-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KqrnPODIt25HIn9Uzzrn2Qole/Mh8QOaXmFdeFlaiVuCjIXOkDqyJlJbASSoyv+r VhosShD+7c/kabhGpt4exA== 0001095811-01-502191.txt : 20010515 0001095811-01-502191.hdr.sgml : 20010515 ACCESSION NUMBER: 0001095811-01-502191 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEORX CORP CENTRAL INDEX KEY: 0000755806 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 911261311 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16614 FILM NUMBER: 1633527 BUSINESS ADDRESS: STREET 1: 410 W HARRISON ST CITY: SEATTLE STATE: WA ZIP: 98119 BUSINESS PHONE: 206-286-25 MAIL ADDRESS: STREET 1: 410 W. HARRISON STREET 2: 410 W. HARRISON CITY: SEATTLE STATE: WA ZIP: 98119 10-Q 1 v72584e10-q.txt FORM 10-Q QUARTER ENDED MARCH 31, 2001 1 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 MARCH 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _______________. Commission File Number 0-16614 NEORX CORPORATION (Exact Name of Registrant as Specified in its Charter) WASHINGTON 91-1261311 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 410 West Harrison Street, Seattle, Washington 98119 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (206) 281-7001 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 [ ] Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of May 7, 2001 there were outstanding 26,384,998 shares of the Company's Common Stock, $.02 par value. 2 TABLE OF CONTENTS QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001
PART I FINANCIAL INFORMATION PAGE - ------ --------------------- ---- Item 1. Financial Statements: Balance Sheets as of March 31, 2001 and December 31, 2000 3 Statements of Operations for the three months ended March 31, 2001 and 2000 4 Statements of Cash Flows for the three months ended March 31, 2001 and 2000 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 27 PART II OTHER INFORMATION Item 5. Other Information 28 Item 6. Exhibits 28 Signature 32
2 3 NEORX CORPORATION
BALANCE SHEETS (in thousands, except share data) (unaudited) MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,812 $ 8,389 Investment securities 45,172 49,189 Notes receivable 2,617 2,617 Prepaid expenses and other current assets 1,295 1,333 --------- --------- Total current assets 57,896 61,528 --------- --------- FACILITIES AND EQUIPMENT, at cost: Leasehold improvements 3,283 3,283 Equipment and furniture 6,443 6,152 --------- --------- 9,726 9,435 Less: accumulated depreciation and amortization (7,915) (7,791) --------- --------- Facilities and equipment, net 1,811 1,644 --------- --------- OTHER ASSETS, net 1,797 1,286 --------- --------- Total Assets $ 61,504 $ 64,458 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 934 $ 1,702 Accrued liabilities 733 511 --------- --------- Total current liabilities 1,667 2,213 --------- --------- SHAREHOLDERS' EQUITY Series preferred stock, $.02 par value, 3,000,000 shares authorized: Convertible exchangeable preferred stock, Series 1, 205,340 shares issued and outstanding at March 31, 2001 and December 31, 2000 (entitled in liquidation to $5,300 and $5,176 at March 31, 2001 and December 31, 2000, respectively) 4 4 Common stock, $.02 par value, 60,000,000 shares authorized, 26,384,998 and 26,197,699 shares issued and outstanding, at March 31, 2001 and December 31, 2000, respectively 528 524 Additional paid-in capital 221,712 220,702 Accumulated deficit (162,707) (159,001) Accumulated other comprehensive income -- unrealized gain on investment securities 300 16 --------- --------- Total shareholders' equity 59,837 62,245 --------- --------- Total liabilities and shareholders' equity $ 61,504 $ 64,458 ========= ========= See accompanying notes to the financial statements.
3 4 NEORX CORPORATION
STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) THREE MONTHS ENDED MARCH 31, ----------------------- 2001 2000 -------- -------- REVENUE $ 1,039 $ 149 -------- -------- OPERATING EXPENSES: Research and development 3,920 4,526 General and administrative 1,566 1,537 -------- -------- Total operating expenses 5,486 6,063 -------- -------- Loss from operations (4,447) (5,914) OTHER INCOME (EXPENSE): Interest income 813 267 Realized gain on sale of securities 85 3,310 Interest expense (32) (29) -------- -------- Net loss $ (3,581) $ (2,366) ======== ======== Preferred stock dividends (125) (127) -------- -------- Net loss applicable to common shares $ (3,706) $ (2,493) ======== ======== Net loss per common share -- basic and diluted $ (.14) $ (.12) ======== ======== Weighted average common shares outstanding -- basic and diluted 26,245 21,363 ======== ======== See accompanying notes to the financial statements.
4 5 NEORX CORPORATION
STATEMENTS OF CASH FLOWS (in thousands) (unaudited) THREE MONTHS ENDED MARCH 31, ----------------------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,581) $ (2,366) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 156 85 Gain on sale of securities (85) (3,310) Common stock issued for services -- 81 Stock options and warrants issued for services 741 206 Increase in prepaid expenses and other assets (375) (581) Increase (decrease) in accounts payable (768) 529 Increase (decrease) in accrued liabilities 97 (358) -------- -------- Net cash used in operating activities (3,815) (5,714) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investment securities 17,100 6,775 Purchases of investment securities (12,714) (5,624) Facilities and equipment purchases (421) (10) -------- -------- Net cash provided by investing activities 3,965 1,141 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock options and warrants exercised 273 1,775 -------- -------- Net cash provided by financing activities 273 1,775 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 423 (2,798) CASH AND CASH EQUIVALENTS: Beginning of period 8,389 3,752 -------- -------- End of period $ 8,812 $ 954 ======== ======== See accompanying notes to the financial statements.
5 6 NEORX CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1. Basis of Presentation The interim financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2000. In the opinion of management, the interim financial statements reflect all adjustments, consisting only of normal recurring accruals necessary to present fairly the Company's financial position as of March 31, 2001 and the results of its operations and cash flows for the periods ended March 31, 2001 and 2000. The results of operations for the quarters ended March 31, 2001 and 2000 are not necessarily indicative of the expected operating results for the full year. Note 2. Shareholders' Equity Changes in shareholders' equity from December 31, 2000 to March 31, 2001 are as follows (in thousands):
Balance, December 31, 2000 $ 62,245 Proceeds from stock options and warrants exercised 273 Stock options and warrants issued for services 741 Preferred stock dividends (125) Net loss (3,581) Accumulated other comprehensive income -- unrealized gain on investment securities 284 -------- Balance, March 31, 2001 $ 59,837 ========
6 7 NOTES TO FINANCIAL STATEMENTS (Continued) Note 3. Loss per share The following is a reconciliation of the numerator and denominator of the basic and diluted loss per share computations for the three months ended March 31, 2001 and 2000 (in thousands, except per share data):
Three months ended March 31, ----------------------- 2001 2000 -------- -------- Net loss $ (3,581) $ (2,366) Less: preferred stock dividends (125) (127) -------- -------- Net loss applicable to common shares $ (3,706) $ (2,493) ======== ======== Weighted average common shares outstanding -- basic and diluted 26,245 21,363 ======== ======== Net loss per common share -- basic and diluted $ (.14) $ (.12) ======== ========
The denominator for diluted loss per share calculations for the quarters ended March 31, 2001 and 2000 excludes the effect of options to purchase additional shares of common stock because the share increments would be antidilutive. Excluded for the quarters ended March 31, 2001 and 2000 were 3,186,567 and 2,890,453 shares of common stock issuable under stock options, respectively. In addition, 234,088 and 237,394 shares of common stock issuable upon conversion of Series 1 Preferred Stock were not included in the calculation of diluted loss per share for the quarters ended March 31, 2001 and 2000, respectively, because the effect of including such shares would have been antidilutive. For the same reason, outstanding warrants to purchase 270,000 and 305,000 shares of common stock at March 31, 2001 and 2000, respectively, and 45,930 shares of common stock issuable upon conversion of the Company's convertible subordinated debentures for the quarter ended March 31, 2000 were excluded from the calculation. 7 8 NOTES TO FINANCIAL STATEMENTS (continued) Note 4. Comprehensive Loss The Company's comprehensive loss for the quarters ended March 31, 2001 and 2000 was $3,297,000 and $2,761,000, respectively. The comprehensive loss for the quarters ended March 31, 2001 and 2000 consisted of net loss of $3,581,000 and $2,366,000, respectively, and an unrealized gain on investment securities of $284,000 for the quarter ended March 31, 2001 and a net unrealized loss on investment securities of $395,000 for the quarter ended March 31, 2000. Note 5. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, also known as SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 establishes a new model for accounting for derivatives and hedging activities and supersedes and amends existing accounting standards and was required to be adopted on January 1, 2001. SFAS 133 requires that all derivatives be recognized in the balance sheet at their fair market value, and the corresponding derivative gains or losses be either reported in the statement of operations or as a component of other comprehensive income depending on the type of hedge relationship that exists with respect to such derivative. The adoption of SFAS 133 on January 1, 2001 did not have an impact on the Company's financial statements. 8 9 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition This Form 10-Q contains forward-looking statements. These statements relate to future events or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," "propose" or "continue," the negative of these terms or other terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors described below in the section entitled "Additional factors that may affect results." These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on our forward-looking statements, which apply only as of the date of this report. Quarter ended March 31, 2001 compared to quarter ended March 31, 2000. Revenue for the quarter ended March 31, 2001 was $1,039,000 compared to $149,000 for the quarter ended March 31, 2000. Revenue for the quarter ended March 31, 2001 was primarily from government grants. The Company recognizes revenue from government grants as earned. Revenue for the quarter ended March 31, 2000 consisted primarily of licensing revenue from Theseus, Ltd., under an agreement licensing certain technology unrelated to NeoRx's primary product development programs. Total operating expenses for the quarter ended March 31, 2001 decreased 10% to $5,486,000 from $6,063,000 in the quarter ended March 31, 2000. Research and development expenses for the quarter ended March 31, 2001 decreased 13% to $3,920,000 from $4,526,000 for the same time period in 2000. The decrease in research and development expenses is primarily the result of lower clinical trial costs. NeoRx's proposed Skeletal Targeted Radiotherapy product, which we call STR, has been placed on clinical hold with the US Food and Drug Administration. General and administrative expenses for the quarter ended March 31, 2001 were $1,566,000 versus $1,537,000 for the quarter ended March 31, 2000. Other income for the first quarter of 2001 was $866,000 compared to $3,548,000 for the first quarter of 2000. Other income included interest income for the first quarter of 2001 of $813,000 compared to $267,000 for the first quarter of 2000. The increase 9 10 in interest income is due to a higher balance of investment securities. Other income for the first quarter of 2000 also included $3,310,000 of realized gains on the sale of the Company's shares of Angiotech Pharmaceuticals, Inc. Liquidity and capital resources. Cash and investment securities as of March 31, 2001 were $53,984,000 compared to $57,578,000 at December 31, 2000. The Company has available a line of credit with PPD, Inc., of up to $5,000,000 to assist in funding its pending phase III trial of its proposed STR product. The Company has not drawn funds on this line of credit to date. On April 19, 2001, the Company completed its purchase from International Isotopes Inc. of a radiopharmaceutical manufacturing plant and certain other related assets in Denton, Texas. To acquire the facility and related assets, the Company paid $6,000,000 in cash and assumed $6,000,000 of restructured debt of International Isotopes. Of the $6,000,000 in cash paid, approximately $700,000 had been previously advanced and was included in notes receivable at December 31, 2000. The Company expects that its capital resources and interest income will be sufficient to finance its currently anticipated working capital and capital requirements through at least the second quarter of 2002. The Company's actual capital requirements will depend on numerous factors, including results of research and development activities, clinical trials, the levels of resources that the Company devotes to establishing and expanding marketing and manufacturing capabilities, competitive and technological developments and the timing of revenues and expense reimbursements resulting from relationships with third parties or collaborative agreements. The Company intends to seek additional funding through arrangements with corporate partners, public or private equity financing, or other sources. There can be no assurance that the Company will be able to obtain such additional capital or enter into relationships with corporate partners on a timely basis, on favorable terms, or at all. If adequate funds are not available, the Company may be required to delay, reduce or eliminate expenditures for certain of its programs or products or enter into relationships with corporate partners to develop or commercialize products or technologies that the Company would otherwise seek to develop or commercialize itself. Recent Developments. On April 19, 2001, the Company completed its purchase from 10 11 International Isotopes Inc. of a radiopharmaceutical manufacturing plant and certain other related assets in Denton, Texas. The facility acquired has achieved cGMP, or current Good Manufacturing Practices, status and has qualified for issuance of appropriate radiation permits from the State of Texas. The Company has hired certain former employees of International Isotopes to serve on the Company's radiopharmaceutical manufacturing team at the facility. The Company intends to use the facility primarily to produce its STR and other products in development. Additionally, the Company intends to explore certain select opportunities to provide manufacturing contract services to third parties. To acquire the facility and related assets, the Company paid $6,000,000 in cash and assumed $6,000,000 of restructured debt of International Isotopes. In addition, the Company issued to International Isotopes a three-year warrant to purchase up to 800,000 shares of NeoRx common stock at a purchase price of $10 per share. The Company has agreed to file a registration statement to register the warrant shares for resale upon satisfaction of certain conditions. On March 21, 2001, the Company announced that it was in continuing discussions with the FDA regarding its proposed STR product. The Company's phase III multiple myeloma and other STR studies were placed on clinical hold in November 2000 by the FDA after some patients developed a serious delayed toxicity. Communications with the FDA have focused on the relevant factors for selecting a safe radiation dose and the accuracy of radiation calculations. The FDA has requested that the Company collect additional dosimetry data from patients to demonstrate the accuracy of the method the Company proposes to use to calculate dose in its phase III STR trial. The Company has submitted a proposed protocol for this study with the FDA. The Company's phase III STR trials will be delayed pending the completion of this study. The FDA suggested that the Company analyze the relevant factors to select a radiation dose with the appropriate safety profile. The Company's current STR phase III protocol may be modified by this analysis. The Company intends to continue to work diligently with the FDA to move development of the STR product forward. The Company also announced on March 21, 2001, that Douglas Given, MD, PhD, formerly the Chief Technology Officer of Mallinckrodt, Oye Olukoton, MD, formerly the Chief Medical Officer of Mallinckrodt, and Ray Schmelter, PhD, formerly Senior Director of Medical Affairs and Operations of Mallinckrodt, are consulting with the Company to support its operations, medical and regulatory functions. On that same date, the Company announced that Richard Anderson announced his intention to retire in twelve months. Mr. Anderson has stepped down from his positions as President and Chief Operating Officer of the Company and will focus on the transition and integration of the Denton, Texas radiopharmaceutical facility. 11 12 Paul G. Abrams now serves as President in addition to his previous position as Chief Executive Officer of the Company. In addition, Carl Goldfischer, MD, formerly Chief Financial Officer of ImClone, Inc., and currently a director of NeoRx, has agreed to serve as a strategic and financial consultant to NeoRx. Additional factors that may affect results. In addition to the other information contained in this report, the following factors could affect the Company's actual results and could cause our actual results to differ materially from those achieved in the past or expressed in our forward looking statements. WE HAVE A HISTORY OF OPERATING LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES, AND WE MAY NEVER BECOME PROFITABLE. We have not been profitable for any year since our formation in 1984. As of March 31, 2001, we had an accumulated deficit of $163 million. These losses have resulted principally from costs incurred in our research and development programs and from our general and administrative costs. To date, we have been engaged only in research and development activities and have not generated any significant revenues from product sales. We do not anticipate that any of our proposed products will be commercially available for several years. We expect to incur additional operating losses in the future. These losses may increase significantly as we expand development and clinical trial efforts. Our ability to achieve long-term profitability is dependent upon obtaining regulatory approvals for our proposed products and successfully commercializing our products alone or with third parties. However, our operations may not be profitable even if we succeed in commercializing any of our products under development. WE WILL NEED TO RAISE ADDITIONAL CAPITAL, AND OUR FUTURE ACCESS TO CAPITAL IS UNCERTAIN. It is expensive to develop cancer therapy products and conduct clinical trials for these products. We plan to continue to simultaneously conduct clinical trials and preclinical research for a number of different cancer therapy products, which is costly. Our future revenues may not be sufficient to support the expense of our operations and the conduct of our clinical trials and preclinical research. We will need to raise additional capital: - To fund operations 12 13 - To continue the research and development of our therapeutic products - To commercialize our proposed products. We believe that our existing funds will be sufficient to satisfy our financing requirements through at least the second quarter of 2002. However, we may need additional financing within this time frame depending on a number of factors, including the following: - The rate of progress and costs of our research and development and clinical trial activities - The costs of developing manufacturing operations - The costs of developing marketing operations, if we undertake those activities - The amount of milestone payments we might receive from potential collaborators - Our degree of success in commercializing our cancer therapy products - The emergence of competing technologies and other adverse market developments - Changes in or terminations of our existing collaborations and licensing arrangements - The costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights. We may not be able to obtain additional financing on favorable terms or at all. If we are unable to raise additional funds when we need them, we may be required to delay, reduce or eliminate some or all of our development programs and some or all of our clinical trials. We also may be forced to partner with third parties to develop or commercialize products or technologies that we otherwise would have sought to develop independently. If we raise additional funds by issuing equity securities, further dilution to shareholders may result, and new investors could have rights superior to current security holders. OUR POTENTIAL PRODUCTS MUST UNDERGO RIGOROUS CLINICAL TESTING AND 13 14 REGULATORY APPROVALS, WHICH COULD BE COSTLY, TIME CONSUMING, SUBJECT US TO UNANTICIPATED DELAYS OR PREVENT US FROM MARKETING ANY PRODUCTS. The manufacture and marketing of our proposed products and our research and development activities are subject to regulation for safety, efficacy and quality by the U.S. Food and Drug Administration in the United States and comparable authorities in other countries. The process of obtaining FDA and other required regulatory approvals, including foreign approvals, is expensive and often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. Our Skeletal Targeted Radiation, which we call STR, and PRETARGET(R) products are novel; therefore, regulatory agencies lack experience with them. This may lengthen the regulatory review process, increase our development costs and delay or prevent commercialization of our STR and PRETARGET(R) products. Our current STR studies were placed on clinical hold after some phase I/II patients in our STR multiple myeloma trials developed a serious late toxicity. The FDA has requested that we collect additional dosimetry data from patients to demonstrate the accuracy of the method we propose to use to calculate dose in our phase III trial. Our phase III STR trials may be delayed until the dosimetry trial is completed. The FDA has also suggested that we analyze our patient data to determine the relevant factors for selecting a radiation dose likely to produce an appropriate safety profile. Our current STR phase III protocol could be modified based on this analysis. Our trials cannot begin until we receive authorization from the FDA. No cancer products using our STR or PRETARGET(R) technologies have been approved for marketing. Consequently, there is no precedent for the successful commercialization of products based on our technologies. In addition, we have had only limited experience in filing and pursuing applications necessary to gain regulatory approvals. This may impede our ability to obtain timely FDA approvals, if at all. We will not be able to commercialize any of our potential products until we obtain FDA approval, and consequently any delay in obtaining, or inability to obtain, FDA approval could harm our business. If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be fined, forced to remove a product from the market and experience other adverse consequences, including delay, which could materially harm our financial results. Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion of our proposed products. We may also be required to undertake post- 14 15 marketing trials. In addition, if others or we identify side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products, and additional marketing applications may be required. The requirements governing the conduct of clinical trials, manufacturing and marketing of our proposed products outside the United States vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can involve additional testing. Foreign regulatory approval processes include all of the risks associated with the FDA approval processes. Also, approval of a product by the FDA does not ensure approval of the same product by the health authorities of other countries. WE MAY TAKE LONGER TO COMPLETE OUR CLINICAL TRIALS THAN WE PROJECT, OR WE MAY BE UNABLE TO COMPLETE THEM AT ALL. Although for planning purposes we project the commencement, continuation and completion of our clinical trials, a number of factors may cause significant delays, including scheduling conflicts with participating clinicians and clinical institutions and difficulties in identifying and enrolling patients who meet trial eligibility criteria. We may not commence or complete clinical trials involving any of our products as projected or may not conduct them successfully. We rely on academic institutions or clinical research organizations to conduct, supervise or monitor some or all aspects of clinical trials involving our proposed products. We will have less control over the timing and other aspects of those clinical trials than if we conducted them entirely on our own. If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our stock price and our ability to conduct our business as currently planned could be harmed. IF TESTING OF A PARTICULAR PRODUCT DOES NOT YIELD SUCCESSFUL RESULTS, WE WILL BE UNABLE TO COMMERCIALIZE THAT PRODUCT. Our research and development programs are designed to test the safety and efficacy of our proposed products in humans through extensive preclinical and clinical testing. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of our proposed products, including the following: 15 16 - Safety and efficacy results attained in early human clinical trials may not be indicative of results that are obtained in later clinical trials. - The results of preclinical studies may be inconclusive, or they may not be indicative of results that will be obtained in human clinical trials. - After reviewing test results, we or any potential collaborators may abandon projects that we previously believed were promising. - Our potential collaborators or regulators may suspend or terminate clinical trials if the participating subjects or patients are being exposed to unacceptable health risks. - The effects our potential products have may not be the desired effects or may include undesirable side effects or other characteristics that preclude regulatory approval or limit their commercial use if approved. Clinical testing is very expensive, can take many years, and the outcome is uncertain. We cannot at this time predict if, when or under what conditions we will be permitted to restart our STR phase III trial or our other STR clinical trials. The data collected from our clinical trials may not be sufficient to support approval by the FDA of our proposed STR multiple myeloma product, or any of our other proposed products. The clinical trials of our proposed STR multiple myeloma product, and our other products under development, may not be completed on schedule and the FDA may not ultimately approve any of our product candidates for commercial sale. Our failure to adequately demonstrate the safety and efficacy of a cancer therapy product under development would delay or prevent regulatory approval of the product, which could prevent us from achieving profitability. WE ARE DEPENDENT ON SUPPLIERS FOR THE TIMELY DELIVERY OF MATERIALS AND SERVICES AND MAY EXPERIENCE INTERRUPTIONS IN SUPPLY IN THE FUTURE. To be successful, we need to develop and maintain reliable and affordable third party suppliers of: - Commercial quantities of holmium-166, the form of radiation used in our STR product, and yttrium-90, the form of radiation used in our PRETARGET(R) program 16 17 - The chemical agent used in our STR product to deliver holmium-166 to the bone - The antibodies and proteins used in our PRETARGET(R) program. Sources of some of these materials are limited, and we may be unable to obtain these materials in amounts and at prices necessary to successfully commercialize our proposed products. Timely delivery of materials is critical to our success. For example, holmium-166, the form of radiation used in our STR product, loses its effectiveness for treating patients within a short period of time. As a result, our suppliers must ship the STR product to the patient within 24-hours after it is manufactured. Failures or delays in the manufacturing and shipping processes could compromise the quality and effectiveness of our products. We currently depend on a single source vendor for the holmium-166 component of our STR product. We plan to establish an additional supplier for this material, but this may take several years. There are, in general, relatively few alternative sources of holmium-166. While the current vendor generally has provided us these materials with acceptable quality, quantity and cost in the past, it may be unable or unwilling to meet out future demands. If we have to switch to a replacement vendor, the manufacture and delivery of our products could be interrupted for an extended period. We have entered into an arrangement with the University of Missouri research reactor facility group, also known as MURR, to produce holmium-166. MURR currently is responsible for the manufacture of holmium-166, including process qualification, quality control, packaging and shipping, from its Columbia, Missouri reactor facility. Our business and operations could be materially adversely affected if MURR does not perform satisfactorily under this arrangement. We plan to negotiate a long-term supply contract with MURR. If we are unable to negotiate a long-term contract in a timely fashion upon favorable terms, or if MURR is unable or unwilling to provide supplies of holmium-166 under such contract in a satisfactory manner, we may suffer delays in, or be prevented from, initiating or completing clinical trials of our STR product. IF WE FAIL TO NEGOTIATE AND MAINTAIN COLLABORATIVE ARRANGEMENTS WITH THIRD PARTIES, OUR MANUFACTURING, CLINICAL TESTING, SALES AND MARKETING ACTIVITIES MAY BE DELAYED OR REDUCED. We rely in part on collaborators and other third parties to perform for us or assist us with a variety of important functions, including research and development, manufacturing and clinical trials management. We also license technology from others to 17 18 enhance or supplement our technologies. We may not be able to locate suppliers to manufacture our products at a cost or in quantities necessary to make them commercially viable. We intend to rely on third party contract manufacturers to produce large quantities of materials needed for clinical trials and product commercialization. Third party manufacturers may not be able to meet our needs with respect to timing, quantity or quality. If we are unable to contract for a sufficient supply of needed materials on acceptable terms, or if we should encounter delays or difficulties in our relationships with manufacturers, our clinical testing may be delayed, thereby delaying the submission of products for regulatory approval or the market introduction and subsequent sales of our products. Any such delay may lower our revenues and potential profitability. Moreover, any potential third-party manufacturers and we must continually adhere to cGMP regulations enforced by the FDA through its facilities inspection program. If our facilities, or the facilities of these manufacturers, cannot pass a pre-approval plant inspection, the FDA will not grant pre-market approval of our cancer therapy products. In complying with cGMP and foreign regulatory requirements, we and any of our third-party manufacturers will be obligated to expend time, money and effort in production, record-keeping and quality control to assure that our products meet applicable specifications and other requirements. If any of our third-party manufacturers or we fail to comply with these requirements, we may be subject to regulatory action. ABC Laboratories, Inc., which we call ABC Labs, currently is our sole collaborator manufacturing STR for our pending multiple myeloma clinical trials. As such, ABC Labs would be responsible for all aspects of the manufacture of STR, including process qualification, quality control, packaging and shipping. We believe that ABC's manufacturing facilities will be sufficient to meet our initial needs for the planned STR multiple myeloma and other STR clinical trials. In the past, we have experienced interruptions in ABC Labs' STR manufacturing processes, which if they occur in the future, could result in material delays in, or prevent us from completing, our clinical trials and otherwise commercializing our STR product. To help protect against such future interruptions or delays in supply, on April 19, 2001, we purchased, from International Isotopes Inc., a radiopharmaceutical manufacturing facility and certain other assets, located in Denton, Texas. We have hired certain former employees of International Isotopes to serve on the Company's radiopharmaceutical manufacturing team at the facility. We intend to use the facility primarily to produce our STR and other products in development. Additionally, we intend to explore certain select opportunities to provide manufacturing contract services to third parties. To acquire the facility and 18 19 related assets, we paid $6,000,000 in cash and assumed $6,000,000 of restructured debt of International Isotopes. In addition, we issued to International Isotopes a three-year warrant to purchase up to 800,000 shares of NeoRx common stock at a purchase price of $10 per share. We currently expect this manufacturing facility to be operational in the third quarter of 2001. In this case, ABC Labs and NeoRx would share the manufacture of STR for clinical trials. If we lose or are unable to secure collaborators, or if we are not successful in initiating manufacturing operations at the Denton, Texas facility, or if our current collaborators, including ABC Labs, do not apply adequate resources to their collaboration with us, our product development and potential for profitability may suffer. We intend to enter into collaborations for one or more of the research, development, manufacturing, marketing and other commercialization activities relating to some of our products under development. If any collaborator breaches or terminates its agreement with us, or fails to conduct its collaborative activities in a timely manner, the commercialization of our products under development could be slowed down or blocked completely. Disputes may arise between us and ABC Labs or other collaborators on a variety of matters, including financial or other obligations under our agreements. These disputes may be both expensive and time consuming and may result in delays in the development and commercialization of our proposed products. WE FACE SUBSTANTIAL COMPETITION IN THE DEVELOPMENT OF CANCER THERAPIES AND MAY NOT BE ABLE TO SUCCESSFULLY COMPETE, AND OUR POTENTIAL PRODUCTS MAY BE RENDERED OBSOLETE BY RAPID TECHNOLOGICAL CHANGE. The competition for development of cancer therapies is intense. There are numerous competitors developing products to treat the diseases for which we are seeking to develop products. We are initially focusing our STR product on the treatment of multiple myeloma. Celgene Corporation's thalidomide product is being sold for multiple myeloma, and Cell Therapeutics, Inc.'s arsenic trioxide also is being tested in that disease. Some competitors have adopted product development strategies targeting cancer cells with antibodies. Many emerging companies, including IDEC Pharmaceuticals, Cytogen Corp. and Coulter Pharmaceuticals, have corporate partnership arrangements with large, established companies to support the research, development and commercialization of products that may be competitive with ours. In addition, a number of established pharmaceutical companies, including SmithKline Beecham, Nycomed Amersham, Mallinkrodt, Inc. and Bristol-Myers Squibb, are developing proprietary technologies or have enhanced their capabilities by entering into arrangements with, or acquiring, companies with proprietary antibody-based 19 20 technology or other technologies applicable to the treatment of cancer. Many of our existing or potential competitors have, or have access to, substantially greater financial, research and development, marketing and production resources than we do and may be better equipped than us to develop, manufacture and market competing products. Our competitors may have, or may develop and introduce, new products that would render our technology and products under development less competitive, uneconomical or obsolete. We also expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out a significant amount of cancer research and development. These institutions are becoming increasingly aware of the commercial value of their findings and more active in seeking patent and other proprietary rights, as well as licensing revenues. IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, OR OPERATE PROFITABLY. Our success is dependent in part on obtaining, maintaining and enforcing our patents and other proprietary rights and our ability to avoid infringing the proprietary rights of others. Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and, consequently, patent positions in our industry may not be as strong as in other better-established fields. Accordingly, the United States Patent and Trademark Office may not issue patents from the patent applications owned by or licensed to us. If issued, the patents may not give us an advantage over competitors with similar technology. We own more than 100 issued United States patents and have licenses to additional patents. However, the issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court or in other proceedings, such as oppositions, which may be brought in foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance by the Patent and Technology Office. It is possible that a competitor may successfully challenge our patents or that a challenge will result in limiting their coverage. Moreover, the cost of litigation to uphold the validity of patents and to prevent infringement can be substantial. If the outcome of litigation is adverse to us, third parties may be able to use our patented invention without payment to us. Moreover, it is possible that competitors may infringe our patents or successfully avoid them through design innovation. To stop these activities we may need to file a lawsuit. These lawsuits are expensive and would 20 21 consume time and other resources, even if we were successful in stopping the violation of our patent rights. In addition, there is a risk that a court would decide that our patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of our patents was upheld, a court would refuse to stop the other party on the ground that its activities do not infringe our patents. In addition to the intellectual property rights described above, we also rely on unpatented technology, trade secrets and confidential information. Therefore, others may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We may not be able to effectively protect our rights in unpatented technology, trade secrets and confidential information. We require each of our employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting relationship with us. However, these agreements may not provide effective protection of our information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies. THE USE OF OUR TECHNOLOGIES COULD POTENTIALLY CONFLICT WITH THE RIGHTS OF OTHERS. Our competitors or others may have or acquire patent rights that they could enforce against us. If they do so, we may be required to alter our products, pay licensing fees or cease activities. If our products conflict with patent rights of others, third parties could bring legal actions against us claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for damages, we could be required to obtain a license in order to continue to manufacture or market the affected products. We may not prevail in any legal action and a required license under the patent may not be available on acceptable terms or at all. WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS. The cost to us of any litigation or other proceedings relating to intellectual property rights, even if resolved in our favor, could be substantial. Some of our competitors may be better able to sustain the costs of complex patent litigation because they have substantially greater resources. If there is litigation against 21 22 us, we may not be able to continue our operations. If third parties file patent applications, or are issued patents claiming technology also claimed by us in pending applications, we may be required to participate in interference proceedings in the Patent and Trademark Office to determine priority of invention. We may be required to participate in interference proceedings involving our issued patents and pending applications. We may be required to cease using the technology or to license rights from prevailing third parties as a result of an unfavorable outcome in an interference proceeding. A prevailing party in that case may not offer us a license on commercially acceptable terms. PRODUCT LIABILITY CLAIMS IN EXCESS OF THE AMOUNT OF OUR INSURANCE WOULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. The testing, manufacturing, marketing and sale of the cancer therapy products that we have under development may subject us to product liability claims. We are insured against such risks up to a $10 million annual aggregate limit in connection with clinical trials of our products under development and intend to obtain product liability coverage in the future. However, insurance coverage may not be available to us at an acceptable cost, if at all. We may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise. Regardless of merit or eventual outcome, product liability claims may result in decreased demand for a product, injury to our reputation, withdrawal of clinical trial volunteers and loss of revenues. As a result, regardless of whether we are insured, a product liability claim or product recall may result in losses that could be material. OUR USE OF RADIOACTIVE AND OTHER HAZARDOUS MATERIALS EXPOSES US TO THE RISK OF MATERIAL ENVIRONMENTAL LIABILITIES, AND WE MAY INCUR SIGNIFICANT ADDITIONAL COSTS TO COMPLY WITH ENVIRONMENTAL LAWS IN THE FUTURE. Our research and development and clinical manufacturing processes, as well as the manufacturing processes used by our collaborators, involve the controlled use of hazardous and radioactive materials. As a result, we are subject to foreign, 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 and wastes in connection with our use of these materials. Although we believe that our safety procedures and the safety procedures utilized by our collaborative partners for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, we may be required to incur significant costs to 22 23 comply with environmental and health and safety regulations in the future. In addition, the risk of accidental contamination or injury from hazardous and radioactive materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any resulting damages, and any such liability could exceed our resources. EVEN IF WE BRING PRODUCTS TO MARKET, CHANGES IN HEALTHCARE REIMBURSEMENT COULD ADVERSELY AFFECT OUR ABILITY TO EFFECTIVELY PRICE OUR PRODUCTS OR OBTAIN ADEQUATE REIMBURSEMENT FOR SALES OF OUR PRODUCTS. The levels of revenues and profitability of biotechnology companies may be affected by the continuing efforts of government and third-party payors to contain or reduce the costs of healthcare through various means. For example, in certain foreign markets pricing or profitability of prescription pharmaceuticals is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental controls. It is uncertain what legislative proposals will be adopted or what actions federal, state or private payors for healthcare goods and services may take in response to any healthcare reform proposals or legislation. Even in the absence of statutory change, market forces are changing the healthcare sector. We cannot predict the effect healthcare reforms may have on the development, testing, commercialization and marketability of our cancer therapy products. Further, our ability to commercialize our products under development may be adversely affected to the extent that such proposals or reforms have a material adverse effect on the business, financial condition and profitability of other companies that are prospective collaborators for certain of our potential products. In addition, both in the United States and elsewhere, sales of prescription pharmaceuticals depend in part on the availability of reimbursement to the consumer from third-party payors, such as governmental and private insurance plans. Third-party payors are increasingly challenging the prices charged for medical products and services. If we succeed in bringing one or more products to market, we cannot be certain that these products will be considered cost-effective and that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive or profitable basis. THE LOSS OF KEY EMPLOYEES COULD ADVERSELY AFFECT OUR OPERATIONS. We are a small company with approximately 110 employees as of April 19, 2001 subsequent to the purchase of the Denton, Texas facility and hiring of personnel for that facility. Our success 23 24 depends, to a significant extent, on the continued contributions of our principal management and scientific personnel. The loss of the services of one or more of our key personnel, including Paul G. Abrams, President and Chief Executive Officer of the Company, and other principal members of our scientific and management staff, could delay our product development programs and our research and development efforts. We do not maintain key person life insurance on any of our officers, employees or consultants. Competition for qualified employees among companies in the biotechnology and biopharmaceutical industry is intense. Our future success depends upon our ability to attract, retain and motivate highly skilled employees. In order to commercialize our proposed products successfully, we may be required to expand substantially our workforce, particularly in the areas of manufacturing, clinical trials management, regulatory affairs, business development and sales and marketing. These activities will require the addition of new personnel, including management, and the development of additional expertise by existing management personnel. OUR STOCK PRICE IS VOLATILE AND, AS A RESULT, YOU COULD LOSE SOME OR ALL OF YOUR INVESTMENT. There has been a history of significant volatility in the market prices of securities of biotechnology companies, including our common stock, and it is likely that the market price of our common stock will continue to be highly volatile. Our business and the relative prices of our common stock may be influenced by a large variety of industry factors, including: - Announcements by us or our competitors concerning acquisitions, strategic alliances, technological innovations and new commercial products - The availability of critical materials used in developing our products - The results of clinical trials - Developments concerning patents, proprietary rights and potential infringement - The expense and time associated with and the extent of our ultimate success in securing government approvals. In addition, public concern about the safety of the products we develop, comments by securities analysts, and general market 24 25 conditions may have a significant effect on the market price of our common stock. The realization of any of the risks described in this report, as well as other factors, could have a material adverse impact on the market price of our common stock and may result in a loss of some or all of your investment. In the past, securities class action litigation has often been brought against companies following periods of volatility in their stock prices. We may in the future be the targets of similar litigation. Securities litigation could result in substantial costs and divert our management's time and resources, which could cause our business to suffer. CERTAIN PROVISIONS IN OUR ARTICLES OF INCORPORATION AND WASHINGTON STATE LAW COULD DISCOURAGE A CHANGE OF CONTROL OF NEORX. Our articles of incorporation authorize our board of directors to issue up to 3,000,000 shares of preferred stock and to determine the price, rights, preference, privileges and restrictions, including voting rights, of those shares without any further vote or action by our shareholders. The issuance of preferred stock could have the effect or delaying, deferring or preventing a change of control of NeoRx, even if this change would benefit our shareholders. In addition, the issuance of preferred stock may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have adopted a shareholders' rights plan, which is intended to protect the rights of shareholders by deterring coercive or unfair takeover tactics. The board of directors declared a dividend to holders of our common stock of one preferred share purchase right for each outstanding share of the common stock. The right is exercisable ten days following the offer to purchase or acquisition of beneficial ownership of 20% of the outstanding common stock by a person or group of affiliated persons. Each right entitles the registered holder, other than the acquiring person or group, to purchase from NeoRx one-hundredth of one share of Series A Junior Participating Preferred Stock at the price of $40, subject to adjustment. The rights expire April 10, 2006. In lieu of exercising the right by purchasing one one-hundredth of one share of Series A Preferred Stock, the holder of the right, other than the acquiring person or group, may purchase for $40 that number of shares of our common stock having a market value of twice that price. Washington law imposes restrictions on some transactions between a corporation and significant shareholders. Chapter 23B.19 of the Washington Business Corporation Act prohibits a target corporation, with some exceptions, from engaging in particular 25 26 significant business transactions with an acquiring person, which is defined as a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation, for a period of five years after the acquisition, unless the transaction or acquisition of shares is approved by a majority of the members of the target corporation's board of directors prior to the acquisition. Prohibited transactions include, among other things: - A merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from the acquiring person - Termination of 5% or more of the employees of the target corporation - Receipt by the acquiring person of any disproportionate benefit as a shareholder. A corporation may not opt out of this statute. This provision may have the effect of delaying, deterring or preventing a change in control of NeoRx. 26 27 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to the impact of interest rate changes and changes in the market values of its investments. INTEREST RATE RISK The Company's exposure to market rate risk for changes in interest rates relates primarily to the Company's debt securities included in its investment portfolio. The Company does not have any derivative financial instruments. The Company invests in debt instruments of the U.S. Government and its agencies and high-quality corporate issuers. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, the Company's future investment income may fall short of expectations due to changes in interest rates or the Company may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. At March 31, 2001, the Company owned government debt instruments in the amount of $10.2 million and corporate debt securities in the amount of $34.8 million. The Company's exposure to losses as a result of interest rate changes is managed through investing primarily in securities with relatively short maturities of up to three years. INVESTMENT RISK The Company has received equity instruments under licensing agreements. These instruments are included in investment securities and are accounted for at fair value with unrealized gains and losses reported as a component of comprehensive loss and classified as accumulated other comprehensive income - unrealized gain on investment securities in shareholders' equity. Such investments are subject to significant fluctuations in fair market value due to the volatility of the stock market. At March 31, 2001, the Company owned such corporate equity securities in the amount of $0.2 million. 27 28 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K EXHIBIT INDEX
INCORPORATION EXHIBIT DESCRIPTION BY REFERENCE TO - ------- ----------- --------------- 3.1(a) Restated Articles of Incorporation, dated April 29, 1996 * 3.1(b) Articles of Amendment, dated March 31, 1997, to Restated Articles of Incorporation ** 3.1(c) Articles of Amendment, dated August 8, 1997, to Restated Articles of Incorporation XXXXX 3.2 Bylaws, as amended, of the registrant XXXXX 4.1 Form of Indenture, dated as of June 1, 1989, between NeoRx Corporation and First Interstate Bank of Washington, N.A., as Trustee *** 10.1 Restated 1994 Stock Option Plan(++) (R) 10.2 Lease Agreement for 410 West Harrison facility, dated February 15, 1996, between NeoRx Corporation and Diamond Parking, Inc. # 10.3 Amendment No. 1, dated August 14, 2000, to Lease Agreement between NeoRx Corporation and Dina Corporation X 10.4 1991 Stock Option Plan for Non-Employee Directors, as amended(++) == 10.5 1991 Restricted Stock Option Plan(++) ****** 10.6 Agreement, dated as of December 15, 1995 ===== 10.7 Consulting Agreement, dated as of July 7, 1993, between NeoRx Corporation and Dr. Fred Craves(++) = 10.8 Amendment No. 4 to consulting agreement, dated July 1, 2000 between NeoRx Corporation and Dr. Fred Craves(++) X 10.9 Agreement, dated as of June 1, 1987, between NeoRx Corporation and the Board of Trustees of the Leland Stanford Junior University, as amended == 10.10 Amendment No. 4, dated July 11, 1997, to Contract between NeoRx Corporation and the Board of Trustees of the Leland Stanford Junior University X 10.11 Indemnification Agreement(++) # 10.12 Form of Key Executive Severance Agreement(++) ## 10.13 Officer Change in Control Agreement(++) XXXXX 10.14 Key Executive Severance Agreement(++) XXXXX 10.15 License Agreement, dated June 30, 1999,
28 29
INCORPORATION EXHIBIT DESCRIPTION BY REFERENCE TO - ------- ----------- --------------- between NeoRx Corporation and The Dow Chemical Company (DELTA) 10.16 Credit Facility Agreement, dated February 3, 2000, between NeoRx Corporation and PPD, Inc. (DELTA)(DELTA) 10.17 Clinical Manufacture and Supply Agreement, dated February 21, 2000, between NeoRx Corporation and International Isotopes, Inc. (DELTA)(DELTA) 10.18 Clinical Manufacture and Supply Agreement, dated September 1, 2000, between NeoRx Corporation and ABC Labs (DELTA)(DELTA)(DELTA) 10.19 Facilities Lease, dated July 24, 2000, between NeoRx Corporation and F5 Networks (DELTA)(DELTA)(DELTA) 10.20 Stock Option Agreement, dated December 19, 2000, between NeoRx Corporation and Carl S. Goldfischer(++) X 10.21 Asset Purchase Agreement, dated March 20, 2001, between International Isotopes Inc. and NeoRx Corporation X 10.22 Stock Option Agreement, dated January 17, 2001, between NeoRx Corporation and Carl S. Goldfischer(++) X 10.23 Consulting Agreement, dated December 19, 2000, between NeoRx Corporation and Carl S. Goldfischer(++) X 10.24 Consulting Agreement, dated November 6, 2000, between NeoRx Corporation and Douglass Given(++) X 10.25 Stock Option Agreement, dated November 16, 2000, between NeoRx Corporation and Douglass Given(++) X 10.26 Sublicense Agreement, dated May 15, 1997, between NeoRx Corporation and Boehringer Manheim GmbH. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. /\ 10.27 Clinical Manufacture and Supply Agreement, dated January 25, 2001, between NeoRx Corporation and ABC Labs, Inc. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. /\ 10.28 Consulting Agreement, dated February 28, 2001, between NeoRx Corporation and CR Strategies, L.L.C. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. /\ 10.29 Stock Option Agreement, dated March 12, 2001, between NeoRx Corporation and Adeoye Y. Olukotun(++) /\/\ 10.30 Stock Option Agreement, dated March 12, 2001, between NeoRx Corporation and Raymond F. Smelter(++) /\/\ 10.31 First Amendment to Sublease Agreement, dated
29 30
INCORPORATION EXHIBIT DESCRIPTION BY REFERENCE TO - ------- ----------- --------------- March 30, 2001, between NeoRx Corporation and F5 Networks /\/\ 23.1 Consent of KPMG LLP X
* Filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference. ** Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration No. 333-25161), filed April 14, 1997 and incorporated herein by reference. *** Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration No. 33-28545), effective May 31, 1989 and incorporated herein by reference. ****** Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991 and incorporated herein by reference. = Filed as an exhibit to the Company's Registration Statement on Form S-2 (Registration No. 33-71164) effective December 13, 1993 and incorporated herein by reference. == Filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference. ===== Filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference. (R) Filed as an exhibit to the Company's Registration Statement on Form S-8, filed July 31, 1997 and incorporated herein by reference. # Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended March 31, 1996 and incorporated herein by reference. ## Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended June 30, 1996 and incorporated herein by reference. X Filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 2000. XXXXX Filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1998. (DELTA) Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended September 30, 1999 and incorporated herein by reference. Certain portions of the agreement have been omitted pursuant to a grant of confidential
30 31
treatment. (DELTA)(DELTA) Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended March 31, 2000 and incorporated herein by reference. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. (DELTA)(DELTA)(DELTA) Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended September 30, 2000 and incorporated herein by reference. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. /\ Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended March 31, 2001 and incorporated herein by reference. Certain portions of the agreement have been omitted pursuant to a grant of confidential treatment. /\/\ Filed as an exhibit to the Company's Form 10-Q for the quarterly period ended March 31, 2001 and incorporated herein by reference. ++ Management contract or compensatory plan.
(b) Current Reports on Form 8-K. Form 8-K dated January 11, 2001, relating to suspension of STR trials. Form 8-K dated March 21, 2001, relating to agreement to purchase radiopharmaceutical manufacturing facility, reports on FDA status of STR and additions to NeoRx team. 31 32 SIGNATURE 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. NeoRx Corporation (Registrant) Date: May 14, 2001 By: /s/ Melinda G. Kile ---------------------------------- Melinda G. Kile Controller (Principal Financial and Accounting Officer, Secretary) 32 EX-10.26 2 v72584ex10-26.txt EXHIBIT 10.26 1 EXHIBIT 10.26 ---------------- REDACTED VERSION ---------------- SUBLICENSE AGREEMENT This License Agreement ("Agreement"), is made and entered into this 15th day of May, 1997 ("Effective Date"), by and between Boehringer Mannheim GmbH, a German corporation having its principal place of business at Sandhofer Strasse 116 Postfach 310120 D-68298 Mannheim Germany ("Boehringer") and NeoRx Co., an American corporation having its principal place of business at 410 West Harrison Street Seattle, Washington 98119 ("NeoRx"). 2 WHEREAS: Biogen Inc. has granted Boehringer the exclusive right to make, have made, use, market and sell LICENSED PRODUCTS which right is covered by the U.S. Patents Nos. 5,168,049 and 5,272,254 owned by Biogen Inc., and NeoRx is interested in making, using, selling and having sold LICENSED PRODUCTS, for its PRETARGETING TECHNOLOGY, and BM is willing to grant NeoRx sublicense to make, have made, use, sell and have sold LICENSED PRODUCTS in the FIELD. ARTICLE I - DEFINITIONS 1.1 LICENSED PATENTS The term "Licensed Patents" shall mean the Biogen, Inc. US Patent Nos. 5,168,049 and 5,272,254 (licensed by Boehringer from Biogen), and any other patent owned or controlled by Boehringer relating to [*] and the patents issued therefrom. [*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION. 1.2 LICENSED PRODUCTS The term "Licensed Products" shall mean [*]. 1.3 FIELD "Field" shall mean all applications of NeoRx's proprietary Pretargeting Technology. 1.4 PRETARGETING TECHNOLOGY "Pretargeting Technology" means products and processes involving target site localization in a patient through administration of a targeting agent [*]. ARTICLE II - LICENSE GRANT 2.1 GRANT OF LICENSE Boehringer hereby grants to NeoRx an exclusive sublicense to make, have made, use, sell, and have sold Licensed Products in the Field. 3 2.2 This sublicense to NeoRx shall include [*], consistent with the License Agreement of March 1, 1994 between Biogen and Boehringer [*]. 2.2.1 NeoRx shall comply with all government statutes and regulations that relate to the Licensed Products including all export regulations. 2.3 [*] 2.4 RIGHTS Boehringer represents and warrants that it has the right and power to grant to NeoRx the sublicense provided herein. ARTICLE III - ROYALTY 3.1 INITIAL PAYMENT In consideration of the right and license granted hereunder, NeoRx shall pay to Boehringer the sum of [*] as an initial payment within fifteen (15) days of the Effective Date. 3.2 ANNUAL MAINTENANCE FEE NeoRx shall pay to Boehringer an annual maintenance fee of [*] due on the anniversary date of this Sublicense Agreement. 3.3 ONE-TIME MILESTONE PAYMENT NeoRx shall pay to Boehringer a one-time milestone payment of [*] upon approval by the United States Food and Drug Administration of the first Pretargeting Product containing Licensed Product, no matter if this product is a product of NeoRx or a Sublicensee of NeoRx. 3.4 WITHHOLDING TAX ON CONSIDERATION Unless otherwise agreed, all taxes or other governmental charges which NeoRx is required to withhold from the initial payment and other payments under this Agreement shall be deducted from such payments and an evidence of such withholding shall be delivered to Boehringer without undue delay. 2 4 ARTICLE IV - OBLIGATION OF EXCLUSION OF LIABILITY 4.1 DISCLAIMER OF WARRANTY Boehringer makes no representations, conditions or warranties that any of the Licensed Patents are valid or enforceable and that any manufacture, use, sale or other disposal of the Licensed Products is not an infringement of any patent of any third party. 4.2 DISCLAIMER OF LIABILITY Boehringer shall be under no liability whatsoever to NeoRx (whether in negligence or otherwise) for any expense, loss, damage or injury of any kind (including any loss of profit or consequential damage) sustained by NeoRx or any third party arising or incurred in connection with the manufacture, use, sale or other disposal of Licensed Products or deriving directly or indirectly out of the use of the Licensed Patents or otherwise arising out of the grant of any rights hereunder, or the provision of any information in connection herewith. 4.3 INDEMNIFICATION BY NEORX NeoRx shall indemnify Boehringer from and against all claims, demands, actions, liabilities and damages made by, or awarded to, any person and any costs and expenses thereof arising from, or connected with, the design, production, manufacture, use, sale, promotion, or other disposal of Licensed Products or the provision or use of the Licensed Patents or otherwise arising out of the grant of any rights hereunder. 4.4 INFRINGEMENT BY THIRD PARTIES NeoRx shall notify Boehringer forthwith of any infringement or threatened infringement of any of the Licensed Patents which shall at any time come to its knowledge. NeoRx shall give sufficient cooperation that is legally appropriate and within reasonable range to protect Boehringer's rights over the Licensed Patents. ARTICLE V - DURATION, TERMINATION AND MISCELLANEOUS 5.1 TERM This Agreement shall commence on the Effective Date and endure and remain in full force, unless terminated under the provisions of this Agreement, throughout the life of any one of the Licensed Patents. 3 5 5.1.1 [*] In case Boehringer intends not to maintain the Biogen license, Boehringer shall inform NeoRx with six (6) months prior notice. 5.1.2 Boehringer shall have the right to terminate this Agreement and license granted hereunder if: NeoRx is in breach or default under this Agreement and has not cured such breach of or default within sixty (60) days after written notice is sent by Boehringer to NeoRx specifying the nature of such breach or default. 5.1.3 NeoRx shall have the right to terminate this Agreement upon ninety (90) days written notice to Boehringer, if: (1) Boehringer is in breach or default under this Agreement and has not cured such breach or default with the aforementioned period or, (2) NeoRx is no longer practicing or using the Licensed Patents. 5.1.4 Either Party shall have the right by written notice to the other party to terminate this Agreement in the event that the other party shall file for prosecution under federal or state Bankruptcy Laws, becomes insolvent or makes an assignment for the benefit of creditors, enters or is put into voluntary or compulsory liquidation or has its business enjoined or ordered into receivership of the equivalent. 5.1.5 Termination shall not affect the provisions as set forth in articles 5.5. 5.2 ENFORCEABILITY Should any part of this Agreement be held unenforceable or in conflict with the law of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding. 5.3 WAIVER A waiver of any breach of any provision of this Agreement shall not be construed as a continuing waiver of other breaches of the same or other provisions of this Agreement. 5.4 ASSIGNMENT Neither this Agreement nor any interest herein is assignable or transferable by NeoRx without a prior approval of Boehringer. In the event that Boehringer will assign or otherwise transfer this Agreement to any third party, Boehringer shall notice NeoRx prior to such assignment or transference and shall bind the assignee or transferee of this Agreement to 4 6 the same extent as Boehringer is bound by all of terms and conditions hereof. 5.5 CONFIDENTIALITY 5.5.1 Each party shall treat all confidential information received from the other party (or its agents or employees), including information regarding or relating to NeoRx Patent Rights, and any information derived therefrom, (any and all such information to be hereinafter referred to as "Proprietary Information") as the confidential and proprietary information of the disclosing party. As used herein, "Proprietary Information" does not include: (i) information which at the time of disclosure to the receiving party is generally available to the public, or which after such disclosure becomes generally available to the public by publication or otherwise other than as the result of a prohibited disclosure by the receiving party; (ii) information that is demonstrated to have been in the receiving party's possession prior to the time of disclosure by the disclosing party; (iii) information that is demonstrated by a preponderance of the evidence to have been independently developed by the receiving party's personnel without reference to Proprietary Information disclosed by the disclosing party; and (iv) information received from a third party unless such information is obtained subject to a confidential disclosure agreement. 5.5.2 Except as required by law and as otherwise set forth herein, each party agrees (i) to hold in strict confidence and trust and maintain as confidential all Proprietary Information of the other party except as required by applicable law or regulation including, without limitation, applicable securities laws and regulations, (ii) not to disclose any such Proprietary Information to any person, except to those employees or legal counsel of the receiving party who are required to receive the Proprietary Information for the purposes described in this Agreement and who are bound by a similar obligation of confidentiality and (iii) to use the Proprietary Information only for the purposes described in this Agreement. 5.5.3 Each party agrees that all Proprietary Information disclosed by the other party will at all times be and remain the sole property of the disclosing 5 7 party and the disclosing party is the sole owner of all patents, copyrights and other intellectual property rights and other proprietary rights related to the Proprietary Information disclosed by it. Nothing in this Agreement shall be construed as granting to the receiving party an implied license in, or right or option to license or use any intellectual property right (including but not limited to any patent right obtained by the disclosing party) relating to the Proprietary Information disclosed by it or any right to use such Proprietary Information except as expressly provided herein. 5.5.4 Immediately upon the termination of this Agreement, or upon disclosing party's request, the receiving party will deliver to the disclosing party all Proprietary Information disclosed by the disclosing party and all documents and data storage media containing any such Proprietary Information and any and all copies thereof, and will delete all such Proprietary Information from its documents and data storage media. 5.6 GOVERNING LAW This Agreement shall be interpreted and construed, and the legal relations created herein shall be determined, in accordance with the substantive laws of Germany. 5.7 ARBITRATION 5.7.1 Any dispute, controversy or claim rising out of or relating to this Agreement shall be referred to arbitration in accordance with the rules of conciliation and arbitration of the Zurich Chamber of Commerce. 5.7.2 The Court of Arbitration shall consist of three arbitrators; each party shall nominate one member. The chairman shall be appointed by the President of the Zurich Chamber of Commerce in accordance with the aforementioned arbitration rules. 5.7.3 The arbitration shall be held at a location to be agreed upon by the arbitrators in the English language. Arbitration shall be final and binding upon both parties. 5.8 MODIFICATION No modification or alteration of this Agreement included this provision shall be effective unless they are made in writing and signed by duly authorized representatives of the parties. 6 8 5.9 ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between the parties and supersedes any prior agreements and understandings with respect to the Licensed Patents. 5.10 NOTICES Notices required under this Agreement shall be in writing and shall for all purposes be deemed to be fully given and received when sent by registered mail, postage prepaid, to the respective parties at the following addresses: If to Boehringer Boehringer Mannheim GmbH Legal Counsel Biochemical Division Sandhofer Stra(greek beta)e 116 Postfach 31 01 20 68298 Mannheim Germany If to NeoRx NeoRx Corporation Attention: Anna Wight 410 West Harrison Seattle, WA 98119-4007 USA Either party hereto may change its address for the purposes of this Agreement by giving the other party written notice of its new address. 7 9 In Witness whereof, the parties have affixed their signatures on the dates indicated below to two (2) duplicate originals, each of which shall be considered an original. Date: May 15, 1997 Date: BOEHRINGER MANNHEIM GMBH NEORX CORPORATION By:___________________________________ By:__________________________________ i. V. Dieter Lingelbach John M. Reno, Ph.D. V.P. Biochemicals for the Pharm. V.P. Research & Development Ind. Business By:___________________________________ i. V. Dr. Claus Schneider Senior Director Biochemicals for the Pharm. Ind. Business 8 EX-10.27 3 v72584ex10-27.txt EXHIBIT 10.27 1 EXHIBIT 10.27 ---------------- REDACTED VERSION ---------------- CLINICAL MANUFACTURE AND SUPPLY AGREEMENT THIS AGREEMENT (the "Agreement") is entered into on January 25, 2001 by and between ABC Laboratories, Inc., of Columbia, Missouri ("ABC") and NeoRx Corporation, of Seattle, Washington ("NeoRx"). The Agreement becomes effective on January 15, 2001 and supercedes the Clinical Manufacture and Supply Agreement between ABC and NeoRx dated September 1, 2000. WITNESSETH WHEREAS, ABC desires to manufacture (166)Ho-DOTMP at the radiopharmaceutical manufacturing facility located in rooms 111, 222, 232 and 232B at Missouri University Research Reactor ("MURR") in Columbia, Missouri (the "Facility"); and WHEREAS, NeoRx desires that ABC manufacture and supply to and on behalf of NeoRx, and ABC is willing to manufacture and supply, certain quantities of [*] ((166)Ho-DOTMP) (the "Product") for NeoRx's use in clinical trials, all in accordance with the terms and conditions set forth in this Agreement; [*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION. NOW THEREFORE, in consideration of the foregoing promises and agreements set forth herein, the parties agree as follows: AGREEMENT I. SCOPE OF WORK (A) Processing Responsibilities. ABC will (1) manufacture, analyze, package in dosage form, and inspect and label (collectively "Process") Product at the Facility in accordance with cGMP and the Product specifications set forth on Exhibit A (which is incorporated herein by this reference), unless NeoRx Quality Assurance approves (on a per batch basis) in writing any deviation in batch test result(s) from Product specifications; (2) maintain records regarding the Product in conformity with cGMP; and (3) supply the Product to NeoRx in such doses as NeoRx may order from ABC in accordance with this Agreement. NeoRx acknowledges that ABC can Process Product only as permitted by MURR Health Physics ("HP"). Furthermore, NeoRx acknowledges that in order to perform the process, ABC must [*]. (B) QA/QC Release Testing. ABC will perform all QA/QC release testing on each batch of Product as required pursuant to cGMP and the Product specifications set forth on Exhibit A. -1- 2 (C) Procurement Responsibilities. ABC will procure, test, release, and maintain sufficient inventory of raw materials, manufacturing and QC components and reagents necessary to Process the Product in accordance with this Agreement, other than (1) DOTMP supplied by NeoRx and (2) (166)HoCl(3) supplied by MURR. If ABC is unable to procure certain raw materials, it may request NeoRx to provide assistance with the procurement of certain other raw materials. (D) Record Keeping and Access. ABC will make available to NeoRx and any applicable governmental agency all records relating to the Process and Facility as they relate to the Product. (E) Facility Access and Inspection. ABC will permit NeoRx and FDA inspectors to access and inspect the Facility (as permitted by MURR HP) to ensure that the Product is being Processed in accordance with cGMP and the Product specifications as set forth on Exhibit A. (F) Certificate of Analysis. ABC will provide to NeoRx a certificate of analysis in a form agreed to by the parties and in compliance with all applicable laws, for each batch of Product, provided a certificate of analysis for (166)HoCl(3) is provided to ABC by MURR prior to completion of the Process. (G) Waste Disposal. ABC shall be responsible for the treatment and/or disposal of all waste generated at ABC during the manufacturing process in accordance with established federal, state and local environmental and OSHA laws and regulations, and the maintenance of detailed and complete records related thereto. II. PURCHASE ORDERS (A) Purchase Orders. NeoRx will deliver to ABC by the close of business on Monday of each week during the term of this Agreement, a written or electronic purchase order for batch Processing (and whether each batch is a [*] that NeoRx desires to purchase during the following calendar week. Each purchase order will also specify the delivery dates and the number of doses of Product that are to be shipped to each location. Each dose shall be shipped in such manner, and to such location, as directed by NeoRx and as permitted by MURR HP. (B) Contradictory Provisions. To the extent any purchase order, or related invoice, contains any provisions contrary to the terms of this Agreement, such contrary provisions shall have no force or effect and the terms of this Agreement shall control. III. FEES (A) Project Initiation Fees. NeoRx agrees to pay ABC [*] as full compensation for services rendered and expenses incurred on behalf of NeoRx but beyond the scope of the Clinical Manufacture and Supply Agreement dated September 1, 2000. These fees are to be paid in [*] (the "Monthly Project Initiation Fees"). (B) Full-Time Equivalent Fees. For the duration of the Agreement, NeoRx agrees to pay ABC [*] per month (the "Full-Time Equivalent Fees") for providing [*] to NeoRx in support of this Agreement and other projects as designated by NeoRx and agreed to by ABC. In the -2- 3 event of any necessary change [*], ABC shall immediately notify NeoRx, and the parties shall work together in good faith [*]. (C) Process Fees. NeoRx and ABC acknowledge the developmental nature of the Process and that unanticipated procedures or additional Process revisions may be required. Accordingly, Process fees include a fixed per batch component for the Process, in accordance with normal protocol and batch record requirements as of the date of the Agreement, and a time and material component for variable costs and additional Process revisions. (1) Fixed Process Fees. For each batch Processed during the term of this Agreement, NeoRx shall pay ABC a fee of [*]. The price per batch includes the cost of [*] to manufacture the product. (2) Time and Material Process Fees. NeoRx shall reimburse ABC for [*]. The fees described in this Section III(C)(2) are collectively referred to as the "Process Time and Material Fees." (D) QA/QC Fees. Consistent with Process fees, the QA/QC fees include a fixed per batch component for normal Process QA/QC testing, in accordance with normal protocol and batch record requirements as of the date of this Agreement, and a time and material component for variable costs and additional QA/QC testing revisions. (1) Fixed QA/QC Fees. For each batch Processed during the term of this Agreement, NeoRx shall pay ABC a fee of [*]. The price per batch includes [*]. (2) Time and Material QA/QC Fees. NeoRx shall reimburse ABC for [*]; provided, however the parties agree that ABC shall incur no costs under this Section III(C)(2) without NeoRx's prior written approval. The fees described in this Section III(C)(2) are collectively referred to as the "QA/QC Time and Material Fees." (E) Minimum Purchase Requirement. During the period from the effective date of the Agreement until December 31, 2002, NeoRx agrees to pay, at a minimum, [*]. IV. BILLING AND PAYMENT TERMS ABC shall invoice NeoRx periodically, but at least monthly, for fees earned and defined in Section III. NeoRx shall pay such invoices within thirty (30) days of its receipt. All invoices that remain unpaid after sixty (60) days of NeoRx's receipt thereof shall accrue interest at the rate of 1.5% per month. ABC shall reference the applicable purchase orders on all invoices. If NeoRx disagrees for any reason with an amount of an invoice, NeoRx shall notify ABC in writing of such a disagreement within ten (10) business days of receipt of such invoice, and the parties shall promptly endeavor to resolve the dispute in good faith. V. SHIPPING TERMS NeoRx will be responsible for the shipment of the Product and liable for any losses resulting from such shipment. NeoRx, in consultation with ABC, shall arrange for the shipment -3- 4 of the Product from the Facility to NeoRx, or such other location(s) as determined by NeoRx. NeoRx shall be responsible for the payment of all shipping charges (including, without limitation, freight, handling, insurance and all other transportation-related items associated with such shipments). VI. TERM AND TERMINATION This Agreement will continue through [*]; provided, however, that either party may terminate this agreement after [*], upon 180 days prior written notice (such notice cannot be given prior to [*]); and provided, however, that either party may terminate this Agreement if the other party breaches any of its obligations hereunder and does not cure such breach within ten (10) days of written notice or, if such breach is of a nature which, using its best efforts, the breaching party cannot cure within ten (10) days, if the breaching party fails to cure such breach within thirty (30) days after the expiration of the cure period. Notwithstanding any provision in this Agreement to the contrary, ABC shall continue to Process the Product and deliver the Product in response to any Purchase Order, through the date of termination, unless such Process and delivery requirements are waived in writing by NeoRx. Upon termination by NeoRx (unless as a result of breach which is not cured by ABC) or breach which is not cured by NeoRx or expiration of this Agreement, ownership of all equipment and instrumentation used in the Process and QA/QC testing and maintained at the Facility will be transferred from NeoRx to ABC; provided, however, that ABC will keep the Facility intact through [*] to permit NeoRx and FDA inspectors to access and inspect the Facility and Process to ensure that the Product was manufactured and released in accordance with cGMP and the Product specifications as set forth on Exhibit A; [*]. VII. MISCELLANEOUS (A) Each party may receive information from the other party that the receiving party should reasonably believe is confidential. Each party will hold the other party's confidential information in confidence, including the terms of this Agreement, and will disclose such information to persons on a need to know basis only. (B) This Agreement contains the entire understanding of the parties and supersedes all prior agreements and understandings, and may not be modified, nor any term waived, except by the unanimous written consent of the parties. (C) The parties are acting as independent contractors and independent employers. Nothing herein shall be construed as creating a partnership, joint employer or agency relationship between the parties and no party shall have authority to bind the other in any respect. (D) In the event any provision of this Agreement is held unenforceable under applicable law, the remainder of the Agreement shall remain valid. (E) No patent, trademark, logo, copyright or other intellectual property rights are conveyed by this Agreement, and neither party shall have the right to use the other parties intellectual property for any purpose whatsoever without prior written consent. -4- 5 (F) NeoRx assumes responsibility for payment or settlement of all charges from [*]. NeoRx agrees to indemnify and hold ABC harmless with respect to the resolution of any [*]. (G) During the Term of this Agreement, neither Party shall make any press release or other disclosure of the terms of this Agreement without the prior written consent of the other Party. (H) ABC will be excused from performing the Process if its performance is delayed or prevented by any cause beyond ABC's reasonable control including, but not limited to, acts of God, fire, explosion, earthquake, disease, weather, war, sabotage, government action, or accidents. Performance shall be excused only to the extent of and during the reasonable continuance of such cause. If such cause results in loss or damage to the materials used in the Process, NeoRx will hold ABC harmless for any such loss or damage. ABC will immediately notify client if, because of any of the causes referred herein, ABC is unable to complete a Process. If any part of the Process is rendered invalid because of such cause, ABC will, on written request from NeoRx, repeat the Process at the cost of NeoRx. Performance shall also be excused if the FDA (or other governmental agency with authority), Missouri Department of Health or other regulatory agency orders ABC to cease Processing the Product or orders NeoRx to permanently cease developing or utilizing the Product. (I) NeoRx will be excused from performance under this Agreement if such performance is delayed or prevented by any cause beyond NeoRx's reasonable control including, but not limited to, acts of God, fire, explosion, earthquake, disease, weather, war, sabotage, government action, or accidents. Performance shall be excused only to the extent of and during the reasonable continuance of such cause. Performance shall also be excused if the FDA (or other governmental agency with authority), Missouri Department of Health or other regulatory agency orders ABC to cease Processing the Product or orders NeoRx to permanently cease developing or utilizing the Product. (J) ABC will not be liable to NeoRx for any loss or expense resulting from any claim arising out of NeoRx's sale, use or marketing of the Product. In no event will ABC be liable for any lost profits or other indirect or consequential loss or damage incurred by NeoRx. (K) Each Party shall defend, indemnify, and hold harmless the other Party, its officers, agents, employees and Affiliates (collectively, the "Indemnified Party") from any third party loss, claim, action, damage, expense or liability (including defense costs and reasonable attorneys' fees) arising out of the Indemnifying Party's (a) breach, violation or non fulfillment of any of its covenant, agreements, representations or warranties under this Agreement, (b) handling, possession, or use of the Product, (c) negligence or willful misconduct, or (d) breach of any third party's trade secret right, except to the extent that such loss, claim, action, damage, expense or liability is based on, arises out of, or is due to the negligence or willful misconduct of, or breach of this Agreement by the Indemnified Party. -5- 6 VIII. INSURANCE (A) Product Liability Insurance. NeoRx shall obtain and maintain in effect, with financially sound and reputable insurers, carrying no less than a Best Rating of A V., Clinical Trial Products Liability insurance or indemnity policies in a form acceptable to both parties which name ABC as an additional insured, with respect to the manufacture, sale and use of commercial products produced by NeoRx that contain Products. Such insurance policies shall be in an amount not less than [*] per occurrence and in the aggregate. (B) Manufacturer's Insurance. ABC shall obtain and maintain in effect in a form acceptable to both parties, with financially sound and reputable insurers carrying no less than a Best Rating of A V., insurance or indemnity policies as described in section VIII(D) with a minimum aggregate coverage of not less than [*] per occurrence and in the aggregate, naming NeoRx as an additional insured, with respect to the Processing of the Products according to the Requirements. (C) Evidence of Insurance. Each party shall supply to the other copies of certificates of insurance giving evidence of procurement of the insurance in the amounts specified in this Article VIII (including the naming of the other party as an additional insured, where required). (D) Type of Insurance. ABC will carry the following types of insurance - Commercial, General Liability, Products Liability, and property insurance with "all risk" coverage on a replacement cost and agreed amount basis, including coverage for business interruption, contingent business interruption, extra expense covering lost profits and continuing payroll and endorsed to include coverage for the extended period of indemnity in a form acceptable to both parties. Both parties also acknowledge that ABC is actively pursuing the establishment of pollution/radioactive contamination liability insurance and will have obtained such coverage on or about March 1, 2001. IN WITNESS WHEREOF, each party has caused this Agreement to be executed by a duly authorized representative, effective on this date first set forth above. NEORX CORPORATION ABC LABORATORIES, INC. By:___________________________________ By:__________________________________ Name:_________________________________ Name:________________________________ Title:________________________________ Title:_______________________________ -6- 7 EXHIBIT A ITEM SPECIFICATIONS [*] -7- EX-10.28 4 v72584ex10-28.txt EXHIBIT 10.28 1 EXHIBIT 10.28 ---------------- REDACTED VERSION ---------------- [LETTER HEAD OF CR STRATEGIES] MASTER SERVICE AGREEMENT BETWEEN CR STRATEGIES, L.L.C. AND NEORX CORPORATION FEBRUARY 28, 2001 2 1. OVERVIEW. This agreement states the terms and conditions by which CR Strategies, L.L.C. will deliver and NeoRx Corporation will receive any or all of the services provided by CR Strategies, L.L.C. The specific services to be provided hereunder are identified and described in detail in the applicable SERVICE LEVEL AGREEMENT attached to this Agreement. Each SERVICE LEVEL AGREEMENT accepted and executed by both parties is hereby incorporated by reference into this agreement. This agreement is intended to cover any and all services ordered by NeoRx Corporation and provided by CR Strategies, L.L.C. 2. DEFINITIONS. When used in this Agreement, the "BOLDED" terms listed below shall have the following meanings: (a) "NEORX CORPORATION TECHNOLOGY" shall mean any proprietary technology owned by NeoRx Corporation, or licensed to NeoRx Corporation by third parties, and all similar proprietary information provided to CR Strategies, L.L.C. by NeoRx Corporation in connection with CR Strategies, L.L.C.'s provision of services to NeoRx Corporation. (b) "CONFIDENTIAL INFORMATION" shall mean any information disclosed by either party to the other party, directly or indirectly, in writing, orally or by inspection of tangible objects that is designated as "Confidential", "Proprietary" or some other similar designation, including information disclosed to a disclosing party by third parties. Confidential Information shall not include any information that: is or becomes publicly known and generally available without violation of this Agreement; is in the possession of the receiving party prior to the disclosure without the obligation to maintain its confidentiality; is independently developed by the receiving party without use of or reference to the disclosing party's Confidential Information; is obtained from third parties without restrictions on disclosure; or is required by law or legal process to be disclosed by the receiving party, provided that, if permitted, the receiving party gives the disclosing party prompt written notice prior to such disclosure. (c) "CR STRATEGIES, L.L.C. TECHNOLOGY" shall mean any designs, concepts, reports, documentation, written materials, and any techniques, methods, patterns, formulas and any and all intellectual property rights used, invented, developed or delivered by CR Strategies, L.L.C. in the course of providing services. (d) "EFFECTIVE DATE" shall mean the date on which authorized representatives of NeoRx Corporation and CR Strategies, L.L.C have executed this Master Service Agreement. 3 3. SERVICE LEVEL AGREEMENT. A SERVICE LEVEL AGREEMENT is attached to this Master Service Agreement. Extensions or modifications to such SERVICE LEVEL AGREEMENT may be requested by NeoRx Corporation subject to any procedures set forth in such SERVICE LEVEL AGREEMENT or herein, and shall be subject to CR Strategies, L.L.C.'s approval and execution of an amendment to the SERVICE LEVEL AGREEMENT or, if appropriate, a new SERVICE LEVEL AGREEMENT. 4. PAYMENTS. NeoRx Corporation agrees to pay to CR Strategies, L.L.C. according to the schedule provided in the attached SERVICE LEVEL AGREEMENT. NeoRx Corporation shall remit payment to CR Strategies, L.L.C., referencing the CR Strategies, L.L.C. invoice number, to: CR Strategies, L.L.C. 21 Kimberly Court Collinsville, IL 62234 Attn: Accounts Receivable or to such other address as CR Strategies, L.L.C. shall designate in writing to NeoRx Corporation. 5. OWNERSHIP AND LICENSE. The documentation, enhancements, revisions, updates, upgrades, modifications, and derivative works thereto, and all other items delivered by CR Strategies, L.L.C. under this Agreement are owned by NeoRx Corporation. 6. CONFIDENTIAL INFORMATION. Each party agrees not to use any Confidential Information of the other party for any purpose except in the performance of the services. Each party agrees not to disclose any Confidential Information of the other party to such party's employees or to third parties, except those who need to know such information for the purposes hereof. Each party agrees that it shall take reasonable efforts to protect the secrecy of and avoid disclosure and unauthorized use of any Confidential Information of the other party. Without limiting the foregoing, each party shall take at least those measures that it takes to protect its most highly confidential information. All documents and other tangible objects containing or representing Confidential Information which have been disclosed by either party to the other party, and all copies thereof which are in the possession of the receiving party, shall be and remain the property of the disclosing party and shall promptly be returned 4 to the disclosing party upon the request of the disclosing party. Except as expressly provided herein, nothing contained in this Agreement is intended to grant any rights to either party under any patent, mask work right, copyright, trademark, service mark or other intellectual property right of the other party. 7. LIMITED WARRANTY; LIMITATION OF LIABILITY. (a) CR Strategies, L.L.C. warrants that the services shall materially comply with the specifications for such services set forth in the attached SERVICE LEVEL AGREEMENT. To the extent that any failure of the services to comply with the specifications results in a failure or inability of CR Strategies, L.L.C. to provide services to NeoRx Corporation, CR Strategies, L.L.C.'s obligations and liability with respect to such failure, and NeoRx Corporation's sole remedy with respect to such failure, will be limited to a refund of that portion of the SERVICE LEVEL AGREEMENT total cost that is attributable to the specific services giving rise to the claim for damages. Subject to the limitations set forth herein, NeoRx Corporation agrees to defend, indemnify and hold CR Strategies, L.L.C., and its officers, employees and agents harmless against and for all losses, causes of action, liability, costs, expenses, claims and damages, including all expenses of litigation, reasonable attorney's fees and court costs, that either party may at any time suffer or sustain or become liable for, due to injury or death of a person, or for damage to any property arising out of, in connection with, or incidental to the service(s) provided by CR Strategies, L.L.C. under the terms of this agreement. (b) Except for NeoRx Corporation's payment obligations in section 4 neither party shall be liable for any special, indirect, incidental or consequential damages (even if advised of the possibility of such damage), including without limitation, lost profits or lost savings, loss of use of services (except as specifically provided in the attached SERVICE LEVEL AGREEMENT), cost of capital, cost of substitute services or re-procurement, downtime costs, or damages resulting from loss of use of data or from third party claims. CR Strategies, L.L.C. shall have no liability from damages resulting from NeoRx Corporation's failure to perform their responsibilities hereunder, including, but not limited to, NeoRx Corporation's failure to provide accurate and complete information to CR Strategies, L.L.C. In no event, shall CR Strategies, L.L.C.'s liability for damages hereunder exceed the amounts paid to CR Strategies, L.L.C. by NeoRx Corporation for the services giving 5 rise to the claim for damages. NeoRx Corporation recognizes that the fees specified in the attached SERVICE LEVEL (c) AGREEMENT are based in part on the limited warranty and limitation of liability set forth above. The remedies specified in this agreement are exclusive. 8. WORKMANSHIP. CR Strategies, L.L.C. represents and warrants that all of the services specified in the attached SERVICE LEVEL AGREEMENT will be performed in a good, workmanlike and professional manner in accordance with industry standards by qualified persons fully familiar with the requirements for such services. 9. FORCE MAJEURE. Except with respect to payment obligations, neither party shall be liable, nor shall any credit allowance or other remedy be extended, for any failure to fulfill its obligations under this Agreement due to causes beyond such party's reasonable control, including, but not limited to: acts of God, flood, extreme weather, fire or other natural calamity; any law, order, regulation, direction, action, or request of any governmental entity or any civil or military authority; unavailability of rights-of-way or materials; national emergencies, insurrections, riots, or wars; or strikes, lock-outs, work stoppages, or other labor difficulties. Each party agrees to notify the other party, as soon as possible, if such an event has occurred. The time for completion of any obligation to which this provision applies shall be extended for a period equivalent to the delay except for payment obligations, which shall be extended by a maximum of 10 days. 10. INITIAL DISPUTE RESOLUTION. Except in the case of a dispute in which a party seeks injunctive relief or must file suit in order to avoid expiration of the applicable statute of limitations, all disputes shall be referred to the senior executives of the parties for resolution. If the dispute is not resolved within 60 days of receipt of the initiating party's written notice, or if the senior executives fail to discuss the dispute(s) within 30 days of receipt of the initiating party's notice, either party may pursue any and all remedies available at law. 11. ASSIGNMENT. Either party may transfer its rights and duties under this Agreement to an entity which has acquired all of such party's capital stock or all or substantially all of such party's assets, provided that: (i) the acquiring entity is not a competitor of the other party, (ii) the acquiring entity agrees in writing to be bound by the terms of this Agreement, (iii) the acquiring entity is capable of meeting all of its obligations under this Agreement, (iv) the other party is in full compliance with its obligations under this Agreement, and (v) the other party consents in writing to such transfer in advance, which consent shall not be unreasonably withheld. In all other cases, neither this Agreement nor any rights or licenses granted 6 hereunder may be assigned, or duties delegated whether by operation of law or otherwise, by either party without the prior written consent of the other party. Any attempted assignment or delegation in violation of this Section shall be void and ineffective for all purposes. This Agreement shall be binding upon and inure to the benefit of NeoRx Corporation and any permitted assignee or successor of either party. 12. TERM AND TERMINATION. This Agreement shall become effective on the Effective Date and shall remain in effect for the period specified in the attached SERVICE LEVEL AGREEMENT. (a) TERMINATION FOR MATERIAL BREACH. (i) In the event of any other material breach of this Agreement, the non-breaching party shall give the breaching party written notice describing such breach. In the event that the breaching party fails to cure such material breach within 30 days after receipt of written notice of such breach from the non-breaching party, the non-breaching party shall be entitled to terminate this Agreement upon written notice to the breaching party. (ii) Upon any termination of this Agreement for material breach by CR Strategies, L.L.C., NeoRx Corporation shall be entitled to a pro rata refund of amounts paid in advance for services. (b) INSOLVENCY. In the event either party shall (i) be declared bankrupt, become subject to any proceedings relating to its liquidation, reorganization, or insolvency, whether voluntary or involuntary, or for the appointment of a trustee or receiver or similar official, of or for it or any part of its property, or (ii) fail generally, or admit in writing its inability to pay its debts as they become due, or (iii) make a general assignment for the benefit of creditors, or (iv) be dissolved or otherwise cease business as an ongoing business entity, then the other party may, upon thirty (30) days prior written notice, terminate this Agreement for cause. In the event of the commencement of a case under the Bankruptcy Code by or against either party, and during the period prior to the entry of an order directing or authorizing the other party or its trustee in bankruptcy to assume, reject or otherwise terminate this Agreement, such party may exercise its rights under Bankruptcy Code Section 365(n), as such section may be amended or supplemented from time to time, and the exercise of such rights or resort to any remedies provided thereunder shall not be deemed the exclusive rights and/or remedies available to such party, but such party is entitled to obtain any relief to the fullest extent provided by applicable bankruptcy or nonbankruptcy law. 7 (c) RENEWAL AND EXPIRATION. (i) Apart from the above conditions the parties shall have the right to renew this Agreement upon mutual agreement, and it shall continue in effect for so long as there is a SERVICE LEVEL AGREEMENT in effect. Unless specifically provided otherwise, the term of a SERVICE LEVEL AGREEMENT, and NeoRx Corporation's right to use the services specified in such SERVICE LEVEL AGREEMENT, shall begin on the commencement date specified in Section 12 and continue in effect for the term stated in the SERVICE LEVEL AGREEMENT. Thereafter, the parties shall have the right to renew, upon mutual agreement, a SERVICE LEVEL AGREEMENT for successive renewal terms of duration equal to the original agreement. (ii) In the event of any expiration or termination of this Agreement NeoRx Corporation shall pay CR Strategies, L.L.C. on or before the effective date of termination all fees due, including but not limited to any out-of pocket expenses and reasonable travel and related expenses incurred up to the date of termination. Notwithstanding any termination or expiration of this Agreement, Sections 2, 4, 5, 6, 7, 8, 9, 10, 11, 12(c)(ii), 16, and 17 shall survive termination. 13. GOVERNING LAW. Interpretation, construction and enforcement of this Agreement shall be pursuant to the laws of Washington, U.S.A. The parties agree that the United Nations Convention for the International Sale of Goods shall not apply to this Agreement. Both parties agree to submit to the exclusive jurisdiction and venue of and agree that any cause of action arising under this Agreement shall be brought in a court in Washington. 14. NOTICES. All notices required to be given under this Agreement shall be in writing and shall be deemed effective when received and shall be delivered in person, by facsimile, with a confirmation copy sent as provided herein, or by mail, postage prepaid, for delivery as registered or certified mail addressed, return receipt requested. All notices shall be deemed received (i) if given by hand, immediately, (ii) if given by registered mail, 3 business days after posting, (iii) if given by express courier service, the next business day, or (iv) if given by facsimile, upon receipt thereof by the recipient's facsimile machine as indicated either in the sender's identification line produced by the recipient's facsimile machine or in the sender's transmission confirmation report as produced electronically by the sender's facsimile machine. Notices to CR Strategies, L.L.C. shall be sent to: 8 CR Strategies, L.L.C. 605 Alder Street Prescott, AZ 86301 Attn: Raymond F. Schmelter, PhD, MBA FAX Number (520) 445-1378 or, in the case of NeoRx Corporation, to: NeoRx Corporation 410 West Harrison Street Seattle, WA 98119-4007 Attn: Paul G. Abrams, M.D., J.D. or to such other address as either party may designate in writing to the other from time to time. 15. ENTIRE AGREEMENT. This Agreement and the SERVICE LEVEL AGREEMENT referenced herein constitute the full and final expression of agreement between the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, whether written or oral, relating to the subject matter hereof. This Agreement may not be altered, amended or modified except by written instrument signed by the duly authorized representatives of both parties. Any different, additional and/or pre-printed terms contained on purchase orders or other terms and conditions submitted by NeoRx Corporation shall be void. As used herein, "include" and its derivatives shall be deemed to mean, "including but not limited to". 16. SEVERABILITY. Should any term of this Agreement, for any reason, be held to be illegal or unenforceable by a court of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect, and the offending term shall be limited or modified to the extent necessary to make it enforceable. 17. GENERAL. (a) Either party may disclose that NeoRx Corporation has retained CR Strategies, L.L.C.'s services, and CR Strategies, L.L.C. may describe in general, non-confidential terms, CR Strategies, L.L.C.'s work under the Agreement in its marketing materials. Any other disclosure as to the nature of this Agreement or the work being performed hereunder shall be subject to the prior approval of both parties. (b) No waiver of or 9 failure to act regarding any breach of this Agreement shall constitute a waiver of any other breach. (c) Subject to applicable law, no action, other than an action for nonpayment, arising out of or relating to this Agreement may be brought by either party more than 2 years after the cause of action has accrued, provided that neither party shall be precluded from making a counterclaim or cross-claim in an action commenced by the other party or by a third party. CR Strategies, L.L.C.'s contractors may be direct and intended third party beneficiaries of this Agreement and may be entitled to enforce this Agreement directly against NeoRx Corporation to the extent that (i) this Agreement relates to the acquisition of CR Strategies, L.L.C. contractor's services, and (ii) CR Strategies, L.L.C. fails to enforce the terms of this Agreement on CR Strategies, L.L.C. contractors' behalf. This Agreement may be amended or modified only by a written instrument signed by an authorized representative of CR Strategies, L.L.C. and NeoRx Corporation. By the signatures of their duly authorized representatives below, CR Strategies, L.L.C. and NeoRx Corporation, intending to be legally bound, agree to all of the provisions of this Agreement. ACCEPTED & AGREED TO: CR Strategies, L.L.C. NeoRx Corporation By: By: Adeoye Y. Olukotun, MD, MPH Title: CEO Title: Date: February 28, 2001 Date: By: Raymond F. Schmelter, PhD, MBA Title: President and COO Date: February 28, 2001 10 ATTACHMENT A. SERVICE LEVEL AGREEMENT BETWEEN CR STRATEGIES, L.L.C. AND NEORX CORPORATION FEBRUARY 28, 2001 OVERVIEW CR Strategies, L.L.C. will function as the Senior Management of Medical and Regulatory Affairs for NeoRx Corporation through the end of December 2001 and will perform the specific tasks listed under Section B below. NeoRx Corporation and CR Strategies, L.L.C. have agreed that CR Strategies, L.L.C. will endeavor to achieve the following objectives for this engagement: - - Identify, propose, and build systems, processes and human resources internally at NeoRx Corporation toward establishing an NDA-ready organization. - - Manage, through direct reporting and supervision, all Medical & Regulatory Affairs personnel. Mentor the STR program and its personnel through the term of the engagement. One of CR Strategies, L.L.C.'s principal members will be [*] for the duration of the engagement. CR Strategies, L.L.C. will report to Dr. Doug Given for the duration of the engagement. [*] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION. Services provided by CR Strategies, L.L.C. will commence on the date on which NeoRx Corporation signs the Master Service Agreement to which this SERVICE LEVEL AGREEMENT is attached and will terminate not later than December 31, 2001. WORK PRODUCT CR Strategies, L.L.C. will perform the following specific tasks for NeoRx Corporation: - - Identify and procure, according to the terms in Section D below, a complete problem-solving team to manage the STR clinical and regulatory program. 11 - - Form [*] capable of crossing the threshold acceptable to FDA. All consulting costs for these experts will be billed by the consultants directly to NeoRx Corporation. - - Prepare for [*] with FDA. - - Develop [*] acceptable to FDA. - - Identify and set up clinical sites appropriate to performing [*]. - - Manage the performance of the [*] clinical study. - - Analyze, submit to FDA, and defend clinical data developed in [*]. - - Develop a protocol for performing [*] for a subsequent [*] clinical trial. - - Initiate the [*] clinical trial. - - Manage the relationship with PPD Contract Research Organization. - - Perform potential problem analysis and develop a plan to manage regulatory risk. - - Develop internal NeoRx systems to prepare for NDA submission. - - Assist in identifying, recruiting, and training NeoRx human resources to complete the [*] clinical trial and submit the NDA. NeoRx Corporation will provide CR Strategies, L.L.C. with full access to its STR project employees, subcontractors, and consultants, and all necessary STR project data and documentation to allow CR Strategies, L.L.C. to fulfill its obligations under this SERVICE LEVEL AGREEMENT. MATERIALS, SHIPPING, TRAVEL, SITE VISITS, PHOTOCOPYING Expenses incurred by CR Strategies, L.L.C. in providing these services are anticipated to not exceed approximately 20% of the price of this SERVICE LEVEL AGREEMENT and will be separately billed to NeoRx Corporation on a bi-weekly basis. If for any reason prices exceed 20% of the price of this SERVICE LEVEL AGREEMENT, CR Strategies, L.L.C. will obtain NeoRX Corporation's approval prior to proceeding. Expected costs include, but are not limited to, travel, travel expenses (meals and lodging), telephone, fax, courier, shipping costs, copying, materials, etc. When either party to this agreement deems travel necessary, CR Strategies, L.L.C. will contact NeoRx Corporation to reach agreement about costs and trip duration. PRICING AND PAYMENT SCHEDULE CR Strategies, L.L.C. will perform the tasks indicated in Section B for [*], plus [*] stock options ([*] for each CR Strategies, L.L.C. principal member), plus expenses as described in Section C. The cost breakdown for the engagement is as follows:
CR Strategies Salaries [*] Administrative Overhead (25%) [*] Total [*]
One hundred percent of Administrative Overhead [*] will be invoiced immediately upon commencement of the engagement. [*] of the CR Strategies, L.L.C. salaries shown above ([*]) will be invoiced at the end of each calendar quarter, commencing March 30, 2001. In addition, it is anticipated that the following professionals will subcontract directly with NeoRx, but be managed by CR Strategies, L.L.C., for approximately the following salaries in order to further the objectives listed in Section A: 12
-------------------------------------------------------------------------- Fully- Position Loaded Annualized Hours/ Hourly Weeks/ 10-Month Salary Week Rate Year Total -------------------------------------------------------------------------- Ph.D. Regulatory Director [*] [*] [*] [*] [*] MD Safety Reviewer [*] [*] [*] [*] [*] M.S. Statistician [*] [*] [*] [*] [*] M.S. Senior CRA [*] [*] [*] [*] [*] B.S. Senior CRA Safety Reviewer [*] [*] [*] [*] [*] B.S. Regulatory Specialist [*] [*] [*] [*] [*] B.S. Medical Writer [*] [*] [*] [*] [*] -------------------------------------------------------------------------- Total [*] --------------------------------------------------------------------------
CR Strategies, L.L.C. will invoice NeoRx Corporation a one-time charge of 10% of the 10-month salary for each of these, or other similar, professionals that CR Strategies, L.L.C. successfully recruits as subcontractors to the STR project. The price in this quotation is valid for 30 days from the date on the cover sheet of this SERVICE LEVEL AGREEMENT. EX-10.29 5 v72584ex10-29.txt EXHIBIT 10.29 1 EXHIBIT 10.29 NEORX CORPORATION NONQUALIFIED STOCK OPTION LETTER AGREEMENT MARCH 12, 2001 TO: ADEOYE Y. OLUKOTUN We are pleased to inform you that you have been granted a nonqualified stock option under the NeoRx Corporation Restated 1994 Stock Option Plan (the "Plan") for the purchase of 50,000 shares of NeoRx Corporation's (the "Company") common stock at an exercise price of $5.5312 per share, pursuant to the terms and conditions set forth below and in the Company Plan. A copy of the Plan is attached and incorporated into this Agreement by reference. The terms of the option are as set forth in the Plan and in this Agreement. The most important of the terms set forth in the Plan are summarized as follows: DATE OF GRANT: The date of grant of the option is March 12, 2001. VESTING: The option shall vest and become exercisable immediately upon grant. TERM: The option will expire upon the earlier of ten years from the date of grant or one year after your termination of service as a Consultant to the Company, unless sooner terminated. EXERCISE: During your lifetime only you can exercise the option. The Plan also provides for exercise of the option by the personal representative of your estate or the beneficiary thereof following your death. PAYMENT FOR SHARES: The option may be exercised by the delivery of: (1) Cash, personal check (unless, at the time of exercise, the Plan Administrator determines otherwise), bank certified or cashiers check; (2) Unless the Plan Administrator in its sole discretion determines otherwise, shares of the capital stock of the Company held by you for a period of at least six months having a fair market value at the time of exercise, as determined in good faith by the Plan Administrator, equal to the exercise price; or (3) A properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price. TERMINATION: If you cease to be a Consultant to the Company for any reason other than death or termination for cause, and unless by its terms this option sooner terminates or expires, then you may exercise, for a one-year period, that portion of your option which is exercisable at the time of such cessation, but the option shall terminate at the end of such period following such cessation as to all shares for which it has not theretofore been exercised. 2 DEATH OF OPTIONEE: If you die while serving as a Consultant to the Company or within the one-year period following cessation of such service, this option may, to the extent that you would have been entitled to exercise this option, be exercised within one year after your death by the personal representative of your estate or by the person or persons to whom your rights under this option shall pass by will or by the applicable laws of descent and distribution, unless sooner terminated. STATUS OF SHAREHOLDER: Neither you nor any person or persons to whom your rights and privileges under this option may pass shall be, or have any of the rights or privileges of, a shareholder of the Company with respect to any of the shares issuable upon the exercise of this option unless and until this option has been exercised. CONTINUATION OF STATUS AS CONSULTANT: Nothing in this Agreement shall confer upon you any right to continue as a Consultant to the Company, or to interfere in any way with the right of the Company to terminate your service as a Consultant to the Company at any time. TRANSFER OF OPTION: This option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by the applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process. Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of any right or privilege conferred hereby, contrary to law or to the provisions of this Agreement, or the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby shall be null and void. HOLDING PERIOD: Shares of common stock obtained upon the exercise of this option may not be sold until six months after the date the option was granted. Your particular attention is directed to the section(s) of the Plan which describe(s) certain important conditions relating to federal and state securities laws that must be satisfied before the option can be exercised and before the Company can issue any shares to you. The Company intends to maintain an effective registration statement with respect to the shares that will be issued upon exercise of this option but has no obligation to do so. If there is no effective registration statement, you will not be able to exercise the option or sell the option shares unless exemptions from registration under federal and state securities laws are available. Such exemptions are very limited and might be unavailable. Consequently, you might have no opportunity to exercise the option and to receive shares upon such exercise. Please execute the Acceptance and Acknowledgment set forth below and return it to the undersigned. NEORX CORPORATION ______________________________________ Paul G. Abrams Chief Executive Officer 3 ACCEPTANCE AND ACKNOWLEDGMENT I, Adeoye Y. Olukotun, a resident of the State of New Jersey, accept the nonqualified stock option described above and in NeoRx Corporation's 1994 Stock Option Plan, and acknowledge receipt of a copy of this Agreement, including a copy of the Plan. I have read and understand the Plan, including the provision(s) relating to federal and securities law. Dated:__________________________ _____________________________________ ____________________ Taxpayer I.D. Number By signing below, the spouse of the Optionee, if such Optionee is legally married as of the date of execution of this Agreement, acknowledges that (s)he has read this Agreement and the Plan and is familiar with the terms and provisions thereof, and agrees to be bound by all the terms and conditions of this Agreement and the Plan. Dated:__________________________ _____________________________________ By signing below, the Optionee represents that (s)he is not legally married as of the date of execution of this Agreement. Dated:__________________________ _____________________________________ EX-10.30 6 v72584ex10-30.txt EXHIBIT 10.30 1 EXHIBIT 10.30 NEORX CORPORATION NONQUALIFIED STOCK OPTION LETTER AGREEMENT MARCH 12, 2001 TO: RAYMOND F. SCHMELTER We are pleased to inform you that you have been granted a nonqualified stock option under the NeoRx Corporation Restated 1994 Stock Option Plan (the "Plan") for the purchase of 50,000 shares of NeoRx Corporation's (the "Company") common stock at an exercise price of $5.5312 per share, pursuant to the terms and conditions set forth below and in the Company Plan. A copy of the Plan is attached and incorporated into this Agreement by reference. The terms of the option are as set forth in the Plan and in this Agreement. The most important of the terms set forth in the Plan are summarized as follows: DATE OF GRANT: The date of grant of the option is March 12, 2001. VESTING: The option shall vest and become exercisable immediately upon grant. TERM: The option will expire upon the earlier of ten years from the date of grant or one year after your termination of service as a Consultant to the Company, unless sooner terminated. EXERCISE: During your lifetime only you can exercise the option. The Plan also provides for exercise of the option by the personal representative of your estate or the beneficiary thereof following your death. PAYMENT FOR SHARES: The option may be exercised by the delivery of: (1) Cash, personal check (unless, at the time of exercise, the Plan Administrator determines otherwise), bank certified or cashiers check; (2) Unless the Plan Administrator in its sole discretion determines otherwise, shares of the capital stock of the Company held by you for a period of at least six months having a fair market value at the time of exercise, as determined in good faith by the Plan Administrator, equal to the exercise price; or (3) A properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds to pay the exercise price. TERMINATION: If you cease to be a Consultant to the Company for any reason other than death or termination for cause, and unless by its terms this option sooner terminates or expires, then you may exercise, for a one-year period, that portion of your option which is exercisable at the time of such cessation, but the option shall terminate at the end of such period following such cessation as to all shares for which it has not theretofore been exercised. 2 DEATH OF OPTIONEE: If you die while serving as a Consultant to the Company or within the one-year period following cessation of such service, this option may, to the extent that you would have been entitled to exercise this option, be exercised within one year after your death by the personal representative of your estate or by the person or persons to whom your rights under this option shall pass by will or by the applicable laws of descent and distribution, unless sooner terminated. STATUS OF SHAREHOLDER: Neither you nor any person or persons to whom your rights and privileges under this option may pass shall be, or have any of the rights or privileges of, a shareholder of the Company with respect to any of the shares issuable upon the exercise of this option unless and until this option has been exercised. CONTINUATION OF STATUS AS CONSULTANT: Nothing in this Agreement shall confer upon you any right to continue as a Consultant to the Company, or to interfere in any way with the right of the Company to terminate your service as a Consultant to the Company at any time. TRANSFER OF OPTION: This option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by the applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process. Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of any right or privilege conferred hereby, contrary to law or to the provisions of this Agreement, or the sale or levy or any attachment or similar process upon the rights and privileges conferred hereby shall be null and void. HOLDING PERIOD: Shares of common stock obtained upon the exercise of this option may not be sold until six months after the date the option was granted. Your particular attention is directed to the section(s) of the Plan which describe(s) certain important conditions relating to federal and state securities laws that must be satisfied before the option can be exercised and before the Company can issue any shares to you. The Company intends to maintain an effective registration statement with respect to the shares that will be issued upon exercise of this option but has no obligation to do so. If there is no effective registration statement, you will not be able to exercise the option or sell the option shares unless exemptions from registration under federal and state securities laws are available. Such exemptions are very limited and might be unavailable. Consequently, you might have no opportunity to exercise the option and to receive shares upon such exercise. Please execute the Acceptance and Acknowledgment set forth below and return it to the undersigned. NEORX CORPORATION ______________________________________ Paul G. Abrams Chief Executive Officer 3 ACCEPTANCE AND ACKNOWLEDGMENT I, Raymond F. Schmelter, a resident of the State of Arizona, accept the nonqualified stock option described above and in NeoRx Corporation's 1994 Stock Option Plan, and acknowledge receipt of a copy of this Agreement, including a copy of the Plan. I have read and understand the Plan, including the provision(s) relating to federal and securities law. Dated:__________________________ _____________________________________ ____________________ Taxpayer I.D. Number By signing below, the spouse of the Optionee, if such Optionee is legally married as of the date of execution of this Agreement, acknowledges that (s)he has read this Agreement and the Plan and is familiar with the terms and provisions thereof, and agrees to be bound by all the terms and conditions of this Agreement and the Plan. Dated:__________________________ _____________________________________ By signing below, the Optionee represents that (s)he is not legally married as of the date of execution of this Agreement. Dated:__________________________ _____________________________________ EX-10.31 7 v72584ex10-31.txt EXHIBIT 10.31 1 EXHIBIT 10.31 FIRST AMENDMENT TO SUBLEASE AGREEMENT This First Amendment (the "Amendment") is dated for reference purposes March 30, 2001, and amends that certain Sublease Agreement dated July 24, 2000 (the "Sublease") made by and between F5 Networks, Inc., a Washington corporation, as Sublandlord, and NeoRx Corporation, Inc., a Washington corporation, as Subtenant. The proper nouns used in this Amendment that are not otherwise defined shall have the meaning given to those same terms in the Sublease. RECITALS Provided Sublandlord is successful in completing a sublease of the recaptured space, Sublandlord and Subtenant wish to amend the Sublease to reduce the area of the Subleased Premises from 28,854 rentable square feet to 14,666 rentable square feet and adjust the rent, all is more particularly described below. NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment, and for other good and valuable consideration, the receipt and sufficiency for which is hereby acknowledged by the parties, Sublandlord and Subtenant hereby agree as follows. AGREEMENT 1. SUBLEASED PREMISES. On the Effective Date, Sublandlord shall recapture 14,188 rentable square feet of the Subleased Premises identified as the "Recapture Space" on the outline attached as Exhibit A, and the Sublease will be amended to provide that the Subleased Premises shall be the area shown on the attached Exhibit A as the "Reduced Subleased Premises" comprised of an agreed area of 14,666 rentable square feet. Provided, however, Sublandlord and its potential subtenants shall have the right to enter the Recapture Space prior to the Effective Date to conduct inspections and to begin the planning and design process for alterations contemplated for the space. 2. DELIVERY OF THE RECAPTURE SPACE. On or before the Effective Date, Subtenant shall deliver the Recapture Space to Sublandlord in a neat and clean condition, with all of Subtenant's trade fixtures, furniture, equipment, improvements and alterations removed and all damage caused by such removal repaired. 1 2 3. BASE RENT AND OPERATING EXPENSES. 3.1 BASE RENT. On the Effective Date or any earlier date from which Sublandlord has been credited rent by its proposed subtenant (currently contemplated to be April 6, 2001) (the "Rent Reduction Date"), the Base Rent shall be as follows to reflect the reduction in the area of the Subleased Premises and to compensate Sublandlord for the reduced rent received under the new sublease of the Recapture Space:
TIME PERIOD MONTHLY BASE RENT ANNUAL BASE RENT/RSS/YR - ----------- ----------------- ----------------------- Rent Reduction Date to $41,434.17 $33.90 October 31, 2001 November 1, 2001 to $43,838.67 $35.87 October 31, 2001 November 1, 2002 to $46,243.17 $37.84 October 31, 2003
3.2 OPERATING EXPENSES. On and after the Rent Reduction Date, Subtenant's proportionate share of all Expenses, as defined in Section 4(c) of the Master Lease, shall be reduced to 13.32 percent to reflect the reduction in the area of the Sublease Premises. 4. SUBLEASE OF THE RECAPTURE SPACE. This Amendment is conditioned upon: (i) Sublandlord entering into a sublease for the Recapture Space on terms acceptable to Sublandlord; and (ii) Landlord consenting to that sublease. The date on which both of those conditions have been satisfied is the "Effective Date" hereunder. Either party may terminate this Amendment by written notice to the other if the Effective Date has not occurred on or before May 4, 2001. 5. SECURITY DEPOSIT. On the Effective Date, the security deposit referenced in paragraph 7 of the Sublease shall be reduced to $138,729.51 (the last 3 months rent). On the first business day after the Effective Date, Sublandlord shall return the balance of Subtentant's deposit, which is $99,315.99. 2 3 6. REAL ESTATE COMMISSION. On the first business day after the Effective Date, Subtenant shall pay $66,276 to satisfy commissions that are due to Washington Partners, Inc. and Colliers International for services rendered in relation to successfully completing this Amendment. It shall be paid in the following manner, a) $25,491 shall be paid to Washington Partners, and b) $40,785 shall be paid to F5 NETWORKS, INC. F5 Networks, Inc. shall be responsible to pay Colliers International. 7. TERMINATION FEE. In the event the Sublandlord exercises its right to cancel the Sublease prior to the Expiration Date (October 31, 2003), Sublandlord shall pay a termination fee to Subtenant based on the following formula. The base Principle Amount for the calculation of the Termination Fee shall be $25,822. Sublandlord shall pay its pro-rata share of the Principle Amount based on the denominator being 365 and the nominator being the number of days remaining in the Term from the effective cancellation date to the Expiration Date. As an example, if Sublandlord cancelled the Sublease and 170 days remained until the Expiration date, the nominator would be 170, divided by the denominator of 365 times the Principle Amount ($25,822) for a termination fee of $12,026. Not withstanding the forgoing, Sublandlord shall not be responsible for a termination fee that is greater than the Principle Amount. The termination fee shall be paid upon the effective cancellation date. 8. MISCELLANEOUS. This Amendment and the agreements referenced herein constitute the entire agreement between Sublandlord and Subtenant with respect to the Subleased Premises and may not be amended or altered except by a written agreement executed by both parties. This Amendment may be signed in counterparts. Transmission of a counterpart by facsimile shall be the same as delivery of an original. A party will confirm his or her signature by re-signing a counterpart at the request of the other party. In the event of any conflict between the terms of this Amendment and the Sublease, this Amendment shall control 3 4 IN WITNESS WHEREOF, the parties have executed this Amendment as of the date stated above. SUBLANDLORD: SUBTENANT: F5 Networks, Inc., a Washington NeoRx Corporation, Inc., a Washington corporation corporation By:___________________________________ By:__________________________________ Name:_________________________________ Name:________________________________ Title:________________________________ Title:_______________________________ 4 5 STATE OF WASHINGTON ) ) ss: COUNTY OF KING ) I certify that I know or have satisfactory evidence that ________________ is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute this instrument and acknowledged it as the ___________________ of F5 Networks, Inc., a a Washington corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED: __________________, 2001. _____________________________________ Print Name:__________________________ NOTARY PUBLIC in and for the State of Washington, residing at _____________ My Appointment expires: _____________ 5 6 STATE OF WASHINGTON ) ) ss: COUNTY OF KING ) I certify that I know or have satisfactory evidence that ________________ is the person who appeared before me, and said person acknowledged that he signed this instrument, on oath stated that he was authorized to execute this instrument and acknowledged it as the _________________ of NeoRx Corporation, a Washington corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in this instrument. DATED:___________________, 2001. Print Name: _________________________ NOTARY PUBLIC in and for the State of Washington, residing at _____________ My Appointment expires: _____________ 6 7 EXHIBIT A OUTLINE OF THE REDUCED SUBLEASED PREMISES AND RECAPTURE SPACE SHADED AREA IS THE REDUCED SUBLEASE SPACE NON-SHADED AREA IS THE RECAPTURE SPACE -----END PRIVACY-ENHANCED MESSAGE-----