------
- ------------------------------
Dear:
-------------------------
The purpose of this letter agreement is to document the terms of the
severance package to which you will be entitled should there occur certain
changes in control of the Company or should your employment with Pharmacyclics,
Inc. (the "Company") be terminated involuntarily in connection with such changes
in control of the Company.
Part One of this letter agreement specifies the terms and conditions
of your severance benefits. Part Two sets forth certain definitional provisions
to be in effect for purposes of determining your benefit entitlements. Part
Three concludes this agreement with a series of general terms and conditions
applicable to your benefits.
PART ONE -- CHANGE IN CONTROL BENEFITS
Upon a Change in Control or any Change Related Termination effected
during the term of this letter agreement, you will become entitled to receive
the special severance benefits set forth below.
1. SEVERANCE PAYMENTS. You will receive severance payments from the
Company for a period of twelve (12) months following your Change Related
Termination in an aggregate amount equal to the sum of (A) one (1) times the
annual rate of base salary in effect for you at the time of your Change Related
Termination plus (B) one (1) times the average of the bonuses paid to you for
services rendered in the fiscal year immediately preceding the fiscal year of
your Change Related Termination. The severance payments will be paid to you in
equal installments at bi-weekly intervals over the one (1) year period following
your Change Related Termination. At your election, in lieu of the installment
payments, the Company will pay you the present value of the severance payments
under this Paragraph 1, in a lump sum within thirty (30) days of your Change
Related Termination. The present value of the severance payments will be
determined using the prime rate in effect at Bank of America N.T.&S.A. in San
Francisco, California on the date of your Change Related Termination. Your
election to receive the lump sum payment must be made within five (5) business
days of your Change Related
<PAGE> 2
- ----------------- PAGE 2.
___________________, 1997
Termination. All payments under this Paragraph 1 will be subject to the
Company's collection of applicable withholding taxes.
2. HEALTH CARE COVERAGE. The Company will, at its expense, provide
you and your eligible dependents with continued health care coverage under the
Company's medical/dental insurance plan until the earlier of (i) one (1) year
after the effective date of your Change Related Termination or (ii) the first
date that you are covered under another employer's health benefit program which
provides substantially the same level of benefits without exclusion for
pre-existing medical conditions. At the end of such period, you will be entitled
to continued health care coverage pursuant to COBRA at your own expense to the
extent permitted by law.
3. OPTION ACCELERATION AND VESTING OF STOCK ISSUANCES. Upon the
occurrence of a Change in Control, as to all outstanding Options then held by
you which would otherwise become fully exercisable or fully vest at least
eighteen (18) months after the Change in Control, the exercisability and vesting
of such options shall be accelerated in accordance with the following schedule:
fifty percent (50%) of the previously unexercisable or unvested portion
immediately upon the Change in Control; twenty-five percent (25%) of the portion
unexercisable or unvested at the time of the Change in Control one (1) year
after the Change in Control (if you are then still employed by the Company or
its successor); and twenty-five percent (25%) of the portion unexercisable or
unvested at the time of the Change in Control eighteen (18) months after a
Change in Control (if you are then still employed by the Company or its
successor). All Options held by you at the time of a Change in Control which
will otherwise become fully exercisable or fully vest within eighteen (18)
months following the Change in Control will become exercisable and vest in
accordance with the following schedule: fifty percent (50%) of the previously
unexercisable or unvested portion immediately upon the Change in Control; the
remaining portion will continue to become exercisable and vest in accordance
with the exercise/vesting schedule applicable to those Options at the time of
the Change in Control. Similarly, as to all shares held by you subject to a
repurchase right in the Company which lapses over the course of your employment
at least eighteen (18) months after the Change in Control, shall automatically
vest, and the repurchase right with respect thereto shall lapse, in accordance
with the following schedule: fifty percent (50%) of the shares subject to
repurchase immediately upon the Change in Control; twenty-five percent (25%) of
the shares subject to repurchase one (1) year after the Change in Control (if
you are then still employed by the Company or its successor); and twenty-five
percent (25%) of the shares subject to repurchase eighteen (18) months after the
Change in Control (if you are then still employed by the Company or its
successor). Any shares subject to a repurchase right which otherwise lapses
within eighteen (18) months of the Change In Control will vest (and the
repurchase right will lapse) in accordance with the following schedule: fifty
percent (50%) of the shares subject to repurchase immediately
<PAGE> 3
- ----------------- PAGE 3.
___________________, 1997
upon the Change in Control; the remaining shares will continue to vest (and the
repurchase right with respect to those shares will lapse) in accordance with the
vesting schedule otherwise applicable to those shares at the time of the Change
in Control.
In the event of any Change Related Termination during the eighteen
(18) month period after the Change in Control, all previously unexercisable
options (including options which did not accelerate at the time of the Change in
Control) shall become immediately exercisable and the repurchase rights shall
lapse as to all shares then held. Each such accelerated Option, together with
all of your other vested Options, will remain exercisable until the earlier of
(i) the expiration of the one (1)-year period measured from the effective date
of your Change Related Termination or (ii) the end of the specified ten
(10)-year option term and may be exercised for any or all of the option shares
in accordance with the exercise provisions of the option agreement evidencing
the grant. In addition, all of the unvested Stock Issuances you hold will (to
the extent not then otherwise vested) automatically vest upon your Change
Related Termination.
4. BENEFIT REDUCTION. Should any of your severance benefits under
this letter agreement be deemed to be parachute payments under Code Section
280G, then the following limitations will become applicable: (i) first, the
dollar amount of your severance payment under Paragraph 1, and (ii) then, the
accelerated vesting of your options under Paragraph 3 will be reduced to the
extent (and only to the extent) necessary to provide you with the maximum
after-tax benefit available, after taking into account any parachute excise tax
which might otherwise be payable by you under Code Section 4999 and any
analogous State income tax provision.
5. RESTRICTIVE COVENANTS. For the twelve (12) month period following
your Change Related Termination:
(i) You will not directly or indirectly, whether for your own
account or as an employee, director, consultant or advisor, provide
services to any business enterprise which is at the time in
competition with any of the Company's then existing product lines
and which is located geographically in an area where the Company
maintains substantial business activities, unless you obtain the
prior written consent of the Board.
(ii) You will not directly or indirectly encourage or solicit any
individual to leave the Company's employ for any reason or interfere
in any other manner with the employment relationships at the time
existing between the Company and its current or prospective
employees.
<PAGE> 4
- ----------------- PAGE 4.
___________________, 1997
(iii) You will not induce or attempt to induce any customer,
supplier, distributor, licensee or other business relation of the
Company to cease doing business with the Company or in any way
interfere with the existing business relationship between any such
customer, supplier, distributor, licensee or other business relation
and the Company.
You acknowledge that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
your breach of the foregoing restrictive covenants. Accordingly, in the event of
any such breach, the Company shall, in addition to the cessation of the
severance benefits provided you under this agreement and any remedies available
to the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants shall be applicable in
the event your Change Related Termination occurs in connection with a Hostile
Take-Over.
PART TWO -- DEFINITIONS
DEFINITIONS. For purposes of this letter agreement, the following
definitions will be in effect:
BOARD means the Company's Board of Directors.
CHANGE IN CONTROL means any of the following events:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or
persons different from the persons holding those securities
immediately prior to such transaction and the composition of the
Board of Directors of the Company following such transaction is such
that the directors of the Company prior to the transaction
constitute less than fifty percent (50%) of the Board membership
following the transaction,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete
liquidation or dissolution of the Company, or
(iii) a Hostile Take-Over.
<PAGE> 5
- ----------------- PAGE 5.
___________________, 1997
CHANGE RELATED TERMINATION means an Involuntary Termination which
occurs within thirty-six (36) months of a Change in Control.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK means the Company's common stock.
HEALTH CARE COVERAGE means the continued medical/dental, vision and
disability insurance coverage to which you and your eligible dependents may
become entitled under this agreement upon the Change Related Termination of your
employment other than Termination for Cause.
HOSTILE TAKE-OVER means either of the following events:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender offer made
directly to the Company's stockholders which the Board does not
recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of
the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning
of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time
the Board approved such election or nomination.
INVOLUNTARY TERMINATION means the termination of your employment with
the Company:
(i) involuntarily upon your discharge or dismissal; or
(ii) voluntarily upon your resignation following (A) a change in
your position with the Company which materially reduces your level of
<PAGE> 6
- ----------------- PAGE 6.
___________________, 1997
responsibility, (B) an annual compensation increase, if increases
are given, which is less than 50% of the mean increases given to all
other corporate officers, (C) a decrease in salary or compensation
(health, benefits, vacation, etc.) which is greater than ten percent
(10%) above the decrease applicable to other corporate officers on
average, or (D) a relocation of your principal place of employment
by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Company without your
consent.
In no event shall an Involuntary Termination be deemed
to occur should your employment terminate by reason of death or permanent
disability.
1934 ACT means the Securities Exchange Act of 1934, as
amended.
OPTION means any option granted to you under the
Company's 1992 Stock Option Plan, 1995 Stock Option Plan or any other equity
incentive plan subsequently adopted by the Company or any successor which is
outstanding at the time of your subsequent Change Related Termination.
STOCK ISSUANCE means the issuance of unvested shares of
Common Stock under the Company's 1992 Stock Option Plan, the 1995 Stock Option
Plan or any other equity incentive plan subsequently adopted by the Company or
any successor.
TERMINATION FOR CAUSE means an Involuntary Termination
of your employment with the Company by reason of your commission of any act of
fraud, embezzlement or dishonesty, or your unauthorized use or disclosure of
confidential information or trade secrets of the Company or its subsidiaries or
your material failure to perform your duties as specified by the Chief Executive
Officer of the Company or the Board of Directors of the Company.
PART THREE -- MISCELLANEOUS PROVISIONS
1. TERMINATION FOR CAUSE. Should your Involuntary
Termination constitute a Termination for Cause, then the Company shall only be
required to pay you (i) any unpaid compensation earned for services previously
rendered through the date of such termination and (ii) any accrued but unpaid
vacation benefits or sick days, and no benefits will be payable to you under
Part One of this letter agreement.
2. TERM OF AGREEMENT. The provisions of this letter
agreement will continue in effect until December 31, 2001. Thereafter, this
letter agreement will continue in effect from calendar year to calendar year,
unless terminated by written notice to you from the Company
<PAGE> 7
- ----------------- PAGE 7.
___________________, 1997
at least thirty (30) days prior to the start of the next calendar year. In the
event of a Change in Control, this agreement shall be automatically renewed for
thirty-six (36) months from the date of the Change in Control or until December
31, 2001, whichever is later.
3. GENERAL CREDITOR STATUS. The benefits to which you
may become entitled under this letter agreement (except those attributable to
your Options or Stock Issuances) will be paid, when due, from the general assets
of the Company. Your right (or the right of the executors or administrators of
your estate) to receive any such payments will at all times be that of a general
creditor of the Company and will have no priority over the claims of other
general creditors of the Company.
4. DEATH. Should you die before receipt of all benefits
to which you become entitled under this letter agreement, then the payment of
such benefits will be made, on the due date or dates hereunder had you survived,
to the executors or administrators of your estate. Should you die before you
exercise your Options, then each such Option may be exercised, during the
applicable exercise period in effect hereunder for those Options at the time of
your death, by the executors or administrators of your estate or by person to
whom the Option is transferred pursuant to your will or in accordance with the
laws of inheritance.
5. MISCELLANEOUS. The provisions of this letter
agreement will be construed and interpreted under the laws of the State of
California. This agreement incorporates the entire agreement between you and the
Company relating to the subject of severance benefits and supersedes all prior
agreements and understandings with respect to such subject matter. This
agreement may only be amended by written instrument signed by you and another
duly-authorized officer of the Company. If any provision of this letter
agreement as applied to any party or to any circumstance should be adjudged by a
court of competent jurisdiction to be void or unenforceable for any reason, the
invalidity of that provision shall in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances
different from those adjudicated by the court, the application of any other
provision of this letter agreement, or the enforceability or invalidity of this
letter agreement as a whole. Should any provision of this letter agreement
become or be deemed invalid, illegal or unenforceable in any jurisdiction by
reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so
as to be valid and enforceable or, if such provision cannot be so amended
without materially altering the intention of the parties, then such provision
shall be stricken and the remainder of this letter agreement shall continue in
full force and effect.
6. REMEDIES. All rights and remedies provided pursuant
to this letter agreement or by law will be cumulative, and no such right or
remedy will be exclusive of any
<PAGE> 8
- ----------------- PAGE 8.
___________________, 1997
other. A party may pursue any one or more rights or remedies hereunder or may
seek damages or specific performance in the event of another party's breach
hereunder or may pursue any other remedy by law or equity, whether or not stated
in this letter agreement.
7. ARBITRATION. Any controversy which may arise between
you and the Company with respect to the construction, interpretation or
application of any of the terms, provisions or conditions of this agreement or
any monetary claim arising from or relating to this agreement will be submitted
to final and binding arbitration in San Jose, California in accordance with the
rules of the American Arbitration Association then in effect.
8. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
agreement shall confer upon you any right to continue in the employment of the
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company or you, which rights are hereby
expressly reserved by each, to terminate your employment at any time for any
reason whatsoever, with or without cause.
9. PROPRIETARY INFORMATION. You hereby acknowledge that
the Company may, from time to time during your employment with the Company,
disclose to you confidential information pertaining to the Company's business
and affairs. All information and data, whether or not in writing, of a private
or confidential nature concerning the business or financial affairs of the
Company (collectively, "Proprietary Information") is and will remain the sole
and exclusive property of the Company. In connection with such Proprietary
Information, you agree as follows:
(i) You will not, during your employment with the
Company or at any time thereafter, disclose to any third party or
directly or indirectly make use of any such Proprietary
Information other than in connection with, and in furtherance of,
the Company's business and affairs.
(ii) You agree that you will use all files, letters,
memoranda, reports, records, data or other written, reproduced or
other tangible manifestations of the Proprietary Information,
whether created by you or others, to which you have access during
your employment with the Company, only in the performance of your
duties with the Company. You will return all such materials
(whether written, printed or otherwise reproduced or recorded) to
the Company immediately upon the termination of your employment
with the Company or upon any earlier request by the Company,
without retaining any copies, notes or excerpts thereof.
<PAGE> 9
- ----------------- PAGE 9.
___________________, 1997
(iii) Your obligations under this Paragraph 9 will
continue in effect after the termination of your employment with
the Company, whatever the reason or reasons for such termination,
and the Company will have the right to communicate with any
future or prospective employer concerning your continuing
obligations under this Paragraph 9.
Please indicate your acceptance of the foregoing
provisions of this severance agreement by signing the enclosed copy of this
letter agreement and returning it to the Company.
PHARMACYCLICS, INC.
By:
-------------------------------------
Title:
----------------------------------
ACCEPTED BY AND AGREED TO
Signature:
-----------------------------
Dated: , 1996
------------
<PAGE> 1
Exhibit 10.36
DEVELOPMENT, LICENSE AND
COMMERCIALIZATION AGREEMENT
BETWEEN
NYCOMED IMAGING AS
AND
PHARMACYCLICS
OCTOBER 17, 1997
* 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
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1. Definitions....................................................................1
1.1 Affiliate 1
1.2 Competitive Product 1
1.3 Core Dossier 2
1.4 Development Data 2
1.5 Development Expenses 2
1.6 Development Plan and Budget 2
1.7 Devices 2
1.8 Drug Substance 2
1.9 EMEA 3
1.10 External Cancers 3
1.11 FDA 3
1.12 FD&C Act 3
1.13 Field 3
1.14 Fill and Finish 3
1.15 First Commercial Sale 3
1.16 Health Authority 3
1.17 HC Agreement 3
1.18 HCC 3
1.19 Initial External Cancers 3
1.20 Initial Internal Cancers 3
1.21 Internal Cancers 3
1.22 JDC 3
1.23 Licensed Product 3
1.24 MA 4
1.25 MAA 4
1.26 Major Countries 4
1.27 NDA 4
1.28 Net Sales 4
1.29 NYCOMED Collaboration Inventions 5
1.30 NYCOMED Independent Inventions 5
1.31 NYCOMED Know-How 5
1.32 NYCOMED Patents 5
1.33 NYCOMED Technology 5
1.34 Party 5
1.35 PCI-0123 6
1.36 PHARMACYCLICS Inventions 6
1.37 PHARMACYCLICS Know-How 6
1.38 PHARMACYCLICS Patents 6
1.39 PHARMACYCLICS Technology 6
1.40 Phase I 6
1.41 Phase II 7
1.42 Phase III 7
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1.43 PDT or Photodynamic Therapy 7
1.44 Retained Territory 7
1.45 Territory 7
1.46 Texaphyrin 7
1.47 UT License 7
2. License Grants; Exclusivity........ ...........................................7
2.1 Development License to NYCOMED. 7
2.2 Commercialization License to NYCOMED. 7
2.3 UT License. 7
2.4 No Restrictions. 8
2.5 Sublicense Rights. 8
2.6 Rights Upon Expiration. 8
2.7 Covenants of NYCOMED. 8
2.8 License to PHARMACYCLICS 8
2.9 Development of Competitive Products 9
2.10 Commercialization of Licensed Product in the Field in the
Retained Territory. 10
2.11 Development of Licensed Products Outside The Field in The
Territory. 11
2.12 Opportunity for Redress of Harm to NYCOMED 13
3. Milestone Payments And Royalties..............................................13
3.1 Milestone Payments. 13
3.2 Royalties. 14
3.3 Duration of Royalty Payments. 15
3.4 No Additional Payments 15
4. Manufacture And Supply Of The Licensed Product................................16
4.1 Supply of Drug Substance. 16
4.2 Fill and Finish of Licensed Products. 16
5. Development, Manufacture and Supply of Devices................................17
5.1 Devise Development Expenses 17
5.2 NYCOMED recognizes that PHARMACYCLICS 17
6. Commercialization of Licensed Products........................................18
6.1 Launch and Commercial Roll-Out of Licensed Products 18
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6.2 Marketing Efforts. 18
6.3 Marketing Restrictions. 18
6.4 Trademark. 18
6.5 Packaging. 18
7. Payments, Reports and Records.................................................19
7.1 Payments. 19
7.2 Late Payments. 19
7.3 Exchange Rates; Blocked Currency. 19
8. Joint Development Committee; Development of Products..........................20
8.1 Collaborative Development. 20
8.2 Joint Development Committee. 20
8.3 Responsibilities of the JDC. 21
8.4 Dispute Resolution. 21
8.5 Development Plan and Budget. 21
8.6 Initial Indications 22
8.7 Additional Indications. 22
8.8 Substitution of Lead Compound. 24
8.9 Licensed Product Formulation. 24
8.10 Responsibilities of Each Party. 24
8.11 Allocation of Development Expenses. 25
8.12 Reimbursement. 26
8.13 Documentation Exchange, Cooperation. 26
9. Regulatory Matters............................................................26
9.1 Government Approval. 26
9.2 Adverse Reaction Reporting. 27
9.3 Compliance. 27
9.4 Product Recall. 27
10. Liability and Indemnification.................................................27
10.1 Indemnification by NYCOMED. 27
10.2 Indemnification by PHARMACYCLICS. 28
11. Intellectual Property.........................................................29
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11.1 Ownership of Intellectual Property 29
11.2 Patent Prosecution and Maintenance. 29
11.3 Infringement of Third Party Patents in Territory. 30
11.4 Third Party Infringement/Misappropriation of
PHARMACYCLICS Technology. 30
12. Warranties and Representations...............................................31
12.1.........................................................................31
12.2.........................................................................31
12.3.........................................................................31
13. Effective Date and Term......................................................31
14. Termination..................................................................32
14.1 Termination by PHARMACYCLICS. 32
14.2 Termination by NYCOMED. 32
14.3 ..................................................................32
14.4 ..................................................................32
14.5 ..................................................................32
14.6 ..................................................................33
15. Rights and Obligations During, Upon and Following Termination;
Confidentiality...............................................................33
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15.1 ..................................................................33
15.2 ..................................................................33
16. Publicity.....................................................................34
17. Force Majeure.................................................................34
18. Succession and Assignment.....................................................34
19. Notices.......................................................................34
20. Affiliates....................................................................35
21. Waiver........................................................................36
22. Entire Agreement and Amendment; Titles........................................36
23. Severability..................................................................36
24. No Agency.....................................................................36
25. Governing Law; Dispute Resolution.............................................36
26. Modifications.................................................................37
27. United States Dollars.........................................................37
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<PAGE> 7
DEVELOPMENT, LICENSE AND COMMERCIALIZATION
AGREEMENT
THIS AGREEMENT, is made effective as of October 17, 1997 (the "Effective
Date"), between NYCOMED IMAGING AS, Nycoveien 1-2, N-0401, Oslo, Norway
(hereinafter referred to as "NYCOMED"), and PHARMACYCLICS, INC., 995 E. Arques
Avenue, Sunnyvale, California 94086 (hereinafter referred to as "PHARMACYCLICS")
WITNESSETH THAT:
WHEREAS, PHARMACYCLICS is engaged in the development of a compound based
upon its proprietary texaphyrin technology for use in photodynamic cancer
therapies; and
WHEREAS, PHARMACYCLICS has licensed, from the University of Texas,
certain patents related thereto with the right to sublicense; and
WHEREAS, NYCOMED has experience in the development of compounds for use
in cancer diagnosis and therapy, and in the marketing, distribution and sale of
such compounds; and
WHEREAS, NYCOMED is desirous of obtaining from PHARMACYCLICS the
exclusive right to develop and commercialize products based on PHARMACYCLICS'
technology and patents in the Territory (as hereinafter defined) in accordance
with the terms and conditions hereof;
WHEREAS, PHARMACYCLICS is willing to grant such a license upon the terms
and conditions hereof;
NOW, THEREFORE, the Parties hereto have mutually agreed as follows:
1. DEFINITIONS. The following definitions will control the construction of
each of the following terms wherever they appear in this Agreement:
1.1 AFFILIATE shall mean, as to a Party hereto, any person, corporation,
company, partnership, joint venture, firm and/or other entity (a "Person") which
controls, is controlled by or is under common control with such Party. For these
purposes, "control" means direct or indirect ownership or control of at least
fifty percent (50%) of
<PAGE> 8
the outstanding voting securities of a corporation or a comparable equitable
interest in any other type of entity.
1.2 COMPETITIVE PRODUCT shall mean any product in the Field other than a
Licensed Product.
1.3 CORE DOSSIER shall mean with respect to each Development Plan, those
pre-clinical and clinical studies required in the United States for submission
and approval of the NDA for a Licensed Product. It is anticipated that the
studies comprising the Core Dossier would, in general, be those which are also
required for approval in Europe.
1.4 DEVELOPMENT DATA shall mean any results, information and data
arising from the development of Licensed Products and Devices pursuant to
Section 8, other than NYCOMED Inventions or PHARMACYCLICS Inventions.
1.5 DEVELOPMENT EXPENSES shall include, as to a particular Development
Plan and Budget: (i) expenses related to trial planning and implementation, and
fees paid to third party suppliers of clinical services, clinical site
recruiting, training and participation, monitoring of clinical sites, data
analysis and data quality assurance, preparing documents for FDA or EMEA
submission, and any expenses associated with obtaining regulatory approval for
the clinical trial in question; (ii) costs associated with the design and
development of the Device used in conjunction with the Licensed Product, subject
to Article 5; (iii) amounts paid for Drug Substance and/or Licensed Product and
Devices for use in clinical trials; (iv) non-labor indirect costs normally
associated with clinical trials and Device development; (v) overhead and a
reasonable allocation of administrative expenses directly in support of the
foregoing; such allocation shall not include fixed expenses associated with the
overall business of PHARMACYCLICS and NYCOMED including but not limited to rent,
utilities and executive compensation; (vi) costs for validation and stability of
clinical trial batches of Drug Substance and/or finished Licensed Product; all
as specified in the Development Plan and Budget approved by the JDC pursuant to
Article 8.
1.6 DEVELOPMENT PLAN AND BUDGET shall have the meaning assigned thereto
in Section 8.5.
1.7 DEVICES shall mean any light source (including, e.g., any laser or
incoherent light source) and light delivery devices including any catheter,
fiber optic light disperser, needles detectors, and sensors designed, developed,
produced and/or manufactured by or for PHARMACYCLICS and/or NYCOMED for the
delivery of the appropriate spectrum of light in connection with the
photoactivation of the Licensed Product in the Field. "Device" shall include, in
particular, that certain diode laser
<PAGE> 9
currently under development by PHARMACYCLICS, as well as that certain solid
state light array system and directly related items currently under development
by PHARMACYCLICS and as further specified in that memo dated September 5, 1997
from PHARMACYCLICS to NYCOMED incorporated herein by reference (the "Base
Device").
1.8 DRUG SUBSTANCE shall mean a composition containing PCI-0123 (or any
Texaphyrin incorporating lutetium substituted therefor pursuant to Section 8.8)
in bulk form.
1.9 EMEA shall mean European Medicines Evaluation Agency.
1.10 EXTERNAL CANCERS shall mean [*] and including the Initial External
Cancers.
1.11 FDA shall mean the United States Food and Drug Administration.
1.12 FD&C ACT shall mean the United States Food, Drug and Cosmetic Act.
1.13 FIELD shall mean the treatment of Internal Cancers or External
Cancers in humans through PDT.
1.14 FILL AND FINISH shall mean the vialing of Drug Substance, and the
labeling and packaging of the vialed Licensed Product.
1.15 FIRST COMMERCIAL SALE shall mean the first sale of the Licensed
Product for use, consumption or resale to any third party customer in a
particular country in the Territory after MA and all relevant price and
reimbursement approvals have been obtained.
1.16 HEALTH AUTHORITY means the health regulatory agency of a particular
country in the Territory or in the Retained Territory.
1.17 HC AGREEMENT shall mean that certain Master Process Development and
Supply Agreement between PHARMACYCLICS and HCC dated September 6, 1996 for the
manufacture and supply of Drug Substance.
* 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> 10
1.18 HCC shall mean the Hoechst Celanese Corporation.
1.19 INITIAL EXTERNAL CANCERS shall mean [*] and [*].
1.20 INITIAL INTERNAL CANCERS shall mean [*] and [*], and [*] patients.
1.21 INTERNAL CANCERS shall mean [*] including, e.g., without
limitation, the Initial Internal Cancers.
1.22 JDC shall mean the Joint Development Committee as described in
Article 8 hereof.
1.23 LICENSED PRODUCT shall mean any therapeutic agent which contains
PCI- 0123 or, where agreed to by the Parties pursuant to Section 8.8, any
Texaphyrin incorporating the metal lutetium which is substituted for PCI-0123.
In particular, but without limiting the generality of the foregoing, "Licensed
Product" shall not include either (i) any Texaphyrin incorporating the metal
lutetium and conjugated with any biopolymer (e.g. a protein, carbohydrate,
nucleic acid or steroid); or (ii) any polymer of a Texaphyrin incorporating
lutetium and combined with a Texaphyrin incorporating a metal other than
lutetium.
1.24 MA shall mean "Marketing Approval," the approval to market and
commercially distribute a pharmaceutical product or medical device, exclusive of
government price or reimbursement approval where applicable, by the EMEA or by
the Health Authority (or other appropriate regulatory agency) of a country
within the Territory.
1.25 MAA shall mean an application for MA submitted to the EMEA or any
Health Authority.
1.26 MAJOR COUNTRIES shall mean [*], [*], [*].
1.27 NDA shall mean a New Drug Application with the FDA.
1.28 NET SALES shall mean:
* 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> 11
(a) Subject to Subsection (b) below, with respect to a Licensed
Product and a specified period, the gross revenues collected by NYCOMED, its
Affiliates or its sublicensees from or on account of sales of such Licensed
Product during that period to independent third parties, less deduction for:
(i) Credits or allowances, if any, actually granted on
account of price adjustments, rejection or return of Licensed Products
previously sold, whether during the specific period or not, rebates and
discounts;
(ii) Excise, sales taxes, duties or other taxes imposed
upon and paid with respect to such sales (excluding franchise, income, or other
taxes levied with respect to gross receipts); and
(iii) Separately itemized insurance and transportation
costs incurred in shipping Licensed Products to independent third parties. Net
Sales shall not include any transfer of Licensed Product between NYCOMED and any
of its Affiliates or its sublicensees for resale but shall include the resale
from an Affiliate of NYCOMED or a sublicensee of NYCOMED to an independent third
party.
(b) For countries in the Territory where NYCOMED uses a third
party distributor (who is not a sublicensee) to market and sell the
Licensed Product, including but not limited to certain countries in
South America, Mexico, certain countries of Africa and the Middle East,
"Net Sales" will be equal to NYCOMED'S gross revenue collected for such
sales [*] of the difference between the "Acquisition Price" and the
gross revenue collected by NYCOMED from such third party distributor.
"Acquisition Price" shall be the price paid by the end customer of such
third party distributor. For example, assume NYCOMED sold a unit of
Licensed Product to such distributor for [*]; assume also that such
distributor sold such unit of Licensed Product to its end user customer
for [*]. "Net Sales" for such unit of Licensed Product would equal [*]
plus [*].
1.29 NYCOMED INVENTIONS shall mean all inventions relating to the
Licensed Product in the Field made or discovered solely by employees or agents
of NYCOMED and NYCOMED'S interest in inventions made or discovered jointly by
employees or agents of NYCOMED and PHARMACYCLICS and/or any designated Device
manufacturer working on behalf of the Parties, all in the course of the conduct
of the development of Licensed Products under this Agreement.
1.30 NYCOMED INDEPENDENT INVENTIONS shall mean any inventions which
cover the manufacture, use, or sale of the Licensed Products in the Field and
which exist as of the Effective Date or which are made or discovered during the
term of this
* 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> 12
Agreement, but outside of the conduct of the development of Licensed Products,
and which are owned or controlled by NYCOMED (with the right to grant
sublicenses).
1.31 NYCOMED KNOW-HOW shall mean: all non-patented inventions, know-
how, technology, trade secrets, processes, data and methods and any other
information which:
(i) NYCOMED owns, controls or has a license to, as of
the Effective Date, or during the term of this Agreement, and
(ii) Relates to the development, Fill and Finish, use,
marketing, sale, importation and distribution of the Licensed Product and its
respective Device(s) for use in the Field in the Territory, including NYCOMED'S
interest in the Development Data.
1.32 NYCOMED PATENTS shall mean all patent applications claiming any
NYCOMED Inventions or NYCOMED Independent Inventions, as the context requires,
and all patents issued pursuant to any such patent applications, and all
substitutions, divisionals, reissues, renewals, continuations,
continuations-in-part, extensions, supplementary protection certificates and
foreign counterparts thereof.
1.33 NYCOMED TECHNOLOGY shall mean the NYCOMED Patents and the NYCOMED
Know-How.
1.34 PARTY shall mean either PHARMACYCLICS or NYCOMED, as the context
may require.
1.35 PCI-0123 shall mean the Texaphyrin compound incorporating lutetium
and having the structure shown in Appendix A and the IUPAC name as follows: Bis
(acetato-O)[9,10-diethyl-20,21-bis[2-[2-(2-methoxyethoxy)ethoxy]ethoxy]-4,15-
dimethyl-8,11-imino-6,3:16,13-dinitrilo-1,18-benzodiazacycloeicosine-5,14-
dipropanolato-N1, N18, N23, N24, N25] lutetium hydrate.
1.36 PHARMACYCLICS INVENTIONS shall mean all inventions relating to the
Licensed Product in the Field made or discovered solely by employees or agents
of PHARMACYCLICS and PHARMACYCLICS' interest in inventions made or discovered
jointly by employees or agents of NYCOMED and PHARMACYCLICS and/or any
designated Device manufacturer working on behalf of the Parties, all in the
course of the conduct of the development of Licensed Products under this
Agreement.
<PAGE> 13
1.37 PHARMACYCLICS KNOW-HOW shall mean: all non-patented inventions,
know-how, technology, trade secrets, processes, data, methods and any physical,
chemical or biological material or other information which:
(i) PHARMACYCLICS owns, controls or has a license to
(with a right to sublicense) as of the Effective Date or during the term of this
Agreement, and
(ii) Relates to the development, Fill and Finish, use,
marketing, sale, importation and distribution of the Licensed Product and its
respective Device(s) for use in the Field in the Territory, including
PHARMACYCLICS' interest in the Development Data.
1.38 PHARMACYCLICS PATENTS shall mean:
(i) All patents and patent applications owned or
controlled by or licensed to PHARMACYCLICS (with the right to
grant sublicenses) in the Territory as of the Effective Date or during the term
of this Agreement, which contain claims which cover the development, use or sale
of the Licensed Product in the Field, including, without limitation, the patents
and patent applications listed in Appendix B hereto;
(ii) All patents issued pursuant to any such patent
applications; and
(iii) All substitutions, divisionals, reissues,
renewals, continuations, continuations-in-part, extensions, and supplementary
protection certificates of the patents described in (i) and (ii) of this
definition.
1.39 PHARMACYCLICS TECHNOLOGY shall mean the PHARMACYCLICS Patents and
the PHARMACYCLICS Know-How.
1.40 PHASE I shall mean that phase of clinical development as defined in
the United States FD&C Act and applicable regulations promulgated thereunder.
1.41 PHASE II shall mean that phase of clinical development as defined
in the United States FD&C Act and applicable regulations promulgated thereunder.
1.42 PHASE III shall mean that phase of clinical development as defined
in the United States FD&C Act and applicable regulations promulgated thereunder.
<PAGE> 14
1.43 PDT OR PHOTODYNAMIC THERAPY shall mean the treatment of Internal
Cancer or External Cancer by the application of light to a cancerous anatomic
site containing a photosensitizing therapeutic agent at the time that such agent
is present at the cancerous site.
1.44 RETAINED TERRITORY shall mean the United States (except for its
territories and possessions), Canada and Japan.
1.45 TERRITORY shall mean all the countries and territories of the world
except the Retained Territory.
1.46 TEXAPHYRIN shall mean a molecule which has as its core structure
the structure set forth on Appendix C.
1.47 UT LICENSE shall mean that certain License Agreement, effective as
of May 28, 1992, between PHARMACYCLICS and the University of Texas, a copy of
which has been provided by PHARMACYCLICS to NYCOMED prior to the Effective Date.
2. LICENSE GRANTS; EXCLUSIVITY.
2.1 DEVELOPMENT LICENSE TO NYCOMED. Subject to the terms and conditions
of this Agreement, PHARMACYCLICS hereby grants to NYCOMED an exclusive (even as
to PHARMACYCLICS) sublicense under the PHARMACYCLICS Technology governed by the
UT License and an exclusive license under all other PHARMACYCLICS Technology, to
conduct clinical development of the Licensed Product for use in the Field in the
Territory pursuant to Article 8 except that PHARMACYCLICS retains the right to
participate in such development in accordance with this Agreement.
2.2 COMMERCIALIZATION LICENSE TO NYCOMED. Subject to the terms and
conditions of this Agreement, PHARMACYCLICS hereby grants to NYCOMED an
exclusive (even as to PHARMACYCLICS) sublicense under the PHARMACYCLICS
Technology governed by the UT License and an exclusive license under all other
PHARMACYCLICS Technology, to use, import, Fill and Finish, market, sell, offer
for sale and distribute the Licensed Product for use in the Field in the
Territory.
2.3 UT LICENSE. NYCOMED acknowledges and understands that the licenses
to the PHARMACYCLICS Technology granted to NYCOMED under Sections 2.1 and 2.2
contemplate sublicenses of certain of such PHARMACYCLICS Technology under and
pursuant to the UT License, and that such sublicensed PHARMACYCLICS
<PAGE> 15
Technology is subject to any rights retained by the University of Texas,
including, without limitation, rights with respect to patent infringement,
prosecution and maintenance under Sections 7 and 13 of the UT License, or the
United States government pursuant to the UT License.
2.4 NO RESTRICTIONS. PHARMACYCLICS represents and warrants to NYCOMED
that, except as set forth in Section 2.3, there are no restrictions on
PHARMACYCLICS' rights to grant the licenses set forth in Sections 2.1 and 2.2.
2.5 SUBLICENSE RIGHTS. NYCOMED shall have the right to sublicense the
licenses granted in Sections 2.1 and 2.2, subject to the prior written approval
of PHARMACYCLICS, which approval shall not be unreasonably withheld or delayed,
so long as each sublicensee agrees to be bound mutatis mutandis by all of the
terms and conditions of this Agreement, except that no consent of PHARMACYCLICS
shall be required for sublicenses to Affiliates of NYCOMED. Further, NYCOMED
shall have the right to appoint the distributor(s) of its choice in any country
of the Territory, pursuant to its normal distribution channels, without the
approval of PHARMACYCLICS.
2.6 RIGHTS UPON EXPIRATION. Upon the expiration of NYCOMED'S obligations
to pay royalties pursuant to Section 3.3, NYCOMED'S license rights granted
hereunder with respect to Licensed Products then sold by NYCOMED and/or its
Affiliates shall become paid-up, royalty-free, irrevocable and perpetual.
2.7 COVENANTS OF NYCOMED. NYCOMED covenants that it shall not, nor shall
it cause any Affiliate to, use or practice directly or indirectly any
PHARMACYCLICS Know-How, and, until expiration thereof, inventions claimed in any
PHARMACYCLICS Patents, for any purposes other than the development, importation,
use, marketing, distribution, offer for sale or sale of Licensed Products or the
Devices in the Field and in the Territory. NYCOMED shall ensure that any
permitted sublicense under this Agreement shall contain terms with the same
effect as this Section 2.7, and agrees that it will, at PHARMACYCLICS' request,
take all measures requested to enforce the pertinent terms of such sublicense
against the sublicensee.
2.8 LICENSE TO PHARMACYCLICS. Subject to the terms and conditions of
this Agreement, NYCOMED hereby grants to PHARMACYCLICS
(i) An exclusive, royalty-free, license to use and
practice the NYCOMED Inventions and patents arising therefrom to make, have
made, use, import, offer for sale and sell Licensed Products in the Field in the
Retained Territory; and
<PAGE> 16
(ii) A worldwide, non-exclusive, royalty-free license to
use and practice the NYCOMED Inventions and patents arising therefrom to make,
have made, use, import, offer for sale and sell products outside the Field.
2.9 DEVELOPMENT OF COMPETITIVE PRODUCTS
(a) IN-LICENSE OF COMPETITIVE PRODUCTS. NYCOMED agrees that,
until the [*] anniversary of the Effective Date, it shall not license from a
third party any Competitive Product for development and/or sale by NYCOMED or
its Affiliates in the Territory without PHARMACYCLICS' written consent. After
such [*] anniversary date, NYCOMED shall be free to license any Competitive
Product from a third party for the Territory without the consent of
PHARMACYCLICS; provided, however, that the development and commercialization of
such Competitive Product shall be subject to the provisions of this Section 2.9.
(b) COMPETITIVE PRODUCT DEVELOPMENT. If NYCOMED licenses a
Competitive Product for the Territory from a third party
pursuant to Section 2.9(a) or if NYCOMED shall have discovered internally any
Competitive Product for the Territory, it shall have the right to conduct
pre-clinical and/or clinical development with respect thereto after the second
anniversary of the Effective Date, provided NYCOMED continues to conduct such
development tasks and fund its share of Development Expenses as are set forth in
Sections 8.10 and 8.11 and in each Development Plan and Budget under which the
Parties are operating and as has been approved by the JDC as of the time such
Competitive Product is licensed for the Territory, or, where discovered
internally, as of the commencement of development of such Competitive Product,
through filing of the MAA of the Licensed Product.
(c) COMMERCIALIZATION OF COMPETITIVE PRODUCTS. In the event
NYCOMED determines to file a MAA in the Territory for a
Competitive Product either in- licensed or developed internally by NYCOMED, it
shall so notify PHARMACYCLICS in writing and the following shall apply:
(i) NYCOMED shall retain the exclusive licenses set
forth in Section 2.2 with respect to any Licensed Product
then on the market at the time of the filing of such MAA (or for which an MAA
has been filed), but only for a period of five (5) years from the date of First
Commercial Sale of the Competitive Product. Thereafter, all rights of NYCOMED
with respect to such Licensed Products shall terminate and shall revert to
PHARMACYCLICS, and PHARMACYCLICS shall have the right to license such reverted
Licensed Products to any third party.
(ii) NYCOMED'S rights to further develop and
commercialize any Licensed Product which is under development
pursuant to a Development Plan and
* 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> 17
Budget at the time of the filing of such MAA for the Competitive Product shall
terminate and shall revert to PHARMACYCLICS. In the event of such reversion,
PHARMACYCLICS shall have the right to license to any third party such Licensed
Products then under development; provided, however, that PHARMACYCLICS shall pay
to NYCOMED a royalty on Net Sales of such reverted Licensed Products in the
Territory at one-half the rates set forth in Section 3.2, up to an amount equal
to the amount of Development Expenses funded by NYCOMED for such reverted
Licensed Product.
(iii) NYCOMED'S rights to develop and commercialize any
and all Licensed Products under Section 8.7 for any
indications not then under development by the Parties will terminate and will
revert to PHARMACYCLICS. In the event of such reversion, PHARMACYCLICS shall
have the right to license to any third party the Licensed Products for such
reverted indication(s).
(d) RIGHTS OF PHARMACYCLICS. In the event NYCOMED'S rights
terminate as provided in Sub-Section 2.9(c), the following shall apply:
(i) PHARMACYCLICS shall have the right to use and to
grant to any third party licensee the right to use the Trademark in connection
with the sale of Licensed Products in the Field and in the Territory, after
reversion of Licensed Products under Section 2.9(c)(i).
(ii) PHARMACYCLICS shall have the right, and may license
to any such third party licensee in the Territory the right, to use any and all
Development Data, and to reference the MAAs and any other regulatory
applications prepared by NYCOMED and/or PHARMACYCLICS with respect to Licensed
Products in the Field, for the purpose of any development or commercialization
of such Licensed Products for such reverted indications, subject to the
confidentiality provisions of Article 15.
(iii) Effective only in such event, NYCOMED hereby
grants to PHARMACYCLICS a license, with the right to sublicense, to practice the
NYCOMED Inventions under the NYCOMED Patents, if any, to develop, make, have
made, use, import and sell Licensed Products for the reverted indications in the
Field and in the Territory. In addition, NYCOMED agrees to grant to
PHARMACYCLICS a license, with the right to sublicense, to practice the NYCOMED
Independent Inventions for the same purpose as provided in the previous
sentence, upon terms to be negotiated by the Parties in good faith.
2.10 COMMERCIALIZATION OF LICENSED PRODUCT IN THE FIELD IN THE RETAINED
TERRITORY.
<PAGE> 18
(a) RIGHT OF NEGOTIATION. In the event PHARMACYCLICS determines not to
develop and/or market and sell the Licensed Product itself in the United States
or Canada or both, it shall so inform NYCOMED. NYCOMED shall have thirty (30)
days following receipt of such notice to provide written notice to PHARMACYCLICS
of its desire to negotiate for such rights, in the case of the United States
alone, or the United States and Canada combined, or, in the case of Canada
alone, to add Canada to the Territory under this Agreement. Upon PHARMACYCLICS'
receipt of such statement of interest in the United States or the United States
and Canada combined, the Parties will negotiate in good faith the terms under
which PHARMACYCLICS would grant to NYCOMED the right to develop and/or market
and sell the Licensed Product in the United States or the United States and
Canada. If NYCOMED has not provided a notice of its interest within the thirty
(30) day period referenced above, or if the Parties are unable to agree upon the
principal terms of such an agreement within sixty (60) days following receipt of
NYCOMED'S notice of interest, PHARMACYCLICS shall be free to proceed
independently, alone or with a third party, provided that PHARMACYCLICS shall
not enter into any agreement with a third party on terms which when viewed in
their totality are more favorable than those last offered to NYCOMED hereunder.
(b) RIGHTS OF PHARMACYCLICS. In the event that PHARMACYCLICS proceeds
independently or with a third party licensee to develop and/or market and sell
Licensed Products in the Field in the Retained Territory, the following shall
apply:
(i) PHARMACYCLICS shall have the right to use, and to grant to
any such third party licensee the right to use, the Trademark selected by the
Parties under Section 6.4 in connection with the sale, inside the Retained
Territory, of Licensed Products for use in the Field. Except as provided in the
preceding sentence and in Section 2.9(d), neither PHARMACYCLICS nor any third
party shall have any rights to use the Trademark selected pursuant to Section
6.4.
(ii) PHARMACYCLICS shall have the right, and may license to any
such third party licensee in the Retained Territory the right, to use any and
all Development Data, and to reference the MAAs and NDAs and other regulatory
applications prepared hereunder, for the purpose of such commercialization
efforts, subject to the confidentiality provisions of Article 15.
(iii) Effective only in such event, NYCOMED hereby grants to
PHARMACYCLICS a license, with the right to sublicense, to practice the NYCOMED
Inventions if any, under the NYCOMED Patents, to develop, make, have made, use,
import and sell Licensed Products in the Field in the Retained Territory. In
addition, NYCOMED agrees to grant to PHARMACYCLICS a license, with the right to
sublicense, to practice the NYCOMED Independent Inventions, under the NYCOMED
<PAGE> 19
Patents, for the same purpose as provided in the previous sentence, for terms to
be negotiated in good faith between the Parties.
(iv) NYCOMED, upon request, shall supply Finished Product for
sale in the Retained Territory to any such third party licensee at a price equal
to NYCOMED'S direct cost of goods plus [*] pursuant to Section 4.2.
2.11 DEVELOPMENT OF LICENSED PRODUCTS OUTSIDE THE FIELD IN THE
TERRITORY.
(a) In the event that PHARMACYCLICS enters into an agreement
with any third party for the development, marketing and sale of a Licensed
Product which has the same chemical structure as a Licensed Product then under
development or commercialized by the Parties (a "Third Party Compound") for
indications outside the Field, but for sale in the Territory (a "Third Party
Agreement"), it will ensure that:
(i) The proposed Third Party Compound differs in its
formulation in such a manner that prescribing physicians could not reasonably be
expected to substitute in the marketplace such Third Party Compound for the
Licensed Product(s) then being developed or commercialized by NYCOMED and
PHARMACYCLICS in the Field; or
(ii) The proposed development program differs in such
other respects from the NYCOMED and PHARMACYCLICS development program hereunder
or its anticipated commercialized Licensed Products then under development so as
to otherwise ensure that the substitution referred to in (i) above could not
reasonably be expected to occur.
(b) From and after the date PHARMACYCLICS enters into such Third
Party Agreement, each Party agrees and understands that the JDC will not be
permitted to recommend the modification of any Licensed Product, whether with
respect to its formulation or otherwise, where such modification would increase
the likelihood that prescribing physicians reasonably would substitute in the
marketplace such Licensed Product for one or more Third Party Compounds then
being developed and/or sold for use outside the Field but for sale in the
Territory. NYCOMED will ensure that any permitted sublicense under this
Agreement contains terms with the same effect as this Section 2.11. Prior to
entering into any such Third Party Agreement, PHARMACYCLICS agrees to disclose
to NYCOMED in confidence those portions of such Third Party Agreement that are
reasonably necessary to demonstrate compliance with this Section 2.11.
* 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> 20
(c) PHARMACYCLICS agrees to keep NYCOMED reasonably
informed as to the development programs under any Third Party
Agreements, subject to the confidentiality provisions of Article 15, in order to
allow NYCOMED to monitor PHARMACYCLICS' compliance with its obligations under
this Section 2.11. NYCOMED agrees to inform PHARMACYCLICS promptly of any
adverse implications of such third party development programs anticipated by
NYCOMED and PHARMACYCLICS agrees to meet with NYCOMED in good faith to address
such adverse implications.
(d) In the event that, despite the Parties' compliance
with their obligations under Sub-Sections (a), (b) and (c) above, a
Third Party Compound which is marketed or sold for use outside the Field and in
the Territory is nonetheless substituted in the marketplace for a Licensed
Product marketed and sold by NYCOMED, its Affiliates or sublicensees hereunder,
the following shall apply:
(i) NYCOMED shall provide to PHARMACYCLICS any and all
audit data collected by NYCOMED in its normal course of
business with respect to (a) NYCOMED'S sales of Licensed Products actually used
in the Field and in the Territory, (b) sales of Licensed Products used outside
the Field in the Territory, (c) sales of Third Party Compounds used in the Field
and the Territory, and (d) sales of Third Party Compounds used outside the Field
in the Territory;
(ii) PHARMACYCLICS shall require that any and all third
party licensees under all Third Party Agreements provide to PHARMACYCLICS all
audit data collected by such third party with respect to the sales referenced in
Sub-Section (i) above;
(iii) PHARMACYCLICS shall analyze all data provided by
both NYCOMED and PHARMACYCLICS' third party licensees and shall first develop a
methodology for determining the extent and nature of sales of Licensed Products
by NYCOMED outside the Field and by such third party licensees within the Field,
in the Territory (the "Audit Methodology") which shall be subject to the
approval of NYCOMED and the third party licensee(s). Upon such approval,
PHARMACYCLICS shall then determine the sales for each party using the agreed to
Audit Methodology and all audit data provided by NYCOMED and the third party
licensee(s) under Section (i) and (ii) above. In the event data is required to
make such a determination in addition to that provided by NYCOMED and such third
party licensee and collected in the normal course of business, PHARMACYCLICS
will reimburse NYCOMED for all reasonable costs associated with NYCOMED'S
collection of such additional data. PHARMACYCLICS will be responsible for
collecting all data outside the scope of normal business of NYCOMED. The Audit
Methodology shall be used solely as a mechanism for reconciling the appropriate
net profit to each of NYCOMED and such
<PAGE> 21
third party licensees, as well as the royalty owed PHARMACYCLICS for sales of
such Licensed Product in the Territory.
2.12 OPPORTUNITY FOR REDRESS OF HARM TO NYCOMED. In the event NYCOMED
determines that it has been economically harmed by the sale of any Third Party
Compound or any other compound containing a Texaphyrin incorporating the metal
lutetium in the Territory in ways other than the sales of such Third Party
Compound into the Field, which such sales are addressed under Section 2.11
(including, without limitation, price erosion, regulatory delays or issues, or
trademark issues), it shall have the right to present evidence of such harm to
PHARMACYCLICS, and upon the presentation of such data the Parties shall
negotiate in good faith a reduction in royalty percentage to compensate NYCOMED
for anticipated lost profit.
3. MILESTONE PAYMENTS AND ROYALTIES.
3.1 MILESTONE PAYMENTS. For and in consideration of the rights and
licenses granted by PHARMACYCLICS to NYCOMED hereunder and the access to and use
of all PHARMACYCLICS Know-How and Development Data, NYCOMED shall pay or cause
to be paid to PHARMACYCLICS the nonrefundable amounts outlined below:
(a) A license fee equal to [*];
(b) [*] upon the [*];
(c) [*];
(d) [*] upon the earlier of
(i) [*]
(ii) [*]
(e) Milestone payments for the development of Licensed Products
for one or more of the Initial Internal Cancer indications shall be negotiated
in good faith 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.
<PAGE> 22
the Parties, following PHARMACYCLICS' delivery to NYCOMED of the Development
Plan and Budget for such Initial Internal Cancers; provided, however, that such
milestones will be triggered by the same events as are set forth in Sub-Sections
(b), (c) and (d). Milestone payments for the development of Initial Internal
Cancer indications shall be equal, in the aggregate, to [*].
3.2 ROYALTIES.
(a) In exchange for the Licenses under Section 2.1 and 2.2 and
the receipt of Development Data under Article 8, NYCOMED shall pay to
PHARMACYCLICS a royalty, on annual, aggregate Net Sales of all Licensed Products
in all countries of the Territory, (the "Net Sales Base") as set forth below:
Where the Net Sales Base is in the range of [*], a royalty of
[*] of the Net Sales Base; or
Where the Net Sales Base is in the range [*], a royalty of [*]
of the Net Sales Base; or
Where the Net Sales Base is in the range [*], a royalty of [*]
of the Net Sales Base.
Where the Net Sales Base is above [*], a royalty of [*] of the
Net Sales Base.
(b) However, in any country of the Territory in which no patent
protection exists to cover the use or sale of the Licensed Product or the
PHARMACYCLICS Patents have expired and where a Competitive Product consisting of
lutetium texaphyrin is marketed by another party, the Net Sales Base calculation
will be conducted as follows:
(i) [*] of Net Sales for that country will be counted
towards Net Sales Base if one Competitive Product is marketed,
(ii) [*] of Net Sales for that country will be counted
towards Net Sales Base if two Competitive Products are marketed, or
* 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> 23
(iii) [*] of Net Sales for that country will be counted
towards Net Sales Base if three or more Competitive Products are marketed. All
other countries where there is no Competitive Product, Net Sales will be one
hundred percent (100%) of actual sales in the country.
(c) In addition to the royalties paid to PHARMACYCLICS under
Section 3.2(a), and in consideration for the rights sublicensed to NYCOMED
through the UT License, NYCOMED shall also pay to PHARMACYCLICS a royalty, on
annual, aggregate Net Sales of all Licensed Products in all countries of the
Territory, as follows:
Where Net Sales are in the range of [*] a royalty of [*] of all
such Net Sales; and
Where Net Sales are above [*] a royalty of [*] of all such Net
Sales.
3.3 DURATION OF ROYALTY PAYMENTS. NYCOMED shall pay to PHARMACYCLICS a
royalty on one hundred percent (100%) of the Net Sales of each Licensed Product
in each country of the Territory for either:
(i) The life of the last to expire PHARMACYCLICS Patent
in each such country; or
(ii) Ten (10) years after the First Commercial Sale of
the Licensed Product in each such country; whichever occurs last, subject to
Section 3.2(b).
3.4 NO ADDITIONAL PAYMENTS. Except as otherwise provided in this
Agreement, PHARMACYCLICS shall not be entitled to any additional payment as a
result of the disclosure of PHARMACYCLICS Know-How to NYCOMED pursuant to
Section 8.12, nor for NYCOMED'S use of such PHARMACYCLICS Know-How as permitted
under this Agreement.
4. MANUFACTURE AND SUPPLY OF THE LICENSED PRODUCT.
4.1 SUPPLY OF DRUG SUBSTANCE. NYCOMED acknowledges and understands that
PHARMACYCLICS has entered into the HC Agreement and that, pursuant to the HC
Agreement, HCC has the right to supply to PHARMACYCLICS all of its worldwide
requirements for Drug Substance for Phase III Clinical Trials and commercial
sale. PHARMACYCLICS agrees to either:
* 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> 24
(i) Direct HCC to supply to NYCOMED all of NYCOMED'S
requirements of Drug Substance; or
(ii) Enter into negotiations with NYCOMED and HCC for
the supply by HCC of Drug Substance directly to NYCOMED, in either case, as the
Parties shall determine following the Effective Date. In the event PHARMACYCLICS
agrees to supply Drug Substance to NYCOMED through and under the HC Agreement,
NYCOMED and PHARMACYCLICS shall enter into a separate supply agreement (the
"PHARMACYCLICS Supply Agreement"), which such agreement shall set forth the
terms and conditions of such supply; provided, however, that the price to be
paid by NYCOMED for such Drug Substance will be [*] In the event the Parties
determine to negotiate with HCC for supply directly by HCC to NYCOMED, such
supply will be conducted pursuant to a separate supply agreement by and between
NYCOMED (and, where deemed appropriate, PHARMACYCLICS) and HCC (the "HCC/NYCOMED
Supply Agreement").
4.2 FILL AND FINISH OF LICENSED PRODUCTS.
(a) Upon request of NYCOMED, PHARMACYCLICS shall transfer to
NYCOMED the PHARMACYCLICS Know-How with regard to Fill and Finish. NYCOMED shall
Fill and Finish Licensed Product in accordance with the applicable MA's at the
plant of its Affiliate, NYCOMED Puerto Rico Inc., or at another of NYCOMED'S
sites. In the event NYCOMED selects an Affiliate, other than NYCOMED Puerto
Rico, Inc., to Fill and Finish Licensed Product, NYCOMED shall give
PHARMACYCLICS ninety (90) days written notice, or, where PHARMACYCLICS exercises
its option under Section 4.2(b), one hundred eighty (180) days written notice.
All such Fill and Finish shall be done in accordance with all applicable
regulatory requirements, including cGMPs.
(b) In addition, NYCOMED hereby grants to PHARMACYCLICS
an option to have NYCOMED cause to be supplied to PHARMACYCLICS,
for use or sale by its own sales organization, finished Licensed Product,
utilizing Drug Substance supplied to NYCOMED Puerto Rico Inc. (or such other
supplier as NYCOMED designates) by PHARMACYCLICS, for use or sale in the
Retained Territory, at a price equal to NYCOMED'S direct cost of goods. Such
supply option shall be in effect as of the Effective Date and shall extend until
five (5) years after the Licensed Product is approved by the FDA. Such option
shall be exercised upon written notice by PHARMACYCLICS and shall be subject to
the negotiation by the Parties of appropriate terms and conditions governing
such supply. Such supply shall be conducted pursuant to a separate supply
agreement to be entered into by the Parties (the "Fill and Finish 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> 25
5. DEVELOPMENT, MANUFACTURE AND SUPPLY OF DEVICES.
5.1 DEVICE DEVELOPMENT EXPENSES. NYCOMED acknowledges and understands
that PHARMACYCLICS has been engaged, either directly or through third parties,
in the development and preliminary manufacture of the Base Device. Such
activities, and the budgeted amounts to be expended therefor have been disclosed
to NYCOMED pursuant to that certain memorandum dated September 5, 1997, from
PHARMACYCLICS to NYCOMED. As part of its obligations to assist in the funding of
the Development Expenses, NYCOMED agrees to reimburse PHARMACYCLICS for [*] of
such costs, subject to a limit of [*] With respect to all other Devices, or any
improvements to the Base Device, NYCOMED agrees also to [*] of all costs
associated therewith, provided such costs are included within the Development
Plan and Budget for a particular indication approved by the JDC.
5.2 NYCOMED recognizes that PHARMACYCLICS has entered into contracts,
and is in ongoing discussions with, third parties for the supply of the Base
Device as well as other Devices ("Device Suppliers"). Pursuant to such
discussions, PHARMACYCLICS expects to secure agreements with the Device
Suppliers ("Supplier Agreements") for the manufacture and supply of such Devices
to PHARMACYCLICS for clinical trials and commercial sale. PHARMACYCLICS agrees
to either: (i) cause such Device Suppliers to supply to NYCOMED all of NYCOMED'S
requirements for the Devices; or (ii) enter into negotiations with NYCOMED and
such Device Suppliers for the supply by such Device Suppliers of Devices
directly to NYCOMED, in either case, as the Parties shall determine. In the
event PHARMACYCLICS agrees to supply devices to NYCOMED through and under the
Device Suppliers' Agreements, NYCOMED and PHARMACYCLICS shall enter into a
separate supply agreement (a "PHARMACYCLICS Device Supply Agreement"), which
such agreement shall set forth the terms and conditions of such supply;
provided, however, that the price to be paid by NYCOMED for such Devices will be
equal to the price paid by PHARMACYCLICS to Device Suppliers for such Devices.
In the event the Parties decide to negotiate with Device Suppliers for supply
directly by Device Suppliers to NYCOMED, such supply will be conducted pursuant
to a separate supply agreement by and between NYCOMED (and, where deemed
appropriate, PHARMACYCLICS) and the Device Suppliers (the "Suppliers/NYCOMED
Supply Agreement").
6. COMMERCIALIZATION OF LICENSED PRODUCTS.
6.1 LAUNCH AND COMMERCIAL ROLL-OUT OF LICENSED PRODUCTS. NYCOMED agrees
that it shall use its reasonable best efforts to apply for an MAA with respect
to each Licensed Product in the countries and territories as specified in that
memo dated October 9, 1997, and to launch, upon receipt of MA (and, where
required, pricing and reimbursement approval) in such country or territory, in
the order of priority and
* 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> 26
according to the timeline as specified in that memo dated October 9, 1997 from
NYCOMED to PHARMACYCLICS. NYCOMED acknowledges and agrees that it is NYCOMED'S
intention to seek MAA with respect to each Licensed Product in as many markets
as are commercially feasible.
6.2 MARKETING EFFORTS. NYCOMED, NYCOMED Affiliates and NYCOMED
sublicensees each shall use its reasonable best efforts, subject to governmental
laws, regulations and requirements and the terms and provisions of this
Agreement, to market and sell Licensed Products and related Device(s). Such
reasonable best efforts shall require the dedication by NYCOMED, NYCOMED
Affiliates and NYCOMED sublicensees of resources consistent with the resources
which would have been used by NYCOMED at the relevant time in relation to a
product with similar clinical applications generated from NYCOMED'S own research
endeavor which NYCOMED had decided to market. In assessing NYCOMED, NYCOMED
Affiliates and NYCOMED sublicensee's compliance with the obligations contained
in this Article 6, consideration shall be given to the overall market conditions
and commercial viability of the Licensed Product in each country of the
Territory.
6.3 MARKETING RESTRICTIONS. NYCOMED hereby covenants that it will not,
without the prior written authorization of PHARMACYCLICS, solicit the sale of
Licensed Products or Devices, or advertise, or keep a stock of Licensed Products
or Devices, outside of the Territory, nor will it solicit the sale of Licensed
Products or Devices or promote the use of Licensed Products or Devices outside
the Field.
6.4 TRADEMARK. NYCOMED, its Affiliates and permitted sublicensees shall
sell the Licensed Product in the Territory using a trademark selected by NYCOMED
and approved by PHARMACYCLICS, such approval not to be unreasonably withheld
(the "Trademark"). NYCOMED shall own the Trademark. It is understood and agreed
that PHARMACYCLICS shall own any and all trademarks used in connection with the
sale of the Licensed Product in the Retained Territory.
6.5 PACKAGING. Unless otherwise agreed, the Licensed Product and, where
allowed, the Device shall be sold under NYCOMED'S name or trade name. All
packaging for the Licensed Product and the Device shall be approved by the
Parties and shall comply with applicable government rules and regulations. In
addition, and as required by law or as agreed to by the Parties, packaging for
the Licensed Product shall indicate, as appropriate:
(i) That PHARMACYCLICS is the holder of the patent(s)
under which the Licensed Product is licensed; and
<PAGE> 27
(ii) The name of the manufacturer(s) of the
Licensed Product or the Device.
7. PAYMENTS, REPORTS AND RECORDS.
7.1 PAYMENTS. Royalties accruing in any calendar quarter shall be paid
by NYCOMED, NYCOMED Affiliates and/or NYCOMED sublicensees, as the case may be,
within thirty (30) days after the end of such quarter. Simultaneously with the
delivery of each such royalty payment, NYCOMED, NYCOMED Affiliates and/or
NYCOMED sublicensees, as the case may be, shall deliver to PHARMACYCLICS a
report indicating Net Sales for each Licensed Product and the Net Sales Base,
and including an accounting of the deduction from Net Sales permitted by the
definition thereof as well as the calculation of the Net Sales Base, and the
calculation of the total royalties owed. NYCOMED, NYCOMED Affiliates and NYCOMED
sublicensees, will keep records in sufficient detail to enable the royalties to
be determined, and an independent certified public accountant selected by
PHARMACYCLICS shall have access to the records of NYCOMED, NYCOMED Affiliates
and NYCOMED sublicensees during reasonable business hours for the purpose of
verifying for PHARMACYCLICS, in respect of any calendar quarter ending not more
than three calendar years prior to the date of such request, the correctness of
any report and/or payment made under this Agreement. Such accountant shall not
disclose any information other than information relating solely to the accuracy
of the reports and payments made under this Agreement' Any such audit shall be
at PHARMACYCLICS' expense, except where such audit reveals an underpayment by
NYCOMED of five percent (5%) or more, in which case NYCOMED shall bear such
expense.
7.2 LATE PAYMENTS. Any amount not paid when due under this Agreement
shall bear interest at the lesser of:
(i) One and one-half percent (1-1/2%) per month,
compounded monthly; or
(ii) The highest rate permitted by applicable law.
7.3 EXCHANGE RATES; BLOCKED CURRENCY. Royalties due on sales by NYCOMED,
NYCOMED Affiliates or NYCOMED sublicensees to third party customers shall be
calculated and paid by NYCOMED in United States Dollars using the average of the
exchange rate applicable on each day of the last week of the quarter for which
settlement shall be made as set forth in the Wall Street Journal under the
column for World Value of the United States Dollar. In the event that, by reason
of regulations or taxes of any kind, it becomes impossible or illegal for
NYCOMED, a NYCOMED Affiliate or a NYCOMED sublicensee as to any country to
transfer, or have transferred on its
<PAGE> 28
behalf, royalty or other payments to PHARMACYCLICS in the United States, such
royalties or other payments shall be deposited in local currency in the relevant
country to the credit of PHARMACYCLICS in a recognized banking institution
designated by PHARMACYCLICS or, if none is designated by PHARMACYCLICS within a
period of 30 days, in a recognized banking institution selected by NYCOMED, a
NYCOMED Affiliate or a NYCOMED sublicensee, as the case may be, and identified
in a notice in writing given to PHARMACYCLICS.
8. JOINT DEVELOPMENT COMMITTEE; DEVELOPMENT OF PRODUCTS.
8.1 COLLABORATIVE DEVELOPMENT. NYCOMED acknowledges and understands that
all development of the Licensed Products, for all indications within the Field
in the United States and the Territory, shall be conducted in collaboration with
PHARMACYCLICS, as provided in this Article 8, except where either Party proceeds
independently with respect to an additional indication, where provided under
Section 8.7. The role of each Party and the funding obligations of each Party
with respect to such collaborative development shall be as set forth in this
Article 8 and by the JDC. All collaborative development of the Licensed Product
in the Field and in the United States and the Territory shall be conducted only
under the direction of the Joint Development Committee. NYCOMED shall have the
right to proceed independently with human clinical development of a Licensed
Product only as provided in Sections 8.7 and 8.10.
8.2 JOINT DEVELOPMENT COMMITTEE. Promptly following the execution of
this Agreement, the Parties shall form a Joint Development Committee ("JDC")
consisting of three (3) representatives from each Party, as shall be agreed, to
determine appropriate development strategies for Licensed Products. The JDC will
oversee all aspects of the development program under this Article 8. While the
Licensed Product is in development in the United States or in the Territory, the
JDC will meet at least on a quarterly basis, alternating between NYCOMED'S Oslo
offices and PHARMACYCLICS' Sunnyvale offices and will otherwise communicate
regularly by telephone, facsimile or video conference. Thereafter, the JDC will
meet at such times and places as may be agreed by the Parties. A Party may
change any of its appointments to the JDC at any time upon giving written notice
to the other Party. Any disputes or disagreements within the JDC shall be
resolved pursuant to Section 8.4.
Each representative shall have one vote. Any approval, determination,
decision or other action by the JDC shall require the affirmative vote of each
of the representatives of NYCOMED and PHARMACYCLICS present at the meeting,
provided that at least two (2) representatives from each of the Parties are
present at such meeting. The Party hosting each meeting of the JDC promptly
shall prepare, and deliver to the other Party, minutes of such meeting setting
forth all decisions of such committee in form and content reasonably acceptable
to the other Party.
<PAGE> 29
In the event a Party proceeds independently with the development of a
Licensed Product for an additional indication under Section 8.7(b), the JDC
shall not oversee such development, but such Party shall provide to the JDC
periodic reports on the status of the development of such Licensed Product.
8.3 RESPONSIBILITIES OF THE JDC. The JDC will be responsible for
overseeing and directing all aspects of the collaborative development of the
Licensed Products in the Territory and the United States in the Field. In
particular, the JDC will:
(i) Develop and adopt a Development Plan and Budget
for each Licensed Product and Device for each indication within the Field;
(ii) Coordinate, expedite and monitor the development
of Licensed Products under each Development Plan and Budget;
(iii) Determine whether to substitute for PCI-0123
another Texaphyrin incorporating lutetium pursuant to Section 8.8;
(iv) Allocate budgeted resources and determine
priorities for each Development Plan; and
(v) To facilitate the flow of information with respect
to the development work being conducted for each Licensed Product on a worldwide
basis.
8.4 DISPUTE RESOLUTION. Any disputes or disagreements arising under the
Agreement which relate to the development program will be referred to the JDC.
If the JDC is unable to resolve a dispute regarding any issue presented to it or
arising in it, such dispute will be referred to the Chief Executive Officers of
PHARMACYCLICS and NYCOMED (or their designees) for good faith resolution, for a
period of ninety (90) days. If such dispute is not resolved by the end of such
ninety (90) day period, the Parties shall be free to pursue any legal or
equitable remedy available to them, subject to Section 25.2.
8.5 DEVELOPMENT PLAN AND BUDGET. The collaborative development of each
Licensed Product shall be governed by a specific and comprehensive development
plan and budget (the "Development Plan and Budget"). No collaborative
development of the Licensed Product for use in the Field in the Territory and in
the United States shall be conducted other than pursuant to the Development Plan
and Budget. The Development Plan shall outline fully the proposed program and
time-line for development of the Licensed Product and the Device for a specific
indication in the Field in the United States, and the Major Countries, including
clinical testing,
<PAGE> 30
formulation, process development, manufacture of pilot and clinical trial lots,
clinical studies and regulatory plans and other key elements needed to obtain
regulatory approval. The Parties agree and acknowledge that each Development
Plan and Budget may be modified dependent upon the recommendations of the EMEA
and/or the FDA. The Budget shall include all proposed Development Expenses of
the program expected during the development process through obtaining the MA in
the United States and the Major Countries. Each Development Plan and Budget
shall be updated annually by the JDC not later than ninety (90) days prior to
January 1 of a calendar year hereunder. The JDC shall oversee the implementation
of each Development Plan and Budget.
8.6 INITIAL INDICATIONS.
(a) NYCOMED and PHARMACYCLICS agree that the initial focus with
respect to External Cancers will be upon the Initial External Cancers.
PHARMACYCLICS shall have the responsibility for conducting all pre-clinical and
Phase I clinical trials with respect to a Licensed Product for each of the
External Cancers. The initial Development Plan and Budget for the Licensed
Products for the Initial External Cancers is set forth in that certain letter
from PHARMACYCLICS to NYCOMED, dated September 5, 1997, and incorporated herein
by reference; however, the Parties agree and acknowledge that such initial
Development Plan and Budget may be modified dependent upon the review of the JDC
following the Effective Date, or upon recommendations of the EMEA and/or the
FDA. NYCOMED's commitment for development of the Initial External Cancers shall
not exceed [*] as per that memo dated September 5, 1997 from PHARMACYCLICS to
NYCOMED for such indication as amended by the JDC.
(b) NYCOMED and PHARMACYCLICS agree that the initial focus with
respect to Internal Cancers will be upon the Initial Internal Cancers.
PHARMACYCLICS shall have the responsibility for conducting all pre-clinical and
Phase I clinical trials with respect to a Licensed Product for each of the
Initial Internal Indications. Following the conduct of Phase I clinical trials,
should PHARMACYCLICS determine to propose pursuing the further development for
such Initial Internal Cancer, it shall provide to NYCOMED a proposed Development
Plan and Budget for such indication. NYCOMED agrees that, upon review of such
Development Plan and Budget, it will pursue such development for such Initial
Cancer Indication as a Licensed Product under this Agreement unless it
reasonably demonstrates that there is an insufficient commercial opportunity in
the Territory for the sale of the Licensed Product for such Initial Internal
Cancer.
8.7 ADDITIONAL INDICATIONS.
* 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> 31
(a) Both Parties acknowledge that the development of the
Licensed Product will expand beyond the initial indications, and each Party
shall have the right to conduct development of Licensed Products for such
additional indications, subject to this Section 8.7. This may include additional
indication(s) for External Cancers and/or Internal Cancers, other than the
Initial Internal Cancers and the Initial External Cancers. In the event that
either Party determines to pursue additional indication(s) for the Licensed
Product, it shall notify the other party and shall provide to the JDC all such
data requested by such other Party so as to enable such other Party to determine
whether to pursue such indication collaboratively, under this Article 8 and the
JDC. Should the other Party agree to pursue the indication(s), all Development
Expenses will be shared in the same percentages as outlined in Section 8.11.
Further, JDC will determine the Development Plan and Budget for such and
indication(s).
(b) (i) In the event that NYCOMED determines that, for
commercial reasons, it does not choose to pursue collaboratively the development
of an additional indication proposed by PHARMACYCLICS, it shall provide the
information upon which its decision was based to PHARMACYCLICS. Should
PHARMACYCLICS agree that NYCOMED'S decision is supportable, then NYCOMED shall
have the right, but no obligation, to participate in the development of such
additional indication as set forth below in this Section 8.7(c).
(ii) Should PHARMACYCLICS not agree that NYCOMED'S
decision is supportable, the dispute shall be resolved pursuant to Article 8.4
hereof.
(iii) Should such dispute be resolved in favor of
PHARMACYCLICS then NYCOMED shall be obliged to participate in the development of
such additional indication at such time in the development process as NYCOMED
shall determine but nonetheless as set forth in this Article 8.7(c).
(iv) Should such dispute be resolved in favor of
NYCOMED then NYCOMED shall not be obligated to participate in the development of
such additional indication but shall have the opportunity to participate, at its
election, in accordance with Section 8.7(c).
(c) In the event that one Party elects not to participate in the
development of an additional indication, the remaining Party may proceed
independently at its own cost. However, the Party which elected not to
participate shall have the opportunity or, in the case of NYCOMED pursuant to
Section 8.7(b)(iii), shall be obligated to join in the development of the
indication at a later date; provided that the following reimbursement schedule
will apply:
<PAGE> 32
(i) If the Party joins in development following Phase II
clinical trials and prior to commencement of Phase III trials, such Party will
reimburse the other Party an amount equal to [*] of the Development Expenses
such Party would otherwise have expended had the program been done in
collaboration,
(ii) If the Party joins in development after the
initiation of Phase III clinical trials but prior to thirty days after filing of
the MAA, such Party will reimburse the other Party an amount equal to [*] of the
Development Expenses such Party would otherwise have expended had the program
been done in collaboration, and
(iii) If the Party joins in development after the MA has
been obtained, such Party will reimburse the other Party an amount equal to [*]
of the Development Expenses such Party would otherwise have expended had the
program been done in collaboration, as set forth below:
<TABLE>
<CAPTION>
NYCOMED PHARMACYCLICS
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
</TABLE>
After reimbursement as provided above, the Parties shall share all
subsequent Development Expenses, if any, in the same percentages as outlined in
Section 8.11.
(d) In the event the other Party does not choose to exercise its
right to participate in the development of Licensed Product under Sub-Section
8.7(c), such Party shall have the right to pursue such development and
commercialization independently; but without the right to license to any third
party the right to market such Licensed Product for such independently pursued
indication. In such event, the Party proceeding independently shall bear all
costs associated with such development and commercialization of such Licensed
Product for such additional indication. In addition, the Party proceeding
independently shall own all right, title and interest in all Development Data
resulting from such independent development, without any obligation to provide
use of such Development Data to the non-developing Party.
8.8 SUBSTITUTION OF LEAD COMPOUND. If during the course of development
of PCI-0123 for a given indication the JDC determines that it appears possible
that a Licensed Product containing PCI-0123 will not meet the objectives of the
Development Plan therefor, in particular with respect to toxicity, efficacy,
competitive advantage, safety, cost and/or for any other reason, the JDC, upon
the approval of the Parties, may abandon the development of such Licensed
Product and may substitute for such
* 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> 33
Licensed Product a Licensed Product containing a Texaphyrin containing lutetium,
other than PCI-0123. Such development of such substituted Licensed Product shall
be as established for PCI-0123 and the provisions of this Agreement shall apply
to such substituted Licensed Product, mutatis mutandis.
8.9 LICENSED PRODUCT FORMULATION. NYCOMED agrees that it shall not make
any changes to the formulation or chemical structure of any Licensed Product
except upon the prior written approval of PHARMACYCLICS.
8.10 RESPONSIBILITIES OF EACH PARTY. With respect to each Development
Plan, PHARMACYCLICS shall be responsible for the conduct of all studies in the
Core Dossier. PHARMACYCLICS shall also be responsible for the conduct of any and
all pre-clinical and clinical studies, in addition to or other than the Core
Dossier, that are specifically required to be conducted in order to obtain MA of
a Licensed Product in Canada and Japan (the "PHARMACYCLICS Incremental
Dossier"). In the event Phase III trials are specifically required to be
conducted for the filing of the MAA and obtaining MA for a Licensed Product for
the Initial External Cancers or Initial Internal Cancers in the Major Countries,
in addition to the Core Dossier (the "Phase III Incremental Dossier") NYCOMED
and PHARMACYCLICS shall agree which Party shall be responsible for the conduct
of any and all such Phase III trials needed for the Phase III Incremental
Dossier. Except as provided in the aforementioned sentence, NYCOMED shall be
responsible for the conduct of any pre-clinical studies or any other clinical
studies, other than or in addition to those in the Core Dossier, that are
specifically required to be conducted in order to obtain MA for a Licensed
Product in the Territory (the "NYCOMED Incremental Dossier"). PHARMACYCLICS and
NYCOMED shall each be responsible for any post-governmental approval clinical
studies in the Retained Territory and the Territory, respectively (in each case,
the "Marketing Trials").
8.11 ALLOCATION OF DEVELOPMENT EXPENSES. PHARMACYCLICS will bear one
hundred percent (100%) of all Development Expenses incurred for the Core Dossier
up to the commencement of Phase II trials for each of the Initial External
Cancers and the Initial Internal Cancers. All Development Expenses incurred for
the Core Dossier:
(i) From and after the commencement of Phase II Trials
for each of the Initial External Cancers and the Initial Internal Cancers, and
(ii) From and after the time the Parties agree to pursue
an additional indication collaboratively under Section 8.7, for each such
additional indication for the Licensed Product,
<PAGE> 34
shall be borne [*] by PHARMACYCLICS [*] by NYCOMED.
All Development Expenses incurred for the Phase III
Incremental Dossier (as defined under Section 8.10), if any, shall be [*] by
PHARMACYCLICS and [*] by NYCOMED; provided, however, that NYCOMED shall have the
right to offset against any royalties owed PHARMACYCLICS pursuant to Section
3.2(a) an amount equal [*] of the total Development Expenses incurred by both
Parties in aggregate for the Phase III Incremental Dossier, but in no event more
[*] of the royalties otherwise due PHARMACYCLICS in any one year. PHARMACYCLICS
alone will bear all Development Expenses associated with the PHARMACYCLICS
Incremental Dossier and NYCOMED alone will bear all Development Expenses
associated with the NYCOMED Incremental Dossier. Each Party will bear all of the
Development Expenses associated with that Party's Marketing Trials. In general,
the Parties expect that the Party responsible for the conduct of the specific
studies for which it is responsible will incur Development Expenses in the first
instance. Neither Party will incur any Development Expenses which are the
ultimate responsibility of the other Party except in connection with activities
which are specifically assigned to the incurring Party under the Development
Plan and in accordance with the Budget. The responsible Party will reimburse the
other Party, in accordance with Section 8.12, for Development Expenses which
such other Party incurs in accordance with the preceding sentence.
8.12 REIMBURSEMENT. The Parties will determine on a quarterly basis
whether reimbursement of Development Expenses incurred by either Party will be
required pursuant to Section 8.11. If reimbursement is required, within thirty
(30) days following the commencement of the calendar quarter, the responsible
Party will pay to the incurring Party the amount of reimbursement expected to be
required in accordance with the approved Development Plan and Budget. Within
thirty (30) days following the end of each calendar quarter, each Party will
provide the other with a report of Development Expenses actually incurred during
such quarter in accordance with the Development Plan and Budget. Within thirty
(30) days following receipt of such report, each Party shall pay the other, by
payment or offset against amounts then owed by the other, its share of any
Development Expenses for which it is responsible and has not yet paid; and each
Party shall refund to the other, by payment or by offset against amounts due
from the other, any excess of payments previously received over amounts to which
such Party was entitled pursuant to Section 8.11.
8.13 DOCUMENTATION EXCHANGE, COOPERATION. Each Party will make available
to the other Party all Development Data and all technical, process and other
information with respect to the Licensed Product and the Device (including, in
PHARMACYCLICS' case, all PHARMACYCLICS Know-How) for the purpose of conducting
development of the Licensed Product for use in the Field and of obtaining
* 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> 35
governmental approvals in the Territory and the Retained Territory, including,
in detail, all results of any pre-clinical or clinical trial. Each Party will
fully cooperate with the other in connection with all such activities.
9. REGULATORY MATTERS.
9.1 GOVERNMENT APPROVAL. NYCOMED will be responsible for the
administrative handling of MAAs in all countries of the Territory for the
Licensed Product and the Device, unless otherwise decided by the Parties.
NYCOMED will pay all fees and expenses related thereto. NYCOMED shall keep
PHARMACYCLICS informed on an ongoing and timely basis, including, where
requested by PHARMACYCLICS, providing copies of all MAAs to PHARMACYCLICS.
PHARMACYCLICS shall provide to NYCOMED all of the data in the Core Dossier.
NYCOMED shall be the sole holder of the MAAs and will at its own expense, be
responsible for all administrative matters necessary to compile and submit the
MAAs for the Licensed Product (and Device, where relevant) in each country of
the Territory. NYCOMED shall also be responsible for maintaining the MAAs and
will bear the registration renewal fees for the MAAs of the Licensed Product
(and Device, where relevant) in each country of the Territory.
9.2 ADVERSE REACTION REPORTING. Either Party shall advise the other
Party, by telephone or facsimile, within such time as is required by the FDA or
other Health Authority (with respect to the severity and/or increased frequency
of such adverse reaction) after it becomes aware of any adverse reaction to the
use of the Licensed Product or the Device. Such advising Party shall provide the
other Party with a written report delivered by confirmed facsimile of any
reported adverse reaction, stating the full facts known to it, including but not
limited to customer name, address, telephone number and lot or serial number, as
appropriate.
9.3 COMPLIANCE. NYCOMED shall comply with all health registration laws,
regulations and orders of any government entity within the Territory and with
all other governmental requirements relating to the promotion, marketing and
sale of the Licensed Products.
9.4 PRODUCT RECALL. NYCOMED and PHARMACYCLICS each shall notify the
other promptly if any unit of Licensed Product or Device for use in the Field is
alleged or proven to be the subject of or it is such Party's opinion such unit
should be 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, NYCOMED shall have final authority with respect
to such matters in the Field and in the Territory and PHARMACYCLICS shall have
final authority in the Retained Territory and outside the
<PAGE> 36
Field. The cost of all recalls, market withdrawal or corrections of the Licensed
Product and/or Device shall be the expense of the Party incurring such cost,
subject to any rights to recover against HCC under the HC Agreement or against
Device Suppliers under the Supplier Agreements. Each Party shall maintain
records of all sales of Licensed Products and Devices and customers sufficient
to adequately administer a recall, market withdrawal or correction for a period
of three (3) years after termination or expiration of this Agreement, unless
required by law to be maintained for a longer period. NYCOMED shall in all
events be responsible for conducting any recalls, market withdrawals or
corrections with respect to the Licensed Product and/or Device in the Field in
the Territory. PHARMACYCLICS shall in all events be responsible for conducting
any recalls, market withdrawals or corrections with respect to the Licensed
Product and/or Devices in the Retained Territory or for Licensed Products
outside the Field but in the Territory.
10. LIABILITY AND INDEMNIFICATION.
10.1 INDEMNIFICATION BY NYCOMED. NYCOMED shall indemnify, defend and
hold harmless PHARMACYCLICS, its Affiliates and sublicensees and all officers,
directors, employees and agents thereof (collectively, "PHARMACYCLICS
Indemnitees") from all damages, losses, claims, judgments, liabilities, cost and
expenses, including without limitation, reasonable attorneys fees and expenses
(collectively, "Costs"), whether the foregoing are based in contract, tort,
negligence or product liability incurred by or assessed against any
PHARMACYCLICS Indemnitees that arise out of or incident to injury or death of
persons or damage to or destruction of property caused or alleged to be caused
by:
(i) The negligence, recklessness or willful misconduct
of NYCOMED or its officers or employees;
(ii) Any representation made or warranty given by
NYCOMED with respect to the Licensed Product (other than the labeling for the
Licensed Product as approved by the EMEA or Health Authority); and
(iii) Any Licensed Product Filled and Finished by
NYCOMED, NYCOMED Affiliates or NYCOMED sublicensees pursuant to the license
grant set forth in Section 2.2. In the event of any such claim against or Costs
incurred by any of the PHARMACYCLICS Indemnitees, PHARMACYCLICS shall promptly
notify NYCOMED of such claim or Costs. NYCOMED shall manage and control, at its
sole expense, the defense and/or settlement of any such claim against a
PHARMACYCLICS Indemnitee. The PHARMACYCLICS Indemnitees shall cooperate with
NYCOMED and may, at their option and expense, be represented in (but not
control) any such action or proceeding. NYCOMED shall not be liable for any
settlement entered into or cost or expense incurred by the PHARMACYCLICS
Indemnitees in relation to any such action or
<PAGE> 37
proceeding without NYCOMED'S written authorization (unless NYCOMED shall have
failed to assume management and control of the defense and settlement of the
matter as provided above in this Section 10.1).
10.2 INDEMNIFICATION BY PHARMACYCLICS. PHARMACYCLICS shall indemnify,
defend and hold harmless NYCOMED, its Affiliates and sublicensees and all
officers, directors, employees and agents thereof (collectively, "NYCOMED
Indemnitees") from all Costs whether the foregoing are based in contract, tort,
negligence or product liability, incurred by or assessed against any NYCOMED
Indemnitees that arise out of or incident to injury or death of persons or
damage to or destruction of property caused or alleged to be caused by the
negligence, recklessness or willful misconduct of PHARMACYCLICS or its officers
or employees. In the event of any such claim against or Costs incurred by any of
the NYCOMED Indemnitees, NYCOMED shall promptly notify PHARMACYCLICS of such
claim or Costs. PHARMACYCLICS shall manage and control, at its sole expense, the
defense and/or settlement of any such claim against a NYCOMED Indemnitee. The
NYCOMED Indemnitees shall cooperate with PHARMACYCLICS and may, at their option
and expense, be represented in (but not control) any such action or proceeding.
PHARMACYCLICS shall not be liable for any settlement entered into or cost or
expense incurred by the NYCOMED Indemnitees in relation to any such action or
proceeding without PHARMACYCLICS' written authorization (unless PHARMACYCLICS
shall have failed to assume management and control of the defense and settlement
of the matter as provided above in this Section 10.2).
11. INTELLECTUAL PROPERTY.
11.1 OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) PHARMACYCLICS shall retain all of its rights, title and
interest in and to all PHARMACYCLICS Technology, copyrights, trade marks, trade
name, and all other intellectual property owned by it as of the Effective Date
which is embodied in or appurtenant to the Licensed Product.
(b) Ownership of inventions (whether or not patentable) arising
from work performed pursuant to this Agreement shall be determined in accordance
with United States laws of inventorship.
(c) All Development Data arising from work performed pursuant to
this Agreement shall be owned jointly by the Parties. Subject to the terms of
this Agreement, both Parties shall be authorized to use such Development Data as
provided by this Agreement.
<PAGE> 38
11.2 PATENT PROSECUTION AND MAINTENANCE.
(a) PHARMACYCLICS has the sole right to continue prosecution and
maintenance of the PHARMACYCLICS Patents. PHARMACYCLICS shall provide NYCOMED
with copies of all patent applications, prosecution documents, correspondence
with government entities, and other information that NYCOMED may request with
respect to the PHARMACYCLICS Patents. PHARMACYCLICS shall provide NYCOMED with a
quarterly report of the status of such patents and such reasonable back-up
documentation as NYCOMED may request.
(b) PHARMACYCLICS shall have the right, at its option, to
prepare, file and prosecute any patent applications with respect to any
PHARMACYCLICS Inventions owned solely by PHARMACYCLICS. In connection therewith,
NYCOMED agrees to cooperate with PHARMACYCLICS, at NYCOMED'S expense, in the
preparation and prosecution of all such patent applications and in the
maintenance of any patents issued.
(c) The Parties shall mutually determine which Party shall file,
prosecute and maintain patent applications with respect to inventions jointly
owned by PHARMACYCLICS and NYCOMED. The Parties shall bear all out-of-pocket
costs of such patents equally, and shall cooperate with each other in connection
with all such filings. Each Party shall have the right to review and comment on
any joint patent application prior to its filing, and to consult with the filing
Party with respect to prosecution of such application.
(d) NYCOMED shall have the right, at its option, to prepare,
file, prosecute and maintain any patent applications with respect to any NYCOMED
Inventions owned solely by NYCOMED. With respect to the NYCOMED Patents, and in
connection therewith, PHARMACYCLICS agrees to cooperate with NYCOMED at
PHARMACYCLICS' expense in the preparation and prosecution of all such patent
applications and in the maintenance of any patents issued. NYCOMED shall provide
PHARMACYCLICS with copies of all patent applications, prosecution documents,
correspondence with government entities, and other information that
PHARMACYCLICS may request with respect to the NYCOMED Patents. NYCOMED shall
provide PHARMACYCLICS with a quarterly report of the status of such patents.
11.3 INFRINGEMENT OF THIRD PARTY PATENTS IN TERRITORY. If a third party
asserts that a patent or other proprietary right owned by it is infringed by the
manufacture, use, importation, offer for sale or sale of a Licensed Product in
the Field and in the Territory, and arising solely from the use of the
PHARMACYCLICS Technology and not the NYCOMED Technology, 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. PHARMACYCLICS shall have
the first right, but not the obligation,
<PAGE> 39
to defend such action, and NYCOMED shall cooperate in connection therewith, and
shall have the right to be represented separately by counsel of its own choice,
at its own expense. In the event a claim is asserted against NYCOMED and
PHARMACYCLICS does not assume such defense, NYCOMED shall have the right to
defend such action. PHARMACYCLICS shall cooperate in connection therewith, and
shall have the right to be represented separately by counsel of its own choice,
at its own expense. The entity (whether PHARMACYCLICS or NYCOMED) that controls
the defense of a given claim with respect to the Licensed Product in the Field
and in the Territory shall also have the right to control settlement of such
claim; provided, however, that 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. NYCOMED shall have the right to [*] to
PHARMACYCLICS under Section 3.2(a) up to [*] pursuant to this Section 11.3
including, without limitation, any [*] that NYCOMED and/or its Affiliates and
sublicensees are required to [*].
11.4 THIRD PARTY INFRINGEMENT/MISAPPROPRIATION OF PHARMACYCLICS
TECHNOLOGY.
(a) If either Party becomes aware of any infringement of the
PHARMACYCLICS Patents or misappropriation of the PHARMACYCLICS Know-How by a
third party in the Territory in the Field, such Party shall promptly give notice
thereof to the other Party and shall provide the other Party with any evidence
or other information in its possession relating to such infringement or
misappropriation. The Parties shall thereupon consult together as to the action
to be taken.
(b) PHARMACYCLICS shall have the first right, but not the
obligation, to commence legal proceedings against any infringer of any
PHARMACYCLICS Patent or misappropriation of PHARMACYCLICS Know-How in the
Territory in the Field and in this case (subject to the provisions of the next
two sentences) any damages recovered shall belong to PHARMACYCLICS. In the event
PHARMACYCLICS commences such legal proceedings, NYCOMED may join in such
proceedings within sixty (60) days after its receipt of notice from
PHARMACYCLICS of the commencement of such proceedings if NYCOMED agrees to pay
an amount equal to [*] of the cost of such proceedings. In such event, any
damages, settlement fees or other consideration for past infringement in the
Field and in the Territory received as a result of such proceedings shall be
shared by PHARMACYCLICS and NYCOMED equally. If PHARMACYCLICS is not willing to
undertake legal proceedings against the infringement or misappropriation in the
Territory in the Field, NYCOMED may at its own cost and expense in its own name
commence such legal proceedings and in such case
* 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
any damages recovered shall first be used to pay NYCOMED * * * * of its
out-of-pocket costs incurred in bringing such action. Any amounts remaining
shall be shared in the same proportion as if the sales represented by such
amounts were Net Sales accruing during the year in which such recovery was
obtained, as set forth in Section 3.2. Further, in such event, (a) subject to
PHARMACYCLICS' right to approve any sublicense pursuant to Section 2.5, NYCOMED
shall be free to settle the disputes on an amicable basis, (b) PHARMACYCLICS
shall cooperate with NYCOMED as reasonably requested by NYCOMED.
12. WARRANTIES AND REPRESENTATIONS.
12.1 PHARMACYCLICS warrants and represents that it is the owner of the
entire right, title and interest in and to the PHARMACYCLICS Technology (or
holds requisite rights as licensee thereof) and that it has the right to grant
the licenses under the PHARMACYCLICS Technology of the scope set forth herein.
12.2 PHARMACYCLICS warrants and represents that to the best of its
knowledge each patent included within the PHARMACYCLICS Patents was not
fraudulently procured from the relevant governmental patent granting authority.
12.3 Each Party hereto represents and warrants to the other that its
execution and delivery hereof has been duly authorized by all necessary
corporate action and that the terms and conditions of this Agreement, and its
obligations hereunder, do not conflict with or violate any terms or conditions
of any other agreement or commitment to which it is a signatory or by which it
is bound.
13. EFFECTIVE DATE AND TERM. This Agreement will be effective as of the day
and year first above written and will remain in effect until the expiration of
all royalty or other payment obligations hereunder.
14. TERMINATION.
14.1 TERMINATION BY PHARMACYCLICS. Failure by NYCOMED to comply with any
of its material obligations and conditions in this Agreement shall be considered
a breach of this Agreement, and shall entitle PHARMACYCLICS to give NYCOMED
written notice requiring NYCOMED to cure such breach. NYCOMED shall have sixty
(60) days to cure any such breach, except for breaches arising from failure to
pay, in which case NYCOMED shall have ten (10) days to cure. In the event
NYCOMED does not cure any such breach in the time provided, PHARMACYCLICS may
terminate this Agreement by giving notice to take effect immediately.
<PAGE> 41
14.2 TERMINATION BY NYCOMED. Failure by PHARMACYCLICS to comply with any
of its material obligations and conditions in this Agreement shall be considered
a breach of this Agreement, and shall entitle NYCOMED to give PHARMACYCLICS
notice requiring PHARMACYCLICS to cure any such breach within sixty (60) days.
In the event PHARMACYCLICS does not cure any such breach in such time, NYCOMED
may terminate this Agreement by giving notice to take effect immediately. Any
alleged breach or default under a PHARMACYCLICS Supply Agreement or
PHARMACYCLICS Device Supply Agreement or any alleged breach by PHARMACYCLICS'
suppliers shall not be considered a breach or default by PHARMACYCLICS of this
Agreement. In the event of termination of this Agreement by NYCOMED under this
Section 14.2.
(a) PHARMACYCLICS renounces its right to any form of injunctive
relief against NYCOMED, its subsidiaries, affiliates and distributors during the
pendency of such dispute resolution except where PHARMACYCLICS had alleged a
breach by NYCOMED of section 2.1, 2.2, 2.7 and 15.1.
14.3 IN NO EVENT SHALL EITHER PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEE,
AGENTS OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON A CLAIM OR
ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR
OTHERWISE, ARISING OUT OF THIS AGREEMENT.
14.4 The right of either Party to terminate this Agreement, as
hereinabove provided, shall not be affected in any way by its waiver of, or
failure to take action with respect to, any previous default.
14.5 Notwithstanding anything else in this Agreement to the contrary,
the Parties agree that Sections 3.2, 3.3, 9.1, 9.2, 9.3, 10.1, 10.2, 11.1, 11.2,
14.5, 15.1, 15.2, 25.1 and 25.2 shall survive the termination or expiration of
this Agreement, as the case may be, to the extent required thereby for the full
observation and performance by either or both of the Parties hereto.
14.6 Termination of this Agreement, by expiration or for any other
reason, shall be without prejudice to (a) PHARMACYCLICS' rights to receive all
royalties and other payments due and accrued hereunder and unpaid on the
effective date of such termination, and (b) any other remedies which either
Party may then have hereunder.
15. CONFIDENTIALITY.
<PAGE> 42
15.1 During the term of this Agreement and for a period of ten (10)
years from any termination or expiration hereof, the receiving Party agrees to
keep in confidence and not to disclose to any third party, or use for any
purpose, except pursuant to, and in order to carry out, the terms and objectives
of this Agreement, any Confidential Information disclosed by the other Party.
Notwithstanding the previous sentence, each Party shall be free to disclose
Confidential Information (as hereinafter defined), to actual or potential
licensees, licensors (in the case of PHARMACYCLICS) and sublicensees, as well as
independent contractors, under a binder of confidentiality providing protection
comparable to that provided in this Agreement.
15.2 As used herein, "Confidential Information" shall mean all trade
secrets or confidential or proprietary information designated as such in writing
by the disclosing Party, whether by letter or by the use of an appropriate stamp
or legend, prior to or at the time any such trade secret or confidential or
proprietary information is disclosed by the disclosing Party to the receiving
Party. Notwithstanding the foregoing, information which is orally or visually
disclosed to the receiving Party by the disclosing Party, or is disclosed in
writing without an appropriate letter, stamp or legend, shall constitute
Confidential Information if
(i) It would be apparent to a reasonable person,
familiar with the disclosing Party's business and the industry in which it
operates, that such information is of a confidential or proprietary nature, the
maintenance of which is important to the disclosing Party, or if
(ii) The disclosing Party, within 30 days after such
disclosure, delivers to the receiving Party a written document or documents
describing such information and referencing the place and date of such oral,
visual or written disclosure and the names of the employees or officers of the
receiving Party to whom such disclosure was made. The restrictions on the
disclosure and use of Confidential Information set forth in Section 15.1 shall
not apply to any information which: (a) was known by the receiving Party (as
evidenced by the receiving Party's written records) prior to disclosure by the
disclosing Party hereunder; (b) is or becomes part of the public domain through
no fault of the receiving Party; (c) is disclosed to the receiving Party by a
third party having a legal right to make such a disclosure; or (d) is
independently developed by the receiving Party, without use of the Confidential
Information of the disclosing Party. This Agreement shall supersede any prior
agreements as to the protection of confidential information.
16. PUBLICITY.
The Parties agree that, with respect to all press releases regarding
this Agreement, each shall review the other Party's proposed press releases
prior to their distribution to the media and public. Subject to Article 15, if,
within forty-eight (48)
<PAGE> 43
hours of receipt of any such press release, the receiving Party does not object
to its contents or timing, the receiving Party's acceptance shall be deemed to
be given, and the disclosing Party shall be free to distribute the press
release. If the receiving Party does object to the contents or timing of the
press release within forty-eight (48) hours of its receipt, the Parties agree to
discuss within the following forty-eight (48) hours a mutually acceptable
solution. Once a press release has been issued in compliance with this Article
16, the Disclosing Party shall have the right, without the further consent of
the other Party, to issue subsequent releases containing some or all of the
information contained in the initial press release.
17. FORCE MAJEURE.
Neither Party shall be considered in default or be liable to the other
Party for any delay in performance or non-performance caused by circumstances
beyond the reasonable control of such Party, including but not limited to acts
of God, explosion, fire, flood, war, whether declared or not, accident, labor
strike, sabotage order or decrees or any court or action of governmental
authority.
18. SUCCESSION AND ASSIGNMENT.
This Agreement may not be assigned or otherwise transferred by either
Party, whether voluntarily or by operation of law, without the prior written
consent of the other Party, which shall not be unreasonably withheld or delayed;
provided that NYCOMED may assign this Agreement or any of its rights hereunder
to any of its Affiliates (although, in such event, NYCOMED shall remain
primarily responsible for all of its obligations and agreements set forth
herein, notwithstanding such assignment). Any purported assignment in violation
of the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. No assignment shall relieve
either Party of responsibility for the performance of any accrued obligation
which such Party then has hereunder. Notwithstanding the foregoing, either Party
may assign this Agreement in connection with the merger, consolidation, transfer
or sale of substantially all of the assets the business unit to which this
Agreement relates.
19. NOTICES.
Any notice or report required or permitted to be given or made under
this Agreement by one of the Parties to the other shall be in writing and shall
be deemed to have been delivered upon personal delivery or (a) in the case of
notices provided between Parties in the continental United States, 48 hours
after deposit in the mail or noon on the business day next following deposit
with a reputable overnight courier, (b) in the case of notices provided between
Parties, at least one of which is outside the
<PAGE> 44
United States, 10 days after deposit in the mail or noon on the second business
day next following deposit with a reputable overnight express courier service,
and (c) in the case of notices provided by telecopy (which notice shall be
followed immediately by an additional notice pursuant to clause (a) or (b) above
if the notice is of a default hereunder) upon completion of transmissions to the
addressee's telecopier, as follows (or at such other addresses or facsimile
numbers as may have been furnished in writing by one of the Parties to the other
as provided in this Article 19):
If to PHARMACYCLICS: PHARMACYCLICS, INC.
995 E. Arques Avenue
Sunnyvale, CA 94086, U.S.A.
Attention: VP, Business Development
Facsimile No.: (408) 774-0340
With a copy to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Barbara Kosacz
Facsimile No.: (650) 857-0663
If to NYCOMED: NYCOMED Imaging AS
P.O. Box 4220 Torshov
N-0401
Oslo, Norway
Attention: President
Facsimile No.: 47 23 18 60 00
With a copy to: NYCOMED ASA
P.O. Box 4220 Torshov
N-0401
Oslo, Norway
Attention: Arnstein 0degaard
Facsimile No.: 47 23 18 60 36
20. AFFILIATES.
To the extent that any obligations or agreements are imposed upon
Affiliates of a Party under this Agreement, such Party shall cause such
Affiliates to fulfill such obligations and agreements.
21. WAIVER.
<PAGE> 45
Failure of either Party to require, in one or more instances,
performance by the other Party in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
the future performance of any such terms and conditions or of any other term and
condition of this Agreement.
22. ENTIRE AGREEMENT AND AMENDMENT; TITLES.
22.1 This Agreement, together with its Appendices, constitutes the
entire agreement between the Parties with respect to the subject matter hereof.
It cancels and supersedes all prior written and oral agreements, understandings
and declarations between the Parties in respect of the subject matter of this
Agreement.
22.2 The titles of the Sections of this Agreement are for general
reference and convenience only and this Agreement shall not be construed and
interpreted by reference to such titles.
23. SEVERABILITY.
In case one or several provisions of this Agreement should be declared
ineffective or void by any court of competent jurisdiction or a government
agency having jurisdiction, such declaration shall not affect the remainder of
this Agreement which will remain in full force and effect. The provisions which
were declared ineffective or void shall be replaced by new effective ones which
shall be in their sense and regarding the intentions of the Parties in respect
of this Agreement as similar as possible to the provisions ineffective or void.
24. NO AGENCY.
Nothing herein shall be deemed to constitute either Party as the agent
or representative of the other Party, or both Parties as joint venturers or
partners for any purpose. Except as set forth herein, neither Party shall be
responsible for the acts or omissions of the other Party, and neither Party will
have authority to act on behalf of, represent or obligate the other Party in any
way without prior written authority from the other Party.
25. GOVERNING LAW; DISPUTE RESOLUTION
25.1 This Agreement is governed by, and construed in accordance with,
the laws of the United States and the State of New York without reference to
choice of law principles.
<PAGE> 46
25.2 This Agreement is made on the basis of mutual confidence and it is
understood that the differences, if any, during the duration of this Agreement
should freely be discussed between the two Parties. Any dispute, controversy or
claim arising out of, or relating to, this Agreement, or the breach, termination
or invalidity thereof, shall be finally settled by arbitration conducted in the
English language in London, England under the Rules of Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with said Rules. The seat of the arbitration shall be in England.
Notwithstanding the foregoing, nothing in this Section 25.2 shall be construed
as limiting in any way the right of a Party to seek injunctive relief with
respect to any actual or threatened breach of this Agreement, which breach would
cause irreparable harm to the Party seeking such relief, from a court of
competent jurisdiction.
26. MODIFICATIONS.
Any modification or addition to this Agreement shall be valid only if it
is confirmed in writing by the duly authorized officers of both Parties.
27. UNITED STATES DOLLARS.
All references herein to dollars shall refer to United States dollars.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the date
first above written.
PHARMACYCLICS, INC. NYCOMED IMAGING AS
By: /s/ Marc S. Steuer By: /s/ Tore Talseth
---------------------------------- ----------------------------------
Title: V.P. Business Development Title: President
------------------------------- -------------------------------
and Chief Financial Officer
------------------------------- Date: October 21, 1997
--------------------------------
Date: October 28, 1997
--------------------------------
<PAGE> 47
APPENDIX A
LU-TEX (PCI-0123) STRUCTURE
[GRAPHIC OMITTED]
<PAGE> 48
APPENDIX B
[*]
FOREIGN APPLICATIONS AND PATENTS:
(excludes U.S., Canada and Japan)
<TABLE>
<CAPTION>
TITLE COUNTRY PAT./APPLN. NO.
<S> <C> <C>
Metal Complexes of WaterSoluble Texaphyrins Australia Pat. 664877
European Appln. [*]
Finland Appln. [*]
New Zealand Pat. 246795
Norway Appln. [*]
S. Korea Appln. [*]
Photodynamic Therapy of PigmentRelated PCT* Appln. [*]
Lesions
</TABLE>
*Note: In PCT applications, all member countries at the time of filing have been
designated.
* 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> 49
APPENDIX C
TEXAPHYRIN STRUCTURE
[GRAPHIC OMITTED]
<PAGE> 1
EXHIBIT 10.37
PHARMACYCLICS, INC.
995 East Arques Avenue
Sunnyvale, CA 94086-4593
October 14, 1997
Michael J. Hensley, M.D.
P.O. Box 21
Moss Beach, CA 94038
Dear Michael:
On behalf of the Company's Board of Directors, I am pleased to
make you an offer to join the Company as its Vice President Regulatory & Quality
Affairs. The purpose of this letter is to set forth the terms of your proposed
employment with the Company, including your compensation level and benefit
entitlements.
1. EMPLOYMENT AND DUTIES.
A. The Company will employ you as Vice President
Regulatory & Quality Affairs, commencing not later than October 17, 1997, and
you will accordingly make yourself available on a full-time bases to assume that
position on or before such date. In that position, you will report directly to
the President. Regulatory and Quality Affairs will encompass Regulatory Affairs,
Quality Assurance, Quality Control, Clinical Quality Assurance and project
Management.
B. You will perform the duties inherent in your position
in good faith and to the best of your ability and will render all services which
may be reasonably required of you in such position. In addition, on an interim
basis, you will supervise clinical research & development activities. While you
are employed with the company, you will devote your full time and effort to the
business and affairs of the Company. Your principal place of operations will be
at the Company's corporate offices, which are presently located in Sunnyvale,
California.
2. COMPENSATION.
A. Your initial base salary will be at the rate of
$165,000.00 per year. Your base salary will be subject to adjustment by the
Company's Board of Directors for each calendar year of service following the
1997 calendar year.
B. Your base salary will be paid at periodic intervals in
accordance with the Company's payroll practices for salaried employees.
<PAGE> 2
Page 2
C. The Company will deduct and withhold, from the base
salary and bonuses payable to you hereunder, any and all applicable Federal,
state and local income and employment withholding taxes and any other amounts
required to be deducted or withheld by the Company under applicable statute or
regulation.
D. The Company will reimburse you for the cost of
supplemental life insurance (not to exceed $500.00 per year) for a maximum
duration of two years or until such time as the company institutes its own
supplemental life insurance.
3. EMPLOYEE STOCK OPTIONS. As soon as possible after you join the
Company as Vice President Regulatory & Quality Affairs , you will be granted a
stock option to purchase 70,000 shares of Pharmacyclics Common Stock. The option
will have an exercise price equal to 100% of the fair market value of the
Pharmacyclics Common Stock on the grant date and will have a maximum term of 10
years, subject to earlier termination upon your cessation of employment with the
Company. The option will become exercisable as follows: the option will become
exercisable for 14,000 shares upon completion of one year of service after your
date of hire, the option will become exercisable for the remaining 56,000 shares
in a series of 48 equal successive monthly installments upon completion of each
month of service thereafter. All vesting under your option will cease upon your
termination of employment. The remaining terms and conditions of your option
will be in accordance with the standard provisions utilized for stock option
grants under the Company's 1995 Stock Option Plan.
4. EXPENSE REIMBURSEMENT. You will be entitled to reimbursement
from the Company for all customary, ordinary and necessary business expenses
incurred by you in the performance of your duties hereunder, provided you
furnish the Company with vouchers, receipts and other details of such expenses
within thirty (30) days after they are incurred.
5. FRINGE BENEFITS. You will be eligible to participate in any
group life insurance plan, group medical and/or dental insurance plan,
accidental death and dismemberment plan, short-term disability program and other
employee benefit plans, including the Section 401(k) plan and the Employee Stock
Purchase Plan, which are made available to executive officers of the Company and
for which you otherwise qualify.
<PAGE> 3
Page 3
6. VACATION. You will accrue paid vacation benefits in accordance
with the Company policy in effect for executive officers.
7. RESTRICTIVE COVENANTS. During the period of service as Vice
President Regulatory & Quality Affairs:
(i) you will devote your full working time and effort to
the performance of your duties as Vice President
Regulatory & Quality Affairs ; and
(ii) except as approved by the President & CEO you will
not directly or indirectly, whether for your own
account or as an employee, consultant or advisor,
provide services to any business enterprise other than
the Company.
However, you will have the right to perform such
incidental services as are necessary in connection with (a) your private passive
investments, (b) your charitable or community activities, and (c) your
participation in trade or professional organizations, but only to the extent
such incidental services do not interfere with the performance of your services
as Vice President Regulatory & Quality Affairs.
8. PROPRIETARY INFORMATION. Upon the commencement of your
services as Vice President Regulatory & Quality Affairs, you will sign and
deliver to the Company the standard-form Proprietary Information and Inventions
Agreement required of all key employees of the Company.
9. TERMINATION OF EMPLOYMENT: SALARY CONTINUATION.
A. Your employment as Vice President Regulatory & Quality
Affairs pursuant to this agreement will be entirely at will.
B. The Company may terminate your employment under this
agreement at any time for any reason, with or without cause (as defined below),
by providing you with at least thirty (30) days prior written notice. However,
such notice requirement will not apply to the termination of your employment for
cause pursuant to subparagraph D below.
C. You may terminate your employment under this agreement
at any time for any reason upon thirty (30) days prior written notice to the
Company.
D. The Company may at any time, upon written notice,
terminate your employment hereunder for cause. Such termination will be
effective immediately upon such notice.
<PAGE> 4
Page 4
For purposes of this agreement, your employment with the Company
will be deemed to have been involuntarily terminated for cause if your services
are terminated by the Company for one or more of the following reasons:
(i) acts of fraud or embezzlement or other intentional
misconduct which adversely affects the Company's
business, or
(ii) failure to correct any material deficiency in the
performance of your services as Vice President
Regulatory & Quality Affairs within thirty (30)
after written notification of such deficiency from
the Board, or
(iii) misappropriation or unauthorized disclosure or use
of the Company's proprietary information.
Please indicate your acceptance of the foregoing provisions of
this employment agreement by signing the enclosed copy of this agreement and
returning it to the Company.
Very truly yours,
PHARMACYCLICS, INC.
By /s/ Richard S. Miller
------------------------------------------
Title: President and Chief Executive Officer
ACCEPTED BY AND AGREED TO
Signature: /s/ Michael J. Hensley
-----------------------------------
Michael J. Hensley, M.D
Dated: October 17, 1997
<PAGE> 1
EXHIBIT 11.1
PHARMACYCLICS, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF NET LOSS PER SHARE
(in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Weighted average common shares outstanding 10,117 8,552
======= =======
Weighted average common and
common equivalent shares 10,117 8,552
======= =======
Net Loss $(2,655) $(2,880)
======= =======
Net loss per share $ (0.26) $ (0.34)
======= =======
</TABLE>
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 24,237
<SECURITIES> 9,605
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,439
<PP&E> 4,929
<DEPRECIATION> (2,633)
<TOTAL-ASSETS> 36,397
<CURRENT-LIABILITIES> 1,687
<BONDS> 478
0
0
<COMMON> 1
<OTHER-SE> 34,162
<TOTAL-LIABILITY-AND-EQUITY> 36,397
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,153
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498
<INCOME-PRETAX> (3,153)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,655)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0
</TABLE>
