-----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, F9k47yA2bVY1+9uEaK2/vqeflovb0iNv+OC0Ts69efWRtTmgSWVV2miFlvVINeHF eDpiMpV6FP76r0mkH0hbpQ== 0000950123-99-009672.txt : 19991103 0000950123-99-009672.hdr.sgml : 19991103 ACCESSION NUMBER: 0000950123-99-009672 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19991102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMCLONE SYSTEMS INC/DE CENTRAL INDEX KEY: 0000765258 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 042834797 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-87489 FILM NUMBER: 99739072 BUSINESS ADDRESS: STREET 1: 180 VARICK ST CITY: NEW YORK STATE: NY ZIP: 10014 BUSINESS PHONE: 2126451405 MAIL ADDRESS: STREET 1: 180 VARICK ST CITY: NEW YORK STATE: NY ZIP: 10014 S-3/A 1 AMENDMENT #3 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 1999 REGISTRATION NO. 333-87489 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ IMCLONE SYSTEMS INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 04-2834797 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
180 VARICK STREET NEW YORK, NY 10014 (212) 645-1405 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ JOHN B. LANDES, ESQ. VICE PRESIDENT, BUSINESS DEVELOPMENT AND GENERAL COUNSEL IMCLONE SYSTEMS INCORPORATED 180 VARICK STREET NEW YORK, NY 10014 (212) 645-1405 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: RICHARD A. DRUCKER, ESQ. PATRICK O'BRIEN, ESQ. DAVIS POLK & WARDWELL ROPES & GRAY 450 LEXINGTON AVENUE ONE INTERNATIONAL PLACE NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02110 (212) 450-4000 (617) 951-7000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - ------------------ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - ------------------ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - ------------------ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS (Subject to Completion) Issued November 2, 1999 2,500,000 Shares [IMCLONE LOGO] ImClone Systems Incorporated COMMON STOCK ------------------------ IMCLONE SYSTEMS INCORPORATED IS OFFERING 2,500,000 SHARES OF ITS COMMON STOCK. ------------------------ OUR COMMON STOCK IS LISTED FOR TRADING ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "IMCL." ON OCTOBER 29, 1999, THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $27 7/8 PER SHARE. ------------------------ INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10. ------------------------ PRICE $ A SHARE ------------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS COMPANY -------- ------------- ----------- Per Share................................................. $ $ $ Total..................................................... $ $ $
We have granted the underwriters the right to purchase up to an additional 375,000 shares to cover over-allotments. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on November , 1999. ------------------------ MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO. PRUDENTIAL VECTOR HEALTHCARE WARBURG DILLON READ LLC a unit of Prudential Securities November , 1999 3 TABLE OF CONTENTS
PAGE ---- Prospectus Summary...................... 5 Risk Factors............................ 10 Use of Proceeds......................... 20 Price Range of Common Stock............. 20 Dividend Policy......................... 20 Capitalization.......................... 21 Dilution................................ 22 Selected Consolidated Financial Data.... 23 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 24 Business................................ 33 Management.............................. 50 Principal Stockholders.................. 55 Description of Capital Stock............ 57 Material U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock................................. 62 Underwriters............................ 64 Legal Matters........................... 65 Experts................................. 65 Where You Can Find More Information..... 66 Index to Financial Statements........... F-1
------------------------ In this prospectus, "ImClone," the "company," "we," "us" and "our" refer to ImClone Systems Incorporated. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. ------------------------ FORWARD-LOOKING STATEMENTS The statements incorporated by reference or contained in this prospectus discuss our future expectations, contain projections of our results of operations or financial condition, and include other "forward-looking" information within the meaning of Section 27A of the Securities Act of 1933, as amended. Our actual results may differ materially from those expressed in forward-looking statements made or incorporated by reference in this prospectus. Forward-looking statements that express our beliefs, plans, objectives, assumptions or future events or performance may involve estimates, assumptions, risks and uncertainties. Therefore, our actual results and performance may differ materially from those expressed in the forward-looking statements. Forward-looking statements often, although not always, include words or phrases such as the following: - "will likely result" - "are expected to" - "will continue" - "is anticipated" - "estimate" - "intends" - "plans" - "projection" - "outlook" 2 4 You should not unduly rely on forward-looking statements contained or incorporated by reference in this prospectus. Actual results or outcomes may differ materially from those predicted in our forward-looking statements due to the risks and uncertainties inherent in our business, including risks and uncertainties in: - clinical trial results - obtaining and maintaining regulatory approval - market acceptance of and continuing demand for our products - the impact of competitive products and pricing - our ability to obtain additional financing to support our operations - factors discussed in the documents listed below You should read and interpret any forward-looking statements together with the following documents: - our most recent Annual Report on Form 10-K - our Quarterly Reports on Form 10-Q - the risk factors contained in this prospectus under the caption "Risk Factors" - our other filings with the Securities and Exchange Commission Any forward-looking statement speaks only as of the date on which that statement is made. We will not update any forward-looking statement to reflect events or circumstances that occur after the date on which such statement is made. ------------------------ ImClone was incorporated in Delaware in 1984 and began its principal research and development operations in March 1986. Our principal executive offices and laboratories are located at 180 Varick Street, New York, New York 10014, and our telephone number is (212) 645-1405. 3 5 [This page intentionally left blank] 4 6 PROSPECTUS SUMMARY This summary highlights information contained elsewhere or incorporated by reference in this prospectus. This summary may not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to those statements, and the documents incorporated by reference in this prospectus. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters' overallotment option. IMCLONE OVERVIEW ImClone is a biopharmaceutical company engaged in the research and development of novel cancer treatments. We are currently pursuing three research and development programs that we believe show promise for treating cancer: growth factor inhibitors, cancer vaccines and angiogenesis inhibitors. Our lead product candidate, C225, is a therapeutic antibody that inhibits stimulation of a receptor found on the cells of certain solid tumors. C225 has been shown in several Phase I/II trials to have an acceptable safety profile, to be well tolerated and, when administered in conjunction with either radiation therapy or chemotherapy, to enhance tumor reduction. We are currently testing C225 in pivotal trials for treating head and neck cancer and in a Phase II clinical trial for colorectal cancer. Our next most advanced product candidate, BEC2, is a cancer vaccine. We and our partner Merck KGaA are testing BEC2 for preventing recurrence or progression of small-cell lung cancer in a multinational pivotal Phase III trial. We are also developing inhibitors of angiogenesis, or the growth of new blood vessels, to treat various kinds of cancer and other diseases. We have identified an antibody for angiogenesis inhibition, c-p1C11, and we plan to file an application with the FDA in the fourth quarter of 1999 in order to commence clinical trials. C225 CANCER THERAPEUTIC C225 is a monoclonal antibody that binds to a receptor, known as the Epidermal Growth Factor, or EGF, receptor. The EGF receptor is overexpressed on the cells of approximately one-third of all types of solid tumors. For these tumor types, the percentage of EGF receptor positive patients varies. For example, 90% of all head and neck cancer patients are positive for the EGF receptor, as well as a majority of colorectal and non small-cell lung cancer patients. The activation of the EGF receptor is believed to play a critical role in the proliferation of these types of tumor cells. C225 attaches to the EGF receptor and blocks this activation, thereby inhibiting cell proliferation. We are developing C225 as a therapeutic for treating, in conjunction with conventional radiation therapy or chemotherapy, those cancer types characterized by high levels of, and dependence upon, the EGF receptor. Completed Clinical Trials Since December 1994, we have completed several Phase I/II clinical trials to evaluate the safety and potential efficacy of C225. In these studies, we have given C225 to approximately 200 patients intravenously, both alone and in combination with conventional cancer therapies. In June 1999, we completed a Phase I/II trial in which 12 patients with advanced head and neck cancer were treated with C225 in combination with cisplatin, a widely used chemotherapeutic drug. At the completion of the trial, two of the nine evaluable patients had achieved a complete response (meaning that the tumor was reduced beyond measurable size) and four had achieved a partial response (meaning that the tumor was reduced by at least 50%). Most of the patients had previously received treatment, including standard chemotherapy, radiation therapy or experimental treatments, and either did not respond or thereafter relapsed. In particular, three of the six responders (including the two complete responders) had previously been treated with a regimen containing cisplatin and relapsed following such treatment. 5 7 In January 1999, we completed a Phase I/II trial in which 16 patients with advanced head and neck cancer were treated with C225 in combination with radiation therapy. At the completion of the trial, all 15 evaluable patients had responded to therapy; 13 of the patients had achieved a complete response and two had achieved a partial response. This compares with historical response rates of approximately 40% in similar patients treated with radiation alone. In all trials to date, while most patients have experienced skin rashes and three of the approximately 200 patients treated have experienced anaphylactic reactions, C225 has otherwise been generally well tolerated by patients. While encouraging, the results from these trials are not sufficient to establish that C225 is safe or effective in treating cancer. Ongoing Clinical Trials We have initiated two pivotal Phase III trials of C225 in treating head and neck cancer. One trial is evaluating the administration of C225 in combination with radiation as first-line therapy for advanced head and neck cancer that has not metastasized, or spread to other parts of the body. Enrollment commenced in April 1999, and we expect the study to take approximately two-and-one-half years to complete. The other Phase III trial is examining the effects of administration of C225 in combination with cisplatin as first-line therapy for metastatic or recurrent head and neck cancer. Enrollment is expected to commence in November 1999, and we expect the study to take one-and-one-half years to complete. We have also initiated two additional Phase II C225 trials in patients who have not responded to conventional therapies. In the first trial, we are testing C225 in combination with cisplatin in patients with refractory head and neck cancer. In the second trial, we are testing C225 in combination with irinotecan, another commonly used chemotherapeutic agent, in patients with EGF receptor-positive refractory colorectal cancer. We expect that enough information may be available from these studies during the first half of 2000 to determine whether the data are sufficient to support an application for FDA approval of C225. In addition, we expect to conduct several additional Phase II clinical trials to continue to determine other types of cancer on which C225 may be effective. These may include pancreatic, lung and renal cancer. We also expect to conduct C225 clinical trials with Merck KGaA in Europe. Marketing and Development We have entered into a development and marketing agreement with Merck KGaA relating to C225. We have retained the right to market C225 within the United States and Canada, for which we are building our own sales force. Merck KGaA has the right to market C225 internationally; however, in Japan we will co-develop and co-market C225 with Merck KGaA. In addition, we will manufacture C225 for any and all commercial sales. Merck KGaA is required to pay us fees for various milestone achievements as well as royalties on all C225 sold by them. Merck KGaA has also agreed to provide a guaranty of our credit agreement obligations relating to the construction of our new C225 commercial manufacturing facility. BEC2 CANCER VACCINE BEC2 is a monoclonal antibody that we are developing as a cancer vaccine. This vaccine is given to a patient following successful treatment of a tumor and is intended to activate the patient's immune responses to protect against spread or recurrence of the tumor. BEC2 mimics GD3, a molecule expressed on the surface of several types of cancer cells. By mimicking GD3, BEC2 stimulates an immune response against cells expressing GD3. We have tested BEC2 in Phase I clinical trials against certain forms of cancer, including both small-cell lung cancer and melanoma. In one such trial, 15 patients with small-cell lung cancer who had previously received chemotherapy and radiation therapy and achieved a partial or complete response were treated with BEC2. At the time the results were analyzed, approximately 27% of the patients had survived nearly five years following diagnosis. These survival rates are longer than historical survival rates for similar patients receiving 6 8 conventional therapy and formed the basis for going forward with Phase III studies. This trial is not sufficient to establish that BEC2 is safe or effective in treating cancer. In conjunction with and funded primarily by Merck KGaA, we have initiated a 570-patient Phase III multinational clinical trial for BEC2 in the treatment of limited disease small-cell lung cancer. The trial will examine patient survival two years after a course of therapy. We expect to complete enrollment in the trial during 2001. We have entered into a development and marketing agreement with Merck KGaA relating to BEC2. Under this agreement, we have retained the right to co-promote BEC2 with Merck KGaA within North America, and we have granted Merck KGaA exclusive rights to develop and market BEC2 outside of North America. In addition, we intend to be the worldwide manufacturer of BEC2. MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS Our lead anti-angiogenesis product candidate, c-p1C11, is an antibody that targets KDR, a principal receptor for a growth factor known as Vascular Endothelial Growth Factor, or VEGF. By blocking the binding of VEGF to KDR, c-p1C11 is designed to inhibit or eliminate tumor growth. We expect to file an application with the FDA by the end of 1999 in order to commence clinical trials of c-p1C11. OTHER RESEARCH In addition to the development of our lead product candidates, we continue to conduct research, both independently and in collaboration with academic and commercial partners, in a number of areas related to our core focus of growth factor inhibitors, cancer vaccines and angiogenesis inhibitors. 7 9 THE OFFERING Common stock offered.......... 2,500,000 shares Common stock to be outstanding after the offering............ 28,129,007 shares Over-allotment option......... 375,000 shares Use of proceeds............... We intend to use the proceeds from this offering: - to fund the expansion of clinical trials - to fund a portion of the costs of our new manufacturing facilities - to develop a sales force in the United States - for general corporate purposes, including research and development expenses, and other working capital Dividend policy............... We have never declared cash dividends on our common stock and have no present intention of declaring such cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors deems relevant. Nasdaq National Market Symbol........................ IMCL The number of shares of our common stock to be outstanding after the offering does not take into account 7,675,550 shares of our common stock issuable upon exercise of outstanding options and warrants, having a weighted average exercise price of $9.65 per share, as of October 27, 1999. This number also does not include the 400,000 shares of series A preferred stock currently held by Merck KGaA, of which 100,000 shares are currently convertible into 800,000 shares of our common stock. This number also does not include common stock that will be issued for cash to Merck KGaA upon the achievement of certain milestones set forth in our agreement with Merck KGaA relating to C225. 8 10 SUMMARY FINANCIAL DATA The following financial data should be read in conjunction with, and are qualified by reference to, "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes included elsewhere in this prospectus.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------ ------------------ 1996 1997 1998 1998 1999 -------- -------- -------- ------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues..................................... $ 600 $ 5,348 $ 4,193 $ 2,615 $ 883 Operating expenses: Research and development................... 11,482 16,455 21,049 8,846 13,505 General and administrative................. 3,961 5,356 7,145 2,959 3,677 Net interest and other income(1)............. (95) (972) (2,619) (1,409) (90) -------- -------- -------- ------- -------- Loss before extraordinary item............... (14,748) (15,491) (21,382) (7,781) (16,209) Extraordinary loss on extinguishment of debt....................................... 1,267 -- -- -- -- -------- -------- -------- ------- -------- Net loss..................................... (16,015) (15,491) (21,382) (7,781) (16,209) Preferred dividends.......................... -- 163 3,668 1,825 1,862 -------- -------- -------- ------- -------- Net loss to common stockholders.............. $(16,015) $(15,654) $(25,050) $(9,606) $(18,071) ======== ======== ======== ======= ======== Basic and diluted net loss per common share...................................... $ (0.83) $ (0.67) $ (1.03) $ (0.40) $ (0.73) ======== ======== ======== ======= ======== Weighted average shares outstanding.......... 19,371 23,457 24,301 24,251 24,718
AS OF JUNE 30, 1999 --------------------------- ACTUAL AS ADJUSTED(2) --------- -------------- (UNAUDITED) (IN THOUSANDS) BALANCE SHEET DATA: Cash, cash equivalents and securities....................... $ 40,678 $ 105,309 Working capital............................................. 21,314 85,945 Total assets................................................ 58,098 122,729 Long-term obligations, less current portion................. 3,786 3,786 Accumulated deficit......................................... (155,055) (155,055) Stockholders' equity........................................ 33,136 97,767
- ------------ (1) Net interest and other income is presented net of interest income, interest expense and realized gains and losses on securities available for sale. (2) As adjusted to reflect receipt of the estimated net proceeds from the sale of 2,500,000 shares of common stock at an assumed offering price of $27 7/8 per share. See "Use of Proceeds" and "Capitalization." 9 11 RISK FACTORS You should carefully consider each of the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. Some of the following risks relate principally to our business and the industry in which we operate. Other risks relate principally to the securities market and ownership of our common stock. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. OUR LEAD PRODUCT CANDIDATES ARE IN DEVELOPMENT, AND WE CANNOT BE CERTAIN THAT ANY OF OUR PRODUCTS WILL BE COMMERCIALIZED Our lead product candidates, C225 and BEC2, are in clinical trials. Before we can commercialize any of our product candidates and begin to sell them to generate revenues, we will need to demonstrate in pivotal clinical trials that they are safe and effective and obtain the necessary approvals from the United States Food and Drug Administration and similar foreign regulatory agencies. It is not certain that clinical trials will demonstrate that our products are safe and effective, or that we can obtain the required regulatory approvals to commercialize them. With respect to C225, there can be no assurance that, even if we were to ultimately receive regulatory approval, we would be able to receive such approval based on the results of our ongoing Phase II clinical trials. Further, even if we successfully develop a product, there is no assurance that we will be able to successfully manufacture or market that product. If we are unable to successfully commercialize C225 and BEC2, our liquidity and financial condition could be materially negatively affected. WE HAVE BEEN OPERATING AT A LOSS AND EXPECT TO INCUR SIGNIFICANT FUTURE LOSSES We have had significant operating losses in each year and have not earned a profit in any year since we formed ImClone. These operating losses and failure to be profitable have been due mainly to the significant amount of money that we have had to spend on research and development. As of June 30, 1999, we had an accumulated deficit of approximately $155 million. We expect to continue to have significant additional operating losses as we continue to expand our product development and clinical trials and initiate marketing efforts. We may never commercialize any of our products or achieve profitability. WE MAY NOT BE ABLE TO OBTAIN THE EXTENSIVE GOVERNMENT APPROVALS REQUIRED TO BRING OUR PRODUCTS TO MARKET The research, pre-clinical development, clinical trials, manufacturing and marketing of our products are all subject to extensive regulation by U.S. and foreign governmental authorities. Although we intend to seek expedited approval for certain of our products, including C225, there can be no assurance that the FDA will grant us expedited review status for any of our potential filings. Failure to receive regulatory approvals for our product candidates and operations in our expected timeframes could have a material negative effect on our liquidity and financial condition. The FDA and similar foreign regulatory authorities regulate our clinical trials as well as our manufacturing and marketing operations. They require us to comply with product-specific testing and approval processes. It may take many years and cost a significant amount of money to obtain the required regulatory approvals for our products. Once we begin clinical trials for a new biologic therapeutic or vaccine product, it may take five or more years to receive the required FDA approval to commercialize that product and begin to sell and market it to the public. It may also take several years to develop a new in vitro diagnostic product, depending upon the clinical data requirements or approval process specified by the FDA for the approval of the product. The FDA may also request additional data which could substantially extend these approval processes. We cannot be certain that any of our products will be shown to be safe and effective or that we will ultimately receive FDA approval at the end of these approval processes. In addition, even if granted, product approvals may be withdrawn or limited at a later time if products do not comply with regulatory standards or if unexpected problems occur following initial marketing. Since our product candidates are still in clinical trials, we have not yet sought or received regulatory approval for the commercial sale of any of our products or for any manufacturing techniques or facilities. We and our licensees may experience long delays or excessive costs when we do attempt to get necessary approvals or licenses. Future federal, state, local or foreign legislative or administrative acts could also prevent or delay 10 12 regulatory approval of our products or the products of our licensees. We cannot be certain that we or our corporate partners will be able to get the necessary approvals for clinical testing, manufacturing or marketing of our products, or that we will meet our expected timeframes for any such approvals. Any of the following events, if they were to occur, could delay or preclude us from further developing, marketing or realizing full commercial use of our products, which in turn would have a material adverse effect on our business, financial condition and results of operations: - failure to obtain or maintain requisite governmental approvals - failure to obtain approvals of clinically intended use of our products under development - identification of serious and unanticipated adverse side effects from our products under development Manufacturers of drugs also must comply with the applicable FDA good manufacturing practice regulations, which include quality control and quality assurance requirements as well as the corresponding maintenance of records and documentation. Manufacturing facilities are subject to ongoing periodic inspection by the FDA and corresponding state agencies, including unannounced inspections, and must be licensed as part of the product approval process before they can be used in commercial manufacturing. We or our present or future suppliers may be unable to comply with the applicable good manufacturing practice regulations and other FDA regulatory requirements. OUR SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND OUR PROPRIETARY TECHNOLOGY The patent position of ImClone, like that of other biopharmaceutical companies, is generally very uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can: - obtain patents to protect our own products - obtain licences to use certain technologies of third parties, which may be protected by patents - protect our trade secrets and know-how - operate without infringing the intellectual property and proprietary rights of others We may not be able to obtain patents that adequately protect our own products. Also, our proprietary technologies could conflict with the rights of others. Our ability to commercialize and market our products using any such technologies could be materially and negatively affected. We have exclusive licenses or assignments to 63 issued patents worldwide. Thirty-seven of those are issued U.S. patents. We have exclusive licenses or assignments to approximately 43 families of patent applications that relate to our proprietary technology in the U.S. and in foreign countries. We cannot be certain that patents will be issued as a result of any of these pending applications. Nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing products. For example, issued patents may be circumvented or challenged and declared invalid. In addition, under many of the agreements under which we have licenses to the patents or patent applications of others, we are required to meet specified milestone or diligence requirements in order to keep our licenses. We cannot be certain that we will satisfy any of these requirements. We know that others have filed patent applications in various countries that relate to several areas in which we are developing products. Some of these patent applications have already been issued as patents and some are still pending. The pending patent applications may issue as patents. Issued patents are entitled to a rebuttable presumption of validity under the laws of the U.S. and certain other countries. These issued patents may therefore limit our ability to develop commercial products. If we need licenses to such patents to permit us to develop or market our products, we cannot be certain that we would be able to get such licenses on acceptable terms. Proprietary trade secrets and unpatented know-how are important to our research and development activities. We cannot be certain that others will not develop the same or similar technologies on their own. 11 13 Although we have taken steps, including entering into confidentiality agreements with our employees and third parties, to protect our trade secrets and unpatented know-how and keep them secret, third parties may still obtain such information. The following are some of the specific areas in which we may be negatively affected by the patents and patent applications of others: We have an exclusive license to an issued U.S. patent for the murine form of C225, our EGF receptor antibody product. We believe that this patent covers C225 under the patent law doctrine of equivalents. Under this doctrine, the subject matter of a claim is deemed to cover variations that do substantially the same thing, in substantially the same way, to achieve the same result, especially if the variation is known and routine. We believe, in this instance, the doctrine of equivalents would extend protection to C225. Our licensor of this patent did not obtain patent protection outside the U.S. for this antibody. While this patent covers only our antibody and would not block third parties from obtaining patents covering other antibodies to the EGF receptor, we are pursuing additional patent protection for the use of any antibody that inhibits the EGF receptor in combination with chemotherapy or radiation therapy, or when used to treat refractory patients. We have exclusively licensed, from Rhone-Poulenc Rorer, a family of patent applications seeking to cover the use of antibodies to the EGF receptor in conjunction with chemotherapeutic agents. A Canadian patent was issued in this family, and the patent examiner in Europe has indicated an intent to issue a European patent. U.S. prosecution continues. We are also currently prosecuting additional patent applications in the U.S. and elsewhere. We cannot be certain that patents will ever be issued in respect of these patent applications or that we will have sufficient protection for C225. We are aware of a U.S. patent issued to a third party that includes claims covering the use, subject to certain restrictions, of antibodies to the EGF receptor and cytotoxic factors to inhibit tumor growth. We have retained special patent counsel, Kenyon & Kenyon, which has advised us that in its opinion, subject to the assumptions and qualifications set forth in such opinion, no valid claim of this third party patent is infringed by reason of our manufacture or sale, or medical professionals' use, of C225 alone or in combination with chemotherapy or radiation therapy and, therefore, in the event of litigation for infringement of this third party patent, a court should find that no valid claim of this third party patent is infringed. We have also received an opinion from our regular patent counsel, Hoffmann & Baron, LLP, that we do not infringe this third party patent. Based upon these opinions, as well as our review, in conjunction with our regular patent counsel, of other relevant patents, we believe that we will be able to commercialize C225 alone and in combination with chemotherapy and radiation therapy provided we successfully complete our clinical trials and receive the necessary FDA approvals. These opinions of counsel, however, are not binding on any court or the U.S. Patent and Trademark Office. In addition, there can be no assurance that we will not in the future, in the U.S. or any other country, be subject to patent infringement claims, patent interference proceedings or adverse judgments in patent litigation. The C225 monoclonal antibody is chimerized, meaning that it is made of antibody fragments derived from more than one type of animal (specifically, in the case of C225, mouse and human). Patents have been issued to other biotechnology companies that cover the chimerization of antibodies. Therefore, we may be required to obtain licenses under these patents, some of which have already been obtained, before we can commercialize our own chimerized monoclonal antibodies, including C225. We cannot be certain that we will be able to obtain such licenses in the territories where we want to commercialize, or how much such licenses would cost. We know that others have been issued patents in the U.S. and Europe covering anti-idiotypic antibodies or their use for the treatment of tumors. These patents, if valid, could be interpreted to cover our BEC2 monoclonal antibody and certain uses of BEC2. Merck KGaA, our worldwide licensee of BEC2, has informed us that it has obtained non-exclusive, worldwide licenses to these patents in order to market BEC2 in its territory. We are entitled to co-promote BEC2 in North America. However, we cannot be certain that we can obtain the necessary licenses on commercially acceptable terms, if at all. We have patents and have filed patent applications to protect our proprietary rights to anti-angiogenic therapeutics, as well as therapeutic methods of treating angiogenic disease. We are aware that others have 12 14 filed patent applications that could affect our ability to commercialize some of our anti-angiogenic therapeutics or therapeutic treatments. We are aware that third parties have filed patent applications in areas that could affect our ability or Abbott Laboratories's ability to commercialize our diagnostic products. These areas could include target amplification technology and signal amplification technology. Third party patents have already been issued in the field of target amplification such as polymerase chain reaction technology. There has been significant litigation in the biopharmaceutical industry over patents and other proprietary rights. The defense and prosecution of intellectual property suits and related legal and administrative proceedings can be both costly and time consuming. Litigation and interference proceedings could result in substantial expense to us and significant diversion of effort by our technical and management personnel. An adverse determination in any such interference or litigation, particularly with respect to C225, to which we may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties. If required, the necessary licenses may not be available on acceptable terms or at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us, in whole or in part, from commercializing our products, which could have a material adverse effect on our business, financial condition and results of operations. WE CURRENTLY HAVE LIMITED MANUFACTURING CAPACITY AND WILL NEED TO ENTER INTO ARRANGEMENTS WITH THIRD PARTY MANUFACTURERS So far, we have manufactured only small quantities of our products in the laboratory and our pilot-scale manufacturing facility. In some cases, we have produced enough for pre-clinical animal trials and early-stage clinical trials. We can only be profitable if our products are manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. However, it may be difficult for us to produce large enough quantities for late-stage clinical trials or for more than one product candidate. Production in commercial quantities will require us to expand our manufacturing capabilities significantly and hire and train additional personnel. We have limited experience in clinical-scale manufacturing and no experience in commercial-scale manufacturing. To date, C225 has been manufactured at a 2,000 liter scale. We expect that the commercial supply of C225 will be manufactured at the 10,000 liter scale. There can be no assurance, however, that we will be successful in scaling up the production process for C225 to the 10,000 liter scale. Therefore, we cannot be certain that we will be able to make the transition to late-stage clinical or commercial production of C225 or any other of our products successfully. In addition, we cannot be certain that our production costs will not be higher than expected. We are in the process of acquiring land adjacent to our current facility in New Jersey on which we plan to build a commercial-scale manufacturing plant for our products. The cost to build such a facility will be high and the construction process will take several years. We have completed plans for, and will begin construction of the plant before we have received FDA approval for any of our product candidates. If we do not obtain FDA approval for these product candidates, the financing and other costs associated with the new manufacturing facility could have an adverse effect on our liquidity and financial condition. Alternatively, if any of our products are approved for sale, and we encounter difficulty or delays in completing the new manufacturing facility, obtaining the required FDA approval of the facility or in manufacturing commercial quantities of our products, such difficulties or delays could have a material adverse effect on our business, financial condition or results of operations. If we obtain FDA approval of C225 prior to FDA approval of our proposed manufacturing facility, we will need to obtain commercial-scale quantities of C225 from one or more contract manufacturers in order to have sufficient quantities of C225 for product launch. In any event, we intend to seek to enter into arrangements with contract manufacturers in order to provide a second source for our products as well as additional capacity for the manufacture of our products. To date, we have entered into an agreement with Boehringer Ingelheim Pharmaceuticals KG ("BI") under which BI has manufactured C225 in relatively small quantities to supplement the quantities of C225 that we produce and use in clinical trials. We may pursue an agreement with another third party relating to the manufacture of C225 for both clinical trials and commercial sale. We 13 15 cannot be certain that we will be able to enter into this agreement or any other agreements with third party manufacturers on terms acceptable to us or at all. Even if we are able to enter into such agreements, we cannot be certain that we will be able to produce or obtain sufficient quantities for the commercial sale of our products. Any delays in producing or obtaining commercial quantities of our products could have a material adverse effect on our business, financial condition and results of operations. We are also dependent upon a sole supplier of a component of the media used in the production of C225. If this supply were to cease, it could hinder our ability to manufacture C225 in the quantities required. OUR BUSINESS DEPENDS UPON OUR CORPORATE PARTNERS So far, we have earned almost all of our revenues from research and development funding and license fees and royalties paid to us under agreements with our corporate partners. We expect this to continue over the next several years. License fees may be payable to us either when we first enter into an agreement or when and if we or our corporate partners, depending on the agreement, reach agreed-upon research, regulatory and commercialization milestones, or both. We do not receive any of these payments at regular intervals; the amounts have fluctuated in the past and we expect them to continue to fluctuate in the future. In most cases, our corporate partners can terminate these arrangements, including their payment obligations, on relatively short notice under specified circumstances. We cannot be certain that we will continue to receive revenues from these arrangements, or that we will enter into any new similar agreements. The successful development, marketing and sale of our products worldwide is subject to the risk of financial or other difficulties with respect to our relationships with our corporate partners. The amount and timing of payments we receive under our arrangements with these parties depend upon variables that are out of our control. In addition, our corporate partners or their affiliates may be developing their own products or technologies which may directly compete with products that are the subject of their arrangements with us. While we believe that our corporate partners are or will be economically motivated to work toward successful arrangements with us, we cannot be certain that their corporate interests and motivations will remain consistent with ours. In December 1998, we entered into an agreement with Merck KGaA, a German-based drug company, relating to the development, marketing and sale of C225. Under this agreement: - we have retained the rights to develop and market C225 within the United States and Canada - we have granted Merck KGaA exclusive rights, except in Japan, to develop and market C225 outside of the United States and Canada - we have agreed to supply Merck KGaA, and Merck KGaA has agreed to purchase, C225 for the conduct of clinical trials and the commercialization of the product outside the United States and Canada - we will co-develop and co-market C225 in Japan with Merck KGaA - we have granted Merck KGaA an exclusive license outside of the United States and Canada, without the right to sublicense, to apply certain of our patents to a humanized EGF receptor antibody on which Merck KGaA has performed preclinical studies In return, Merck KGaA agreed to pay up-front fees and to make cash payments and equity investments in our business if specific milestones are achieved. Merck KGaA will also pay us royalties on any sales of C225 outside the United States and Canada. In addition, Merck KGaA has agreed to provide a guaranty of our obligations under a credit agreement relating to the construction of our new C225 manufacturing facility. We have also granted Merck KGaA a license to develop and market BEC2 worldwide. We have retained the right to co-promote BEC2 with Merck KGaA within North America and it is intended that we will be the bulk manufacturer of BEC2 for worldwide production. In return, Merck KGaA has agreed to pay up-front 14 16 fees, to make cash milestone payments and to make royalty payments to us on all sales of BEC2 outside North America. If Merck KGaA fails to complete development of or does not commence commercialization of C225 and BEC2, we would not receive any royalties on sales by Merck KGaA, although the product rights would revert to us. Merck KGaA can terminate its relationship with us under the agreement with respect to C225 at its discretion on any milestone payment date. If Merck KGaA were to terminate that agreement or we failed to meet certain requirements of that agreement, we would lose one of our primary sources of funding and would have to look elsewhere for financing. As well as losing future payments, if Merck KGaA were to terminate the agreement because it determined that commercialization of C225 was economically unfeasible, we would have to pay back up to 50% of the cash-based milestone payments made to date out of revenues, if any, based upon a royalty rate applied to the gross profit from C225 sales or C225 license fees in the United States and Canada. Additionally, the termination of the agreement due to Merck KGaA's failure to provide the guaranty of our credit agreement obligations with respect to our new C225 manufacturing facility, or our failure to obtain the necessary collateral license agreements, would require us to return all milestone payments made to date. Finally, upon termination we would be required to use our reasonable best efforts to have Merck KGaA released from its guaranty of our credit agreement obligations with respect to our new C225 manufacturing facility. This release of Merck KGaA would likely cause the acceleration of our obligations under this credit agreement. Thus, termination of the agreement with Merck KGaA relating to C225 could have a material adverse effect on our business, financial condition and results of operations. WE WILL CONTINUE TO NEED SIGNIFICANT AMOUNTS OF ADDITIONAL CASH AND WE CANNOT BE SURE THAT ADDITIONAL CASH WILL BE AVAILABLE TO US At this time and for the foreseeable future, we will need to spend a significant amount of money for, among others, the following purposes: - ongoing pre-clinical and clinical trials of our product candidates - research and development of new products - establishing both clinical-scale and commercial-scale manufacturing capability in our own facilities and/or in the facilities of others - marketing our products if we receive necessary regulatory approvals - payment of dividends on our convertible series A preferred stock We believe that our existing cash on hand and amounts expected to be available under our credit facilities, together with net proceeds from this offering, will be sufficient to fund ImClone through at least 2001. We are also entitled to reimbursement from our corporate partners for certain research and development expenditures and to certain milestone payments. However, we will only receive future milestone payments from our corporate partners if we meet specified research and development milestones. We have not yet achieved some of those milestones and we cannot be certain that we will ever do so. Our C225 agreement with Merck KGaA is subject to termination at Merck's discretion on certain dates and so we cannot be certain of the level of future payments, if any, under this agreement. The cash available from our existing corporate partners may be insufficient to meet our needs. We may also need to seek additional capital through equity or debt financings or from other sources. We cannot be certain that we will successfully complete any such arrangements or financings. If adequate funds are not available from operations or additional sources of financing, we may have to delay, reduce the scope of or eliminate one or more of our research or development programs, which would materially and adversely affect our business, financial conditions and operations. 15 17 ACCEPTANCE OF OUR PRODUCTS IN THE MARKETPLACE IS UNCERTAIN, AND FAILURE TO ACHIEVE MARKET ACCEPTANCE WILL HARM OUR BUSINESS Even if approved for marketing, our products may not achieve market acceptance. The degree of market acceptance of our products will depend upon a number of factors, including: - the receipt of regulatory approvals for the uses that we are studying - the establishment and demonstration in the medical community of the safety and clinical efficacy of our products and their potential advantages over existing therapeutic products - pricing and reimbursement policies of government and third-party payors such as insurance companies, health maintenance organizations and other plan administrators Physicians, patients, payors or the medical community in general may be unwilling to accept, utilize or recommend any of our products. WE NEED TO ESTABLISH OUR SALES, MARKETING AND DISTRIBUTION CAPABILITY To date, we have had no experience in selling, marketing or distributing new products. If we are successful in developing and obtaining regulatory approval for our products under development, we will need to establish our sales, marketing and distribution capability. Under our agreement with Merck KGaA for C225, we have the exclusive right to market C225 in the United States and Canada if it is approved for sale there. We also will co-develop C225 with Merck KGaA in Japan. Under our agreement with Merck KGaA for BEC2, we have the right to co-promote BEC2 in North America if it is approved for sale there. If and when we want to market a new product on our own, we will need expertise in sales and marketing. We currently plan to build our own sales force to market and sell C225 in the United States and Canada. However, we cannot be certain that we will be able to hire and train qualified or experienced sales and marketing personnel or that any marketing or sales efforts by such personnel will be successful. If we are unable to recruit or retain suitable sales and marketing personnel, it could have a material adverse effect on our business, financial condition and results of operations. OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE Our products are now in research and various stages of development or clinical studies. Accordingly, we do not sell or receive any revenues from sales of these products. At this time, most of our revenues come from payments we receive from our corporate partners under license and research arrangements. Our results of operations historically have fluctuated on a quarterly basis and can be expected to continue to be subject to quarterly fluctuations. The level of our revenues and results of operations at any given time is based primarily on the following factors: - the status of development of our various products - the time at which we enter into research and license agreements with corporate partners that provide for payments to us, and the timing and accounting treatment of payments to us under those agreements - whether or not we achieve specified research or commercialization milestones - timely payment by our corporate partners of amounts payable to us - the addition or termination of research programs or funding support - variations in the level of expenses related to our proprietary products during any given period We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. These fluctuations may cause the price of our stock to fluctuate, perhaps substantially. 16 18 OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS Our ability to successfully develop marketable products and to maintain a competitive position will depend in large part on our ability to attract and retain highly qualified scientific and management personnel. We will also need to develop and maintain relationships with leading research institutions and consultants. Our success is also very dependent upon the principal members of our management, scientific staff and scientific advisory board, many of whom have special expertise and would be difficult to replace. Competition for such personnel and relationships is intense, and we cannot be certain that we will be able to continue to attract and retain such personnel and maintain such relationships. WE MAY NOT BE ABLE TO KEEP PACE WITH TECHNOLOGICAL CHANGE OR WITH THE ADVANCES OF OUR COMPETITORS The biopharmaceutical industry is subject to rapid and significant technological change. We have many competitors, including major drug and chemical companies, specialized biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than our products or which would make our technology and products obsolete and non-competitive. Many of these competitors have much greater financial and technical resources and production and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining FDA and other regulatory approvals. We know that competitors are developing or manufacturing various products that are used for the prevention, diagnosis or treatment of diseases that we have targeted for product development. Some of these competitive products use therapeutic approaches that compete directly with certain of our product candidates. Our competitors may succeed in obtaining FDA approval for their competitive products sooner than we do for ours. This could hurt our ability to further develop and market our products. Also, if we do begin significant commercial sales of our products, we will have to compete with the established manufacturing and marketing capabilities of our competitors. Manufacturing and marketing are areas in which we have limited or no experience. WE MAY HAVE PRODUCT LIABILITY EXPOSURE Because our product candidates are new treatments for diseases, with limited, if any, past use on humans, their use during testing or after approval could expose us to product liability claims. We cannot be certain that we would have enough money available to satisfy any liability that might result from any such claims. We try to obtain indemnification from our corporate partners against certain of these types of claims. However, we cannot be certain that these parties would honor any such indemnity obligations. Although we carry product liability insurance, we cannot be certain that this coverage will be adequate to protect us in the event of a successful product liability claim or that the insurance will continue to be available on commercially reasonable terms. HEALTH CARE INSURERS AND OTHER ORGANIZATIONS MAY NOT PAY FOR OUR PRODUCTS, OR MAY IMPOSE LIMITS ON REIMBURSEMENTS The continuing efforts of government and insurance companies, health maintenance organizations and other payors of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the availability of capital. For example, in certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to government control. In the United States, given recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals could have a material adverse effect on our business, financial condition and results of operations. 17 19 Our ability to commercialize our products successfully will depend in part on the extent to which appropriate reimbursement levels for the cost of our products and related treatment are obtained by governmental authorities, private health insurers and other organizations, such as HMOs. Third-party payors are increasingly challenging the prices charged for medical products and services. Also, the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our products. The cost containment measures that health care payors and providers are instituting and the effect of any health care reform could materially adversely affect our ability to operate profitably. OUR COMPUTER SYSTEMS, AND OTHER COMPUTER SYSTEMS THAT AFFECT OUR BUSINESS, MAY EXPERIENCE PROBLEMS WHEN THE CALENDAR YEAR CHANGES FROM 1999 TO 2000 We have completed a review of our internal computer systems, and we are in the process of making inquiries of groups with which we do business with respect to their computer systems, to determine whether these systems will experience a "Year 2000 problem." A Year 2000 problem would result from a computer system recognizing the first two digits of a year after the year 1999 as "19" instead of "20," thereby reading the wrong year. We cannot be certain that we will be able to successfully do this, or that the groups with which we do business will identify and replace their computer systems which would cause a Year 2000 problem. The failure to identify and remedy Year 2000 problems could disrupt important operations which could affect the development and ultimate marketing of potential products as well as put us at a competitive disadvantage relative to companies that have corrected such problems. OUR STOCK PRICE MAY BE VOLATILE The market price for our common stock could decline below the past or current public offering prices. We believe that the following factors, among others, have caused the market price of our common stock to fluctuate substantially, and that they will continue to do so in the future: - the results of preclinical testing and clinical trials by us or our competitors - the formation or termination of our corporate alliances - determinations regarding our patent applications and those of others - variations in our quarterly operating results The stock market has recently experienced extreme price and volume fluctuations. These fluctuations have especially affected the market price of the stock of many high technology and healthcare-related companies. Such fluctuations have often been unrelated to the operating performance of these companies. Nonetheless, these broad market fluctuations may negatively affect the market price of our common stock. EVENTS WITH RESPECT TO OUR SHARE CAPITAL COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE Sales of substantial amounts of our common stock in the open market, or the availability of such shares for sale, could adversely affect the price of our common stock. Upon completion of this offering, we expect to have 28,129,007 shares of common stock outstanding, excluding shares reserved for issuance upon the exercise of outstanding stock options, warrants and preferred stock (or 28,504,007 shares of common stock outstanding if the underwriters' over-allotment option is exercised in full). The following securities that may be exercised for, or are convertible into, shares of our common stock were issued and outstanding as of October 27, 1999: - Warrants. Various warrants to purchase 1,791,590 shares of our common stock, all of which are currently exercisable, at an average exercise price of approximately $2.96 per share (subject to adjustment in certain circumstances). - Options. Stock options to purchase 5,883,960 shares of our common stock at an average exercise price of approximately $11.68 per share (subject to adjustment in certain circumstances); of this total, 2,526,669 are currently exercisable at an average exercise price of approximately $7.06 per share. 18 20 - Series A Preferred Stock. 400,000 shares of our Series A Preferred Stock are outstanding, of which 100,000 shares are currently convertible into 800,000 shares of our common stock, at a conversion price of $12.50 per share. These shares are held by Merck KGaA. The shares of our common stock that may be issued under the warrants and options are either currently registered with the SEC, or will be registered with the SEC before the shares are purchased by the holders of the warrants and options. Under our license agreement with Merck KGaA for C225, we are entitled to receive from Merck KGaA up to $60 million upon our achievement of various milestones in the development of C225. In connection with making the final $30 million of these milestone payments, Merck KGaA is entitled to receive milestone shares from us, which, if issued, will be shares of our common stock (or other capital stock convertible into our common stock). The number of milestone shares issued will be determined based on premiums to then-market prices of our common stock at the time the milestones are achieved. As of October 27, 1999, Merck KGaA has not acquired any milestone shares convertible into common stock. We have granted Merck KGaA certain registration rights regarding the shares of common stock that they may acquire upon conversion of the series A preferred shares and upon receipt of milestone shares. Specifically, Merck KGaA has the right to require us to register, at our expense, the number of shares of common stock into which the shares of series A preferred stock are converted according to their terms and the number of milestone shares that are issued. Merck KGaA may also exercise rights to have such registrable common stock registered at any time that we file a registration statement for other shares of our common stock. Merck KGaA may exercise these rights at any time after conversion of its shares of series A preferred stock into shares of common stock or receipt of milestone shares. As of October 27, 1999, Merck KGaA has not converted any series A preferred stock into common stock. We, our directors, our officers and certain other stockholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, none of us will, during the period ending 90 days after the date of this prospectus, sell or otherwise dispose of any shares of our common stock, subject to certain exceptions. 19 21 USE OF PROCEEDS We will receive net proceeds from this offering of about $64.6 million at an assumed public offering price of $27 7/8 per share after deducting the underwriting discounts and estimated expenses ($74.5 million if the underwriters exercise their over-allotment option in full). We intend to use such proceeds: - to fund the expansion of clinical trials - to fund a portion of the costs of our new manufacturing facilities - to develop a sales force in the United States - for general corporate purposes, including research and development expenses, and other working capital Pending the use of the net proceeds of this offering, we will invest the funds in short-term, interest-bearing, investment-grade securities. PRICE RANGE OF COMMON STOCK Our common stock is quoted on the Nasdaq National Market under the symbol "IMCL." The following table sets forth, for the periods indicated, the range of high and low sale prices for our common stock. On October 29, 1999, the reported last sale price for our common stock was $27 7/8 per share.
COMMON STOCK PRICE ----------- HIGH LOW ---- --- YEAR ENDED DECEMBER 31, 1997 First Quarter............................................. $10 1/8 $5 3/4 Second Quarter............................................ 7 7/8 4 5/8 Third Quarter............................................. 8 1/8 4 5/8 Fourth Quarter............................................ 8 1/2 5 21/32 YEAR ENDED DECEMBER 31, 1998 First Quarter............................................. 8 7/16 5 5/8 Second Quarter............................................ 13 7/8 7 5/8 Third Quarter............................................. 13 7/8 8 1/4 Fourth Quarter............................................ 12 1/8 5 9/16 YEAR ENDED DECEMBER 31, 1999 First Quarter............................................. 16 15/16 8 3/4 Second Quarter............................................ 26 15 1/2 Third Quarter............................................. 39 1/2 21 5/16 Fourth Quarter (through October 29, 1999)................. 33 3/16 16 1/4
DIVIDEND POLICY We have never declared cash dividends on our common stock and have no present intention of declaring such cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects, and other factors our board of directors deems relevant. In addition, the terms of our Series A Convertible Preferred Stock (the "series A preferred stock") restrict our ability to pay dividends on our common stock. See "Description of Capital Stock." 20 22 CAPITALIZATION The following table sets forth the total capitalization of our company at June 30, 1999 and as adjusted to reflect our receipt of the estimated net proceeds from our sale of 2,500,000 shares of common stock pursuant to this offering at an assumed offering price of $27 7/8 per share. This table should be read in conjunction with the Selected Consolidated Financial Data appearing on page 23 in this prospectus.
AS OF JUNE 30, 1999 ------------------------ ACTUAL AS ADJUSTED --------- ----------- (UNAUDITED) (IN THOUSANDS) Long-term debt.............................................. $ 2,200 $ 2,200 Other long-term liabilities, less current portion........... 1,586 1,586 Stockholders' equity: Preferred stock, $1.00 par value; 4,000,000 shares authorized; series A preferred stock: 400,000 shares authorized, issued and outstanding, actual and 400,000 as adjusted (preference in liquidation $43,702,000).... 400 400 Common stock, $.001 par value; 60,000,000 shares authorized; 25,397,474 shares issued and 25,346,657 shares outstanding, actual; 27,897,474 shares issued and 27,846,657 shares outstanding, as adjusted......... 25 28 Additional paid-in capital................................ 188,118 252,746 Accumulated deficit....................................... (155,055) (155,055) Treasury stock, at cost; 50,817 shares actual and 50,817 as adjusted............................................ (492) (492) Note receivable--officer and stockholder.................. (137) (137) Accumulated other comprehensive income.................... 277 277 --------- --------- Total stockholders' equity............................. 33,136 97,767 --------- --------- Total capitalization.............................. $ 36,922 $ 101,553 ========= =========
The number of shares of our common stock to be outstanding after the offering does not take into account 7,675,550 shares of our common stock issuable upon exercise of outstanding options and warrants, having a weighted average exercise price of $9.65 per share, as of October 27, 1999. This number also does not include the 400,000 shares of series A preferred stock currently held by Merck KGaA, of which 100,000 shares are currently convertible into 800,000 shares of our common stock. This number also does not include common stock that will be issued for cash to Merck KGaA upon the achievement of certain milestones set forth in our agreement with Merck KGaA relating to C225. 21 23 DILUTION Our net tangible book deficit on June 30, 1999 was $(7.8) million or $(0.31) per common share. Net tangible book deficit per common share is determined by dividing our tangible net worth, which equals total tangible assets less total liabilities less the liquidation value of the series A preferred stock, excluding accrued dividends, by the aggregate number of shares of our common stock outstanding. After giving effect to the sale by us of the 2,500,000 shares of common stock in this offering, at an assumed public offering price of $27 7/8, per share, our net tangible book value at June 30, 1999 would have been $56.8 million, or $2.04 per common share. This represents an immediate increase in net tangible book value to existing stockholders of $2.35 per common share and an immediate dilution to new investors of $25.84 per common share. The following table illustrates this per share dilution: Assumed public offering price per common share.............. $27.88 Net tangible book deficit per common share as of June 30, 1999................................................... $(0.31) Increase per share attributable to new investors.......... 2.35 ------ Net tangible book value per common share after offering..... 2.04 ------ Dilution per share to new investors......................... $25.84 ======
Dilution is determined by subtracting net tangible book value per common share after the offering from the public offering price per common share. 22 24 SELECTED CONSOLIDATED FINANCIAL DATA The following selected financial data of ImClone should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of December 31, 1997 and 1998 are derived from, and qualified by reference to, the audited financial statements included elsewhere in this prospectus, and should be read in conjunction with those financial statements and notes thereto. The statement of operations data for the six-month periods ended June 30, 1998 and 1999 and the balance sheet data as of June 30, 1999 are derived from our unaudited financial statements included elsewhere in this prospectus, and which, in our opinion, have been prepared on a basis consistent with the audited financial statements and reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations and financial position. Results for the six months ended June 30, 1999 are not necessarily indicative of results that may be expected for the entire year.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------------------------------- ------------------ 1994 1995 1996 1997 1998 1998 1999 -------- ------- -------- -------- -------- ------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Revenues................................... $ 950 $ 800 $ 600 $ 5,348 $ 4,193 $ 2,615 $ 883 Operating expenses: Research and development................. 11,816 8,768 11,482 16,455 21,049 8,846 13,505 General and administrative............... 3,348 3,739 3,961 5,356 7,145 2,959 3,677 Net interest and other income(1)........... (2,365) (2,066) (95) (972) (2,619) (1,409) (90) Equity in loss of affiliate................ 342 -- -- -- -- -- -- -------- ------- -------- -------- -------- ------- -------- Loss before extraordinary item............. (12,191) (9,641) (14,748) (15,491) (21,382) (7,781) (16,209) Extraordinary loss on extinguishment of debt.................................. -- -- 1,267 -- -- -- -- -------- ------- -------- -------- -------- ------- -------- Net loss................................... (12,191) (9,641) (16,015) (15,491) (21,382) (7,781) (16,209) Preferred dividends (including assumed incremental yield of $51 in 1997, $1,268 in 1998, $635 in 2Q98 and $672 in 2Q99).................................... -- -- -- 163 3,668 1,825 1,862 -------- ------- -------- -------- -------- ------- -------- Net loss to common stockholders............ $(12,191) $(9,641) $(16,015) $(15,654) $(25,050) $(9,606) $(18,071) ======== ======= ======== ======== ======== ======= ======== Basic and diluted net loss per common share: Loss before extraordinary item........... $ (1.12) $ (0.72) $ (0.76) $ (0.67) $ (1.03) $ (0.40) $ (0.73) Extraordinary loss on extinguishment of debt................................... -- -- (0.07) -- -- -- -- -------- ------- -------- -------- -------- ------- -------- Net loss per share......................... $ (1.12) $ (0.72) $ (0.83) $ (0.67) $ (1.03) $ (0.40) $ (0.73) ======== ======= ======== ======== ======== ======= ======== Weighted average shares outstanding........ 10,903 13,311 19,371 23,457 24,301 24,251 24,718
AS OF DECEMBER 31, AS OF JUNE 30, ----------------------------------------------------------- -------------- 1994 1995 1996 1997 1998 1999 -------- -------- --------- --------- --------- -------------- (UNAUDITED) (IN THOUSANDS) BALANCE SHEET DATA: Cash, cash equivalents and securities..................... $ 3,032 $ 10,207 $ 13,514 $ 59,610 $ 46,739 $ 40,678 Working capital.................. (1,470) 3,735 7,695 56,671 35,073 21,314 Total assets..................... 17,467 22,803 25,885 75,780 62,252 58,098 Long-term obligations, less current portion................ 4,487 4,235 2,775 3,430 3,746 3,786 Accumulated deficit.............. (76,317) (85,958) (101,973) (117,464) (138,846) (155,055) Stockholders' equity............. 8,176 11,823 16,589 68,226 45,174 33,136
- ------------ (1) Net interest expense and other income is presented net of interest income, interest expense and realized gains and losses on securities available for sale. 23 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis by our management is provided to identify certain significant factors which affected our financial position and operating results during the periods included in the accompanying financial statements. OVERVIEW We are a biopharmaceutical company engaged in the research and development of novel cancer treatments. We are currently pursuing three research and development programs that we believe show promise for treating cancer: growth factor inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors. Since our inception in April 1984, we have devoted substantially all of our efforts and resources to research and development conducted on our own behalf and through collaborations with corporate partners and academic research and clinical institutions. We have not derived any commercial revenue from product sales. As a result of our substantial research and development costs, we have incurred significant operating losses and we have generated a cumulative net loss of approximately $155 million for the period from our inception to June 30, 1999. We expect to incur significant additional operating losses. Substantially all of our revenues were generated from license and research arrangements with collaborative partners. Such revenues, as well as our results of operations, have fluctuated and are expected to continue to fluctuate significantly from period to period due to: - the status of development of our various products - the time at which we enter into research and license agreements with corporate partners that provide for payments to us, and the timing and accounting treatment of payments to us under these agreements - whether or not we achieve specified research or commercialization milestones - timely payment by our corporate partners of amounts payable to us - the addition or termination of research programs or funding support - variations in the level of expenses related to our proprietary products during any given period Before we can commercialize our products and begin to sell them to generate revenues, they will need additional development and clinical testing, which will cost a lot of money. Generally, to make a profit we will need to successfully develop, test, introduce and market our products. It is not certain that any of our products will be successfully developed or that required regulatory approvals to commercialize them can be obtained. Further, even if we successfully develop a product, there is no assurance that we will be able to successfully manufacture or market that product or that customers will buy it. See "Risk Factors -- Our lead product candidates are in development, and we cannot be certain that any of our products will be commercialized." In December 1998, we entered into an agreement with Merck KGaA, a German-based drug company, relating to the development, marketing and sale of C225. Under this agreement: we have retained the rights to develop and market C225 within the United States and Canada; we have granted Merck KGaA exclusive rights, except in Japan, to develop and market C225 outside of the United States and Canada; we have agreed to supply Merck KGaA, and Merck KGaA will purchase from us, C225 for the conduct of clinical trials and the commercialization of the product outside of the United States and Canada; we will co-develop C225 in Japan with Merck KGaA; and we have granted Merck KGaA an exclusive license outside of the United States and Canada, without the right to sublicense, to certain of our patents to apply to a humanized antibody to the EGF receptor on which Merck KGaA has performed preclinical studies. In return, Merck KGaA has agreed, subject to the terms of the agreement, to (1) pay us $30 million in up-front fees and early cash-based milestone payments based upon our achievement of the milestones set forth in the agreement, (2) pay us an additional $30 million if further milestones are achieved for which Merck KGaA will receive equity in ImClone which will be priced at varying premiums to the then-market price of 24 26 the common stock depending upon the timing of the achievement of the respective milestones, (3) provide us, subject to certain terms, a guaranty of our obligations under a $30 million credit facility relating to the construction of a new C225 commercial manufacturing facility, (4) fund clinical development of C225 outside of the United States and Canada and (5) pay us royalties on future sales of C225 in its territory, if any. This agreement may be terminated by Merck KGaA in various instances, including (1) at its discretion on any date on which a milestone is achieved (in which case no milestone payment will be made), (2) for a one-year period after first commercial sale of C225 in Merck KGaA's territory, upon Merck KGaA's reasonable determination that the product is economically unfeasible (in which case Merck KGaA is entitled to receive back 50% of the cash-based milestone payments then paid to date, but only out of revenues received, if any, based upon a royalty rate applied to the gross profit from C225 sales or C225 license fees in the United States and Canada), or (3) in the event we do not obtain certain collateral license agreements, in which case Merck KGaA also is entitled to a return of all cash milestone payments to date, plus liquidated damages of $500,000. Upon termination of the agreement, we would also be required to use our best reasonable efforts to cause the release of Merck KGaA as guarantor of the credit facility for our new manufacturing facility. Through October 27, 1999, Merck KGaA has paid us $14 million in up-front and milestone fees and has confirmed that we have achieved milestones with respect to which we are entitled to receive an additional $6 million in payments. As of June 30, 1999, $12 million had been received and recorded as fees potentially refundable from a corporate partner and will be recognized as revenues upon Merck KGaA's agreeing on the production concept for the new C225 manufacturing facility and our obtaining the necessary collateral license agreements. In April 1999, the parties agreed on the production concept for the manufacturing facility and are currently working toward securing Merck KGaA's guaranty of our obligations under a $30 million credit facility. We are also in the process of negotiating the necessary collateral license agreements. We have also granted Merck KGaA a license to develop and market BEC2 worldwide. We have retained the right to co-promote BEC2 with Merck KGaA within North America and it is intended that we will be the bulk manufacturer of BEC2 for worldwide production. In return, Merck KGaA has agreed to pay up-front fees, to make cash milestone payments and to make royalty payments to us on all sales of BEC2 outside North America. In return, Merck KGaA has made research support payments to us totaling $4.7 million and is required to make milestone payments to us of up to $22.5 million, of which $3 million has been received through October 27, 1999. In addition, Merck KGaA is required to make royalty payments to us on any sales of BEC2 outside North America, with a portion of the milestone and research support payments received under the agreement being creditable against the amount of royalties due. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 AND 1998 Revenues. Revenues for the six months ended June 30, 1999 and 1998 were $883,000 and $2,615,000, respectively, a decrease of $1,732,000, or 66%. Revenues for the six months ended June 30, 1999 primarily consisted of (1) $150,000 in research support from our partnership with American Home Products Corporation ("American Home") in infectious disease vaccines, (2) $533,000 in research and support payments from our research and license agreement with Merck KGaA for our principal cancer vaccine product candidate, BEC2, and (3) $195,000 in royalty revenue from our strategic alliance with Abbott Laboratories ("Abbott") in diagnostics. Revenues for the six months ended June 30, 1998 consisted of (1) $150,000 in research support from our partnership with American Home in infectious disease vaccines, (2) $1 million in milestone revenue and $1.3 million in research and support payments from our research and license agreement with Merck KGaA for BEC2 (3) $117,000 in royalty revenue from our strategic alliance with Abbott in diagnostics and (4) $98,000 from a Phase I Small Business Innovation Research grant from the National Cancer Institute (the "NCI") for a program in cancer-related angiogenesis. The decrease in revenues for the six months ended June 30, 1999 was primarily attributable to (1) the decrease in research and support revenue as a result of the completion of all research and support payments due from our research and license agreement with Merck KGaA for BEC2 and (2) a decrease in milestone revenue which can vary 25 27 widely from period to period depending upon the timing of the achievement of various research and development milestones for products under development. Operating Expenses: Research and Development. Total operating expenses for the six months ended June 30, 1999 and 1998 were $17,182,000 and $11,805,000, respectively, an increase of $5,377,000, or 46%. Research and development expenses for the six months ended June 30, 1999 and 1998 were $13,505,000 and $8,846,000, respectively, an increase of $4,659,000 or 53%. Such amounts for the six months ended June 30, 1999 and 1998 represented 79% and 75%, respectively, of total operating expenses. The increase in research and development expenses for the six months ended June 30, 1999 was primarily attributable to (1) the costs associated with an agreement for the supplemental further development and manufacture of clinical grade C225, our lead interventional therapeutic product candidate for cancer, to support ongoing and future human clinical trials, (2) the costs associated with the initiation of Phase III clinical studies of C225, (3) expenditures in the functional areas of product development, manufacturing, clinical and regulatory affairs associated with C225 and (4) expenditures associated with additional staffing in the area of discovery research. General and Administrative Expenses. General and administrative expenses include administrative personnel costs, costs incurred in connection with pursuing arrangements with corporate partners and technology licensors, and expenses associated with applying for patent protection for our technology and products. Such expenses for the six months ended June 30, 1999 and 1998 were $3,677,000 and $2,959,000, respectively, an increase of $718,000, or 24%. The increase in general and administrative expenses primarily reflected (1) additional support staffing for our expanding research, development, clinical manufacturing and marketing efforts, particularly with respect to C225 and (2) expenses associated with the pursuit of strategic corporate alliances and other corporate development expenses. We expect general and administrative expenses to increase in future periods to support our planned increases in research, development, clinical and manufacturing efforts. Interest and Other Income or Loss and Interest Expense. Interest income was $1,168,000 for the six months ended June 30, 1999 compared to $1,607,000 for the six months ended June 30, 1998, a decrease of $439,000, or 27%. The decrease was primarily attributable to the decrease in our investment portfolio as a result of funding our operations. Interest expense was $246,000 and $200,000 for the six months ended June 30, 1999 and 1998, respectively, an increase of $46,000, or 23%. Interest expense for both periods primarily included (1) interest on an outstanding Industrial Development Revenue Bond issued in 1990 (the "1990 IDA Bond") with a principal amount of $2.2 million and (2) interest recorded on various capital lease obligations under a December 1996 Financing Agreement (the "1996 Financing Agreement") and an April 1998 Financing Agreement (the "1998 Financing Agreement") with Finova Technology Finance, Inc. ("Finova"). The increase was primarily attributable to entering into additional capital leases. We recorded losses on securities available for sale for the six months ended June 30, 1999 in the amount of $832,000 as compared to gains of $2,000 for the six months ended June 30, 1998. The loss for the six months ended June 30, 1999 is primarily attributable to the $828,000 write-down of our investment in CombiChem Inc. ("CombiChem") as a result of other than a temporary decline. We have not sold these securities. On October 7, 1999, CombiChem announced that it is being acquired and holders of its shares will receive cash consideration of approximately $6.75 per share, which would represent a financial reporting gain with respect to our CombiChem shares of approximately $900,000, after considering the aforementioned write-down. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Net Losses. We had net losses to common stockholders of $18,071,000, or $0.73 per share, for the six months ended June 30, 1999 compared with $9,606,000, or $0.40 per share, for the six months ended June 30, 1998. The increase in the net losses and per share net loss to common stockholders was due primarily to the factors noted above. YEARS ENDED DECEMBER 31, 1998 AND 1997 Revenues. Revenues for the years ended December 31, 1998 and 1997 were $4,193,000 and $5,348,000, respectively, a decrease of $1,155,000, or 22%. Revenues for the year ended December 31, 1998 consisted of 26 28 (1) $300,000 in research support from our partnership with American Home in infectious disease vaccines, (2) $1 million in milestone revenue and $2.5 million in research and support payments from our agreement with Merck KGaA for BEC2, (3) $295,000 in royalty revenue from our strategic alliance with Abbott in diagnostics and (4) $98,000 from a Phase I Small Business Innovation Research grant from the NCI for a program in cancer-related angiogenesis. Revenues for the year ended December 31, 1997 consisted of (1) $300,000 in research support from our partnership with American Home in infectious disease vaccines, (2) $2 million in milestone revenue and $1.7 million in research and support payments from our agreement with Merck KGaA for BEC2 and (3) $1 million in milestone revenue and $381,000 in royalty revenue from our strategic alliance with Abbott in diagnostics. The decrease in revenues for the year ended December 31, 1998 was primarily attributable to a decrease in milestone revenue which can vary widely from period to period depending upon the timing of the achievement of various research and development milestones for products under development. Operating Expenses: Research and Development. Total operating expenses for the years ended December 31, 1998 and 1997 were $28,194,000 and $21,811,000, respectively, an increase of $6,383,000, or 29%. Research and development expenses for the years ended December 31, 1998 and 1997 were $21,049,000 and $16,455,000, respectively, an increase of $4,594,000 or 28%. Such amounts for both years ended December 31, 1998 and 1997 represented 75% of total operating expenses. The increase in research and development expenses for the year ended December 31, 1998 was partially attributable to (1) the costs associated with an agreement in principle for the supplemental further development and manufacture of clinical grade C225 to support ongoing and future human clinical trials, (2) expenditures associated with additional staffing in the area of discovery research, (3) the initiation of new supported research programs with academic institutions, (4) the establishment of corporate in-licensing arrangements and (5) expenditures in the functional areas of product development, manufacturing, clinical and regulatory affairs associated with C225. This increase was partially offset by the one-time $2.2 million non-cash compensation expense recorded for the year ended December 31, 1997 in connection with the extension of the term of an officer's warrant to purchase 397,000 shares of common stock. General and Administrative Expenses. General and administrative expenses include administrative personnel costs, costs incurred in connection with pursuing arrangements with corporate partners and technology licensors, and expenses associated with applying for patent protection for our technology and products. Such expenses for the years ended December 31, 1998 and 1997 were $7,145,000 and $5,356,000, respectively, an increase of $1,789,000, or 33%. The increase in general and administrative expenses primarily reflected (1) additional support staffing for expanding our research, development, clinical and manufacturing efforts, particularly with respect to C225 and (2) expenses associated with the pursuit of strategic corporate alliances and other corporate development expenses. We expect general and administrative expenses to increase in future periods to support our planned increases in research, development, clinical and manufacturing efforts. Interest and Other Income and Interest Expense. Interest and other income was $3,054,000 for the year ended December 31, 1998 compared to $1,523,000 for the year ended December 31, 1997, an increase of $1,531,000, or 101%. The increase was primarily attributable to the increased interest income earned from higher cash balances in our investment portfolio resulting from the private placement of series A preferred stock completed in December 1997. Interest expense was $435,000 and $551,000 for the years ended December 31, 1998 and 1997, respectively, a decrease of $116,000, or 21%. Interest expense for both periods primarily included (1) interest on the 1990 IDA Bond, which has a principal amount of $2.2 million, (2) interest recorded on capital lease obligations and (3) interest recorded on a liability to Pharmacia and Upjohn Inc. ("Pharmacia"), for the reacquisition of the worldwide rights to a recombinant mutein form of Interleukin-6 ("IL-6m") as well as clinical material manufactured and supplied to us by Pharmacia. The decrease was primarily attributable to the (1) December 1997 repayment of an IDA Bond issued in 1986 (the "1986 IDA Bond") with a principal amount of $2.1 million and (2) February 1998 repayment of the remaining liability to Pharmacia. Net Losses. We had net losses to common stockholders of $25,050,000, or $1.03 per share, for the year ended December 31, 1998 compared with $15,654,000, or $0.67 per share, for the year ended December 31, 27 29 supply of C225 for both clinical trials and commercial sale. We cannot be certain that we will be able to enter into this agreement or any other agreements with third party manufacturers on terms acceptable to us or at all. Even if we are able to enter into such agreements, we cannot be certain that we will be able to produce or obtain sufficient quantities for the commercial sale of our products. Any delays in producing or obtaining commercial quantities of our products could have a material adverse effect on our business, financial condition and results of operations. We are also dependent upon a sole supplier of a component of the media used in the production of C225. If this supply were to cease, it could hinder our ability to manufacture C225 in the quantities required. OUR BUSINESS DEPENDS UPON OUR CORPORATE PARTNERS So far, we have earned almost all of our revenues from research and development funding and license fees and royalties paid to us under agreements with our corporate partners. We expect this to continue over the next several years. License fees may be payable to us either when we first enter into an agreement or when and if we or our corporate partners, depending on the agreement, reach agreed-upon research, regulatory and commercialization milestones, or both. We do not receive any of these payments at regular intervals; the amounts have fluctuated in the past and we expect them to continue to fluctuate in the future. In most cases, our corporate partners can terminate these arrangements, including their payment obligations, on relatively short notice under specified circumstances. We cannot be certain that we will continue to receive revenues from these arrangements, or that we will enter into any new similar agreements. The successful development, marketing and sale of our products worldwide is subject to the risk of financial or other difficulties with respect to our relationships with our corporate partners. The amount and timing of payments we receive under our arrangements with these parties depend upon variables that are out of our control. In addition, our corporate partners or their affiliates may be developing their own products or technologies which may directly compete with products that are the subject of their arrangements with us. While we believe that our corporate partners are or will be economically motivated to work toward successful arrangements with us, we cannot be certain that their corporate interests and motivations will remain consistent with ours. In December 1998, we entered into an agreement with Merck KGaA, a German-based drug company, relating to the development, marketing and sale of C225. Under this agreement: - we have retained the rights to develop and market C225 within the United States and Canada - we have granted Merck KGaA exclusive rights, except in Japan, to develop and market C225 outside of the United States and Canada - we have agreed to supply Merck KGaA, and Merck KGaA has agreed to purchase, C225 for the conduct of clinical trials and the commercialization of the product outside the United States and Canada - we will co-develop and co-market C225 in Japan with Merck KGaA - we have granted Merck KGaA an exclusive license outside of the United States and Canada, without the right to sublicense, to apply certain of our patents to a humanized EGF receptor antibody on which Merck KGaA has performed preclinical studies In return, Merck KGaA agreed to pay up-front fees and to make cash payments and equity investments in our business if specific milestones are achieved. Merck KGaA will also pay us royalties on any sales of C225 outside the United States and Canada. In addition, Merck KGaA has agreed to provide a guaranty of our obligations under a credit agreement relating to the construction of our new C225 manufacturing facility. We have also granted Merck KGaA a license to develop and market BEC2 worldwide. We have retained the right to co-promote BEC2 with Merck KGaA within North America and it is intended that we will be the bulk manufacturer of BEC2 for worldwide production. In return, Merck KGaA has agreed to pay up-front 28 30 Net Losses. We had net losses to common stockholders of $15,654,000, or $0.67 per share, for the year ended December 31, 1997, compared with $16,015,000, or $0.83 per share, for the year ended December 31, 1996. The year ended December 31, 1996 included a $1,267,000 or $0.07 per share extraordinary loss on early extinguishment of debt. This extraordinary loss resulted from the issuance of our common stock in lieu of cash repayment of a $2.5 million loan due the Oracle Group and a $180,000 long-term note owed to one of our directors. The decrease in the per share net loss to common stockholders is due primarily to the increased number of shares of our common stock outstanding as a result of the March 1997 public offering of our common stock. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, our principal sources of liquidity consisted of cash and cash equivalents and short-term securities available for sale of approximately $40.7 million. Since inception we have financed our operations through the following means: - Public and private sales of equity securities in financing transactions have raised approximately $163.8 million in net proceeds. - We have earned approximately $33,738,000 from license fees, contract research and development fees and royalties from collaborative partners, including approximately $883,000 earned during the six months ended June 30, 1999. Additionally, we have received $14 million, $12 million of which we had received and recorded as of June 30, 1999, in potentially refundable fees from our C225 development and license agreement with Merck KGaA. And, as of October 27, 1999, Merck KGaA has confirmed that we have achieved milestones, with respect to which we are entitled to receive an additional $6 million in payments. The amounts from Merck KGaA have yet to be recognized as revenue. - We have earned approximately $9.6 million in interest income, including approximately $1.2 million earned during the six months ended June 30,1999. - The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an aggregate of $6.3 million, the proceeds of which have been used for the acquisition, construction and installation of our research and development facility in New York City, and of which $2.2 million is outstanding as of June 30, 1999. The 1990 IDA Bond in the outstanding principal amount of $2.2 million becomes due in 2004. We will incur annual interest on the 1990 IDA Bond aggregating approximately $250,000. In order to secure our obligations to the New York Industrial Development Agency ("NYIDA") under the 1990 IDA Bond, we have granted the NYIDA a security interest in facility equipment purchased with the bond proceeds. We signed a definitive agreement in April 1999 with BI for the further development, production scale-up and manufacture of our lead therapeutic product candidate, C225, for use in human clinical trials. Services pursuant to this agreement commenced in April 1998 pursuant to an agreement in principle. We estimate that the total cost under the agreement, including the cost of additional amounts of material we have the right to request, will be DM12,100,000 (or $6,392,000, as of June 30, 1999). As of June 30, 1999, we had incurred approximately DM3,940,000, of which DM3,130,000 had been paid, for services provided under this agreement. We do not currently hedge our exposure to the foreign currency risk associated with this agreement. We may pursue an agreement with another third party relating to the manufacture of C225 for both clinical trials and commercial sale. Any such agreement would likely require us to expend substantial funds over the next several years for process development and for supply of C225. We have obligations under various capital leases for certain laboratory, office and computer equipment and also certain building improvements primarily under the 1996 Financing Agreement and the 1998 Financing Agreement with Finova. The 1996 Financing Agreement allowed us to finance the lease of equipment and make certain building and leasehold improvements to existing facilities involving amounts totaling approximately $2.5 million. Each lease has a fair market value purchase option at the expiration of a 42-month term. Pursuant to the 1996 Financing Agreement, we issued to Finova a warrant expiring December 31, 1999 to purchase 23,220 shares of our common stock at an exercise price of $9.69 per share. We 29 31 recorded a non-cash debt discount of approximately $125,000 in connection with this financing, which discount is being amortized over the 42-month term of the first lease. The 1996 Financing Agreement with Finova expired in December 1997 and we utilized only $1.7 million of the full $2.5 million under the agreement. In April 1998, we entered into the 1998 Financing Agreement with Finova totaling approximately $2 million. The terms of the 1998 Financing Agreement are substantially similar to the now expired 1996 Financing Agreement except that each lease has a 48-month term. As of June 30, 1999, we had entered into twelve individual leases under both the 1996 Financing Agreement and the 1998 Financing Agreement aggregating a total cost of $3.7 million. The 1998 Financing Agreement expired in May 1999. We rent our New York City facility under a lease which was scheduled to expire in March 1999. We renewed the entire lease for a term commencing as of January 1, 1999 through December 2004 and have begun to retrofit the facility to better suit our needs at an expected cost of approximately $2 million. Under our agreement with Merck KGaA for C225, we developed, in consultation with Merck KGaA, a production concept for a new manufacturing facility for the commercial production of C225. Merck KGaA is to provide us, subject to certain conditions, with a guaranty under a $30 million credit facility for the build-out of this facility. We have determined to erect this facility adjacent to our current manufacturing facility in New Jersey, which supplies C225 to support our clinical trials. We plan to begin construction on this facility in the first half of 2000 and estimate that the total cost will be approximately $45 million. We are currently in the process of finalizing the terms of the loan agreement and guaranty. We expect to fund the remaining cost of this facility through a combination of cash on hand and equipment financing transactions. Total capital expenditures made during the six months ended June 30, 1999 were $2,542,000, of which $532,000 has been reimbursed in accordance with the terms of the 1998 Financing Agreement with Finova. Of the total capital expenditures made during the six months ended June 30, 1999, $1.4 million related to the purchase of equipment for and costs associated with the retrofit of our corporate office and research laboratories in New York. The balance of capital additions includes $933,000 associated with the construction of the commercial manufacturing facility to be erected adjacent to our current manufacturing facility in New Jersey. The remaining $217,000 related to improving and equipping our existing manufacturing facility. The holders of the 400,000 shares of series A preferred stock are entitled to receive cumulative dividends at an annual rate of $6.00 per share. Dividends accrue as of the issuance date of the series A preferred stock and are payable on the outstanding series A preferred stock in cash on December 31 of each year beginning December 31, 1999 or at the time of conversion or redemption of the series A preferred stock on which the dividend is to be paid, whichever is sooner. Accrued dividends were $3,702,000 at June 30, 1999. We believe that our existing cash on hand and amounts expected to be available under our credit facilities, together with the net proceeds from this offering, should enable us to maintain our current and planned operations through at least 2001. We are also entitled to reimbursement for certain research and development expenditures and to certain milestone payments, including $16 million in cash-based milestone payments and $30 million in equity-based milestone payments from our C225 development and license agreement with Merck KGaA, which are to be paid subject to our attaining research and development milestones, certain of which have recently been attained, and certain other conditions. There can be no assurance that we will achieve the unachieved milestones. Additionally, the termination of the agreement due to our failure to obtain the necessary collateral license agreements would require us to return all milestone payments made to date, plus $500,000 in liquidated damages. Our future working capital and capital requirements will depend upon numerous factors, including, but not limited to: - progress of our research and development programs, pre-clinical testing and clinical trials - our corporate partners fulfilling their obligations to us - timing and cost of seeking and obtaining regulatory approvals - timing and cost of manufacturing scale-up and effective commercialization activities and arrangements - level of resources that we devote to the development of marketing and sales capabilities 30 32 - costs involved in filing, prosecuting and enforcing patent claims - technological advances - status of competitors - our ability to maintain existing and establish new collaborative arrangements with other companies to provide funding to support these activities - costs of establishing both clinical scale and commercial scale manufacturing capacity in our facility and those of others In order to fund our capital needs after 2001, we will require significant levels of additional capital and we intend to raise the capital through additional arrangements with corporate partners, equity or debt financings, or from other sources including the proceeds of product sales, if any. There is no assurance that we will be successful in consummating any such arrangements. If adequate funds are not available, we may be required to significantly curtail our planned operations. At December 31, 1998, we had net operating loss carryforwards for United States federal income tax purposes of approximately $129.5 million, which expire at various dates from 2000 through 2018. At December 31, 1998 we had research credit carryforwards of approximately $3.6 million, which expire at various dates from 2009 through 2018. Under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation's ability to use net operating loss and research credit carryforwards may be limited if the corporation experiences a change in ownership of more than 50 percentage points within a three-year period. Since 1986, we have experienced two such ownership changes. As a result, we are only permitted to use in any one year approximately $5.2 million of our available net operating loss carryforwards that relate to periods before these ownership changes. Similarly, we are limited in using our research credit carryforwards. It has not been determined whether the offering described in this prospectus will result in additional ownership changes that would further limit the use of our net operating losses and research credit carryforwards. MARKET RISK Our holdings of financial instruments are comprised of a mix of any of U.S. corporate debt, foreign corporate debt, U.S. government debt, foreign government/agency guaranteed debt and commercial paper. All such instruments are classified as securities available for sale. Generally, we do not invest in portfolio equity securities or commodities or use financial derivatives for trading purposes. Our debt security portfolio represents funds held temporarily pending use in our business and operations. We manage these funds accordingly. We seek reasonable assuredness of the safety of principal and market liquidity by investing in rated fixed income securities while at the same time seeking to achieve a favorable rate of return. Our market risk exposure consists principally of exposure to changes in interest rates. Our holdings are also exposed to the risks of changes in the credit quality of issuers. We typically invest in the shorter-end of the maturity spectrum, or if longer, in highly liquid debt instruments with periodic interest rate adjustments. We also have certain foreign exchange currency risk. The table below presents the principal amounts and related weighted average interest rates by year of maturity for our investment portfolio as of June 30, 1999:
2004 AND 1999 2000 2001 2002 2003 THEREAFTER TOTAL FAIR VALUE ---- ---------- ---------- ---- ---- ---------- ----------- ----------- Fixed Rate............ -- $2,739,000 -- -- -- -- $ 2,739,000 $ 2,744,000 Average Interest Rate................ -- 5.10% -- -- -- -- 5.20% -- Variable Rate......... -- -- $1,136,000(1) -- -- $33,952,000(1) $35,088,000 $35,262,000 Average Interest Rate................ -- -- 5.43% -- -- 5.17% 5.18% -- -- ---------- ---------- -- -- ----------- ----------- ----------- -- $2,739,000 $1,136,000(1) -- -- $33,952,000(1) $37,827,000 $38,006,000 == ========== ========== == == =========== =========== ===========
- ------------ (1) These holdings consist of U.S. corporate and foreign corporate floating rate notes. Interest on the securities are adjusted at fixed dates using prevailing interest rates. These holdings are highly liquid and we consider the potential for loss of principal to be minimal. 31 33 YEAR 2000 The "Year 2000 problem" involves mainly the inability of certain computer programs and microprocessing devices to differentiate between the year 1900 and the year 2000 because two-digit rather than four-digit fields were used to identify the year. There are a variety of related "date" problems, including the use by older programs and devices of algorithms that will fail to correctly identify the year 2000 and certain other years in the twenty-first century as leap years. A Year 2000 problem could cause a computer system or microprocessor that is date sensitive to malfunction, resulting in system failures. Such failures could cause disruptions of our operations, including, without limitation, the systems in place at our Somerville, New Jersey clinical-scale manufacturing facility, computers, communication devices and laboratory instrumentation and systems which use date-based information in our research and development and scientific testing or, possibly, in our pre-clinical or clinical trials. To deal with the Year 2000 problem we have developed a Year 2000 program that has three main phases: (1) review of information technology and non-information-technology systems for the purposes of assessing the potential impact of Year 2000 on our business and identifying non-Year 2000 compliant systems; (2) remediation and development of contingency plans; and (3) testing. These phases are not necessarily sequential. We have a Year 2000 team to coordinate and carry out the various phases and Reporting Responsible Persons in each critical area, including computer hardware, software, other hardware, laboratory equipment, collaborators and process/clinical development. While we believe that our program is and will be adequate to address Year 2000 problems, there can be no assurance that our operations will not be adversely affected. While we have devoted significant resources to dealing with the Year 2000 problem, our efforts to date have not caused the deferral of any other significant information technology projects. We have reviewed the potential impact of the "Y2K" bug on our research and development, product development, manufacturing, financial, communication and administrative operations. We determined which systems are critical to our business. We also determined which systems were non-Year 2000 compliant. We are in the process of remediating through corrective programming modifications or system replacement all mission critical systems that we identified as non-compliant. We believe that this process is substantially completed. In addition, for systems that we have identified as non-mission critical, we also intend to either correct them through programming changes or replace them with compliant software and any necessary hardware or, possibly, simply discontinue using the system. We have incurred approximately $350,000 on our Year 2000 program through June 30, 1999. This includes the purchase of third-party software and required hardware to run such software as well as the cost of modifying software. We estimate that any additional costs incurred to complete our remediation plan will not be material. In addition to the review of internal systems, we are making inquiries of our critical suppliers, corporate partners, manufacturers, clinical study sites, service suppliers, communications providers, lessors, utilities, and banks whose system failures or non-compliant products could have an adverse impact on our operations. While we are not currently aware of any material Year 2000 problems involving such entities that are likely to adversely affect us, there can be no assurance that there will not be such problems or that, if discovered, they will be timely remediated. We have developed contingency plans to deal with possible disruptions of important operations such as discovery research, product development, manufacturing and ongoing clinical trials. Such disruptions could affect the development and ultimate marketing of potential products as well as put us at a competitive disadvantage relative to companies that have corrected such problems. These contingency plans may need to be refined as more information becomes available. 32 34 BUSINESS OVERVIEW We are a biopharmaceutical company engaged in the research and development of novel cancer treatments. We focus on what we believe are three promising strategies for treating cancer: growth factor inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors. Our lead product candidate, C225, is a therapeutic monoclonal antibody that inhibits stimulation of a receptor for growth factors upon which certain solid tumors depend in order to grow. C225 has been shown in several Phase I/II trials to have an acceptable safety profile, to be well tolerated and, when administered with either radiation therapy or chemotherapy, to enhance tumor reduction. C225 is currently in pivotal trials for treating head and neck cancer. Upon the receipt of regulatory approval, we intend to market C225 in the United States and Canada. We will rely on our development and marketing partner, Merck KGaA, to market C225 outside the United States and Canada and to pay us a royalty on all such sales. We are responsible for the manufacture and supply of C225 for all clinical trials and eventual commercial sales. Our next most advanced product candidate, BEC2, is a cancer vaccine. In partnership with Merck KGaA, we are testing BEC2 for preventing recurrence or progression of small-cell lung cancer in a Phase III pivotal trial. Upon the receipt of regulatory approval, we intend to co-promote BEC2 with Merck KGaA in North America. Merck KGaA will be responsible for developing and marketing BEC2 outside North America and will be obligated to pay us royalties on all such sales. In addition, we intend to be the worldwide manufacturer of BEC2. We are also developing inhibitors of angiogenesis, which could be used to treat various kinds of cancer and other diseases. We have identified c-p1C11 as our lead clinical candidate for angiogenesis inhibition. c-p1C11 is an antibody that binds selectively and with high affinity to KDR, a principal VEGF receptor, thereby inhibiting angiogenesis. We plan to file an application with the FDA in the fourth quarter of 1999 in order to commence clinical trials of c-p1C11. In addition to the development of our lead product candidates, we continue to conduct research, both independently and in collaboration with academic and corporate partners, in a number of areas related to our core focus of growth factor inhibitors, cancer vaccines and angiogenesis inhibitors. We have also developed diagnostic products and vaccines for certain infectious diseases, and we have licensed the rights to these products and vaccines to corporate partners. DEVELOPMENT PROGRAMS C225 CANCER THERAPEUTIC The activation of the EGF receptor is believed to play a critical role in the rapid proliferation of certain types of tumor cells and select normal cells. Certain cancer types are characterized by the overexpression of the EGF receptor. For example, according to the NCI, more than 61,000 cases of head and neck cancer are diagnosed in the United States each year. More than 90% of head and neck cancer cases have been shown to overexpress the EGF receptor on the surface of the tumor cells. Similarly, according to the NCI, there are approximately 132,000 cases of colorectal cancer diagnosed in the United States each year, and in roughly half of these cases, the tumor cells have an overexpression of the EGF receptor. Other types of cancer are also characterized, in certain patients, by overexpression of the EGF receptor including lung, renal and pancreatic cancer. By preventing the binding of critical growth factors to the EGF receptor, we believe it is possible to inhibit the growth of these tumors. C225 is a chimerized (part human, part mouse) monoclonal antibody that selectively binds to the EGF receptor and thereby inhibits growth of cells dependent upon activation of the EGF receptor for replication. We have tested C225 in numerous clinical trials, including several Phase I/II trials at Sloan-Kettering, Yale Cancer Center, University of Virginia, MD Anderson Cancer Center and the University of Alabama. In these studies, we have given C225 intravenously at selected doses, both alone and in combination with radiation 33 35 therapy or chemotherapy. To date, we have tested C225 in approximately 200 patients with various solid cancers, such as head and neck, colorectal, lung, renal, breast and prostate cancers. In June 1999, we completed a Phase I/II trial in which 12 patients with advanced head and neck cancer were treated with C225 in combination with cisplatin, a widely used chemotherapeutic drug. At the completion of the trial, two of the nine evaluable patients had achieved a complete response and four had achieved a partial response. Most of the patients had previously received treatment, including standard chemotherapy, radiation therapy or experimental treatments, and either did not respond or thereafter relapsed. In particular, three of the six responders (including the two complete responders) had previously been treated with a regimen containing cisplatin and relapsed following such treatment. In January 1999, we completed a Phase I/II trial in which 16 patients with advanced head and neck cancer were treated with C225 in combination with radiation therapy. At the completion of the trial, all 15 evaluable patients had responded to therapy; 13 of the patients had achieved a complete response and two had achieved a partial response. This compares to historical response rates of approximately 40% in similar patients treated with radiation alone. We believe these trials have established an appropriate dosing regimen and have provided preliminary evidence of efficacy. The primary side effect observed in these trials has been a folliculitis skin rash, similar in appearance to acne, that has varied in severity depending on the patient. The rash subsides following completion of therapy. Additionally, of the approximately 200 patients who have received C225 to date, three have experienced an anaphylactic reaction to the drug. For that reason, we have established protocols for the initiation of therapy in any patient whereby an initial dose of limited quantity is administered in the presence of a physician. If an anaphylactic reaction is experienced, dosing is terminated immediately and appropriate measures are taken to mollify the symptoms. While the data from the C225 clinical trials conducted to date have been encouraging, the results from these trials are not sufficient to establish that C225 is safe or effective in treating cancer. 34 36 In order to establish whether C225 is safe and effective in treating cancer in a large patient population and to continue to determine the types of tumors on which C225 is most effective, we have begun the Phase II and Phase III clinical trials summarized below. In each of these trials, C225 is being used in combination with standard cancer therapies.
NUMBER OF PATIENTS TO BE ENROLLED TRIAL/INDICATION TREATMENT IN STUDY COMMENTS - -------------------- ------------------ ----------- --------------------------------------- PHASE III - C225 + radiation 416 - open-label, stratified, randomized head and neck (vs. radiation study cancer alone) - study initiated February 1999 - 8-week course of - patient treatment commenced April treatment 1999 - 50+ sites expected - primary endpoint: local regional disease control at one year PHASE III - C225 + cisplatin 114 - double-blinded, placebo-controlled, head and neck (vs. placebo + randomized study cancer cisplatin) - conducted in cooperation with the - 8-week course of Eastern Cooperative Oncology Group treatment - study initiated June 1999 - patient treatment expected to commence November 1999 - 50+ sites expected - primary endpoint: progression-free survival PHASE II - C225 + cisplatin 175 - open-label, stratified, refractory head - 6-week course of non-randomized study and neck cancer treatment - 98 patients expected to be treated (patients with C225 previously failed - patients are stratified by disease regimen containing progression or stable disease cisplatin) - study initiated June 1999 - patient treatment commenced September 1999 - 40+ sites expected - primary endpoint: response rate PHASE II - C225 + 98 - open-label, stratified, refractory irinotecan non-randomized study colorectal cancer - 6-week course of - patients are stratified by disease (patients treatment progression or stable disease previously failed - study initiated July 1999 regimen containing - patient treatment commenced October irinotecan) 1999 - 20+ sites expected - primary endpoint: response rate
We expect that results will be available from the two Phase III studies described above during 2001. We expect that enough information may be available from the two Phase II studies described above during the first half of 2000 to determine whether the data are sufficient to support an application for FDA approval of C225. We expect to conduct several additional Phase II clinical trials to continue to determine whether C225 may be effective in treating other types of cancer. These may include pancreatic, lung and renal cancer. We also expect to conduct C225 clinical trials with Merck KGaA in Europe. There can be no assurance that we will receive regulatory approval for C225 based on the results of our ongoing Phase II clinical trials or any of our other ongoing or anticipated C225 clinical trials. We have entered into a development and marketing agreement with Merck KGaA relating to C225. Under this agreement, we have retained the right to develop and market C225 within the United States and Canada, and we have granted Merck KGaA the exclusive right, except in Japan (where we will co-develop 35 37 and co-market C225 with Merck KGaA), to develop and market C225 outside of the United States and Canada. Under the agreement, we will manufacture C225. In return, Merck KGaA has agreed to pay up-front fees and to make cash milestone payments and equity investments in our business if specific milestones are achieved. Merck KGaA will also pay us royalties on any sales of C225 outside of the United States and Canada. Through October 27, 1999, we have received $14 million in up-front fees and milestone payments from Merck KGaA and has confirmed that we have achieved milestones with respect to which we are entitled to receive an additional $6 million in payments under this agreement. In addition, Merck KGaA has agreed to provide a guaranty of our credit agreement obligations relating to the construction of our new C225 commercial manufacturing facility. As described above, we are testing C225 in several different types of cancer. While in certain cancer types, like head and neck cancer, the EGF receptor is overexpressed in nearly every patient with such cancer, in others, like colorectal cancer, many patients will not be positive for the EGF receptor. Currently, for the purpose of testing of patients in the colorectal cancer trial, a diagnostic assay must be used to determine which patients are positive for the EGF receptor. Patients must be positive for the EGF receptor to be included in this trial. Currently, such diagnostic tests are being performed in a laboratory setting as there are no commercialized assays available for such purpose. If C225 is approved for treating particular cancer types, standard diagnostic kits will need to be available commercially. We are in late stage discussions with several different companies capable of developing, obtaining regulatory approval for and commercializing such an assay in a timely fashion so that it will be readily available both for our ongoing clinical trials and for commercialization. BEC2 CANCER VACCINE A cancer vaccine works by the administration of an antigen or the mimic of an antigen that is found on the surface of certain types of cancer cells and which activates immune responses to protect against metastasis or recurrence of the tumor. A cancer vaccine will generally be given after the tumor has responded to initial treatment. Often, an antigen mimic can produce a stronger immune response than that produced by the original antigen that it resembles. BEC2 is a monoclonal antibody that we are developing as a cancer vaccine. BEC2 mimics GD3, a molecule expressed on the surface of several types of cancer cells. By mimicking GD3, BEC2 stimulates an immune response against cells expressing GD3. We have tested BEC2 in Phase I clinical trials at Sloan-Kettering against certain forms of cancer, including both limited disease and extensive disease small-cell lung carcinoma and melanoma (skin cancer). Limited disease small-cell lung carcinoma is limited to the lungs. Extensive disease small-cell lung carcinoma means that the disease has migrated to other parts of the body. In one such trial, 15 patients with small-cell lung carcinoma who had previously received chemotherapy and radiation therapy and achieved a partial or complete response were treated with BEC2. At the time the results were analyzed, approximately 27% of the patients had survived nearly five years following diagnosis. These survival rates are longer than historical survival rates for similar patients receiving conventional therapy and formed the basis for going forward with Phase III studies. This trial is not sufficient to establish that BEC2 is safe or effective in treating cancer. In conjunction with Merck KGaA, we have initiated a 570-patient multinational pivotal Phase III trial for BEC2 in the treatment of limited disease small-cell lung cancer. The trial will examine patient survival two years after course of therapy. We expect to complete enrollment in the trial during 2001. We have entered into a development and marketing agreement with Merck KGaA relating to BEC2. We have retained the right to co-promote BEC2 with Merck KGaA within North America, and we have granted Merck KGaA exclusive rights to develop and market BEC2 outside of North America. Under the agreement, Merck KGaA is also funding the Phase III pivotal trial. In addition, we intend to be the worldwide manufacturer of BEC2. 36 38 MONOCLONAL ANTIBODY INHIBITOR OF ANGIOGENESIS Our general experience with growth factors, particularly the use of C225 to block the EGF receptor, has enabled us to pursue another promising approach for the treatment of cancer, the inhibition of angiogenesis. Angiogenesis is the natural process of new blood vessel growth. VEGF is one of a group of molecules that helps regulate angiogenesis. Tumor cells as well as normal cells produce VEGF. Once produced by the tumor cells, VEGF stimulates the production of new blood vessels and ensures an adequate blood supply to the tumor, enabling the tumor to grow. KDR is a growth factor receptor found almost exclusively on the surface of human endothelial cells, which are the cells that line all blood vessels. VEGF must recognize and bind to this KDR receptor in order to stimulate the endothelial cells to grow and cause new blood vessels to form. We believe that interference with the binding of VEGF to the KDR receptor inhibits angiogenesis, and can potentially be used to slow or halt tumor growth. c-p1C11 is a chimerized monoclonal antibody, which specifically binds to the KDR receptor. By doing so, it prevents VEGF from binding to that receptor, which, in turn, blocks endothelial cell growth and inhibits angiogenesis. c-p1C11 therefore helps inhibit or eliminate cancer by preventing the growth of new blood vessels and depriving the tumor of the blood supply that it requires to grow. We expect to file an IND application with the FDA by the end of 1999 in order to commence clinical trials of c-p1C11. We believe c-p1C11 will be effective in treating many solid tumors and that it may also be useful in treating other diseases such as diabetic retinopathy, age-related macular degeneration, and rheumatoid arthritis that, like cancer, depend on the growth of new blood vessels. IMCLONE'S RESEARCH PROGRAMS GENERAL In addition to concentrating on our products in development, we perform ongoing research, including research in each of the areas of our ongoing clinical programs of growth factor inhibitors, therapeutic cancer vaccines and angiogenesis inhibitors. We have assembled a scientific staff with expertise in a variety of disciplines, including oncology, immunology, molecular and cellular biology, antibody engineering, protein and synthetic chemistry and high-throughput screening. In addition to pursuing research programs in-house, we collaborate with academic institutions and corporations to support our research and development efforts. RESEARCH ON GROWTH FACTOR INHIBITORS We are conducting a research program to develop inhibitors to the cell-signal transduction pathways of a class of enzymes referred to as tyrosine kinases. These pathways have been shown to be involved in the rapid proliferation of tumor cells. We are developing monoclonal antibodies to inhibit the binding of growth factors to cellular receptors that trigger these pathways, thereby potentially inhibiting cell division and tumor growth. We are also developing small molecule inhibitors to the tyrosine kinase pathways. In October 1997, we entered into an agreement with CombiChem, a combinational chemistry company, to utilize their library of structures of chemical compounds to help us identify and synthesize novel small molecule candidates that interfere with the function of growth factor receptors. Performance under this agreement is substantially complete but for the transfer to us of small molecule candidates and related information. We have also entered into an agreement with the Institute for Molecular Medicine in Freiburg, Germany, which permits us to test small molecules as therapeutic candidates to see if they are effective in inhibiting various tyrosine kinase receptors. RESEARCH ON CANCER VACCINES We are conducting research to discover possible cancer vaccines as another route to cancer treatment. Cancer vaccines would activate immune responses to tumors to protect against metastasis or recurrence of cancer. We are focusing our cancer-vaccine research efforts on developing melanoma vaccines. 37 39 In addition to the development of BEC2, we are conducting research on a possible melanoma vaccine based on the melanoma antigen gp75. A melanoma is a tumor or cancerous growth of the skin. Animal studies have shown that a gp75 cancer vaccine is very effective in creating an immune response in the body against melanoma cells, and may prevent or inhibit growth of experimental melanoma tumors in mice. Additionally, we are investigating the use of other melanoma antigens to be used in conjunction with gp75 for the development of an effective vaccine. We are also investigating various modes of enhancing the capacity of the vaccine to elicit an immune response. We have retained North American marketing and manufacturing rights for gp75 and have licensed to Merck KGaA the rights to manufacture and market gp75 outside North America. RESEARCH ON ANGIOGENESIS INHIBITORS We are conducting research on small molecules to develop inhibitors of enzymes important in angiogenesis. In addition, we are continuing to work with DC101 in animal models. DC101 is an antibody that neutralizes the FLK-1 receptor, which is the mouse receptor to VEGF that corresponds to KDR in humans. Such models have shown that DC101 inhibits tumor growth, and we are now focusing on establishing protocols for combination therapies of DC101 with radiation therapy or chemotherapy. Preliminary studies have shown that such combination results in better efficacy than with the DC-101 antibody alone. We are supporting research in this area at Sunnybrook Health Science Center, University of Toronto ("Sunnybrook Health Science Center"). In connection with our anti-angiogenesis research program, we are also doing research to see whether antibodies that inhibit vascular-specific cadherin ("VE-cadherin") also inhibit angiogenesis. Cadherins are a family of cell surface molecules that help organize tissue structures. Researchers believe that VE-cadherin plays an important role in angiogenesis by organizing endothelial cells into vascular tubes, which is a necessary step in the formation of new blood vessels. As we stated above, advanced tumor growth is dependent on the formation of a capillary blood vessel network in the tumor to ensure an adequate blood supply to the tumor. Therefore, antibodies that inhibit VE-cadherin may inhibit such capillary formation in tumors, and help fight cancer by cutting-off an adequate blood supply to the tumor. We intend to test various monoclonal antibodies against VE-cadherin to see if they are effective in inhibiting the function of the VE-cadherin, and the growth of blood vessels. In connection with our VE-cadherin research program, we have been assigned the exclusive rights to VE-cadherin-2, a recently developed form of VE-cadherin, and to antibodies that inhibit VE-cadherins. We also collaborate with the Mario Negri Institute for Pharmacological Research, Milan, Italy (the "Mario Negri Institute"), to do pharmacological research to better determine the role of VE-cadherin in angiogenesis. MISCELLANEOUS RESEARCH AREAS We are conducting additional research outside of our three principal areas of clinical focus. These include: (1) a means to induce apoptosis (programmed cell-death) in order to enhance tumor cell killing, including looking for small molecules that enhance the apoptosic process; (2) efforts to isolate endothelial stem cells and to determine the utility of such isolated cells, possibly in stimulation of wound healing, muscle regeneration or repair of damage to blood-deprived tissues; and (3) development of a panel of genes potentially useful for the maintenance and stimulation of stem cells. RESEARCH COLLABORATIONS AND CLINICAL COLLABORATIONS We engage in collaborations with academic institutions and private industry in the course of conducting our research and clinical studies. We are collaborating with CombiChem to discover and develop novel small molecules for use against selected targets for the treatment of cancer utilizing high throughput screening techniques. We support research at the Mario Negri Institute to explore the role that a family of proteins, called VE-cadherins, plays in angiogenesis. At the University of Texas, Southwestern Medical Center we are further studying the role VE-cadherins play in angiogenesis by studying VE-cadherin-2, a type of VE- 38 40 cadherin, in animal models. At the Sunnybrook Health Science Center, we are supporting research to evaluate whether chemotherapy combined with neutralizing antibodies to the FLK-1/VEGF receptor will result in a synergistic anti-angiogenic response. At Princeton University and the University of Pennsylvania, we are collaborating in the development of an extensive panel of stem cell and stromal cell genes, toward the identification of genes critical to stem cell maintenance and stimulation. In the clinical area, at the University of Wisconsin-Madison Medical School, we are conducting additional studies of C225 in head and neck cancers in combination with radiation therapy. The European Organization for Research and Treatment of Cancer is involved in managing the worldwide data for the BEC2 Phase III study. At Sloan Kettering, we collaborate both in the research area and clinical area. We support research on both potential cancer vaccine products BEC2 and gp75. We have been testing BEC2 in Phase I clinical trials at Sloan-Kettering against certain forms of cancer, including small cell lung carcinoma and melanoma. Our collaborations with Merck KGaA in developing our C225 and BEC2 products are described in the following section. COLLABORATIONS WITH MERCK KGAA C225 License and Development Agreement. In December 1998, we entered into an agreement with Merck KGaA relating to the development and commercialization of C225. Under this agreement: - we have retained the rights to market C225 within the United States and Canada - we have granted Merck KGaA exclusive rights, except in Japan, to market C225 outside of the United States and Canada - we have agreed to supply Merck KGaA, and Merck KGaA has agreed to purchase, C225 for the conduct of clinical trials and the commercialization of the product outside the United States and Canada - we will co-develop and co-market C225 in Japan with Merck KGaA - we have granted Merck KGaA an exclusive license outside of the United States and Canada, without the right to sublicense, to apply certain of our patents to a humanized EGF receptor antibody on which Merck KGaA has performed preclinical studies In return, Merck KGaA is: - paying to us $30 million in up-front fees and early cash-based milestone payments based upon achievement of certain milestones set forth in the agreement, of which $14 million has been received through October 27, 1999 and Merck KGaA has confirmed that we have achieved milestones with respect to which we are entitled to receive an additional $6 million in payments - paying to us an additional $30 million assuming achievement of further milestones for which Merck KGaA will receive equity (the "milestone shares") in our company, which will be at prices at varying premiums to the then market price of the common stock depending upon the timing of the achievement of the respective milestones - providing to us, subject to certain terms, a $30 million guaranty for the construction of a manufacturing facility by us for the commercial production of C225 - funding clinical development of C225 outside of the United States and Canada - required to pay us royalties on its future sales of C225 outside of the United States and Canada, if any The milestone shares, if issued, will be shares of our common stock (or a non-voting security convertible into our common stock). The number of shares issued to Merck KGaA will be determined by dividing the particular milestone payment due by the purchase price of the common stock when the milestone is achieved. The purchase price will relate to the then market price of our common stock, plus a premium which varies, 39 41 depending upon whether the milestone is achieved early, on-time or late. The milestone shares will be a non-voting preferred stock, or other non-voting stock convertible into our common stock if issuing shares of common stock to Merck KGaA would result in Merck KGaA owning greater than 19.9% of our common stock. These convertible securities will not have voting rights. They will be convertible at a price determined in the same manner as the purchase price for shares of our common stock if shares of common stock were to be issued. They will not be convertible into common stock if, as a result of the conversion, Merck KGaA would own greater than 19.9% of our common stock. This 19.9% limitation is in place through December 2002. After this date, Merck KGaA must sell shares it receives as a result of conversion to the extent such shares result in Merck KGaA's owning in excess of 19.9% of our common stock. We have granted Merck KGaA certain registration rights regarding the shares of common stock that it may acquire upon conversion of the series A preferred stock and milestone shares. This agreement may be terminated by Merck KGaA in various instances, including (1) at its discretion on any date on which a milestone is achieved (in which case no milestone payment will be made), (2) for a one-year period after first commercial sale of C225 in Merck KGaA's territory, upon Merck KGaA's reasonable determination that the product is economically unfeasible (in which case Merck KGaA is entitled to receive back 50% of the cash-based milestone payments then paid to date, but only out of revenues received, if any, based upon a royalty rate applied to the gross profit from C225 sales or C225 license fees in the United States and Canada), or (3) in the event we do not obtain certain collateral license agreements in which case Merck KGaA also is entitled to a return of all cash amounts with respect to milestone payments to date, plus liquidated damages of $500,000. In April 1999, the parties agreed on the production concept for the manufacturing facility and are currently working toward securing Merck KGaA's guaranty of our obligations under a $30 million credit facility relating to the construction of the manufacturing facility. In the event of termination of the agreement, we will be required to use our best reasonable efforts to cause the release of Merck KGaA as guarantor. In the year ended December 31, 1998, we recorded $4 million as a fee potentially refundable from our corporate partner under this agreement and in the six months ended June 30, 1999, we recorded an additional $8 million as a fee potentially refundable from our corporate partner under this agreement. BEC2 Research and License Agreement. Effective April 1990, we entered into an agreement with Merck KGaA relating to the development and commercialization of BEC2 and the recombinant gp75 antigen. Under this agreement: - we have granted Merck KGaA a license to develop and market BEC2 worldwide - we have retained the right to co-promote BEC2 within North America - it is intended that we will be the bulk product manufacturer of BEC2 to support worldwide sales - we are required to give Merck KGaA the opportunity to negotiate a license in North America to gp75 before granting such a license to any third party In return, Merck KGaA: - has made research support payments to us totaling $4.7 million - is required to make milestone payments to us of up to $22.5 million, of which $3 million has been received through October 27, 1999, based on milestones achieved in the product development of BEC2 - is required to make royalty payments to us on all sales of the licensed products outside North America, if any, with a portion of the earlier funding received under the agreement being creditable against the amount of royalties due Merck KGaA is responsible for conducting the clinical trials and regulatory submissions outside North America, and we are responsible for conducting those within North America. Costs worldwide to conduct a multi-site, multinational Phase III clinical trial to obtain approval for the indication of the treatment of limited disease small-cell lung carcinoma for BEC2 are the responsibility of Merck KGaA. These include our 40 42 out-of-pocket costs (but do not include costs of establishing a manufacturing facility) for manufacturing materials for clinical trials, conduct of clinical trials and regulatory submissions (other than drug approval fees which are the responsibility of Merck KGaA or ourselves in our respective territories). If these expenses, including such expenses of Merck KGaA, exceed DM17 million, such excess expenses will be shared 60% by Merck KGaA and 40% by us. As of October 27, 1999, this expense level had not yet been reached. We will negotiate, with Merck KGaA, the allocation of costs for the conduct of additional clinical trials for other indications. We are responsible for providing the supply of the active agent outside of North America at the expense of Merck KGaA, and the parties intend that the cost of goods sold in North America be paid out of gross sales of any licensed product in North America in accordance with a co-promotion agreement to be negotiated. The agreement terminates upon the later of (1) the last to expire of any patents issued and covered by the technology (2) or fifteen years from the date of the first commercial sale. After termination, the license will survive without further royalty payment and is irrevocable. The agreement may be terminated earlier by us in the event Merck KGaA fails to pursue in a timely fashion regulatory approval or sale of a licensed product in a country in which it has the right to do so. It also may be terminated earlier by Merck KGaA if milestones are not achieved. In the year ended December 31, 1998, we recorded $3.5 million, and for the six-month period ended June 30, 1999, we recorded $533,000, in revenue from Merck KGaA under this agreement, which consisted of milestone and research and support payments. In connection with the December 1997 amendment to the agreement with Merck KGaA for BEC2, Merck KGaA purchased from us 400,000 shares of our series A preferred stock for a total price of approximately $40 million. See "Description of Capital Stock." In addition, Merck KGaA may nominate one member to our board of directors. OTHER CORPORATE COLLABORATIONS ABBOTT LABORATORIES We have licensed some of our diagnostic products and techniques to Abbott on a worldwide basis. In mid-1995, Abbott launched its first DNA-based diagnostic test in Europe, using our Repair Chain Reaction ("RCR") DNA probe technology. Abbott's test is used to diagnose the sexually transmitted diseases chlamydia and gonorrhea, as well as mycobacteria. The RCR DNA probe technology uses DNA amplification techniques to detect the presence of DNA or RNA in biological samples thereby indicating the presence of disease. In December 1996, we amended our agreement with Abbott to allow Abbott to exclusively license our patented DNA signal amplification technology, AMPLIPROBE, to Chiron Diagnostics. DNA signal amplification technology such as AMPLIPROBE also uses DNA signal amplification techniques in detecting the presence of DNA or RNA in biological samples, thereby indicating the presence of disease. Abbott receives a royalty payment from Chiron on all sales of Chiron branched DNA diagnostic probe technology in countries covered by our patents. Abbott, in turn, pays any such royalties it receives to us. The Chiron branched DNA diagnostic probe technology has recently been sold to Bayer Pharmaceutical Corporation. Under the agreement Abbott has paid us up-front fees and research support, and is obligated to pay milestone fees and royalties on sales. In June 1997, we received two milestone payments from Abbott totaling $1 million, as a result of a patent issuance in Europe for our RCR technology. This is partially creditable against royalties as described below. The issuance of the patent also entitles us to receive royalty payments on sales in covered European countries for products using our RCR technology. Abbott will be entitled to deduct from royalties otherwise due, 25% of such royalties due for a two-year period and 50% thereafter until a total of $500,000 has been deducted. In March 1999, we received a notice of allowance from the U.S. Patent Office for our RCR technology. The patent issuance upon this notice of allowance will entitle us to a $500,000 milestone payment from Abbott and royalties on sales for a two-year period from initiation of U.S. sales by Abbott for products using our RCR technology. The agreement terminates upon the later of (1) the last to 41 43 expire of any patents issued covered by the technology or (2), if no patents are granted, twenty years, subject to certain earlier termination provisions contained in the agreement. For the year ended December 31, 1998 we received a total of $295,000, and in the six-month period ended June 30, 1999 we received a total of $195,000, in royalty fees pursuant to our strategic alliance with Abbott. AMERICAN HOME PRODUCTS In December 1987, we entered into a vaccine development and licensing agreement with American Cyanamid Company ("Cyanamid") that provided Cyanamid an exclusive worldwide license to manufacture and sell vaccines developed during the research period of the agreement. In connection with the agreement, Cyanamid purchased 410,001 shares of our common stock. During the three-year research period of the agreement, which period expired in December 1990, we were engaged in the development of two vaccine candidates, the first of which was for N. gonorrhea based on recombinant proteins, and the second of which was for Herpes Simplex Virus based on recombinant glycoproteins B and D. In September 1993, Cyanamid's Lederle-Praxis Biologicals division and ImClone entered into a research collaboration agreement, which by its terms supersedes the earlier agreement as to N. gonorrhea vaccine candidates, but not as to Herpes Simplex Virus vaccine candidates. The successor to Cyanamid, American Home, has the responsibility under this agreement to pay research support to us, as well as milestone fees and royalties on sales of any N. gonorrhea vaccine that might arise from the collaboration. In January 1998, this agreement was extended to continue annual research funding payable to us in the amount of $300,000 through September 1999 and to extend the period by which American Home was required to have filed an IND application to initiate clinical trials with a vaccine candidate. In October 1999, this milestone was achieved requiring American Home to make a $500,000 payment to us. American Home has the responsibility under both agreements for conducting pre-clinical and clinical trials of the vaccine candidates, obtaining regulatory approval, and manufacturing and marketing the vaccines. American Home is required to pay royalties to us in connection with sales of the vaccines, if any. In the year ended December 31, 1998 we recorded revenues of $300,000, and in the six-month period ended June 30, 1999 we recorded revenues of $150,000, under the American Home agreements. IMMUNEX CORPORATION We are the exclusive licensees of a family of patents and patent applications covering the FLK-2/FLT-3 receptor. FLK-2/FLT-3 growth factor is a protein that binds to and activates the FLK-2/FLT-3 receptor. The FLK-2/FLT-3 growth factor is owned by Immunex. In December 1996, we entered into a non-exclusive license and supply agreement with Immunex under which we granted Immunex an exclusive worldwide license to the FLK-2/FLT-3 receptor for the limited use of the manufacture of the FLK-2/FLT-3 growth factor. Immunex is currently testing the growth factor in human trials for stem cell stimulation and for tumor inhibition. Under this agreement, we receive royalty and licensing fees from Immunex, and Immunex has granted us a license to use the FLK-2/FLT-3 growth factor for use in our ex vivo research on stem cells. In addition, Immunex has granted us a world-wide non-exclusive license to use and sell the FLK-2/FLT-3 growth factor, manufactured by Immunex, for ex-vivo stem cell expansion, together with an exclusive license to distribute the growth factor with our own proprietary products for ex-vivo expansion. Immunex will also supply FLK-2/FLT-3 growth factor to us. Subject to earlier termination provisions contained in the agreements, our license terminates in December 2001, subject to a five-year renewal period, and Immunex's license terminates thirteen years after the first commercial sale of the product. In the year ended December 31, 1998, and in the six-month period ended June 30, 1999, we recorded no revenue from Immunex under this agreement. 42 44 MANUFACTURING Under each of our C225 and BEC2 agreements with Merck KGaA we are required to supply to Merck KGaA and Merck KGaA is required to obtain from us C225 and BEC2, respectively, for clinical trials and commercial supply. We own and operate a manufacturing facility for biologics in Somerville, New Jersey for the manufacture of clinical trial materials. At this facility we manufacture a portion of the C225 utilized for clinical trials and are developing the purification process for c-p1C11 and are in the early stages of its production for clinical trials. This facility is operated in accordance with Good Manufacturing Practices (GMP) which is a requirement for product manufactured for use in clinical trials and for commercial sale. We intend to build a new manufacturing facility adjacent to our current manufacturing facility in Somerville, New Jersey. This new facility will contain three 10,000 liter fermentors and will be dedicated to the commercial production of C225. Under our agreement with Merck KGaA for C225, Merck KGaA is providing us, subject to certain terms, with a $30 million guaranty to apply toward the build-out of this new facility. In April 1999, we agreed on the production concept for this facility with Merck KGaA and expect to break ground during the first half of 2000, subject to obtaining the necessary permits from the local authority. The facility will cost approximately $45 million and will be built on a lot adjacent to our Somerville, New Jersey facility, which we are in the process of purchasing for approximately $700,000. The facility will be dedicated to the production of C225 and will have an area of approximately 85,000 square feet with 20,000 square feet remaining for expansion. BI is supplying us with quantities of C225 required for our clinical trials that exceed the capacity of our current facility under an April 1999 development agreement. The total cost under this agreement, including amounts of additional C225 we had the right to request, will be approximately DM12,100,000 (or $6,392,000 as of June 30, 1999), of which approximately DM3,940,000 had been incurred and DM3,130,000 had been paid as of June 30, 1999. We intend to continue to utilize the services of a contract manufacturer to provide a supplemental supply of C225 for both clinical trials and commercial supply. If we obtain FDA approval of C225 prior to FDA approval of our proposed manufacturing facility, we will need to obtain commercial-scale quantities of C225 from contract manufacturers in order to have sufficient quantities of C225 for product launch. We may pursue an agreement with another third party relating to the manufacture of C225 for both clinical trials and commercial sale. Under our development agreement with BI we demonstrated our ability to successfully transfer the technology necessary for the production and purification of C225. The stable manufacturing process for C225 has been duplicated in both BI's manufacturing facility and ours. This process has been performed in a number of different sized fermentors, including 1,200 liter scale in our facility and 2,000 liter scale in BI's facility. This prior successful scale-up makes us confident that we will be successful in scaling up to 10,000 liters in our new facility and that the process can be successfully transferred to a contract manufacturer for supplemental supply. MARKETING We intend to develop the capacity to market our cancer therapeutic products directly in the U.S. and Canada. As part of this strategy, in our agreement with Merck KGaA for C225, we have retained all rights to commercialize C225 in the U.S. and Canada. We also have co-promotion rights for commercialization of our BEC2 cancer vaccine in North America pursuant to our BEC2 agreement with Merck KGaA. We intend to build an internal sales force and establish the appropriate promotional campaigns and infrastructure. In November 1998, we hired a Vice-President of Marketing with experience in the commercial launch of a monoclonal antibody cancer therapeutic to develop our internal marketing capabilities. As we prepare for the marketing of C225 in the U.S. and Canada, we will be hiring directors of field sales and sales operations in 1999, regional sales managers in the first quarter of 2000 and approximately 40 sales people prior to the commencement of C225 sales. We believe that a sales force of this size can adequately address the North 43 45 American oncology market for this drug, because a manageable number of oncologists are responsible for prescribing most of the cancer therapeutics in North America. Other functions related to commercialization will be outsourced, especially those requiring considerable manpower and infrastructure resources such as inventory control, distribution, accounts receivable and reimbursement. We are currently designing our campaign to elicit the active involvement of leaders in the oncology field to broaden the knowledge of the potential significance of C225. We intend that the sales capability we will build for C225 will allow us to directly market other cancer therapeutics that we may develop, including c-p1C11, when and if we receive such regulatory approval. We expect that with respect to other cancer therapeutics that we may develop, we may enter into development agreements with third parties that may include co-marketing or co-promotion arrangements. In the alternative, we may grant exclusive marketing rights to our corporate partners in return for up-front fees, milestone payments, and royalties on sales. PATENTS AND TRADE SECRETS GENERALLY We seek patent protection for our proprietary technology and products in the United States and abroad. Patent applications have been submitted and are pending in the United States, Canada, Europe and Japan as well as other countries. The patent position of biopharmaceutical firms generally is highly uncertain and involves complex legal and factual questions. Our success will depend, in part, on whether we can: - obtain patents to protect our own products - obtain licenses to use the technologies of third parties, which may be protected by patents - protect our trade secrets and know-how - operate without infringing the intellectual property and proprietary rights of others For a discussion of the risks and uncertainties associated with our intellectual property position, see "Risk Factors -- Our success depends upon our ability to protect our intellectual property and our proprietary technology." PATENT RIGHTS; LICENSES We currently have exclusive licenses or assignments to 63 issued patents worldwide that relate to our proprietary technology in the United States and foreign countries, 37 of which are issued United States patents. In addition, we currently have exclusive licenses or assignments to approximately 43 families of patent applications. C225. We have an exclusive license from the University of California at San Diego to an issued U.S. patent for the murine form of C225, our EGF receptor antibody product. We believe that this patent covers C225 under the patent law doctrine of equivalents. Under this doctrine, the subject matter of a claim is deemed to cover variations that do substantially the same thing, in substantially the same way, to achieve the same result, especially if the variation is known and routine. We believe, in this instance, the doctrine of equivalents would extend protection to C225. Our licensor did not obtain patent protection outside the U.S. for this antibody. While this patent covers only our antibody and would not block third parties from obtaining patents covering other antibodies to the EGF receptor, we are pursuing additional patent protection that may limit the ability of third parties to commercialize EGF receptor antibodies for the treatment of cancer. Specifically, we are pursuing patent protection for the use of any antibody that inhibits the EGF receptor in combination with chemotherapy or radiation therapy. We have exclusively licensed, from Rhone-Poulenc Rorer, a family of patent applications seeking to cover the use of antibodies to the EGF receptor in conjunction with chemotherapeutic agents. A Canadian patent was issued in this family, and the patent examiner in Europe has indicated an intent to issue a European patent. U.S. prosecution continues. We have filed additional patent applications based on our own research that would cover the use of C225 or any other 44 46 EGF receptor inhibitor in conjunction with radiation therapy, and the use of C225 or any other EGF receptor inhibitor in refractory patients, either alone or in combination with chemotherapy or radiation therapy. We have patent applications pending that include claims on (1) the use of C225 to significantly inhibit the growth of tumor cells, (2) humanized forms of the antibody and antibody fragments and (3) chimeric and humanized forms of the antibody and fragments of the antibody used with other drugs, including chemotherapeutic agents. Our exclusive license agreements with the University of California, San Diego and Rhone-Poulenc Rorer require us to pay royalties on sales of C225 that are covered by these licenses. We are aware of a U.S. patent issued to a third party that includes claims covering the use, subject to certain restrictions, of antibodies to the EGF receptor and cytotoxic factors to inhibit tumor growth. We have retained special patent counsel, Kenyon & Kenyon, which has advised us that in its opinion, subject to the assumptions and qualifications set forth in such opinion, no valid claim of this third party patent is infringed by reason of our manufacture or sale, or medical professionals' use, of C225 alone or in combination with chemotherapy or radiation therapy and, therefore, in the event of litigation for infringement of this third party patent, a court should find that no valid claim of this third party patent is infringed. We have also received an opinion from our regular patent counsel, Hoffmann & Baron, LLP, that we do not infringe this third party patent. Based upon these opinions, as well as our review, in conjunction with our regular patent counsel, of other relevant patents, we believe that we will be able to commercialize C225 alone and in combination with chemotherapy and radiation therapy provided we successfully complete our clinical trials and receive the necessary FDA approvals. These opinions of counsel, however, are not binding on any court or the U.S. Patent and Trademark Office. In addition, there can be no assurance that we will not in the future, in the U.S. or any other country, be subject to patent infringement claims, patent interference proceedings or adverse judgments in patent litigation. C225 is a "chimerized" monoclonal antibody, which means it is made of antibody fragments derived from more than one type of animal. Patents have been issued to other biotechnology companies that cover the chimerization of antibodies. Therefore, we may be required to obtain licenses under these patents before we can commercialize our own chimerized monoclonal antibodies, including C225. Some of these licenses have already been obtained. We cannot be certain that we will be able to obtain the rest of such licenses in the territories where we want to commercialize C225, or how much such licenses would cost. BEC2. We have exclusively licensed from Sloan-Kettering a family of patents and patent applications relating to our BEC2 monoclonal anti-idiotypic antibody. We know that others have been issued patents in the U.S. and Europe covering anti-idiotypic antibodies or their use for the treatment of tumors. These patents, if valid, could be interpreted to cover our BEC2 monoclonal antibody and certain uses of BEC2. Merck KGaA, our licensee of BEC2, has informed us that it has obtained non-exclusive, worldwide licenses to these patents in order to market BEC2 in its territory. We are entitled to co-promote BEC2 in North America with Merck KGaA, however, we cannot be certain that we could obtain such licenses on commercially acceptable terms, if at all. Our license from Sloan-Kettering requires us to pay royalties on sales of BEC2. Angiogenesis Inhibitors. With respect to our research on inhibitors to angiogenesis based on the FLK-1 receptor, we are the exclusive licensee from Princeton University of a family of patents and patent applications covering the FLK-1 receptor and antibodies to the receptor and its human homolog, KDR. We are also the assignee of a family of patents and patent applications filed by our scientists covering angiogenesis-inhibiting antibodies to receptors that bind VEGF. One of the patents licensed from Princeton claims the use of FLK-1/KDR receptor antibodies to isolate cells expressing the FLK-1/KDR receptor on their cell surfaces. Additionally, we are a co-owner of a recently filed patent application claiming the use of FLK-1/KDR receptor antibodies to isolate endothelial progenitor cells that express FLK-1/KDR on their cell surfaces. At present, we are seeking exclusive rights to this invention from the co-owners. Our license from Princeton University requires us to pay royalties on sales that would otherwise infringe the licensed patents, which cover antibodies to the FLK-1/KDR receptor including c-p1C11. 45 47 VE Cadherin. We have an assignment of a family of patent applications covering novel cadherin molecules that are involved in endothelial cell interactions. These interactions are believed to be involved in angiogenic processes. The subject patent applications also cover antibodies that bind to, and affect, the cadherin molecules. Diagnostics. Our diagnostics program has been licensed for commercial development to Abbott Laboratories. The program includes target amplification technology and detection methods, such as RCR technology, signal amplification technology, such as AMPLIPROBE, and p53 mutation detection for assisting in cancer diagnosis. Our proprietary position with respect to our diagnostics program is based on numerous families of patents and patent applications. We have either an assignment from our own scientists or exclusive license from academic institutions to these families of patents and patent applications. We have an exclusive license to an issued patent assigned to Princeton University related to the underlying technology for our AMPLIPROBE signal amplification and detection system. We are aware that patent applications have been filed by, and that patents have been issued to, third parties in the field of DNA amplification technology. This could affect Abbott's ability to commercialize our diagnostic products, and our ability to collect royalties for such commercialization. There has been significant litigation in the biopharmaceutical industry over patents and other proprietary rights. The defense and prosecution of intellectual property suits and related legal and administrative proceedings can be both costly and time consuming. Litigation and interference proceedings could result in substantial expense to us and significant diversion of effort by our technical and management personnel. An adverse determination in any such interference or litigation, particularly with respect to C225, to which we may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties. If required, the necessary licenses may not be available on acceptable terms or at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us, in whole or in part, from commercializing our products, which could have a material adverse effect on our business, financial condition and results of operations. Trade Secrets. With respect to certain aspects of our technology, we rely, and intend to continue to rely, on trade secrets, unpatented proprietary know-how and continuing technological innovation to protect our competitive position. Such aspects of our technology include methods of isolating and purifying antibodies and other proteins, collections of plasmids in viable host systems, and antibodies that are specific for proteins that are of interest to us. We cannot be certain that others will not independently develop substantially equivalent proprietary information or techniques. Relationships between us and our employees, scientific consultants and collaborators provide these persons with access to our trade secrets, know-how and technological innovation under confidentiality agreements with the parties involved. Similarly, our employees and consultants enter into agreements with us that require that they do not disclose confidential information of ours and they assign to us all rights to any inventions made while in our employ relating to our activities. We seek patent protection for our proprietary technology and products, in the United States and abroad. Patent applications have been submitted and are pending in the United States, Canada, Europe and Japan as well as other countries. GOVERNMENT REGULATION The research and development, manufacture and marketing of human therapeutic and diagnostic products are subject to regulation primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies and other federal, state and local entities regulate, among other things, research and development activities (including testing in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, advertising and promotion of the products that we are developing. Noncompliance with applicable requirements can result in refusal to approve product licenses or other applications, or revocation of approvals previously granted. Noncompliance also can result in fines, criminal prosecution, recall or seizure of products, total or partial suspension of production or refusal to allow a company to enter into governmental supply contracts. 46 48 The process of obtaining requisite FDA approval has historically been costly and time consuming. Current FDA requirements before a new human drug or biological product may be marketed in the United States include (1) the successful conclusion of pre-clinical laboratory and animal tests, if appropriate, to gain preliminary information on the product's safety, (2) filing with the FDA of an IND application to conduct human clinical trials for drugs or biologics, (3) the successful completion of adequate and well-controlled human clinical investigations to establish the safety and efficacy of the product for its recommended use and (4) filing by a company and approval by the FDA of a New Drug Application ("NDA") for a drug product or a Biological License Application ("BLA") for a biological product to allow commercial distribution of the drug or biologic. Pre-clinical tests include the evaluation of the product in the laboratory and in animal studies to assess the potential safety and efficacy of the product and its formulation. The results of the pre-clinical tests are submitted to the FDA as part of an IND application to support the evaluation of the product in human subjects or patients. Clinical trials involve administration of the product to patients under supervision of a qualified principal investigator. Such trials are typically conducted in three sequential phases, although the phases may overlap. In Phase I, the initial introduction of the drug into human subjects, the product is tested for safety, dosage tolerance, absorption, metabolism, distribution, and excretion. Phase II involves studies in a limited patient population to (1) determine the biological or clinical activity of the product for specific, targeted indications, (2) determine dosage tolerance and optimal dosage, and (3) identify possible adverse effects and safety risks. If Phase II evaluations indicate that a product is effective and has an acceptable benefit-to-risk relationship, Phase III trials may be undertaken to further evaluate clinical efficacy and to further test for safety within an expanded patient population. The FDA reviews the results of the clinical trials and may order the temporary or permanent discontinuation of clinical trials at any time if it believes the product candidate exposes clinical subjects to an unacceptable health risk. Investigational products used in clinical studies must be produced in compliance with GMP pursuant to FDA regulations. On November 21, 1997, President Clinton signed into law the Food and Drug Administration Modernization Act. That act codified the FDA's policy of granting "fast track" approval for cancer therapies and other therapies intended to treat severe or life threatening diseases and having potential to address unmet medical needs. Previously, the FDA approved cancer therapies primarily based on patient survival rates or data on improved quality of life. The FDA considered evidence of partial tumor shrinkage, while often part of the data relied on for approval, insufficient by itself to warrant approval of a cancer therapy, except in limited situations. Under the FDA's new policy, which became effective on February 19, 1998, the FDA has broadened authority to consider evidence of partial tumor shrinkage or other clinical outcomes for approval. This new policy is intended to facilitate the study of cancer therapies and shorten the total time for marketing approvals. We intend to take advantage of this policy; however, it is too early to tell what effect, if any, these provisions may have on the approval of our product candidates. Some of our cancer treatments require the use of in vitro diagnostic products to test patients for particular traits. In vitro diagnostic products are generally regulated by the FDA as medical devices. In general, the FDA must approve a new diagnostic product that is not "substantially equivalent" to a legally marketable product much in the way it must approve drugs and biological products. Specifically, the device must be tested under an investigational device exemption ("IDE") and receive FDA approval under a premarket approval application ("PMA") before it can be commercially marketed. Substantially equivalent devices go through a clearance process at the FDA that is generally less onerous than the PMA process but also can require data submission and other rigorous review. Under current law, each domestic and foreign drug and device product-manufacturing establishment must be registered with the FDA before product approval. Domestic and foreign manufacturing establishments must meet strict standards for compliance with GMP regulations and licensing specifications after the FDA has approved an NDA, BLA or PMA. The FDA and foreign regulatory authorities periodically inspect domestic and foreign manufacturing facilities where applicable. 47 49 Sales outside the United States of products we develop will also be subject to regulatory requirements governing human clinical trials and marketing for drugs and biological products and devices. The requirements vary widely from country to country, but typically the registration and approval process takes several years and requires significant resources. In most cases, if the FDA has not approved a product for sale in the United States the product may be exported for sale outside of the United States only if it has been approved in any one of the following countries: the European Union, Canada, Australia, New Zealand, Japan, Israel, Switzerland and South Africa. There are specific FDA regulations that govern this process. Our ability to earn sufficient returns on our products may depend in part on the extent to which government health administration authorities, private health coverage insurers and other organizations will provide reimbursement for the costs of such products and related treatments. Significant uncertainty exists as to the reimbursement status of newly approved health care products, and there can be no assurance that adequate third-party coverage will be available. ENVIRONMENTAL AND SAFETY MATTERS We use hazardous materials, chemicals, viruses and various radioactive compounds in our research and development activities. Accordingly, we are subject to regulations under federal, state and local laws regarding work force safety, environmental protection and hazardous substance control, and to other present and possible future federal, state and local regulations. We have in place safety procedures for storing, handling and disposing of these materials. However, we cannot completely eliminate the risk of contamination or injury. We could be held liable for any resulting damages, injuries or civil penalties, and our trials could be suspended. In addition, environmental laws or regulations may impose liability for the clean-up of contamination at properties we own or operate, regardless of fault. These environmental laws and regulations do not currently materially adversely affect our operations, business or assets. However, these laws may become more stringent, other facts may emerge, and our processes may change, and therefore the amount and timing of expenditures in the future may vary substantially from those currently anticipated. COMPETITION Competition in the biopharmaceutical industry is intense and based significantly on scientific and technological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions, governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us. We are aware of certain products under development or manufactured by competitors that are used for the prevention, diagnosis, or treatment of certain diseases we have targeted for product development. Various companies are developing biopharmaceutical products that potentially directly compete with our product candidates. These include areas such as (1) the use of small molecules to the receptor or antibodies to those receptors to treat cancer, (2) the use of anti-idiotypic antibody or recombinant antigen approaches to cancer vaccine therapy, (3) the development of inhibitors to angiogenesis, (4) and the use of hematopoietic growth factors to treat blood system disorders to or for stem cell or gene therapy. Some of these product candidates are in advanced stages of clinical trials. We expect that our products under development and in clinical trials will address major markets within the cancer sector. Our competition will be determined in part by the potential indications for which drugs are 48 50 developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors' products may be an important competitive factor. Accordingly, the relative speed with which we can develop products, complete pre-clinical testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price, and patent position. HUMAN RESOURCES We initiated our in-house research and development in 1986. We have assembled a scientific staff with a variety of complementary skills in a broad base of advanced research technologies, including oncology, immunology, molecular and cell biology, antibody engineering, protein and synthetic chemistry and high-throughput screening. We have also recruited a staff of technical and professional employees to carry out manufacturing of clinical trial materials at our Somerville, New Jersey facility. Of our 165 full-time personnel on October 15, 1999, 69 were employed in our product development, clinical and manufacturing programs, 50 in research, and 46 in administration. Our staff includes 20 persons with Ph.D.s and three with M.D.s. PROPERTIES RESEARCH FACILITY -- NEW YORK, NEW YORK We have occupied two contiguous leased floors at 180 Varick Street in New York City since 1986. The current lease for the two floors was effective as of January 1, 1999 and expires in December 2004. The annual rent under the lease for 1999 is $720,000, which increases by 3% per year for subsequent years. Rent expense for the New York facility, prior to our recent lease renewal, was approximately $574,000, $554,000, and $508,000 for the years ended December 31, 1998, 1997 and 1996, respectively. We have completed a design concept and are in the process of renovating the facility to better fit our needs. The renovation is expected to cost approximately $2.0 million and is expected to be completed by November 1999. The original acquisition, construction and installation of our New York research and development facilities were financed principally through the sale of IDA Bonds issued by the NYIDA. Equipment at these facilities purchased with the proceeds of the bond secure the payment of debt service on the outstanding IDA Bond. MANUFACTURING FACILITY -- SOMERVILLE, NEW JERSEY In June 1992, we acquired certain property and a building in Somerville, New Jersey at a cost to us of approximately $4,665,000, including expenses. We have retrofitted the building to serve as our clinical-grade manufacturing facility. When purchased, the facility had in place various features, including clean rooms, air handling, electricity, and water for injection systems and administrative offices. The cost for completion of facility modifications was approximately $5.4 million. We currently operate the facility to develop and manufacture materials for our clinical trials. Under certain circumstances, we also may use the facility for the manufacturing of commercial products. The timing and any additional costs of adapting the facility for commercial manufacturing depend on several factors, including the progress of products through clinical trials. In January 1998, we completed the construction and commissioning of a new 1,750 square foot process development center at this facility dedicated to manufacturing process optimization for existing products and the pre-clinical and Phase I development of new biological therapeutics. We are in the process of purchasing, for approximately $700,000, a lot adjacent to our Somerville, New Jersey facility. We intend to build a new manufacturing facility on this site for commercial supply of C225, which we estimate will cost approximately $45 million. LEGAL PROCEEDINGS There are currently no material legal proceedings pending against us or any of our property. 49 51 MANAGEMENT SENIOR OFFICERS AND DIRECTORS The following table lists the senior officers and directors of ImClone as of October 27, 1999. Below the table is information about the business experience of each person listed.
NAME AGE POSITION - ---- --- -------- Robert F. Goldhammer............. 68 Chairman of the Board and Director(1)(2)(3) Samuel D. Waksal, Ph.D. ......... 53 President, Chief Executive Officer and Director(2)(4) Harlan W. Waksal, M.D. .......... 46 Executive Vice President, Chief Operating Officer and Director(2)(3)(4) Carl Goldfischer................. 41 Vice President and Chief Financial Officer John B. Landes................... 51 Vice President, Business Development and General Counsel Peter Bohlen, Ph.D. ............. 56 Vice President, Research Michael Feldman, Ph.D. .......... 73 Vice President, Discovery Research Ronald A. Martell................ 37 Vice President, Marketing S. Joseph Tarnowski, Ph.D. ...... 46 Vice President, Product and Process Development Michael A. Trapani............... 44 Vice President, Regulatory Affairs and Quality Assurance Jean Carvais, M.D. .............. 72 Director Vincent T. DeVita, Jr., M.D. .... 64 Director(5)(4) Paul B. Kopperl.................. 66 Director(5)(1)(3) William R. Miller................ 71 Director(5)(3) David M. Kies.................... 55 Director(1)(3) John Mendelsohn, M.D. ........... 63 Director(3)(4) Richard Barth.................... 68 Director(5)(1)
- ------------ (1) Member of Compensation and Stock Option Committee (2) Member of Executive Committee (3) Member of Nominating and Corporate Governance Committee (4) Member of Research Oversight Committee (5) Member of Audit Committee Robert F. Goldhammer has served as ImClone's Chairman of the Board since February 1991 and has been a Director of ImClone since October 1984. Mr. Goldhammer has been a partner of Concord International Investment Group, L.P. since 1991. He was a partner of Rohammer Corporation, a private investment company, from 1989 to 1991. He was a managing director of Kidder, Peabody Group Inc., an investment banking firm, from May 1988 to January 1989. He is a director of Esterline Technologies Corporation. Samuel D. Waksal, Ph.D., President of ImClone, is a founder of ImClone and has been its Chief Executive Officer and a Director since August 1985 and President since March 1987. From 1982 to 1985, Dr. Waksal was a member of the faculty of Mt. Sinai School of Medicine as Associate Professor of Pathology and Director of the Division of Immunotherapy within the Department of Pathology. He has served as visiting Investigator of the National Cancer Institute, Immunology Branch, Research Associate of the Department of Genetics, Stanford University Medical School, Assistant Professor of Pathology at Tufts University School of Medicine and Senior Scientist for the Tufts Cancer Research Center. Dr. Waksal was a scholar of the Leukemia Society of America from 1979 to 1984. Dr. Waksal currently serves on the Executive Committee of the New York Biotechnology Association, the Board of Directors of Cadus Pharmaceutical Corporation and is Chairman of the New York Council for the Humanities. Dr. Samuel Waksal and Dr. Harlan Waksal are brothers. Harlan W. Waksal, M.D. is a founder of ImClone and has been a Director since April 1984. He has directed ImClone's research and development since April 1985, and has served as ImClone's Executive Vice 50 52 President and Chief Operating Officer since March 1987. From 1985 to March 1987, Dr. Waksal served as ImClone's President. Dr. Waksal received his training in Internal Medicine from Tufts-New England Medical Center Hospital and in Pathology from Kings County Hospital in Brooklyn, New York from 1982 to 1987. From 1984 to 1985, Dr. Waksal was Chief Resident in Pathology at Kings County Hospital. He received his Medical Degree from Tufts University School of Medicine in 1979. He is currently Adjunct Assistant Professor in the Department of Pathology at Downstate Medical Center, New York. Dr. Harlan Waksal and Dr. Samuel Waksal are brothers. Carl S. Goldfischer, M.D. has served as Vice President, Finance and Chief Financial Officer since May 1996. From June 1994 until joining ImClone, Dr. Goldfischer served as a healthcare analyst with Reliance Insurance Company. From June 1991 until June 1994, Dr. Goldfischer was Director of Research for D. Blech & Co., an investment banking firm. Dr. Goldfischer received a doctorate of medicine from Albert Einstein College of Medicine in 1988 and served as a resident in radiation oncology at Montefiore Hospital of the Albert Einstein College of Medicine until 1991. Dr. Goldfischer is a director of Immulogic Pharmaceutical Corporation. Dr. Goldfischer has indicated that he intends to resign from ImClone to resume his career in investment banking in the near future. John B. Landes has served as Vice President, Business Development and General Counsel since November 1992. Prior thereto, he was Vice President, Administration and Legal since December 1984. He also has been Secretary of ImClone since April 1985 and served as its Treasurer from April 1984 through September 1991, except for an interim period from December 1988 to February 1991. From 1978 to 1984, Mr. Landes was an associate attorney with the Boston law firm of Mahoney, Hawkes and Goldings. Peter Bohlen, Ph.D. has been Vice President, Research of ImClone since September 1996. From November 1995 to July 1996 he was Senior Director of Ixsys, a privately-held biotechnology company. From October 1987 to June 1996 he was department head of the Molecular Biology Section of American Cyanamid Company's Medical Research Division and director of the company's angiogenesis program. He also has held academic positions at the Salk Institute, San Diego and the University of Zurich, Switzerland. Dr. Bohlen received his Ph.D. in chemistry from the University of Berne in Switzerland. In 1983, he received the Cloetta Award in Switzerland for his contributions in the field of protein analysis. Michael Feldman, Ph.D. became Vice President, Discovery Research for ImClone in May 1995. Prior thereto he served as Director of Basic Research for ImClone since 1993. Dr. Feldman is former head of the Department of Cell Biology at the Weizmann Institute of Science in Rehovot, Israel, and a former dean of its graduate school. He has done pioneering work in the areas of transplantation immunology, differentiation of lymphocytes and cancer immunology. In 1984, he received the Griffuel Award in France for his work in cancer metastasis, and in 1986 received the Rothschild Award for his work in immunology. Dr. Feldman is a member of the Israeli Academy of Sciences and Humanities and the World Academy of Arts and Sciences. Dr. Feldman is currently on long-term disability. Ronald A. Martell has served as ImClone's Vice President, Marketing since November 1998. Prior to joining ImClone he worked at Genentech, Inc. for ten years where he held various positions. Most recently, from 1996 until joining ImClone, he served as Genentech's Group Manager of Oncology Products where he directed the launch of Herceptin, Genentech's monoclonal antibody product approved to treat breast cancer. From 1995 to 1996 he served as Senior Product Manager where he launched Pulmozyme for cystic fibrosis in Europe. From 1994 through 1995 he served as Manager of Genentech's Piedmont Sales Division. Prior to that, he served from 1993 as Associate Product Manager for Genentech's Pulmozyme. S. Joseph Tarnowski, Ph.D. has served as ImClone's Vice President, Product and Process Development since January 1999. Prior to joining ImClone, he held various positions with CellPro Inc., the principal business of which was the development, manufacture and marketing of automated systems that utilize monoclonal antibodies to purify large quantities of specific cells for therapeutic and diagnostic applications. He joined CellPro in June 1992 as Vice President of Operations and was appointed to the position of Vice President of Research and Development in June 1995 and became Senior Vice President and Chief Technical Officer in December 1996. From November 1986 to May 1992, Dr. Tarnowski was Director, Process and Product Development of Scios Nova Inc. (formerly California Biotechnology Inc.), a company that develops 51 53 recombinant human proteins for therapeutic uses. Dr. Tarnowski received a Ph.D. in Biochemistry from the University of Tennessee in 1979 and was a Postdoctoral Fellow at the Roche Institute of Molecular Biology from 1979 through 1981. Michael A. Trapani has served as ImClone's Vice President, Regulatory Affairs & Quality Assurance since June 1999. He has more than 20 years' experience in the pharmaceutical industry, with the majority of his experience in the drug approval area. From January 1996 through May 1999, he held various positions at Cytogen Corp., Princeton, New Jersey, most recently as its Vice President, Regulatory Affairs & Quality Assurance. Prior to that, he served from September 1993 until January 1996 as Senior Director, Regulatory Affairs for Pharmacia Adria, Columbus, Ohio. From 1981 through 1993 he served in various positions at Kabi Pharmacia, Piscataway, New Jersey, ending as its Executive Director, Regulatory Affairs. Mr. Trapani began his career in 1977 with the Food and Drug Administration. Mr. Trapani received a B.S. degree in Biology from Brooklyn College and an MBA degree from Seton Hall Graduate School of Business. Jean Carvais, M.D. has been a Director of ImClone since July 1993, and has since 1984 been an independent consultant to companies in the pharmaceutical industry. Prior to that time, Dr. Carvais was President of The Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc. As such, he was involved in the development of a line of anti-cancer drugs, including Bleomycin and Adriamycin, as well as a new line of antibiotics and quinolones. Following the acquisition of Roger Bellon, S.A. by Rhone-Poulenc, Dr. Carvais became a member of Rhone-Poulenc's central research committee which directs the company's worldwide research and development activities. Dr. Carvais has served as a director of Columbia Laboratories, Inc. since 1996. Vincent T. DeVita, Jr., M.D. has been a Director of ImClone since February 1992. Since 1995 Dr. DeVita has served as Director of the Yale Cancer Center as well as Professor of Medicine and Professor of Epidemiology and Public Health at Yale University School of Medicine, New Haven, Connecticut. From September 1988 through June 1995, Dr. DeVita served as Attending Physician at Sloan-Kettering, New York, and through June 1991 as Physician-in-Chief. From 1980 to 1988, he served under Presidential appointment as Director of the National Cancer Institute, where he had held various positions since 1966. During his years with the National Cancer Institute, Dr. DeVita was instrumental in developing the first successful combination cancer chemotherapy program. This work ultimately led to effective regimens of curative chemotherapy for a variety of cancers. Dr. DeVita's numerous awards include the 1990 Armand Hammer Cancer Prize and the 1982 Albert and Mary Lasker Medical Research Award for his contribution to the cure of Hodgkin's disease. Dr. DeVita received his M.D. from the George Washington University School of Medicine, Washington, DC, in 1961. Paul B. Kopperl has served as a Director of ImClone since December 1993. He is President of Pegasus Investments, Inc., Boston, a private investment management firm established in 1994. He has served as President of Delano & Kopperl, Inc., a private business strategy and venture investing firm in Boston and its predecessor firms from 1976 to the present. From 1967 through 1975 he was Vice President and a principal of Kidder, Peabody & Co. Incorporated, New York, an investment banking firm. From 1959 to 1967 he was an associate with Goldman, Sachs & Co., New York. Mr. Kopperl is a Trustee and Governor of the Dana-Farber Cancer Institute, Boston, and over the years has served as a trustee or director of numerous not-for-profit educational, performing arts and social welfare organizations and businesses. William R. Miller has been a Director of ImClone since June 1996. Mr. Miller served as Vice Chairman of the Board of Directors of the Bristol-Myers Squibb Company from 1985 until 1991, at which time he retired. Mr. Miller is a director of Isis Pharmaceuticals, Inc., Transkaryotic Therapies, Inc., Westvaco Corporation and Xomed Surgical Products, Inc. He is Chairman of the Board of Vion Pharmaceuticals, Inc. and SIBIA Neurosciences, Inc. He is Chairman of the Board of Trustees of the Cold Spring Harbor Laboratory and is a past Chairman of the Board of the Pharmaceutical Manufacturers Association. Mr. Miller is a Trustee of the Manhattan School of Music, Metropolitan Opera Association and Opera Orchestra of New York. He is a member of Oxford University Chancellor's Court of Benefactors, Honorary Fellow of St. Edmund Hall and Chairman of the English-Speaking Union of the United States. 52 54 David M. Kies has been a Director of ImClone since June 1996. Mr. Kies is a Partner of the New York based law firm Sullivan & Cromwell, specializing in mergers and acquisitions, securities and general corporate matters. Mr. Kies joined Sullivan & Cromwell in 1968, and was elected a partner of the firm in 1976. From 1991 until 1995, he was the managing partner of the firm's London office. John Mendelsohn, M.D. has been a Director of ImClone since February 1998. He has served as the President of M.D. Anderson Cancer Center, University of Texas, where he has also been Professor of Medicine since 1996. From 1985 to 1996 he was Chairman of the Department of Medicine at Sloan-Kettering, New York, as well as holder of the Winthrop Rockefeller Chair in Medical Oncology at Sloan-Kettering. He was also Professor and Vice-Chairman of Medicine at Cornell University Medical College and an attending physician at both Memorial and New York Hospitals. Dr. Mendelsohn served on the faculty of the University of California, San Diego and was instrumental in the creation of the University's Cancer Center, where he served as Director from 1976 to 1985. Dr. Mendelsohn's work has focused on growth factors and their role in regulating the proliferation of cancer cells through cell surface receptors. Dr. Mendelsohn was responsible for developing specific monoclonal antibodies that block receptors, including epidermal growth factor receptors, which mediate growth factor activation of cell and growth and division. Dr. Mendelsohn is currently a board member of Enron Corp., the Richard Lounsbery Foundation and the Greater Houston Partnership, and a fellow of the New York Academy of Medicine. In 1997, Dr. Mendelsohn was elected to the Institute of Medicine of the National Academy of Sciences. Richard Barth has been a Director of ImClone since October 1996. Mr. Barth served as Chairman of the Board of Ciba-Geigy Corporation, United States from 1990 until December 1996, and was President and Chief Executive Officer of Ciba-Geigy Corporation from 1986 until April 1996. Mr. Barth is a member of the Board of Directors of numerous organizations, including Novartis Corporation, United States, The Bank of New York, Bowater, Inc., and New York Medical College. 53 55 SCIENTIFIC ADVISORY BOARD The following table lists the members of ImClone's Scientific Advisory Board as of October 27, 1999 and their primary professional affiliations.
NAME PROFESSIONAL AFFILIATION(S) - ---- --------------------------- Thomas Deuel, M.D............. Professor of Medicine, Director of the Division of Growth Regulation, Harvard Medical School Charles A. Dinarello, M.D..... Professor of Medicine, University of Colorado School of Medicine Michael Feldman, Ph.D. ....... Vice President, Discovery Research, ImClone Systems Incorporated; Member of the Israeli Academy of Sciences and Humanities and the World Academy of Arts and Sciences Zvi Fuks, M.D................. Chairman of the Department of Radiation Oncology, Memorial Sloan-Kettering Cancer Center Gerald T. Keusch, M.D. ....... Professor and the Head of the Division of Geographic Medicine and Infectious Disease, Tufts University School of Medicine Arnold Levine, Ph.D........... Chairman of the Department of Molecular Biology, Harry C. Weiss Professor of Molecular Biology, Princeton University John Mendelsohn, M.D.......... President, MD Anderson Cancer Center, University of Texas Malcolm Moore, Ph.D........... Enid A. Haupt Professor of Cell Biology, Head of the James Ewing Laboratory of Development Hematopoiesis at Memorial Sloan-Kettering Cancer Center Richard C. Mulligan, Ph.D..... Mallinckrodt Professor of Genetics, Harvard Medical School; Investigator, Howard Hughes Medical Institute, Children's Hospital, Boston Robert Schneider, Ph.D........ Associate Professor, Department of Biochemistry, New York University Medical Center Thomas Shenk, Ph.D............ Professor of Molecular Biology, Princeton University; (Chairman, Scientific Advisory American Cancer Society Professor, Howard Hughes Medical Board) Institute P. Frederick Sparling, M.D.... Professor and Chairman of the Department of Medicine and Professor of Microbiology and Immunology, University of North Carolina School of Medicine Samuel D. Waksal, Ph.D. ...... President and Chief Executive Officer, ImClone Systems Incorporated
54 56 PRINCIPAL STOCKHOLDERS The following table sets forth certain information that we know about the beneficial ownership of our common stock as of October 27, 1999, except as otherwise indicated, by (1) each of our directors, (2) each of our officers who beneficially owns our common stock and (3) all of our directors and executive officers as a group. Except as otherwise indicated, the persons or entities listed below have sole voting and investment power with respect to all shares owned by them.
NUMBER OF SHARES PERCENTAGE OF SHARES BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)(2) - ---------------- ------------------ ------------------------ Samuel D. Waksal, Ph.D. ....................... 1,302,583(3) 4.9% Harlan W. Waksal, M.D. ........................ 1,065,780(4) 4.1% Robert F. Goldhammer........................... 855,390(5) 3.3% John B. Landes................................. 241,000(6) * John Mendelsohn, M.D. ......................... 183,476(7) * Carl S. Goldfischer, M.D. ..................... 179,400 * Michael Feldman, Ph.D. ........................ 165,500(8) * David M. Kies.................................. 158,450(9) * Peter Bohlen, Ph.D. ........................... 80,315(10) * Paul B. Kopperl................................ 69,460(11) * Vincent T. DeVita, Jr., M.D. .................. 69,092(12) * Jean Carvais, M.D. ............................ 48,542(13) * William R. Miller.............................. 36,147 * Richard Barth.................................. 35,250(14) * All directors and executive officers as a group (11 persons)(15)............................. 4,003,570 14.4%
- ------------ * Less than 1%. (1) Unless otherwise noted, each person's address is in care of ImClone Systems Incorporated, 180 Varick Street, Seventh Floor, New York, New York 10014. (2) The percentage of voting stock owned by each stockholder is calculated by dividing (1) the number of shares deemed to be beneficially held by such stockholder as of October 27, 1999, as determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by (2) the sum of (A) 25,629,007 which is the number of shares of common stock outstanding as of October 27, 1999 plus (B) the number of shares of common stock issuable upon exercise of currently exercisable options and warrants held by such stockholder. For purposes of this security ownership table "currently exercisable options" and "currently exercisable warrants" consist of options and warrants exercisable as of October 27, 1999 or within 60 days after October 27, 1999. Shares of our series A preferred stock are not included in the denominator because they do not have voting rights. (3) Includes 350,000 shares issuable upon the exercise of currently exercisable warrants and 415,000 shares issuable upon the exercise of currently exercisable options. Does not include an additional 1,000,000 shares issuable upon the exercise of an option, 200,000 shares of which will become exercisable on May 24, 2000, subject only to Dr. Waksal's continued employment with ImClone. (4) Includes 240,000 shares issuable upon the exercise of currently exercisable options; 310,680 shares issuable upon the exercise of currently exercisable warrants; and 2,600 shares owned by Dr. Waksal's sons. Does not include an additional 650,000 shares issuable upon the exercise of an option, 130,000 shares of which will become exercisable on May 24, 2000, subject only to Dr. Waksal's continued employment with ImClone. (5) Includes 113,542 shares issuable upon the exercise of currently exercisable options; 379,990 shares issuable upon the exercise of currently exercisable warrants; and 13,314 shares held in trust as to which Mr. Goldhammer disclaims beneficial ownership. (6) Includes 101,500 shares issuable upon the exercise of currently exercisable options and 104,000 shares issuable upon the exercise of currently exercisable warrants. (7) Consists of 183,476 shares issuable upon the exercise of currently exercisable options. (8) Includes 105,000 shares issuable upon the exercise of currently exercisable options. (9) Includes 18,750 shares issuable upon the exercise of currently exercisable options and 8,200 shares held by Mr. Kies as custodian for his son. (10) Includes 79,500 shares issuable upon the exercise of currently exercisable options. (11) Includes 42,500 shares issuable upon the exercise of currently exercisable options and 500 shares held by Mr. Kopperl's spouse as to which Mr. Kopperl disclaims beneficial ownership. (12) Includes 68,792 shares issuable upon the exercise of currently exercisable options. (13) Consists of 48,542 shares issuable upon the exercise of currently exercisable options. (14) Includes 33,750 shares issuable upon exercise of currently exercisable options. (footnotes on next page) 55 57 (15) Includes an aggregate of (1) 2,205,022 shares issuable upon the exercise of currently exercisable options and warrants and (2) 13,814 shares as to which beneficial ownership is disclaimed. Shares held by Mr. Landes, Dr. Feldman and Dr. Bohlen have not been included as they are not considered to be executive officers of ImClone. In addition, each of Messrs. Martell and Trapani and Dr. Tarnowski, none of whom is considered to be an executive officer of ImClone, beneficially owns a de minimus number of shares of our common stock, which are not reflected in the table. On October 18, 1999, a Schedule 13D filing under the Securities Exchange Act of 1934 was made jointly by High River Limited Partnership, Riverdale LLC and Carl C. Icahn disclosing their beneficial ownership had increased to 5.1% of ImClone's common stock, based on the number of shares outstanding as of September 1, 1999. Riverdale LLC is the general partner of High River Limited Partnership. Riverdale LLC is wholly owned by Carl C. Icahn. The Schedule 13D states that the shares of ImClone's common stock were acquired for investment purposes. According to the Schedule 13D filing, the principal business address of High River Limited Partnership and Riverdale LLP is 100 South Bedford Road, Mount Kisco, New York 10549 and the principal business address of Carl C. Icahn is c/o Icahn Associates Corp., 767 Fifth Avenue, 47th Floor, New York, New York 10153. 56 58 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 60,000,000 shares of common stock, par value $.001 per share ("common stock"), and 4,000,000 shares of preferred stock, par value $1.00 per share. As of October 27, 1999, there were 25,629,007 shares of common stock outstanding held of record by approximately 372 stockholders and there were 400,000 shares of series A preferred stock outstanding, which are all held by Merck KGaA. The registrar and transfer agent for the common stock is Equiserve. COMMON STOCK Holders of shares of common stock are entitled to one vote per share on matters to be voted upon by our stockholders. Holders of shares of common stock do not have cumulative voting rights. Therefore, the holders of more than 50% of the shares of the common stock will have the ability to select all of our directors. Holders of shares of common stock will be entitled to receive dividends when, as and if declared by our board of directors. In the event of a liquidation, dissolution or winding up of ImClone, holders of common stock have the right to share ratably in all assets remaining after the payment of all liabilities, subject to preference in liquidation of any outstanding preferred stock. Holders of common stock have neither preemptive rights nor rights to convert their common stock into any other securities and are not subject to future calls or assessments by ImClone. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of the series A preferred stock, as well as any additional preferred stock that ImClone may designate and issue in the future. PREFERRED STOCK Our board of directors has the authority to issue preferred stock in one or more series, and to fix the rights, preferences, privileges and restrictions, including the dividend, conversion, voting, redemption (including sinking fund provisions) and other rights, liquidation preferences and the number of shares constituting any series and the designations of such series, without any further vote or action by our stockholders. The provisions of any preferred stock could adversely affect the voting power of the holders of common stock and could, among other things, have the effect of delaying, deferring or preventing a change in control of ImClone. SERIES A PREFERRED STOCK In December 1997, in connection with an amendment to our research and license agreement with Merck KGaA for BEC2, Merck KGaA purchased from us 400,000 shares of series A preferred stock for total consideration of $40 million. Holders of series A preferred stock generally have no voting rights, except: - that two-thirds of the outstanding shares must consent to changes in the terms of the series A preferred stock; - in certain cases, if we default in the timely payment of dividends on the series A preferred stock, the holders will have the right to elect a nominee to our board of directors; and - as otherwise required by law. The holders of the series A preferred stock are entitled to receive annual cumulative dividends of $6.00 per share. Dividends on the outstanding series A preferred stock accrue as of their issuance date and are payable in cash annually on or the earlier of - December 31st of each year beginning December 31, 1999 or - at the time of conversion or redemption of the series A preferred stock on which the dividend is to be paid. Up to 100,000 shares of series A preferred stock as of December 31, 1998 were convertible into 800,000 shares of common stock and an additional 100,000 shares will become convertible, into a number of shares of 57 59 common stock based on the applicable conversion price, on each of January 1, 2000, January 1, 2001 and January 1, 2002. During the period from issuance through December 31, 1999, the series A preferred stock is convertible at a price of $12.50 per share. During the period from January 1, 2000 through December 31, 2000 the series A preferred stock is convertible at a price equal to the average of the closing prices for the common stock for the five trading days ending one trading day prior to December 31, 1999. During the period from January 1, 2001 through December 31, 2001 the series A preferred stock is convertible at a price equal to the average of the closing prices for the common stock for the five trading days ending one trading day prior to December 31, 2000. During the period from January 1, 2002 through December 31, 2002 the series A preferred stock is convertible at a price equal to 88% of the average of the closing prices for the common stock for the five trading days ending one trading day prior to December 31, 2001 (the "beneficial conversion feature"). Anytime after January 1, 2003 the series A preferred stock is convertible at a price equal to the average of the closing prices for the common stock for the five trading days ending one trading day prior to the receipt by us of the notice of conversion. The conversion price is subject to adjustment in the case of certain dilutive events. Further, in the event the average market price of the common stock for the five consecutive trading days ending one trading day prior to any trading day during which any series A preferred stock is outstanding exceeds 150% of the conversion price then in effect, we have the right, as long as such price exceeds 150% of the conversion price, to require the holder of the series A preferred stock to convert all its series A preferred stock as may then be convertible. We may also redeem in whole or any part of the series A preferred stock then outstanding at a redemption price of $120 per share, plus accrued and unpaid dividends thereon. In the event of our liquidation, dissolution or winding up, holders of the series A preferred stock are entitled to receive in cash out of our assets available for distribution to our stockholders an amount equal to the stated value of $100 per share outstanding, plus accrued and unpaid dividends. Such payments will be made before any amount will be paid to the holders of the common stock or holders of other classes or series of our capital stock or if the assets are insufficient to pay the full amount due to the holders of series A preferred stock such holders will receive a pro rata portion thereof. In accordance with the terms of the series A preferred stock, we are required to recognize an assumed incremental yield of $5,455,000 (calculated at the date of issuance and based on the beneficial conversion feature noted above). This amount is being amortized as a preferred stock dividend over a four-year period beginning with the day of issuance. Accrued dividends payable were $3,702,000 or $9.25 per share at June 30, 1999. Additionally, we have recognized a cumulative incremental yield attributable to a beneficial conversion feature of $1,991,000 through June 30, 1999. MILESTONE SHARES Under our license agreement with Merck KGaA for C225, we are entitled to receive from Merck KGaA up to $60 million upon our achievement of various milestones in the development of C225. In connection with making the final $30 million of these milestone payments, Merck KGaA is entitled to receive milestone shares from us, which, if issued, will be shares of our common stock (or other capital stock convertible into our common stock). We describe the milestone shares more fully under the heading "Business -- Collaborations with Merck KGaA -- C225 License and Development Agreement." OPTIONS AND WARRANTS OPTIONS In February 1986, our board of directors adopted an incentive stock option plan and a non-qualified stock option plan (the "86 Plans"). In February 1996, we adopted an additional incentive stock option plan and non-qualified stock option plan (the "96 Plans"). In May 1998, we adopted an additional non-qualified stock option plan (the "98 Plan"). Combined the 86 Plans, the 96 Plans, as amended, and the 98 Plan, as amended, provide for the granting of options to purchase up to 6,500,000 shares of common stock to our key employees, 58 60 directors, consultants and advisors. Incentive stock options may not be granted at a price less than the fair market value of the stock at the date of grant and may not be granted to non-employees. Options may not be granted under the 98 Plan to officers or directors. Options under all the plans, unless earlier terminated, expire ten years from the date of grant. Certain options granted under these plans vest over one-to-five-year periods. At October 27, 1999, options to purchase 3,663,960 shares of common stock were outstanding under the 86 Plans, the 96 Plans and the 98 Plan, and 1,046,490 shares were available for grant under the 96 Plans and the 98 Plan. Options may no longer be granted under the 86 Plans pursuant to the terms of the 86 Plans. In September 1998 and January 1999, we granted to both our Vice President of Marketing and Vice President of Product and Process Development options to purchase 60,000 shares of common stock each. These options were not granted under any of the above mentioned incentive stock option or non-qualified stock option plans. The terms of these options are substantially similar to those granted under the 98 Plan. In May 1999, our stockholders approved the grant of an option to our President and Chief Executive Officer and Executive Vice President and Chief Operating Officer to purchase 1,000,000 and 650,000 shares, respectively, of common stock at a per share exercise price equal to $18.25, the last reported sale price of the common stock on the date shareholder approval was obtained. The options will vest no later than seven years from the grant date and specified amounts are subject to earlier vesting if specified common stock price thresholds are met. During April 1995, we completed the sale of the remaining one-half of our shares of capital stock of Cadus Pharmaceutical Corporation, a Delaware corporation, for $3.0 million to High River LP, a Delaware limited partnership. In exchange for receiving a now-expired right to repurchase all outstanding shares of capital stock of Cadus held by High River, ImClone granted to High River two options to purchase shares of common stock. One option is for 150,000 shares at an exercise price per share equal to $2.00, subject to certain adjustments and the other option is for 300,000 shares at an exercise price per share equal to $0.69, subject to certain adjustments. Both options expire on April 26, 2000. The 450,000 options have a weighted average exercise price of $1.13. WARRANTS As of October 27, 1999, a total of 1,791,590 shares of common stock were issuable upon exercise of outstanding warrants. Such warrants have been issued to our officers, directors, other employees, certain scientific advisory board members, as well as certain investors and certain credit providers. The warrants, all of which are currently exercisable, have exercise prices ranging from $.0625 to $13.33 per share, with an average exercise price of approximately $2.96. The warrants have standard anti-dilution provisions including adjustments for stock splits, reverse stock splits and stock dividends as well as adjustments for capital reorganizations. REGISTRATION RIGHTS We have granted Merck KGaA certain registration rights regarding the shares of common stock that it may acquire upon conversion of the series A preferred shares and upon receipt of milestone shares. Specifically, Merck KGaA has the right to require us to register upon its request once during any 12-month period, up to a total of four times, at our expense, the number of shares of common stock into which the shares of series A preferred stock are converted according to their terms and the number of milestone shares that are issued. Merck KGaA may also exercise rights to have such registrable common stock registered at any time that we file a registration statement for other shares of our common stock. Merck KGaA may exercise these rights at any time after conversion of its shares of series A preferred stock into shares of common stock or receipt of milestone shares. However, Merck KGaA has waived its rights to exercise these registration rights in connection with this offering and during the period ending 90 days after the date of this prospectus. As of October 27, 1999, Merck KGaA has not converted any series A preferred stock into common stock and has not acquired any milestone shares. 59 61 LIMITATION OF LIABILITY As permitted by the Delaware General Corporation Law, our certificate of incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability: - for any breach of the director's duty of loyalty to ImClone or its stockholders - for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law - under Section 174 of the Delaware General Corporation Law, relating to prohibited dividends or distributions or the repurchase or redemption of stock or - for any transaction from which the director derives an improper personal benefit As a result of this provision, we and our stockholders may be unable to obtain monetary damages from a director for breach of his duty of care. Although stockholders may continue to seek injunctive or other equitable relief for an alleged breach of fiduciary duty by a director, stockholders may not have any effective remedy against the challenged conduct if equitable remedies are unavailable. We have obtained directors and officers liability insurance against claims made in the aggregate amount of $13 million per loss and per year. In addition, our by-laws provide for indemnification of all officers and directors against liabilities or expenses incurred in connection with any action, suit or proceeding if the director or officer acted in good faith and in a manner he reasonably believed to be in, or not opposed to, our best interests, unless the action, suit or proceeding involved liability by the director or officer to us and no court determines that such director or officer is entitled to indemnification. Our by-laws also provide that expenses incurred by a director or officer in defending any such action may be advanced by us if the director or officer agrees to repay such amount if it is subsequently determined that he is not entitled to indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act") may be permitted to directors, officers or persons controlling ImClone pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable. BUSINESS COMBINATION PROVISIONS The business combination provision contained in Section 203 of the Delaware General Corporation Law ("Section 203") defines an interested stockholder as any person that - owns, directly or indirectly 15% or more of the outstanding voting stock of a corporation or - is an affiliate or associate of a corporation and was the owner of 15% or more of the outstanding voting stock at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder, and the affiliates and the associates of such person. Under Section 203, a resident domestic corporation may not engage in any business combination with any interested stockholder for a period of three years following the date such stockholder became an interested stockholder, unless - prior to such date the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder - upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding, for determining the number of shares outstanding, (a) shares owned by persons who are directors and officers and (b) employee stock plans, in certain instances) or 60 62 - on or subsequent to such date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder The restrictions imposed by Section 203 will not apply to a corporation if - the corporation's original certificate of incorporation contains a provision expressly electing not to be governed by Section 203 and - the corporation by the action of its stockholders holding a majority of outstanding stock adopts an amendment to its certificate of incorporation or by-laws expressly electing not to be governed by Section 203 Such amendment will not be effective until 12 months after adoption and shall not apply to any business combination between such corporation and any person that became an interested stockholder of such corporation on or prior to such adoption. We have not elected out of the statute and therefore the restrictions imposed by Section 203 will apply to us. 61 63 MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock by a beneficial owner that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a person or entity that, for U.S. federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership, or a foreign estate or trust. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), and administrative interpretations as of the date of this prospectus, all of which are subject to change, including changes with retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to Non-U.S. Holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders should consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of common stock, including the consequences under the laws of any state, local or foreign jurisdiction. DIVIDENDS Dividends paid to a Non-U.S. Holder of common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. For purposes of determining whether tax is to be withheld at a reduced rate under an income tax treaty, ImClone will presume that dividends paid on or before December 31, 2000 to an address in a foreign country are paid to a resident of that country unless it has knowledge that the presumption is not warranted. In order to obtain a reduced rate of withholding for dividends paid after December 31, 2000, a Non-U.S. Holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty. In addition, in certain cases where dividends are paid to a Non-U.S. Holder that is a partnership or other pass-through entity, persons holding an interest in the entity may need to provide the required certification. The withholding tax does not apply to dividends paid to a Non-U.S. Holder that provides a Form 4224 or, after December 31, 2000, a Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the Non-U.S. Holder were a U.S. resident. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional "branch profits tax" imposed at a rate of 30% (or a lower treaty rate) on an earnings amount that is net of the regular tax. GAIN ON DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of common stock unless: - the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States - in the case of certain Non-U.S. Holders who are non-resident alien individuals and hold the common stock as a capital asset, the individuals are present in the United States for 183 or more days in the taxable year of the disposition - the Non-U.S. Holder is subject to tax under the provisions of the Code regarding the taxation of U.S. expatriates or - ImClone is or has been a U.S. real property holding corporation at any time within the five-year period preceding the disposition or the Non-U.S. Holder's holding period, whichever period is shorter The tax relating to stock in a U.S. real property holding corporation does not apply to a Non-U.S. Holder whose holdings, actual and constructive, at all times during the applicable period, amount to 5% or less of the common stock of a U.S. real property holding corporation, provided that the common stock is regularly traded 62 64 on an established securities market. Generally, a corporation is a U.S. real property holding corporation if the fair market value of its U.S. real property interests, as defined in the Code and applicable regulations, equals or exceeds 50% of the aggregate fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. ImClone may be, or may prior to a Non-U.S. Holder's disposition of common stock become, a U.S. real property holding corporation. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ImClone must report to the IRS the amount of dividends paid, the name and address of the recipient, and the amount of any tax withheld. A similar report is sent to the Non-U.S. Holder. Under tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence. Dividends paid on or before December 31, 2000 at an address outside the United States are not subject to backup withholding, unless the payor has knowledge that the payee is a U.S. person. However, a Non-U.S. Holder may need to certify its non-U.S. status in order to avoid backup withholding at a 31% rate on dividends paid after December 31, 2000 or dividends paid on or before that date at an address inside the United States. U.S. information reporting and backup withholding generally will not apply to a payment of proceeds of a disposition of common stock where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, a Non-U.S. Holder may need to certify its non-U.S. status in order to avoid information reporting and backup withholding at a 31% rate on disposition proceeds where the transaction is effected by or through a U.S. office of a broker. In addition, U.S. information reporting requirements may apply to the proceeds of a disposition effected by or through a non-U.S. office of a U.S. broker, or by a non-U.S. broker with specified connections to the United States. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. When withholding results in an overpayment of taxes, a refund may be obtained if the required information is furnished to the IRS. FEDERAL ESTATE TAX An individual Non-U.S. Holder who is treated as the owner of, or has made certain lifetime transfers of, an interest in the common stock will be required to include the value of the stock in his gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise. 63 65 UNDERWRITERS Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date hereof, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Prudential Securities Incorporated and Warburg Dillon Read LLC are acting as representatives, have severally agreed to purchase, and the company has agreed to sell to them, severally, the respective number of shares of common stock set forth opposite the names of such underwriters below:
NUMBER OF NAME SHARES - ---- --------- Morgan Stanley & Co. Incorporated........................... Merrill Lynch, Pierce, Fenner & Smith Incorporated................................... Prudential Securities Incorporated.......................... Warburg Dillon Read LLC..................................... --------- Total.................................................. 2,500,000 =========
The Underwriting Agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered hereby (other than those covered by the underwriters' over-allotment option described below) if any such shares are taken. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. The company has granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 375,000 additional shares of common stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The underwriters may exercise such option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered hereby. To the extent such option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of common stock as the number set forth next to such underwriter's name in the table above bears to the total number of shares of common stock set forth next to the names of all underwriters in the table above. If the underwriters' option is exercised in full, the total price to the public would be $ , the total underwriters' discounts and commission would be $ and total proceeds to the company would be $ . Each of the company and the directors, officers and certain other stockholders of the company has agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it will not during the period ending 90 days after the date of this prospectus: - offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, 64 66 directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock or - enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. The restrictions described above do not apply to: - the sale of shares to the underwriters - the issuance by the company of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing or - transactions by any person other than the company relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the common stock for their own account. In addition, to cover over-allotments or to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering, if the syndicate repurchases previously distributed common stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities and may end any of these activities at any time. The underwriters and dealers may engage in passive market making transactions in the common stock in accordance with Rule 103 of Regulation M promulgated by the SEC. In general, a passive market maker may not bid for, or purchase, the common stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker generally may not exceed 30% of its average daily trading volume in the common stock during a specified two month prior period, or 200 shares, whichever is greater. A passive market maker must identify passive market making bids as such or maintain the market price of the common stock above independent market levels. Underwriters and dealers are not required to engage in passive market making and may end passive market making activities at any time. The company and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters relating to the issuance of the shares of common stock offered hereby will be passed upon for ImClone by Davis Polk & Wardwell, New York, New York, and for the Underwriters by Ropes & Gray, Boston, Massachusetts. EXPERTS The statements in this prospectus under the captions "Risk Factors -- Our success depends upon our ability to protect our intellectual property and our proprietary technology" and "Business -- Patents and Trade Secrets" on matters of U.S. intellectual property law other than references in such sections to the opinion of Kenyon & Kenyon, have been reviewed and approved by Hoffmann & Baron, LLP, intellectual property counsel for ImClone, as experts in U.S. intellectual property law, and are included herein in reliance upon such review and approval. The statements in this prospectus in the second sentence of each of the eighth 65 67 paragraph under the caption "Risk Factors -- Our success depends upon our ability to protect our intellectual property and our proprietary technology" and in the third paragraph under the caption "Business -- Patents and Trade Secrets -- Patent Rights; Licenses -- C225" on matters of U.S. intellectual property law that refer to the opinion of Kenyon & Kenyon, have been reviewed and approved by Kenyon & Kenyon, special intellectual property counsel for ImClone, as experts in U.S. intellectual property law, and are included herein in reliance upon such review and approval. The consolidated financial statements of ImClone Systems Incorporated and its subsidiary as of December 31, 1998 and 1997, and for each of the years in the three-year period ended December 31, 1998, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon authority of said firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information on these public reference rooms. Our filings with the SEC are also available to the public from the SEC's web site at http://www.sec.gov. Our common stock is traded on the NASDAQ National Market under the ticker symbol "IMCL." You may also read and copy our filings with the SEC at the NASDAQ National Market offices located in Washington, D.C. We filed a registration statement on Form S-3 to register the shares offered by this prospectus with the Commission. As allowed by SEC rules, this prospectus does not contain all the information that you can find in the registration statement or the exhibits to the registration statement. The SEC allows us to "incorporate by reference" the information we file with them. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, except if it is superseded by information in this prospectus or by later information that we file with the Commission. Information that we file with the SEC after the date of this prospectus will automatically update and supersede the information contained or incorporated by reference in this prospectus. We incorporate by reference the documents listed below, as well as any future filings we may make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, before the time that all of the shares offered by this prospectus have been sold or de-registered. These documents contain important information about our company and its financial condition. - our Annual Report on Form 10-K for the fiscal year ended December 31, 1998 - our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1999 and June 30, 1999 - our Proxy Statement dated April 21, 1999 filed in connection with our May 24, 1999 Annual Meeting of Stockholders - our Current Report on Form 8-K filed on October 7, 1999 You may request a copy of these filings, excluding all exhibits unless we have specifically incorporated by reference an exhibit, at no cost, by writing or telephoning us at: ImClone Systems Incorporated 180 Varick Street New York, New York 10014 (212) 645-1405 Attention: Catherine M. Vaczy, Associate General Counsel When you are deciding whether to purchase the shares being offered by this prospectus, you should rely only on the information incorporated by reference or provided in this prospectus or any supplement. We have not authorized anyone else to provide you with different information. We are not making any offer of the shares in any state where the offer is not permitted. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of those documents. 66 68 INDEX TO FINANCIAL STATEMENTS AUDITED FINANCIAL STATEMENTS: Independent Auditors' Report................................ F-2 Consolidated Balance Sheets at December 31, 1998 and 1997... F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 1998, 1997, and 1996..... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997, and 1996............. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997, and 1996......................... F-7 Notes to Consolidated Financial Statements.................. F-8 UNAUDITED FINANCIAL STATEMENTS: Unaudited Consolidated Balance Sheet at June 30, 1999....... F-27 Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Six Months Ended June 30, 1999 and 1998.................................................. F-28 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998....................... F-29 Unaudited Notes to Consolidated Financial Statements........ F-30
F-1 69 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders ImClone Systems Incorporated: We have audited the consolidated financial statements of ImClone Systems Incorporated and subsidiary as listed in the accompanying index. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ImClone Systems Incorporated and subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. KPMG LLP Princeton, New Jersey February 19, 1999 F-2 70 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, DECEMBER 31, 1998 1997 ASSETS ------------ ------------ Current assets: Cash and cash equivalents................................. $ 3,888 $ 2,558 Securities available for sale............................. 42,851 57,052 Prepaid expenses.......................................... 470 596 Other current assets...................................... 1,196 589 -------- --------- Total current assets................................ 48,405 60,795 -------- --------- Property and equipment: Land...................................................... 340 340 Building and building improvements........................ 10,519 8,969 Leasehold improvements.................................... 4,846 4,832 Machinery and equipment................................... 7,834 6,315 Furniture and fixtures.................................... 640 550 Construction in progress.................................. 115 2,159 -------- --------- Total cost.......................................... 24,294 23,165 Less accumulated depreciation and amortization............ (12,877) (11,294) -------- --------- Property and equipment, net............................. 11,417 11,871 -------- --------- Patent costs, net........................................... 860 944 Deferred financing costs, net............................... 46 55 Other assets................................................ 1,524 2,115 -------- --------- $ 62,252 $ 75,780 ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 1,109 $ 1,731 Accrued expenses and other................................ 4,847 1,440 Interest payable.......................................... 45 68 Deferred revenue.......................................... 75 208 Fee potentially refundable from corporate partner......... 4,000 -- Current portion of long-term liabilities.................. 744 677 Preferred stock dividends payable......................... 2,512 -- -------- --------- Total current liabilities........................... 13,332 4,124 -------- --------- Long-term debt.............................................. 2,200 2,200 Other long-term liabilities, less current portion........... 1,546 1,118 Preferred stock dividends payable........................... -- 112 -------- --------- Total liabilities................................... 17,078 7,554 -------- --------- Commitments and contingencies Stockholders' equity:
Preferred stock, $1.00 par value; authorized 4,000,000 shares; issued and outstanding Series A Convertible Preferred Stock: 400,000 at December 31, 1998 and December 31, 1997 (preference in liquidation $42,512 and $40,112, respectively). 400 400 Common stock, $.001 par value; authorized 45,000,000 shares; issued 24,567,312 and 24,265,072 at December 31, 1998 and December 31, 1997, respectively; outstanding 24,516,495, and 24,214,255 at December 31, 1998 and December 31, 1997, respectively........................................................ 25 24 Additional paid-in capital............................................ 184,853 185,706 Accumulated deficit................................................... (138,846) (117,464) Treasury stock, at cost; 50,817 shares at December 31, 1998 and December 31, 1997................................................................ (492) (492) Note receivable--officer and stockholder.............................. (142) -- Accumulated other comprehensive income (loss): Unrealized (loss) gain on securities available for sale............. (624) 52 -------- --------- Total stockholders' equity...................................... 45,174 68,226 -------- --------- $ 62,252 $ 75,780 ======== =========
See accompanying notes to financial statements. F-3 71 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, -------------------------------- 1998 1997 1996 -------- -------- -------- Revenues: License fees from third parties.......................... $ 1,000 $ 3,000 $ 75 Research and development funding from third parties and other................................................. 3,193 2,348 525 -------- -------- -------- Total revenues................................... 4,193 5,348 600 -------- -------- -------- Operating expenses: Research and development................................. 21,049 16,455 11,482 General and administrative............................... 7,145 5,356 3,961 -------- -------- -------- Total operating expenses......................... 28,194 21,811 15,443 -------- -------- -------- Operating loss............................................. (24,001) (16,463) (14,843) -------- -------- -------- Other: Interest and other income................................ (3,054) (1,523) (918) Interest expense......................................... 435 551 823 -------- -------- -------- Net interest and other income.................... (2,619) (972) (95) -------- -------- -------- Loss before extraordinary item............................. (21,382) (15,491) (14,748) Extraordinary loss on extinguishment of debt............... -- -- 1,267 -------- -------- -------- Net loss................................................... (21,382) (15,491) (16,015) Preferred dividends (including assumed incremental yield attributable to beneficial conversion feature of $1,268 and $51 for the years ended December 31, 1998 and 1997, respectively)............................................ 3,668 163 -- -------- -------- -------- Net loss to common stockholders............................ $(25,050) $(15,654) $(16,015) ======== ======== ======== Net loss per common share: Basic and diluted: Loss before extraordinary item........................ $ (1.03) $ (0.67) $ (0.76) Extraordinary loss on extinguishment of debt.......... -- -- (0.07) -------- -------- -------- Net loss................................................. $ (1.03) $ (0.67) $ (0.83) ======== ======== ======== Weighted average shares outstanding........................ 24,301 23,457 19,371 ======== ======== ======== Comprehensive loss: Net loss................................................... $(21,382) $(15,491) $(16,015) Other comprehensive income (loss): Unrealized gain on securities available for sale: Unrealized holding gain (loss) arising during the period.............................................. (638) 99 (49) Less: Reclassification adjustment for realized gain (loss) included in net loss......................... 38 (2) -- -------- -------- -------- Total other comprehensive income (loss).......... (676) 101 (49) -------- -------- -------- Total comprehensive loss......................... $(22,058) $(15,390) $(16,064) ======== ======== ========
See accompanying notes to financial statements. F-4 72 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
PREFERRED STOCK COMMON STOCK ADDITIONAL ----------------- ------------------- PAID-IN ACCUMULATED TREASURY SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCK -------- ------ ---------- ------ ---------- ----------- -------- Balance at December 31, 1995... -- $ -- 16,819,622 $17 $ 97,914 $ (85,958) $(150) -------- ---- ---------- --- -------- --------- ----- Issuance of common stock....... 2,200,000 2 13,560 Options exercised.............. 266,275 846 Warrants exercised............. 604,892 1 2,960 Options granted to non-employees................ 95 Extinguishment of debt......... 357,333 3,260 Debt discount.................. 125 Treasury shares................ (19) Changes in unrealized loss on securities available for sale......................... Net loss....................... (16,015) -------- ---- ---------- --- -------- --------- ----- Balance at December 31, 1996... -- -- 20,248,122 20 118,760 (101,973) (169) -------- ---- ---------- --- -------- --------- ----- Issuance of preferred stock.... 400,000 400 39,597 Issuance of common stock....... 3,000,000 3 23,152 Options exercised.............. 147,450 223 Warrants exercised............. 869,500 1 1,385 Options granted to non-employees................ 189 Options/warrants granted to employees.................... 2,512 Treasury shares................ (323) Changes in unrealized loss on securities available for sale......................... Preferred stock dividends...... (112) Net loss....................... (15,491) -------- ---- ---------- --- -------- --------- ----- Balance at December 31, 1997... 400,000 400 24,265,072 24 185,706 (117,464) (492) -------- ---- ---------- --- -------- --------- ----- Options exercised.............. 154,097 1 613 Warrants exercised............. 143,755 200 Issuance of shares through employee stock purchase plan......................... 4,388 33 Options granted to non-employees................ 540 Options granted to employees... 150 Changes in unrealized gain on securities available for sale......................... Note receivable--officer and stockholder.................. Interest on note receivable--officer and stockholder.................. 11 Preferred stock dividends...... (2,400) Net loss....................... (21,382) -------- ---- ---------- --- -------- --------- ----- Balance at December 31, 1998... 400,000 $400 24,567,312 $25 $184,853 $(138,846) $(492) ======== ==== ========== === ======== ========= =====
See accompanying notes to financial statements. F-5 73 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY -- (CONTINUED) YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
NOTE ACCUMULATED RECEIVABLE OTHER OFFICER AND COMPREHENSIVE STOCKHOLDER LOSS TOTAL ----------- ------------- -------- Balance at December 31, 1995........................ $ -- $ -- $ 11,823 ----- ----- -------- Issuance of common stock............................ 13,562 Options exercised................................... 846 Warrants exercised.................................. 2,961 Options granted to non-employees.................... 95 Extinguishment of debt.............................. 3,260 Debt discount....................................... 125 Treasury shares..................................... (19) Changes in unrealized loss on securities available for sale.......................................... (49) (49) Net loss............................................ (16,015) ----- ----- -------- Balance at December 31, 1996........................ -- (49) 16,589 ----- ----- -------- Issuance of preferred stock......................... 39,997 Issuance of common stock............................ 23,155 Options exercised................................... 223 Warrants exercised.................................. 1,386 Options granted to non-employees.................... 189 Options/warrants granted to employees............... 2,512 Treasury shares..................................... (323) Changes in unrealized loss on securities available for sale.......................................... 101 101 Preferred stock dividends........................... (112) Net loss............................................ (15,491) ----- ----- -------- Balance at December 31, 1997........................ -- 52 68,226 ----- ----- -------- Options exercised................................... 614 Warrants exercised.................................. 200 Issuance of shares through employee stock purchase plan.............................................. 33 Options granted to non-employees.................... 540 Options granted to employees........................ 150 Changes in unrealized gain on securities available for sale.......................................... (676) (676) Note receivable--officer and stockholder............ (131) (131) Interest on note receivable--officer and stockholder....................................... (11) -- Preferred stock dividends........................... (2,400) Net loss............................................ (21,382) ----- ----- -------- Balance at December 31, 1998........................ $(142) $(624) $ 45,174 ===== ===== ========
See accompanying notes to financial statements. F-6 74 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 -------- --------- -------- Cash flows from operating activities: Net loss.................................................. $(21,382) $ (15,491) $(16,015) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................... 1,769 1,797 1,704 Expense associated with issuance of options and warrants............................................. 690 2,729 95 Extraordinary loss on extinguishment of debt............ -- -- 1,267 Discounted interest amortization........................ -- -- 156 Write-off of patent costs............................... 235 146 -- (Gain) loss on sale of investments...................... (38) 2 -- Changes in: Prepaid expenses..................................... 126 (474) (7) Other current assets................................. (607) (110) (453) Due from officer and stockholder..................... -- 101 31 Other assets......................................... (62) (37) (14) Interest payable..................................... (23) (170) (105) Accounts payable..................................... (622) 672 67 Accrued expenses and other........................... 3,407 75 540 Deferred revenue..................................... (133) 208 -- Fee potentially refundable from corporate partner.... 4,000 -- -- -------- --------- -------- Net cash used in operating activities.............. (12,640) (10,552) (12,734) -------- --------- -------- Cash flows from investing activities: Acquisitions of property and equipment.................... (472) (1,657) (272) Purchases of securities available for sale................ (62,779) (241,623) (32,665) Sales and maturities of securities available for sale..... 76,996 195,450 21,836 Investment in CombiChem, Inc. ............................ -- (2,000) -- Additions to patents...................................... (254) (212) (343) -------- --------- -------- Net cash provided by (used in) investing activities....................................... 13,491 (50,042) (11,444) -------- --------- -------- Cash flows from financing activities: Net proceeds from issuance of preferred stock............. -- 39,997 -- Net proceeds from issuance of common stock................ -- 23,154 13,562 Proceeds from exercise of stock options and warrants...... 682 1,581 3,807 Proceeds from issuance of common stock under the employee stock purchase plan..................................... 33 -- -- Purchase of treasury stock................................ -- (323) (19) Proceeds from equipment and building improvement financings.............................................. 594 -- -- Repayment of long-term debt............................... -- (2,113) -- Payments of other liabilities............................. (830) (1,878) (645) -------- --------- -------- Net cash provided by financing activities.......... 479 60,418 16,705 -------- --------- -------- Net increase (decrease) in cash and cash equivalents........ 1,330 (176) (7,473) Cash and cash equivalents at beginning of period............ 2,558 2,734 10,207 -------- --------- -------- Cash and cash equivalents at end of period.................. $ 3,888 $ 2,558 $ 2,734 ======== ========= ========
See accompanying notes to financial statements. F-7 75 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ORGANIZATION AND BASIS OF PREPARATION ImClone Systems Incorporated (the "Company") is a biopharmaceutical company engaged primarily in the research and development of therapeutic products for the treatment of cancer and cancer related disorders. The Company employs accounting policies that are in accordance with generally accepted accounting principles in the United States. The biopharmaceutical industry is subject to rapid and significant technological change. The Company has numerous competitors, including major pharmaceutical and chemical companies, specialized biotechnology firms, universities and other research institutions. These competitors may succeed in developing technologies and products that are more effective than any that are being developed by the Company or that would render the Company's technology and products obsolete and non-competitive. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than the Company. In addition, many of the Company's competitors have significantly greater experience than the Company in pre-clinical testing and human clinical trials of new or improved pharmaceutical products and in obtaining Food and Drug Administration ("FDA") and other regulatory approvals on products for use in health care. The Company is aware of various products under development or manufactured by competitors that are used for the prevention, diagnosis or treatment of certain diseases the Company has targeted for product development, some of which use therapeutic approaches that compete directly with certain of the Company's product candidates. The Company has limited experience in conducting and managing pre-clinical testing necessary to enter clinical trials required to obtain government approvals and has limited experience in conducting clinical trials. Accordingly, the Company's competitors may succeed in obtaining FDA approval for products more rapidly than the Company, which could adversely affect the Company's ability to further develop and market its products. If the Company commences significant commercial sales of its products, it will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which the Company has limited or no experience. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the financial statements of ImClone Systems Incorporated and its wholly-owned subsidiary EndoClone Incorporated. All significant intercompany balances and transactions have been eliminated in consolidation. (B) CASH EQUIVALENTS Cash equivalents consist primarily of U.S. Government instruments, commercial paper, master notes and other readily marketable debt instruments. The Company considers all highly liquid debt instruments with original maturities not exceeding three months to be cash equivalents. (C) INVESTMENTS IN SECURITIES The Company classifies its investment in debt and equity securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those debt securities in which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate F-8 76 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) component of accumulated comprehensive loss until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. Dividend and interest income is recognized when earned. At December 31, 1998 and 1997, all investments in securities were classified as available-for-sale. (D) LONG-LIVED ASSETS Property and equipment are stated at cost. Equipment under capital leases are stated at the present value of minimum lease payments. Depreciation of fixed assets is provided by straight-line methods over estimated useful lives of three to twelve years, and leasehold improvements are being amortized over the related lease term or the service lives of the improvements, whichever is shorter. Patent and patent application costs are capitalized and amortized on a straight-line basis over their respective expected useful lives, up to a 15-year period. The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their full carrying value may not be recovered. Assets are considered to be impaired and written down to fair value if expected associated cash flows are less than the carrying amounts. Fair value is generally the present value of the expected associated cash flows. (E) DEFERRED FINANCING COSTS Costs incurred in obtaining the Industrial Development Revenue Bonds (Note 6) are amortized using the straight-line method over the terms of the related bonds. (F) REVENUE RECOGNITION License fees are recognized if the Company enters into license agreements with third parties that provide for the payment of non-refundable fees when the agreement is signed or when all parties concur that specified goals are achieved. These fees are recognized as license fee revenues in accordance with the terms of the particular agreement. Research and development funding revenue is derived from collaborative agreements with third parties and is recognized in accordance with the terms of the respective contracts. Royalty revenue is recognized when earned and collection is probable. Royalty revenue is derived from sales of products by corporate partners using licensed Company technology. Revenue recognized in the accompanying statements of operations is not subject to repayment. Amounts received that are subject to repayment if certain specified goals are not met are classified as fees potentially refundable and recognized as revenue upon the achievement of such specified goals. Revenue received that is related to future performance is classified as deferred revenue and recognized when the revenue is earned. (G) STOCK-BASED COMPENSATION PLANS The Company has two types of stock-based compensation plans, stock option plans and a stock purchase plan. The Company accounts for its stock-based compensation plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the F-9 77 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) market price on the date of grant of the underlying stock exceeded the exercise price. The Company provides the pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in Statement of Financial Accounting Standards ("SFAS") No. 123 had been applied. (H) RESEARCH AND DEVELOPMENT Research and development expenditures made pursuant to certain research and development contracts with academic institutions, and other research and development costs, are expensed as incurred. (I) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (J) USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (K) NET LOSS PER COMMON SHARE Basic and diluted loss per common share is based on the net loss for the relevant period, adjusted for cumulative Series A Preferred Stock dividends and the assumed incremental yield attributable to beneficial conversion feature of $3,668,000, $163,000 and none for the years ended December 31, 1998, 1997 and 1996, respectively, divided by the weighted average number of shares issued and outstanding during the period. For purposes of the diluted loss per share calculation, the exercise or conversion of all potential common shares is not included since their effect would be anti-dilutive for all years presented. As of December 31, 1998, 1997 and 1996, the Company had approximately 10,933,000, 9,444,000 and 5,380,000, respectively, potential common shares outstanding including convertible preferred stock, stock options and stock warrants. The potential shares of Common Stock to which the Series A Preferred Stock is convertible is based on the future market price of the Company's Common Stock. The potential Common Stock outstanding relating to Preferred Stock conversion for the years ended December 31, 1998 and 1997 has been estimated based on the respective closing prices of the Common Stock at December 31, 1998 and December 31, 1997. (L) COMPREHENSIVE INCOME (LOSS) On January 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income (loss) consists of net income (loss) and net unrealized gains (losses) on securities and is presented in the consolidated statements of operations and comprehensive loss. Prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130. (M) RECLASSIFICATION Certain amounts previously reported have been reclassified to conform to the current year's presentation. F-10 78 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (3) SECURITIES AVAILABLE FOR SALE The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale securities by major security type at December 31, 1998 and 1997, were as follows: At December 31, 1998:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED COST HOLDING GAINS HOLDING LOSSES FAIR VALUE ----------- ------------- -------------- ----------- Commercial paper................ $ 4,738,000 $ -- $ -- $ 4,738,000 U.S. government debt............ 2,000,000 2,000 -- 2,002,000 U.S. corporate debt............. 21,633,000 69,000 (48,000) 21,654,000 Foreign corporate debt.......... 14,150,000 44,000 (42,000) 14,152,000 Foreign government/agency guaranteed debt............... 302,000 3,000 -- 305,000 ----------- -------- -------- ----------- $42,823,000 $118,000 $(90,000) $42,851,000 =========== ======== ======== ===========
At December 31, 1997:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED COST HOLDING GAINS HOLDING LOSSES FAIR VALUE ----------- ------------- -------------- ----------- Commercial paper................ $12,104,000 $ 4,000 $ -- $12,108,000 U.S. government debt............ 23,568,000 24,000 (5,000) 23,587,000 U.S. corporate debt............. 3,992,000 4,000 -- 3,996,000 Foreign corporate debt.......... 4,719,000 7,000 -- 4,726,000 Foreign government/agency guaranteed debt............... 12,617,000 18,000 -- 12,635,000 ----------- -------- -------- ----------- $57,000,000 $ 57,000 $ (5,000) $57,052,000 =========== ======== ======== ===========
Maturities of debt securities classified as available-for-sale were as follows at December 31, 1998: Years ended December 31,
AMORTIZED FAIR COST VALUE ----------- ----------- 1999.............................................. $11,257,000 $11,260,000 2000.............................................. 7,151,000 7,198,000 2001.............................................. 1,764,000 1,757,000 2002.............................................. -- -- 2003.............................................. -- -- 2004 and thereafter............................... 22,651,000 22,636,000 ----------- ----------- $42,823,000 $42,851,000 =========== ===========
Proceeds from the sale of investment securities available-for-sale were $35,604,000, $9,115,000 and $2,596,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Gross realized gains included in income in 1998 and 1997 were $41,000 and $1,000, respectively and gross realized losses included in income in 1998 and 1997 were $3,000 in both years. There were no realized gains or losses in 1996. F-11 79 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (4) OTHER ASSETS The following items are included in other assets:
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ Deposits...................................... $ 176,000 $ 115,000 Investment in CombiChem, Inc.................. 1,348,000 2,000,000 ---------- ---------- $1,524,000 $2,115,000 ========== ==========
In October 1997, the Company entered into a Collaborative Research and License Agreement with CombiChem, Inc. ("CombiChem") to discover and develop novel small molecules for use against selected targets for the treatment of cancer. The companies are utilizing CombiChem's Discovery Engine(TM) and Universal Informer Library(TM) to generate small molecules for screening in the Company's assays for identification of lead candidates. The Company is providing CombiChem with research funding through October 1999 in the amount of $500,000 annually and milestone payments and royalties on marketed products, if any, resulting from the collaboration. Concurrent with the execution of the Collaborative Research and License Agreement, the Company entered into a Stock Purchase Agreement pursuant to which the Company purchased 312,500 shares of common stock of CombiChem, as adjusted, for aggregate consideration of $2,000,000. The Company recorded an unrealized loss of $652,000 and none as of December 31, 1998 and 1997, respectively, on this investment due to a reduction in the market value of the stock. The Company deems this reduction in market value to be temporary and therefore this unrealized loss was recorded as a component of accumulated other comprehensive loss. (5) ACCRUED EXPENSES AND OTHER The following items are included in accrued expenses and other:
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ Salaries and other payroll related expenses... $1,256,000 $ 773,000 Legal and accounting fees..................... 484,000 169,000 Research and development contract services.... 2,032,000 -- Other......................................... 1,075,000 498,000 ---------- ---------- $4,847,000 $1,440,000 ========== ==========
(6) LONG-TERM DEBT On December 31, 1986, the New York City Industrial Development Agency (the "NYIDA") issued on behalf of the Company an Industrial Development Revenue Bond (the "1986 Bond") bearing annual interest at 10.75% in the amount of $2,113,000 with a maturity date of December 15, 1994. The proceeds from the sale of the 1986 Bond were used by the Company for the acquisition, construction and installation of the Company's research and development facility in New York City. During December 1994, the 1986 Bond's original maturity date of December 15, 1994 was extended to June 15, 1996. During June 1996, the Company and the NYIDA extended the maturity date an additional eighteen months to December 15, 1997. The Company repaid the obligation on December 15, 1997. In August 1990, the NYIDA issued another Industrial Development Revenue Bond (the "1990 Bond") bearing annual interest at 11.25% in the amount of $2,200,000. The 1990 Bond is due May 1, 2004. The 1990 Bond includes a provision that if the Company terminates its lease on its New York City facility, a portion of F-12 80 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) which was scheduled to expire in March 1999, the 1990 Bond will become due 60 days prior to such date. The Company renewed the entire lease for the New York City facility effective as of January 1, 1999 through December 2004. The proceeds from the sale of the 1990 Bond were used by the Company for the acquisition, construction and installation of the Company's research and development facility in New York City. The Company has granted a security interest in substantially all equipment located in its New York City facility to secure the obligation of the Company to the NYIDA relating to the 1990 Bond. Interest expense on the 1986 and 1990 Bonds was approximately $248,000 for the year ended December 31, 1998, and $465,000 for each of the years ended December 31, 1997 and 1996, respectively. (7) OTHER LONG-TERM LIABILITIES Other long-term liabilities are comprised of the following:
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ Liability to reacquire IL-6m rights........... $ -- $ 283,000 Liability under capital lease obligations..... 2,253,000 1,469,000 Liability under license agreement............. 37,000 43,000 ---------- ---------- 2,290,000 1,795,000 Less current portion.......................... (744,000) (677,000) ---------- ---------- $1,546,000 $1,118,000 ========== ==========
In July 1993, the Company entered into an agreement with Erbamont, Inc., now a subsidiary of Pharmacia and Upjohn, Inc. ("Pharmacia"), to acquire the worldwide rights to IL-6m, a blood cell growth factor, which had been licensed to Pharmacia pursuant to a development and licensing agreement. In consideration of the return of rights and the transfer of certain material and information, the Company had paid $1,400,000 and entered into a repayment agreement for an additional $2,400,000 payable over 24 months commencing March 1996. At December 31, 1998, all amounts due Pharmacia under the repayment agreement were paid in full. Additionally, the Company is required to pay Pharmacia up to $2,700,000 in royalties on eventual sales of IL-6m, if any. The Company is obligated under various capital leases for certain laboratory, office and computer equipment and also certain building improvements primarily under a December 1996 financing agreement (the "1996 Financing Agreement") and an April 1998 financing agreement (the "1998 Financing Agreement") with Finova Technology Finance, Inc. ("Finova"). The 1996 Financing Agreement allowed the Company to finance the lease of equipment and make certain building and leasehold improvements to existing facilities involving amounts aggregating approximately $2,500,000. Each lease has a fair market value purchase option at the expiration of a 42-month term. Pursuant to the 1996 Financing Agreement, the Company issued to Finova a warrant expiring December 31, 1999 to purchase 23,220 shares of Common Stock at an exercise price of $9.69 per share. The Company recorded a non-cash debt discount of approximately $125,000 in connection with this financing, which discount is being amortized over the 42-month term of the first lease. The 1996 Financing Agreement with Finova expired in December 1997 and the Company did not utilize the full $2,500,000 under the agreement. In April 1998, the Company entered into the 1998 Financing Agreement with Finova aggregating approximately $2,000,000. The terms of the 1998 Financing Agreement are substantially similar to the now expired 1996 Financing Agreement except that each lease has a 48-month term and no warrants were issued. As of December 31, 1998, the Company had entered into ten individual leases under both the 1996 Financing Agreement and the 1998 Financing Agreement aggregating a total cost of $3,069,000 and had $676,000 available under the 1998 Financing Agreement. The 1998 Financing Agreement terminates March 31, 1999 and the Company is in discussions regarding its F-13 81 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) extension for an additional 60 days. There are no financial covenants associated with these financing agreements. See Notes 13 and 15. At December 31, 1998 and 1997, the gross amount of laboratory equipment, office equipment, building improvements and furniture and fixtures and the related accumulated depreciation and amortization recorded under all capital leases were as follows:
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ Laboratory, office and computer equipment..... $2,407,000 $1,204,000 Building improvements......................... 861,000 831,000 Furniture and fixtures........................ 92,000 -- ---------- ---------- 3,360,000 2,035,000 Less accumulated depreciation and amortization................................ (643,000) (291,000) ---------- ---------- $2,717,000 $1,744,000 ========== ==========
In connection with the Company's production and eventual marketing of certain products, the Company entered into a license agreement that requires minimum annual royalty payments throughout the term of the agreement. The agreement expires in 2004 and calls for minimum annual payments of $10,000, which are creditable against royalties that may be due from sales. To the extent the minimum annual royalties are not expected to be offset by sales, the Company has charged the net present value of these payments to operations. An interest rate of 10% was used to discount the cash flows. In July 1995, a director loaned the Company $180,000 in exchange for a long-term note due two years from issuance at an annual interest rate of 8%. As part of the transaction, the director was granted 36,000 warrants to purchase Company Common Stock at $1.50 per share and an additional 36,000 warrants to purchase Common Stock at $3.00 per share. In May 1996, the Company and the director exchanged the note for 24,000 shares of Common Stock and the Company paid the accrued and unpaid interest on the note in the amount of $10,000 in cash. The Company recorded an extraordinary loss of $39,000 on the extinguishment of the debt. The Company has registered such shares of Common Stock with the Securities and Exchange Commission (the "Commission") under a registration statement in accordance with the provisions of the Securities Act of 1933, as amended (the "1933 Act"). On August 11, 1995, the Oracle Group purchased 1,000,000 shares of Common Stock for a purchase price of $1.5 million and made a loan to the Company in the aggregate amount of $2.5 million with a two-year maturity, but subject to mandatory prepayment, in whole or in part, upon the occurrence of certain events, including the raising of certain additional funds. The loan carried an annual interest rate of 8%. The Oracle Group includes Oracle Partners, LP, Quasar International Partners C.V., Oracle Institutional Partners LP, Sam Oracle Fund, Inc. and Warren B. Kanders. The Oracle Group also received warrants exercisable at any time until August 10, 2000 entitling the holders thereof to purchase 500,000 shares of Common Stock at a price of $1.50 per share and 500,000 shares of Common Stock at a price of $3.00 per share. As a result of the Company's offerings of shares of its Common Stock in November 1995 and February 1996, the Oracle Group was entitled to require the Company to apply 20 percent of the gross proceeds of the sale of the shares of Common Stock from the offerings to repay the loan. In May 1996, the Company and the Oracle Group exchanged the notes in the aggregate outstanding principal amount of $2.5 million for 333,333 shares of Common Stock and the Company paid the accrued and unpaid interest on the notes in the amount of $143,000 in cash. The Company recorded an extraordinary loss of $1,228,000 on the extinguishment of the debt. The Company has registered such shares of Common Stock with the Commission under a registration statement in accordance with the provisions of the 1933 Act. F-14 82 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (8) COLLABORATIVE AGREEMENTS In December 1990, the Company entered into a development and commercialization agreement with Merck KGaA ("Merck KGaA") with respect to its principal cancer vaccine product candidate, BEC2 and the recombinant gp75 antigen (collectively "BEC2"). The agreement has been amended a number of times, most recently in December 1997. The agreement grants Merck KGaA a license, with the right to sublicense, to manufacture and market BEC2 for all indications outside of North America. Merck KGaA has also been granted a license, without the right to sublicense, to market but not manufacture BEC2 in North America. The Company has the right to co-promote BEC2 in North America. In return, the Company is entitled to $4,700,000, of which $4,167,000 has been recognized as of December 31, 1998, in research support payments. Merck KGaA is also required to make milestone payments up to $22,500,000, of which $3,000,000 has been recognized as of December 31, 1998, based on milestones achieved in the licensed products' development. Merck KGaA is also required to pay royalties on the eventual sales of BEC2 outside of North America, if any. Revenues arising from sales of BEC2 in North America will be distributed in accordance with the terms of a co-promotion agreement to be negotiated by the parties. In December 1998, the Company entered into a development and license agreement with Merck KGaA with respect to its lead interventional therapeutic product candidate for cancer, C225. In exchange for exclusive rights to market C225 outside of North America and co-development rights in Japan, the Company can receive $30,000,000, of which $4,000,000 has been received as of December 31, 1998, in up-front fees and early cash-based milestone payments assuming achievement of defined milestones. An additional $30,000,000 can be received assuming the achievement of further milestones for which Merck KGaA will receive equity in the Company. The equity underlying these milestone payments will be priced at varying premiums to the then market price of the Common Stock depending upon the timing of the achievement of the respective milestones. Additionally, Merck KGaA will, subject to certain terms, provide the Company a $30,000,000 secured line of credit or guaranty for the build-out of a manufacturing facility for the commercial development of C225. Merck KGaA will pay the Company a royalty on future sales of C225 outside of North America, if any. Merck KGaA has also agreed not to own greater than 19.9% of the Company's voting securities through December 3, 2002. The agreement may be terminated by Merck KGaA on any date on which a milestone is achieved (in which case no milestone payment will be made) or for a one year period after the first commercial sale of C225 in Merck KGaA's territory, upon Merck KGaA's reasonable determination that the product is economically unfeasible (in which case Merck KGaA is entitled to receive back 50% of the cash based milestones then paid to date, but only based upon a royalty rate applied to the Company's sales in North America, if any). In the event of termination of the agreement, the due date for the payment of the line of credit for the manufacturing facility will be accelerated, or in the event of a guaranty, the Company will be required to use its best efforts to release Merck KGaA as guarantor. In the event by April 15, 1999 the Company and Merck KGaA fail to agree on a concept for the manufacturing facility or Merck KGaA fails to provide the Company with the credit facility or guaranty then the agreement may be terminated by either party, in which case Merck KGaA is entitled to receive back all milestone payments made to date. Additionally, the Company must timely obtain certain collateral license agreements and the failure to do so will also entitle Merck KGaA to receive back all milestone payments made to date. The $4,000,000 milestone payment received in December 1998 has been recorded as a fee potentially refundable from corporate partner and will be recognized as revenue upon the parties mutual agreement of the manufacturing facility concept and obtaining the defined collateral license agreements. Revenues for the years ended December 31, 1998, 1997 and 1996 were $4,193,000, $5,348,000 and $600,000 respectively. Revenues for the year ended December 31, 1998 consisted of (i) $300,000 in research support from the Company's partnership with the Wyeth/Lederle Vaccine and Pediatrics Division of American Home in infectious disease vaccines, (ii) $1,000,000 in milestone revenue and $2,500,000 in research and support payments from the Company's research and license agreement with Merck KGaA with respect to the Company's BEC2 product candidate, (iii) $295,000 in royalty revenue from the Company's F-15 83 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) strategic alliance with Abbott in diagnostics, and (iv) $98,000 from a Phase I Small Business Innovation Research grant from the National Cancer Institute for a program in cancer-related angiogenesis. Revenues for the year ended December 31, 1997 consisted of (i) $300,000 in research support from the Company's partnership with American Home in infectious disease vaccines, (ii) $2,000,000 in milestone revenue and $1,667,000 in research and support payments from the Company's research and license agreement with Merck KGaA with respect to the Company's BEC2 product candidate, and (iii) $1,000,000 in milestone revenue and $381,000 in royalty revenue from the Company's strategic alliance with Abbott in diagnostics. Revenues for the year ended December 31, 1996 consisted of (i) $300,000 in research support from the Company's partnership with American Home in infectious diseases, (ii) $225,000 in royalty revenue from the Company's strategic alliance with Abbott in diagnostics, and (iii) $75,000 in license fees from the Company's cross-licensing agreement with Immunex Corporation for novel hematopoietic growth factors. Revenues were derived from the following geographic areas:
YEAR ENDED DECEMBER 31, ------------------------------------ 1998 1997 1996 ---------- ---------- -------- United States................................... $ 693,000 $1,681,000 $600,000 Germany......................................... 3,500,000 3,667,000 -- ---------- ---------- -------- $4,193,000 $5,348,000 $600,000 ========== ========== ========
(9) PREFERRED STOCK In connection with the December 1997 amendment to the Company's research and license agreement with Merck KGaA, Merck KGaA purchased from the Company in December 1997 400,000 shares of the Company's Series A Convertible Preferred Stock (the "Series A Preferred Shares" or "Series A Preferred Stock") for total consideration of $40,000,000. The holders of the Series A Preferred Shares are entitled to receive annual cumulative dividends of $6.00 per share. Dividends accrue as of the issuance date of the Series A Preferred Shares and are payable on the outstanding Series A Preferred Shares in cash annually on December 31 of each year beginning December 31, 1999 or at the time of conversion or redemption of the Series A Preferred Shares on which the dividend is to be paid, whichever is sooner. Up to 100,000 Series A Preferred Shares as of December 31, 1998 were convertible and an additional 100,000 Series A Preferred Shares will become convertible on each of January 1, 2000, January 1, 2001 and January 1, 2002. During the period from issuance through December 31, 1999, the Series A Preferred Shares are convertible at a price equal to $12.50 per share; during the period from January 1, 2000 through December 31, 2000 the Series A Preferred Shares are convertible at a price equal to the average of the closing prices for the Common Stock for the five trading days ending on December 31, 1999; during the period from January 1, 2001 through December 31, 2001 the Series A Preferred Shares are convertible at a price equal to the average of the closing prices for the Common Stock for the five trading days ending on December 31, 2000; during the period from January 1, 2002 through December 31, 2002 the Series A Preferred Shares are convertible at a beneficial conversion price equal to 88% of the average of the closing prices for the Common Stock for the five trading days ending on December 31, 2001; and anytime after January 1, 2003 the Series A Preferred Shares are convertible at a price equal to the average of the closing prices for the Common Stock for the five trading days ending on December 31, 2002. The conversion price is subject to adjustment in the case of certain dilutive events. Further, in the event the average market price of the Common Stock for the five consecutive trading days ending one trading day prior to any trading day during which any Series A Preferred Shares are outstanding exceeds 150% of the conversion price then in effect, the Company has the right to require the holder of the Series A Preferred Shares to convert all such shares that may be convertible. The Company may also redeem in whole or any part of the Series A Preferred Shares then outstanding at a redemption price of $120 per Preferred Share, plus accrued and unpaid dividends thereon. In the event of any voluntary or F-16 84 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) involuntary liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Shares shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings, available for distribution to its stockholders, before any amount shall be paid the holders of the Common Stock or holders of other classes or series of capital stock of the Company, an amount equal to the preference in liquidation; provided that, if the assets are insufficient to pay the full amount due to the holders of Series A Preferred Shares, such holders will receive a pro rata portion thereof. In accordance with the terms of the Series A Preferred Stock, the Company is required to recognize an assumed incremental yield of $5,455,000 (calculated at the date of issuance and based on the beneficial conversion feature noted above). Such amount is being amortized as a preferred stock dividend over a four-year period beginning with the day of issuance. Accrued dividends payable were $2,512,000 or $6.28 per share at December 31, 1998. Additionally, the Company has recognized an incremental yield attributable to a beneficial conversion feature of $1,319,000 at December 31, 1998. (10) STOCK OPTIONS AND WARRANTS (A) STOCK OPTION PLANS: In February 1986, the Company adopted and the shareholders thereafter approved an Incentive Stock Option Plan and a Non-Qualified Stock Option Plan (the "86 Plans"). In February 1996, the Company's Board of Directors adopted and the shareholders thereafter approved an additional Incentive Stock Option Plan and Non-Qualified Stock Option Plan (the "96 Plans"). In May 1998, the Company's Board of Directors adopted an additional Non-Qualified Stock Option Plan (the "98 Plan") which shareholders are not required to approve. Combined, the 86 Plans, the 96 Plans, as amended, and the 98 Plan provide for the granting of options to purchase up to 5,500,000 shares of Common Stock to key employees, directors, consultants and advisors of the Company. Incentive stock options may not be granted at a price less than the fair market value of the stock at the date of grant and may not be granted to non-employees. Options may not be granted under the 98 Plan to officers or directors. Options under all the plans, unless earlier terminated, expire ten years from the date of grant. Certain options granted under these plans vest over one-to-five-year periods. At December 31, 1998, options to purchase 4,409,124 shares of Common Stock were outstanding and 453,405 shares were available for grant. Options may no longer be granted under the 86 Plans pursuant to the terms of the 86 Plans. F-17 85 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A summary of stock option activity follows:
WEIGHTED AVERAGE NUMBER OF EXERCISE PRICE SHARES PER SHARE --------- ---------------- Balance at December 31, 1995......................... 1,366,954 $2.34 1996 activity: Granted............................................ 1,077,875 9.32 Exercised.......................................... (266,275) 3.18 Canceled........................................... (74,977) 2.58 --------- Balance at December 31, 1996......................... 2,103,577 5.80 1997 activity: Granted............................................ 456,194 6.62 Exercised.......................................... (147,450) 1.51 Canceled........................................... (35,226) 8.60 --------- Balance at December 31, 1997......................... 2,377,095 6.19 1998 activity: Granted............................................ 2,432,976 10.19 Exercised.......................................... (154,097) 3.98 Canceled........................................... (246,850) 11.04 --------- Balance at December 31, 1998......................... 4,409,124 $8.20 =========
In May 1996, the Company granted an officer an option to purchase 225,000 shares of the Company's Common Stock at an exercise price below the market price of the stock on the date of grant. The Company is recognizing compensation expense as prescribed under APB Opinion No. 25. In September 1998 and January 1999, the Company granted options to its Vice President of Marketing and Vice President of Product and Process Development to respectively purchase 60,000 shares of Common Stock. These options were not granted under any of the above mentioned Incentive Stock Option or Non- Qualified Stock Option Plans. The terms of these options are substantially similar to those granted under the 98 Plan. During the years ended December 31, 1998, 1997 and 1996, the Company granted options to purchase 124,000, 32,000 and 116,000 shares, respectively, of its Common Stock to certain Scientific Advisory Board members and outside consultants in consideration for future services. The fair value of these grants was calculated using the Black-Scholes option pricing model. See Note 10(c) for weighted average assumptions used. During the years ended December 31, 1998, 1997 and 1996, the Company recognized approximately $540,000, $189,000 and $95,000, respectively, in compensation expense relating to the options granted to Scientific Advisory Board members and outside consultants. During the years ended December 31, 1998, 1997 and 1996, the Company granted options to outside members of its Board of Directors to purchase approximately 44,000, 153,000 and 158,000 shares, respectively, of its Common Stock. During April 1995, the company completed the sale of the remaining one-half of its shares of capital stock of Cadus for $3.0 million to High River. In exchange for receiving a now-expired right to repurchase all outstanding shares of capital stock of Cadus held by High River, the Company granted to High River two options to purchase shares of Common Stock. One option if for 150,000 shares at an exercise price per share equal to $2.00, subject to adjustment under certain circumstances, and the other option is for 300,000 shares at an exercise price per share equal to $0.69, subject to adjustment under certain circumstances. Both options will expire on April 26, 2000. The 450,000 options have a weighted average exercise price of $1.13. F-18 86 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (B) WARRANTS As of December 31, 1998, a total of 2,263,590 shares of Common Stock were issuable upon exercise of outstanding warrants. Such warrants have been issued to certain officers, directors and other employees of the Company, certain Scientific Advisory Board members, certain investors and certain credit providers and investors. A summary of warrant activity follows:
WEIGHTED AVERAGE NUMBER OF EXERCISE PRICE SHARES PER SHARE --------- ---------------- Balance at December 31, 1995......................... 3,891,567 $ 3.15 1996 activity: Granted............................................ 23,220 9.69 Exercised.......................................... (604,892) 4.89 Canceled........................................... (33,050) 12.92 --------- Balance at December 31, 1996......................... 3,276,845 2.41 1997 activity: Granted............................................ 397,000 1.50 Exercised.......................................... (869,500) 1.56 Canceled........................................... (397,000) 1.50 --------- Balance at December 31, 1997......................... 2,407,345 2.71 1998 activity: Granted............................................ -- -- Exercised.......................................... (143,755) 1.39 Canceled........................................... -- -- --------- Balance at December 31, 1998......................... 2,263,590 $ 2.80 =========
In March 1997, the Company extended for a two-year period the term of an officer's warrant to purchase 397,000 shares of the Company's Common Stock at a per share exercise price equal to $1.50. In connection with this transaction, the Company recognized non-cash compensation expense of approximately $2,233,000. During September 1996, the Company repriced certain warrants held by investors to purchase 80,700 shares of Common Stock in order to promote their exercise prior to pending expiration. The warrants were repriced to an amount which was ten percent less than the average closing price for the Common Stock for the thirty days leading up to and including the day prior to the date of exercise. The fair market value of the warrants was reflected as a cost of capital. During November 1996, the Company repriced certain warrants held by investors to purchase 130,000 shares of Common Stock in order to promote their exercise prior to pending expiration. The warrants were repriced to an amount which was ten percent less than the average closing price for the Common Stock for the thirty days leading up to and including the day prior to the date of exercise. The fair market value of the warrants was reflected as a cost of capital. F-19 87 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The outstanding warrants (which are all currently exercisable) expire and are exercisable for the number of shares of Common Stock as shown below: December 1999............................................. 35,520 March 2000................................................ 6,150 July 2000................................................. 72,000 August 2000............................................... 925,000 November 2000............................................. 12,720 March 2001................................................ 2,500 May 2001.................................................. 847,700 June 2003................................................. 12,000 December 2005............................................. 350,000 --------- Total................................................ 2,263,590 =========
(C) SFAS NO. 123 DISCLOSURES: The following tables summarize the weighted average fair value of stock options and warrants granted to employees and directors during the years ended December 31, 1998, 1997 and 1996:
OPTION PLANS ---------------------------------------------------------- 1998 1997 1996 ------------------ ---------------- ---------------- SHARES $ SHARES $ SHARES $ --------- ----- ------- ----- ------- ----- Exercise price is less than market value at date of grant........... -- $ -- -- $ -- 225,000 $6.36 Exercise price equals market value at date of grant................. 900,476(1) $5.52 424,194(1) $4.29 736,875(1) $5.31 Exercise price exceeds market value at date of grant................. 1,408,500 $6.28 -- $ -- -- $ --
- ------------ (1) Does not include 124,000 shares in 1998, 32,000 shares in 1997 and 116,000 shares in 1996 under options granted to non-employees. The fair value of these non-employee grants has been recorded as compensation expense as prescribed by SFAS No. 123.
WARRANTS -------------------------------------------------------- 1998 1997 1996 --------------- ----------------- ---------------- SHARES $ SHARES $ SHARES $ ------ ----- -------- ----- ------- ----- Exercise price is less than market value at date of grant............ -- $ -- 397,000(1) $5.91 -- -- Exercise price equals market value at date of grant.................. -- $ -- -- $ -- 23,220 $5.39 Exercise price exceeds market value at date of grant.................. -- $ -- -- $ -- -- $ --
- ------------ (1) The only grant of warrants during 1997 was the extension of an officer's warrant to purchase 397,000 shares of Common Stock. The extension has been considered a cancellation of the original grant and the issuance of a new below market grant. Accordingly, the Company recognized compensation expense consistent with APB Opinion No. 25. The fair value of stock options and warrants was estimated using the Black-Scholes option pricing model. The Black-Scholes model considers a number of variables including the exercise price and the expected life of the option, the current price of the Common Stock, the expected volatility and the dividend yield of the F-20 88 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) underlying Common Stock, and the risk-free interest rate during the expected term of the option. The following summarizes the weighted average assumptions used:
OPTION PLANS WARRANTS ----------------------- ---------------------- 1998 1997 1996 1998 1997 1996 ----- ----- ----- ---- ----- ----- Expected life (years)...................... 5.3 5.0 3.5 -- 2.0 2.0(1) Interest rate.............................. 5.58% 6.00% 5.00% -- 6.00% 5.00% Volatility................................. 76.03% 72.29% 85.13% -- 72.29% 85.13% Dividend yield............................. 0% 0% 0% -- 0% 0%
- ------------ (1) The weighted average expected life does not include the warrants repriced in 1996 as they were exercised simultaneously. The following table summarizes information concerning stock options outstanding at December 31, 1998:
WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER REMAINING AVERAGE NUMBER AVERAGE RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE EXERCISE PRICES AT 12/31/98 TERM PRICE AT 12/31/98 PRICE - ----------------------------- ----------- ----------- -------- ------------- -------- $0.563 - 2.00................ 665,825 2.36 $ 1.13 637,575 $ 1.14 3.75 - 6.00................. 510,125 8.38 5.71 396,751 5.73 6.063 - 7.875............... 602,727 8.76 6.44 66,003 7.08 8.125 - 10.625.............. 492,300 8.13 8.95 257,092 8.57 10.875 - 11.33............... 504,147 7.40 10.88 300,602 10.88 11.375....................... 1,319,000 9.42 11.38 -- -- 11.50 - 13.33................ 315,000 9.23 11.84 14,250 13.03 --------- --------- 4,409,124 7.76 $ 8.20 1,672,273 $ 5.46 ========= =========
As of December 31, 1998, the outstanding warrants to purchase 2,263,590 common shares were all exercisable and have a weighted average remaining contractual term of 2.9 years. The weighted average remaining contractual term at December 31, 1998 for the 6,150, outstanding warrants exercisable at $.63 per share is 1.2 years, the 12,300 exercisable at $.69 per share is 1.0 year, the 1,313,420 exercisable at $1.50 per share is 2.1 years, the 498,500 exercisable at $3.00 per share is 1.6 years, the 350,000 exercisable at $5.50 per share is 7.0 years, the 12,000 exercisable at $7.00 per share is 4.5 years, the 23,220 exercisable at $9.69 per share is 1.0 year, the 6,000 exercisable at $10.00 per share is 1.9 years, and the 42,000 exercisable at $13.33 per share is 2.3 years. The Company applies APB Opinion No. 25 and related Interpretations in accounting for its options and warrants. Except as previously indicated, no compensation cost has been recognized for its stock option and warrant grants. Had compensation cost for the Company's stock option grants been determined based on the fair value at the grant dates for awards consistent with the method of SFAS No. 123, the Company's net loss and loss per share would have been increased or decreased to the pro forma amounts indicated below. F-21 89 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, -------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Net loss to common stockholders As reported........................ $(25,050,000) $(15,654,000) $(16,015,000) Pro forma.......................... (32,306,000) (17,283,000) (19,653,000) Loss per share Basic and diluted: As reported........................ $ (1.03) $ (0.67) $ (0.83) Pro forma.......................... (1.33) (0.74) (1.01)
The pro forma effect on the loss for the years ended December 31, 1998, 1997, and 1996 is not necessarily indicative of the pro forma effect on future years' operating results since it does not take into effect the pro forma compensation expense related to grants made prior to January 1, 1995. (11) EMPLOYEE STOCK PURCHASE PLAN In April 1998, the Company's Board of Directors adopted the ImClone Systems Incorporated 1998 Employee Stock Purchase Plan (the "ESPP"), subject to shareholders' approval which was received in May 1998. The ESPP allows eligible employees to purchase shares of the Company's Common Stock through payroll deductions at the end of quarterly purchase periods. To be eligible, an individual must be employed for a period of not less than six months, he or she is required to work more than 20 hours per week for at least five months per calendar year and he or she may not own greater than 5% of the Company's Common Stock. Pursuant to the ESPP, the Company has reserved 500,000 shares of Common Stock for issuance. On the first day of each quarterly purchase period, each eligible employee participating in such quarterly purchase period will be granted an option to purchase a number of shares of Common Stock determined by dividing such employee's contributions accumulated prior to the last day of the quarterly period by the purchase price. The purchase price is equal to 85% of the market price per share on the last day of each quarterly purchase period. An employee may purchase stock from the accumulation of payroll deductions of up to a maximum of 15% of his or her compensation, limited to $25,000 per year. As of December 31, 1998, participating employees have purchased 4,388 shares of Common Stock at an aggregate purchase price of approximately $33,000 and 495,612 shares were available for future purchases. No compensation expense has been recorded in connection with the ESPP. F-22 90 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (12) INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1998 and December 31, 1997 are presented below.
DECEMBER 31, DECEMBER 31, 1998 1997 ------------ ------------ Deferred tax assets: Liability to reacquire IL-6m rights and materials... $ -- $ 262,000 Research and development carryforward............... 3,642,000 2,303,000 Compensation relating to the issuance of stock options and warrants............................. 376,000 189,000 Net operating loss carryforwards.................... 57,169,000 52,408,000 Other............................................... 3,424,000 1,116,000 ------------ ------------ Total gross deferred tax assets....................... 64,611,000 56,278,000 Less valuation allowance............................ (64,611,000) (56,278,000) ------------ ------------ Net deferred tax assets............................. -- -- ------------ ------------ Deferred tax liabilities: Total gross deferred tax liabilities................ -- -- ------------ ------------ Net deferred tax.................................... $ -- $ -- ============ ============
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The net change in the total valuation allowance for the years ended December 31, 1998 and 1997 was an increase of $8,333,000 and $5,460,000, respectively. The tax benefit assumed using the Federal statutory tax rate of 34% has been reduced to an actual benefit of zero due principally to the aforementioned valuation allowance. At December 31, 1998, the Company had net operating loss carryforwards for federal income tax purposes of approximately $129,485,000 which expire at various dates from 2000 through 2018. At December 31, 1998, the Company had research credit carryforwards of approximately $3,642,000 which expire at various dates between years 2009 and 2018. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company's net operating loss and research credit carryforwards may be limited if the Company experiences a change in ownership of more than 50 percentage points within a three-year period. Since 1986, the Company experienced two such ownership changes. Accordingly, the Company's net operating loss carryforwards available to offset future federal taxable income arising before such ownership changes are limited to $5,159,000 annually. Similarly, the Company is restricted in using its research credit carryforwards arising before such ownership changes to offset future federal income tax expense. (13) COMMITMENTS LEASES The Company leases its New York City facility under an operating lease, a portion of which was scheduled to expire in March 1999. The Company renewed the entire lease effective as of January 1, 1999 through December 2004. The annual minimum rent for 1999 is $720,000 and increases 3% annually for each year thereafter. Rent expense for the New York City facility was approximately $574,000, $554,000, and $508,000 for the years ended December 31, 1998, 1997 and 1996, respectively. See also Note 6. F-23 91 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Future minimum lease payments under the capital and operating leases are as follows:
CAPITAL OPERATING LEASES LEASES ---------- ---------- Years ending December 31, 1999.............................................. $ 900,000 $ 769,000 2000.............................................. 889,000 780,000 2001.............................................. 520,000 794,000 2002.............................................. 248,000 815,000 2003.............................................. -- 823,000 2004.............................................. -- 835,000 ---------- ---------- 2,557,000 4,816,000 Less interest expense............................... (304,000) -- ---------- ---------- $2,253,000 $4,816,000 ========== ==========
SUPPORTED RESEARCH The Company has entered into various research and license agreements with certain academic institutions and others to supplement the Company's research activities and to obtain for the Company rights to certain technology. The agreements generally require the Company to fund the research and to pay royalties based upon percentages of revenues, if any, on sales of products developed from technology arising under these agreements. CONSULTING AGREEMENTS The Company has consulting agreements with several of its Scientific Advisory Board members and other consultants. These agreements generally are for a term of one year or are terminable at the Company's option. CONTRACT SERVICES In April, 1998, the Company entered into an agreement in principle with a pharmaceutical manufacturer for the supplemental further development, production scale-up and manufacture of its lead therapeutic product candidate, C225, for use in human clinical trials. Services pursuant to this agreement commenced in April 1998 and are anticipated to conclude in October 1999. The total project cost is DM8,950,000, or as of December 31, 1998, approximately $5,424,000. As of December 31, 1998, the Company had incurred a liability of approximately $1,897,000 (U.S. dollar equivalent) for services provided to date under this agreement. (14) RETIREMENT PLANS The Company maintains a 401(k) retirement plan available to all full-time, eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. The Company, at its discretion, may make certain contributions to the plan. The Company contributed approximately $47,000 to the plan for the year ended December 31, 1998. No such contributions were made to the plan during the years ended December 31, 1997 and 1996. F-24 92 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (15) SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING Activities are as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Cash paid during the year for: Interest............................................. $ 422,000 $ 707,000 $ 817,000 ========== ========== ========== Non-cash investing and finance activities: Finova capital asset and lease obligations additions......................................... 731,000 1,324,000 421,000 ========== ========== ========== Fair value of Finova warrant......................... -- -- 125,000 ========== ========== ========== Other capital lease obligations...................... -- 28,000 -- ========== ========== ========== Unrealized gain (loss) on securities available-for-sale................................ (676,000) 101,000 (49,000) ========== ========== ========== Extinguishment of Oracle Group debt for stock........ -- -- 2,500,000 ========== ========== ========== Extinguishment of director debt for stock............ -- -- 180,000 ========== ========== ========== Preferred Stock dividend............................. 2,400,000 163,000 -- ========== ========== ========== Warrant exercise paid with a note, including accrued interest.......................................... 142,000 -- -- ========== ========== ==========
(16) RELATED PARTY TRANSACTIONS The Company has scientific consulting agreements with two members of the Board of Directors. Expenses relating to these agreements were $112,000 for each of the years ended December 31, 1998, 1997 and 1996. Through March 1995, the Company made miscellaneous non interest bearing cash advances to the President and CEO of the Company totaling approximately $156,000. The officer provided the Company with a demand promissory note pursuant to which the officer was obligated to repay the debt over a twenty-four month period ending April 30, 1997. In March 1997, the Company accepted a new promissory note (the "new promissory note") in the aggregate amount of $110,000 from the officer. The new promissory note was payable as to $15,000 no later than May 15, 1997 and the remainder upon the earlier of on demand by the Company or December 31, 1997 and bore interest at the rate of 5% compounded quarterly. The new promissory note covered the remaining balance of the original note, interest thereon and additional miscellaneous cash advances made since the date of the original note totaling $15,000. At December 31, 1997, the new promissory note was paid in full by the officer. In January 1996, the Company paid Concord International Investment Group, LP, approximately $163,000 for services rendered by it to the Company in connection with structuring a contemplated product related financing for C225. Mr. Robert F. Goldhammer, Chairman of the Board of Directors, is a limited partner of Concord International Investment Group, LP. In August 1995 and January 1996, the Company paid Delano & Kopperl Financial Advisors, Inc. a total of approximately $69,000 for services rendered by it to the Company in connection with structuring a contemplated product related financing for C225. Paul B. Kopperl, a director of the Company, is President, director, and 25% shareholder of Delano & Kopperl Financial Advisors, Inc. In January 1998, the Company accepted a promissory note totaling approximately $131,000 from its President and CEO in connection with the exercise of a warrant to purchase 87,305 shares of the Company's F-25 93 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) common stock. The note is due no later than two years from issuance and is full recourse. Interest is payable on the first anniversary date of the promissory note and on the stated maturity or any accelerated maturity at the annual rate of 8.5%. At December 31, 1998, the total amount due the Company, including interest, was approximately $142,000 and is classified in the stockholders' equity section of the balance sheet as a note receivable from officer and stockholder. In October 1998, the Company accepted an unsecured promissory note totaling $100,000 from its Executive Vice President and COO. The note is payable on demand including interest at the annual rate of 8.25% for the period that the loan is outstanding. At December 31, 1998, the total amount due the Company, including interest, is approximately $102,000. In August 1998, the Company entered into a utilization agreement with a company to provide certain support services. This company is considered a related party because of common management. The Company is being reimbursed $2,000 per month for providing laboratory space and related support. (17) FAIR VALUE OF FINANCIAL INSTRUMENTS For the years ended December 31, 1998 and 1997, the following methods and assumptions were used to estimate the fair value of each class of financial instrument: CASH AND CASH EQUIVALENTS, ACCOUNTS PAYABLE, ACCRUED AND OTHER CURRENT LIABILITIES The carrying amounts approximate fair value because of the short maturity of those instruments. LONG-TERM DEBT Discounted cash flow analyses were used to determine the fair value of long-term debt because quoted market prices on these instruments were unavailable. The fair value of these instruments approximated the carrying amount. F-26 94 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
JUNE 30, 1999 ASSETS -------- Current assets: Cash and cash equivalents................................. $ 2,672 Securities available for sale............................. 38,006 Prepaid expenses.......................................... 434 Other current assets...................................... 1,378 -------- Total current assets................................ 42,490 -------- Property and equipment: Land...................................................... 340 Building and building improvements........................ 10,690 Leasehold improvements.................................... 4,878 Machinery and equipment................................... 8,427 Furniture and fixtures.................................... 641 Construction in progress.................................. 1,860 -------- Total cost.......................................... 26,836 Less accumulated depreciation and amortization............ (13,742) -------- Property and equipment, net......................... 13,094 -------- Patent costs, net........................................... 892 Deferred financing costs, net............................... 41 Other assets................................................ 1,581 -------- $ 58,098 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 944 Accrued expenses and other................................ 3,568 Interest payable.......................................... 43 Deferred revenue.......................................... -- Fee potentially refundable from corporate partner......... 12,000 Current portion of long-term liabilities.................. 919 Preferred stock dividends payable......................... 3,702 -------- Total current liabilities........................... 21,176 -------- Long-term debt.............................................. 2,200 Other long-term liabilities, less current portion........... 1,586 -------- Total liabilities................................... 24,962 -------- Commitments and contingencies Stockholders' equity: Preferred stock, $1.00 par value; authorized 4,000,000 shares; issued and outstanding Series A Convertible: 400,000 at June 30, 1999 (preference in liquidation $43,702)................................................ 400 Common stock, $.001 par value; authorized 60,000,000 shares; issued 25,397,474 at June 30, 1999, outstanding 25,346,657 at June 30, 1999............................. 25 Additional paid-in capital................................ 188,118 Accumulated deficit....................................... (155,055) Treasury stock, at cost; 50,817 shares at June 30, 1999... (492) Note receivable--officer and stockholder.................. (137) Accumulated other comprehensive income: Unrealized gain on securities available for sale, net... 277 -------- Total stockholders' equity.......................... 33,136 -------- $ 58,098 ========
See accompanying notes to consolidated financial statements. F-27 95 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------- 1999 1998 -------- ------- Revenues: Product development milestone revenues.................... $ -- $ 1,000 Research and development funding from third parties and other.................................................. 883 1,615 -------- ------- Total revenues.................................... 883 2,615 -------- ------- Operating expenses: Research and development.................................. 13,505 8,846 General and administrative................................ 3,677 2,959 -------- ------- Total operating expenses.......................... 17,182 11,805 -------- ------- Operating loss.............................................. (16,299) (9,190) -------- ------- Other: Interest income........................................... (1,168) (1,607) Interest expense.......................................... 246 200 Loss (gain) on securities available for sale.............. 832 (2) -------- ------- Net interest and other income..................... (90) (1,409) -------- ------- Net loss.................................................... (16,209) (7,781) Preferred dividends (including assumed incremental yield attributable to beneficial conversion feature of $672 and $635 for the six months ended June 30, 1999 and 1998, respectively)............................................. 1,862 1,825 -------- ------- Net loss to common stockholders............................. $(18,071) $(9,606) ======== ======= Basic and diluted net loss per common share................. $ (0.73) $ (0.40) ======== ======= Weighted average shares outstanding......................... 24,718 24,251 ======== ======= Comprehensive loss: Net loss.................................................. $(16,209) $(7,781) Other comprehensive income (loss): Unrealized holding gain arising during the period......... 69 204 Less: Reclassification adjustment for realized gain (loss) included in net loss............................................... (832) 2 -------- ------- Total other comprehensive income (loss)........... 901 202 -------- ------- Total Comprehensive loss.......................... $(15,308) $(7,579) ======== =======
See accompanying notes to consolidated financial statements. F-28 96 IMCLONE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, -------------------- 1999 1998 -------- -------- Cash flows from operating activities: Net loss.................................................. $(16,209) $ (7,781) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................... 925 883 Expense associated with issuance of options and warrants.............................................. 1,064 310 Loss (gain) on securities available for sale............ 832 (2) Changes in: Prepaid expenses..................................... 138 20 Other current assets................................. (284) (49) Other assets......................................... (135) (35) Interest payable..................................... (2) (25) Accounts payable..................................... (165) (151) Accrued expenses and other........................... (1,279) (744) Deferred revenue..................................... (75) 75 Fee potentially refundable from corporate partner.... 8,000 -- -------- -------- Net cash used in operating activities.............. (7,190) (7,499) -------- -------- Cash flows from investing activities: Acquisitions of property and equipment.................... (2,010) (570) Purchases of securities available for sale................ (18,508) (28,760) Sales and maturities of securities available for sale..... 23,500 37,997 Additions to patents...................................... (87) (81) -------- -------- Net cash provided by investing activities.......... 2,895 8,586 -------- -------- Cash flows from financing activities: Proceeds from exercise of stock options and warrants...... 3,335 150 Proceeds from issuance of common stock under the employee stock purchase plan..................................... 50 -- Proceeds from equipment and building improvement financings.............................................. 94 593 Payments of other liabilities............................. (411) (514) Interest received on note receivable -- officer and stockholder............................................. 11 -- -------- -------- Net cash provided by financing activities.......... 3,079 229 -------- -------- Net (decrease) increase in cash and cash equivalents........ (1,216) 1,316 Cash and cash equivalents at beginning of period............ 3,888 2,558 -------- -------- Cash and cash equivalents at end of period.................. $ 2,672 $ 3,874 ======== ========
See accompanying notes to consolidated financial statements. F-29 97 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION The consolidated financial statements of ImClone Systems Incorporated ("ImClone" or the "Company") as of June 30, 1999 and for the six months ended June 30, 1999 and 1998 are unaudited. In the opinion of management, these unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, as filed with the Securities and Exchange Commission. Results for the interim periods are not necessarily indicative of results for the full years. (2) COMMITMENTS The Company signed a definitive agreement in April 1999 with Boehringer Ingelheim Pharmaceuticals KG ("BI Pharmaceuticals") for the further development, production scale-up and manufacture of the Company's lead therapeutic product candidate, C225, for use in human clinical trials. Services pursuant to this agreement commenced in April 1998 pursuant to an agreement in principle. The Company estimates that the total cost under the agreement, including the cost of additional amounts of material the Company has the right to request, will be DM12,100,000 or $6,392,000. As of June 30, 1999, the Company has incurred approximately DM3,940,000 of which DM3,130,000 has been paid, for services provided under this agreement. (3) RELATED PARTY TRANSACTIONS In January 1998, the Company accepted a promissory note totaling approximately $131,000 from its President and CEO in connection with the exercise of a warrant to purchase 87,305 shares of the Company's common stock, $.001 par value (the "Common Stock"). The note is due no later than two years from issuance and is full recourse. Interest was paid on the first anniversary date of the promissory note at an annual rate of 8.5% and is payable on the stated maturity or any accelerated maturity. At June 30, 1999, the total amount due the Company, including interest, was approximately $137,000 and is classified in the stockholders' equity section of the balance sheet as a note receivable from officer and stockholder. In October 1998, the Company accepted an unsecured promissory note totaling $100,000 from its Executive Vice President and COO. The note was payable on demand including interest at the annual rate of 8.25% for the period that the loan is outstanding. In April 1999, the note, including all interest, was paid in full. In January 1999, the Company accepted an unsecured promissory note totaling $60,000 from its Vice President, Product and Process Development. The note was payable upon the earlier of the Company's demand or July 28, 1999 including interest at an annual rate of 8.75% for the period that the loan was outstanding. The loan was made in connection with the acceptance of employment and the corresponding relocation of the officer. At June 30, 1999, the total amount due the Company, including interest, was approximately $62,000 and is included as a component of other current assets. In July 1999, the note, including all interest, was paid in full. (4) EARNINGS PER SHARE Basic and diluted Earnings Per Share ("EPS") are computed based on the net loss for the relevant period, adjusted for cumulative Series A Convertible Preferred Stock (the "Series A Preferred Stock" or "Series A Preferred Shares") dividends and the assumed incremental yield attributable to the beneficial conversion feature in the preferred stock, divided by the weighted average number of shares outstanding F-30 98 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) during the period. Potentially dilutive securities, including convertible preferred stock, options and warrants, have not been included in the diluted EPS computation because they are anti-dilutive. (5) COMPREHENSIVE INCOME (LOSS) The following table reconciles net loss to comprehensive loss:
SIX MONTHS ENDED JUNE 30, -------------------------- 1999 1998 ------------ ----------- Net loss.................................................... $(16,209,000) $(7,781,000) Other comprehensive income: Unrealized holding gain arising during the period......... 69,000 204,000 Less: Reclassification adjustment for realized gain (loss) included in net loss................................ (832,000) 2,000 ------------ ----------- Total other comprehensive income....................... 901,000 202,000 ------------ ----------- Total comprehensive loss.................................... $(15,308,000) $(7,579,000) ============ ===========
(6) LOSS ON SECURITIES AVAILABLE FOR SALE In October 1997, the Company entered into a Collaborative Research and License Agreement with CombiChem Inc. ("CombiChem"). Concurrent with this agreement, the Company entered into a Stock Purchase Agreement pursuant to which the Company purchased 312,500 shares of common stock of CombiChem, as adjusted, for a total purchase price of $2,000,000. The investment has been classified as available for sale and a long-term asset. The market value of the investment in CombiChem has declined substantially from the date of original investment and the Company has deemed this decline in market value to be other than temporary. Accordingly, the cost basis in the investment in CombiChem has been adjusted and a loss on securities available for sale of $828,000 was recorded in March 1999. These securities have not been sold by the Company. (7) COMMON STOCK On May 24, 1999, the date of the annual shareholders meeting, the stockholders approved the amendment of the Company's certificate of incorporation to increase the total number of share of Common Stock the Company is authorized to issue from 45,000,000 shares to 60,000,000 shares. (8) STOCK OPTIONS AND WARRANTS On May 24, 1999, the date of the annual shareholders meeting, the stockholders approved an amendment to the Company's 1996 Incentive Stock Option Plan (the "1996 ISO Plan") to increase the total number of shares of Common Stock which may be issued pursuant to options which may be granted under the 1996 ISO PLAN from 3,000,000 to 4,000,000, which number shall be reduced by the number of shares of Common Stock which have been or may be issued pursuant to options granted under the Company's 1996 Non-Qualified Stock Option Plan (the "1996 Non-Qualified Plan"). The stockholders also approved amendments to the Company's 1996 Non-Qualified Plan to (i) increase the total number of shares of Common Stock which may be issued pursuant to options which may be granted under the 1996 Non-Qualified Plan from 3,000,000 to 4,000,000, which number shall be reduced by the number of shares of common stock which have been or may be issued pursuant to options granted under the F-31 99 IMCLONE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) Company's 1996 ISO Plan, and (ii) increase the annual option grant made to members of the Board of Directors and the Chairman who are not full-time employees of the Company under the 1996 Non-Qualified Plan. The annual option grant to non-employee members of the Board of Directors increased from 2,500 to 15,000 and the annual option grant to the Chairman increased from 2,500 to 30,000. The stockholders approved the grant of an option to the Company's President and Chief Executive Officer to purchase 1,000,000 shares of Common Stock at a per share exercise price equal to $18.25, the last reported sale price of the Common Stock on the date shareholder approval was obtained at the annual shareholders meeting. The options will vest no later than six years from the grant date and specified amounts are subject to earlier vesting if specified Company Common Stock price thresholds are met. The stockholders approved the grant of an option to the Company's Executive Vice President and Chief Operating Officer to purchase 650,000 shares of Common Stock at a per share exercise price equal to $18.25, the last reported sale price of the Common Stock on the date shareholder approval was obtained at the annual shareholders meeting. The options will vest no later than six years from the grant date and specified amounts are subject to earlier vesting if specified Company Common Stock price thresholds are met. (9) RECLASSIFICATION Certain amounts previously reported have been reclassified to conform to the current year's presentation. (10) COLLABORATIVE AGREEMENTS The Company has a development and license agreement with Merck KGaA ("Merck") with respect to C225, its lead interventional therapeutic product for the treatment of cancer. In exchange for certain marketing and development rights, the Company can receive up to $60,000,000 in milestone payments ($30,000,000 of which are equity based) assuming the achievement of certain milestones and a $30,000,000 secured line of credit or guaranty for the build-out of a manufacturing facility for the commercial production of C225. The agreement provides that among other reasons, it may be terminated by either party if the Company and Merck failed to agree on a production concept for the manufacturing facility or if Merck had not provided the Company with the credit facility or guaranty by April 15, 1999, in which case Merck is entitled to receive back all milestone payments made to date. Additionally, the Company must timely obtain certain collateral license agreements, and the failure to do so will entitle Merck to receive back all milestone payments made to date. In April 1999 the parties agreed on the production concept for the manufacturing facility and are currently working toward securing the credit facility or guaranty. As of June 30, 1999, the Company has received $12,000,000 in milestone payments. These payments have been recorded as fees potentially refundable from corporate partner and will be recognized as revenue upon Merck's providing the credit facility or guaranty and the Company's obtaining the defined collateral license agreements. F-32 100 ImClone Logo 101 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
AMOUNT TO BE PAID ---------- Registration fee............................................ $ 28,102 NASD filing fee............................................. 10,609 Nasdaq National Market additional share listing fee......... 17,500 Transfer agent's fees....................................... 25,000 Printing and engraving expenses............................. 130,000 Legal fees and expenses..................................... 500,000 Accounting fees and expenses................................ 150,000 Blue Sky fees and expenses.................................. 10,000 Miscellaneous............................................... 3,789 -------- Total............................................. $875,000 ========
Each of the amounts set forth above, other than the Registration fee and the NASD filing fee, is an estimate. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Our Certificate of Incorporation and Bylaws set forth the extent to which our officers and directors may be indemnified by us against any liabilities which they may incur. The general effect of such provisions is that, on the terms and conditions set forth in our Certificate of Incorporation and Bylaws, any person made a party or threatened to be made a party to an action, suit or proceeding by reason of the fact that he or she is or was a director or officer, or is or was serving as a director, officer, employee or agent of another corporation or other enterprise at our request, shall be indemnified by us against expenses (including attorneys' fees, judgments, fines and amounts paid in settlement) reasonably incurred or suffered by him or her in connection with such action, suit or proceeding, to the full extent permitted under the laws of the State of Delaware; provided, however, that, subject to certain limited exceptions, we shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by our Board of Directors. Our Certificate of Incorporation gives our Board of Directors the authority to extend such indemnification to our employees and other agents as well. The general effect of the indemnification provisions contained in Section 145 of the General Corporation Law of the State of Delaware (the "DGCL") is as follows: A director or officer who, by reason of such directorship or officership, is involved in any action, suit or proceeding (other than an action by or in the right of the corporation) may be indemnified by the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe that his or her conduct was unlawful. A director or officer who, by reason of such directorship or officership, is involved in any action or suit by or in the right of the corporation may be indemnified by the corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which he or she shall have been adjudged to be liable to the corporation unless and only to the extent that a court of appropriate jurisdiction shall approve such indemnification. II-1 102 Our Certificate of Incorporation provides that, to the maximum extent permitted under the DGCL, a director of ImClone shall not be personally liable to us or to any stockholders for monetary damages for breach of fiduciary duty as a director of ImClone. Section 102(b)(7) of the DGCL permits a corporation to include in its certificate of incorporation a provision that eliminates or limits the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, that such provision shall not eliminate or limit the liability of a director (1) for any breach of the Director's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL or (4) for any transaction from which the director derived in improper personal benefit. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. The following exhibits are filed as part of this Registration Statement or incorporated by reference herein:
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 1.1 Form of Underwriting Agreement 3.1+ Certificate of Incorporation, and all amendments thereto 3.1A++ Amendment dated June 4, 1999 to the Company's certificate of incorporation, as amended 3.2+ Amended and Restated By-Laws of the Company 4.1+ Form of Warrant issued to the Company's officers and directors under Warrant Agreements 4.2+ Stock Purchase Agreement between Erbamont Inc. and the Company, dated May 1, 1989 4.3+ Stock Purchase Agreement between American Cyanamid Company and the Company dated December 18, 1987 4.4+ Form of Subscription Agreement entered into in connection with September 1991 private placement 4.5+ Form of Warrant issued in connection with September 1991 private placement 4.6+ Preferred Stock Purchase Agreement between the Company and Merck KGaA dated December 3, 1997 4.7+ Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock 5.1* Opinion of Davis Polk & Wardwell 10.1+ Company's 1986 Employee Incentive Stock Option Plan, including form of Incentive Stock Option Agreement 10.2+ Company's 1986 Non-qualified Stock Option Plan, including form of Non-qualified Stock Option Agreement 10.3+ Company's 401(k) Plan 10.4+ Research and License Agreement between Merck KGaA and the Company dated December 19, 1990 10.5+ Hematopoietic Growth Factors License Agreement between Erbamont, N.V. and the Company, dated September 28, 1990 10.6+ Agreement between Cyanamid and the Company dated December 18, 1987 and supplemental letter agreement between Cyanamid and the Company dated September 6, 1991 10.7+ Agreement between Hadasit Medical Research Services & Development, Ltd. and the Company 10.8+ Agreement between Hadasit Medical Research Services & Development, Ltd. and the Company dated September 21, 1989 10.9+ Supported Research Agreement between Memorial Sloan-Kettering Cancer Center (MSKCC) and the Company dated March 26, 1990
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EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.10+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.11+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.12+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.13+ Research Agreement between the Trustees of Princeton University (Princeton) and the Company dated January 1, 1991 10.14+ Research Agreement between Princeton and the Company dated May 1, 1991 10.15+ Research Agreement between Princeton and the Company dated May 1, 1991 10.16+ License Agreement between Princeton and the Company dated March 20, 1991 10.17+ License Agreement between Princeton and the Company dated May 29, 1991 10.18+ License Agreement between Princeton and Oncotech, Inc. dated September 3, 1987 10.19+ Supported Research Agreement between The University of North Carolina at Chapel Hill ("UNC") and the Company effective July 5, 1988 10.20+ License Agreement between UNC and the Company dated July 5, 1988 10.21+ License Agreement between UNC and the Company dated July 27, 1988 10.22+ Supported Research Agreement between UNC and the Company effective April 1, 1989 10.23+ License Agreement between UNC and the Company dated July 1, 1991 10.24+ Agreement between Celltech Limited and the Company dated May 23, 1991 10.25+ Form of Non-disclosure and Discovery Agreement between employees of the Company and the Company 10.26.1+ Industrial Development Revenue Bonds (1985 ImClone Systems Incorporated Project) 10.26.1.1+ Lease Agreement, dated as of October 1, 1985, between the New York City Industrial Development Agency (NYCIDA) and the Company, as Lessee 10.26.1.2+ Indenture of Trust, dated as of October 1, 1985, between NYCIDA and United States Trust Company of New York (US Trust), as Trustee A 10.26.1.3+ Company Sublease Agreement, dated as of October 1, 1985, between the Company and NYCIDA 10.26.1.4+ Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA and the Company to US Trust, as Trustee 10.26.1.5+ Lessee Guaranty Agreement, dated as of October 1, 1985, between the Company and US Trust, as Trustee 10.26.1.6+ First Supplemental Indenture of Trust, dated as of November 1, 1985 from the NYCIDA to US Trust 10.26.1.7+ Third Supplemental Indenture of Trust, dated as of October 12, 1990 from NYCIDA to US Trust 10.26.2+ Industrial Development Revenue Bonds (1986 ImClone Systems Incorporated Project) 10.26.2.1+ First Amendment to Company Sublease Agreement, dated as of December 1, 1986, between the Company, as Sublessor, and NYCIDA as Sublessee 10.26.2.2+ First Amendment to Lease Agreement, dated as of December 1, 1986, between NYCIDA and the Company, as Lessee 10.26.2.3+ Second Supplement Indenture of Trust, dated as of December 1, 1986 between NYCIDA and US Trust, as Trustee 10.26.2.4+ Tax Regulatory Agreement, dated December 31, 1986, from NYCIDA and the Company to US Trust, as Trustee
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EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.26.2.5+ First Amendment to Lessee Guaranty Agreement, dated as of December 1, 1986, between the Company and US Trust, as Trustee 10.26.2.6+ Bond Purchase Agreement, dated as of December 31, 1986, between NYCIDA and New York Muni Fund, Inc., as Purchaser 10.26.2.7+ Letter of Representation and Indemnity Agreement, dated as of December 31, 1986, from the Company to NYCIDA and New York Muni Fund, Inc., as Purchaser 10.26.3+ Industrial Development Revenue Bonds (1990 ImClone Systems Incorporated Project) 10.26.3.1+ Lease Agreement, dated as of August 1, 1990, between NYCIDA and the Company, as lessee 10.26.3.2+ Company Sublease Agreement, dated as of August 1, 1990, between the Company, as Sublessor, and NYCIDA 10.26.3.3+ Indenture of Trust, dated as of August 1, 1990, between NYCIDA and US Trust, as Trustee 10.26.3.4+ Guaranty Agreement, dated as of August 1, 1990, from the Company to US Trust, as Trustee 10.26.3.5+ Tax Regulatory Agreement, dated August 1, 1990, from the Company and NYCIDA to US Trust, as Trustee 10.26.3.6+ Agency Security Agreement, dated as of August 1, 1990, from the Company, as Debtor, and the NYCIDA to US Trust, as Trustee 10.26.3.7+ Letter of Representation and Indemnity Agreement, dated as of August 14, 1990, from the Company to NYCIDA, New York Mutual Fund, Inc., as the Purchaser and Chase Securities, Inc., as Placement Agent Company to NYCIDA 10.27+ Lease Agreement between 180 Varick Street Corporation and the Company, dated October 8, 1985, and Additional Space and Modification Agreement between 180 Varick Street Corporation and the Company, dated June 13, 1989 10.28+ License Agreement between The Board of Trustees of the Leland Stanford Junior University and the Company effective May 1, 1991 10.29+ License Agreement between Genentech, Inc. and the Company dated December 28, 1989 10.30+ License Agreement between David Segev and the Company dated December 28, 1989 10.31+ Letter of Intent between the Company and Dr. David Segev dated November 18, 1991 10.32+ Agreement between the Company and Celltech Limited dated March 11, 1992 10.33+ Agreement of Sale dated June 19, 1992 between the Company and Korsch Tableting Inc. 10.34+ Research and License Agreement, having an effective date of December 15, 1992, between the Company and Abbott Laboratories 10.35+ Research and License Agreement between the Company and Chugai Pharmaceutical Co., Ltd. dated January 25, 1993 10.36+ License Agreement between the Company and the Regents of the University of California dated April 9, 1993 10.37+ Contract between the Company and John Brown, a division of Trafalgar House, dated January 19, 1993 10.38+ Collaboration and License Agreement between the Company and the Cancer Research Campaign Technology, Ltd., signed April 4, 1994, with an effective date of April 1, 1994. 10.39+ Termination Agreement between the Company and Erbamont Inc. dated July 21, 1993 10.40+ Research and License Agreement between the Company and Cyanamid dated September 15, 1993 10.41+ Clinical Trials Agreement between the Company and the National Cancer Institute dated November 23, 1993
II-4 105
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.42+ License Agreement between the Company and UNC dated December 1, 1993 10.43+ Notice of Termination for the research collaboration between the Company and Chugai Pharmaceutical Co., Ltd. dated December 17, 1993 10.44+ License Agreement between the Company and Rhone-Poulenc Rorer dated June 13, 1994 10.45+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and GFL Ultra Fund Limited dated August 12, 1994 10.46+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and GFL Ultra Fund Limited dated November 4, 1994 10.47+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and Anker Bank Zuerich dated November 10, 1994 10.48+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to capital stock of Cadus Pharmaceutical Corporation 10.49+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to 300,000 shares of common stock of ImClone Systems Incorporated 10.50+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to 150,000 shares common stock of ImClone Systems Incorporated 10.51+ Stock Purchase Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.52+ Form of Warrant issued to the members of the Oracle Group 10.53+ Loan Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.54+ Security Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.55+ Mortgage, dated August 10, 1995, made by ImClone Systems Incorporated for the benefit of Oracle Partners, L.P., as Agent 10.56+ Financial Advisory Agreement entered into between the Company and Genesis Merchant Group Securities dated November 2, 1995 10.57+ Repayment Agreement (with Confession of Judgment, and Security Agreement) entered into between the Company and Pharmacia, Inc. on March 6, 1996 10.58+ License Amendment entered into between the Company and Abbott Laboratories on August 28, 1995, amending the Research and License Agreement between the parties dated December 15, 1992 10.59+ Amendment of September 1993 to the Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.60+ Amendment of October 1993 to the Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.61+ Employment agreement dated May 17, 1996 between the Company and Carl S. Goldfischer 10.62+ Financial Advisory Agreement dated February 26, 1997 between the Company and Hambrecht & Quist LLC. 10.63+ Exchange Agreement exchanging debt for common stock dated as of April 15, 1996 among the Company and members of The Oracle Group. 10.64+ Collaborative Research and License Agreement between the Company and CombiChem, Inc. dated October 10, 1997
II-5 106
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.65+ Amendment of May 1996 to Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.66+ Amendment of December 1997 to Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.67+ Equipment Leasing Commitment from Finova Technology Finance, Inc. 10.68+ Development and License Agreement between the Company and Merck KGaA dated December 14, 1998 10.69+ Lease dated as of December 15, 1998 for the Company's premises at 180 Varick Street, New York, New York 10.70+ Engagement Agreement, as amended between the Company and Diaz & Altschul Capital LLC 10.71+ Amendment dated March 2, 1999 to Development and License Agreement between the Company and Merck KGaA 10.72 Agreement for Supply of Material dated as of January 1, 1997 between the Company, Connaught Laboratories Limited, a Pasteur Merieux Company, and Merck KGaA 10.73# Development and Supply Agreement dated as of April 30, 1999 between the Company and Boehringer Ingelheim Pharma KG 21.1+ Subsidiaries 23.1 Consent of KPMG LLP 23.2* Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 23.3 Consent of Kenyon & Kenyon 23.4 Consent of Hoffmann & Baron, LLP 24.1* Power of Attorney (included on signature page to Registration Statement filed September 21, 1999) 99.1+ 1996 Incentive Stock Option Plan, as amended 99.2+ 1996 Non-Qualified Stock Option Plan, as amended 99.3+ ImClone Systems Incorporated 1998 Non-Qualified Stock Option Plan 99.4+ ImClone Systems Incorporated 1998 Employee Stock Purchase Plan 99.5+ Option Agreement, dated as of September 1, 1998, between the Company and Ron Martell 99.6++ 1996 Non-Qualified Stock Option Plan, as amended 99.7++ 1996 Incentive Stock Option Plan, as amended
- ------------ * Previously filed. + Previously filed with, or incorporated by reference in, the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. ++ Previously filed with the registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999. # Confidential treatment has been requested for a portion of this exhibit; material subject to the request for confidential treatment has been filed separately with the SEC. ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); II-6 107 (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act) (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-7 108 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 3 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 1st day of November, 1999. IMCLONE SYSTEMS INCORPORATED By /s/ JOHN B. LANDES ------------------------------------ Name: John B. Landes Title: Attorney-in-Fact Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3 to the Registration Statement has been signed by the following persons in the capacities indicated on the 1st day of November, 1999.
SIGNATURE TITLE --------- ----- * Chairman of the Board and Director - --------------------------------------------------- Robert F. Goldhammer * President, Chief Executive Officer and Director - --------------------------------------------------- (Principal Executive Officer) Samuel D. Waksal * Executive Vice President, Chief Operating Officer - --------------------------------------------------- and Director Harlan W. Waksal * Vice President of Finance and Chief Financial - --------------------------------------------------- Officer (Principal Financial and Accounting Carl Goldfischer Officer) * Director - --------------------------------------------------- Jean Carvais * Director - --------------------------------------------------- Vincent T. DeVita, Jr. * Director - --------------------------------------------------- Paul B. Kopperl * Director - --------------------------------------------------- William R. Miller * Director - --------------------------------------------------- David M. Kies * Director - --------------------------------------------------- John Mendelsohn * Director - --------------------------------------------------- Richard Barth *By /s/ JOHN B. LANDES ---------------------------------------------- John B. Landes, Attorney-in-Fact
II-8 109 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 1.1 Form of Underwriting Agreement 3.1+ Certificate of Incorporation, and all amendments thereto 3.1A++ Amendment dated June 4, 1999 to the Company's certificate of incorporation, as amended 3.2+ Amended and Restated By-Laws of the Company 4.1+ Form of Warrant issued to the Company's officers and directors under Warrant Agreements 4.2+ Stock Purchase Agreement between Erbamont Inc. and the Company, dated May 1, 1989 4.3+ Stock Purchase Agreement between American Cyanamid Company and the Company dated December 18, 1987 4.4+ Form of Subscription Agreement entered into in connection with September 1991 private placement 4.5+ Form of Warrant issued in connection with September 1991 private placement 4.6+ Preferred Stock Purchase Agreement between the Company and Merck KGaA dated December 3, 1997 4.7+ Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock 5.1* Opinion of Davis Polk & Wardwell 10.1+ Company's 1986 Employee Incentive Stock Option Plan, including form of Incentive Stock Option Agreement 10.2+ Company's 1986 Non-qualified Stock Option Plan, including form of Non-qualified Stock Option Agreement 10.3+ Company's 401(k) Plan 10.4+ Research and License Agreement between Merck KGaA and the Company dated December 19, 1990 10.5+ Hematopoietic Growth Factors License Agreement between Erbamont, N.V. and the Company, dated September 28, 1990 10.6+ Agreement between Cyanamid and the Company dated December 18, 1987 and supplemental letter agreement between Cyanamid and the Company dated September 6, 1991 10.7+ Agreement between Hadasit Medical Research Services & Development, Ltd. and the Company 10.8+ Agreement between Hadasit Medical Research Services & Development, Ltd. and the Company dated September 21, 1989 10.9+ Supported Research Agreement between Memorial Sloan-Kettering Cancer Center (MSKCC) and the Company dated March 26, 1990 10.10+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.11+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.12+ License Agreement between MSKCC and the Company, dated March 26, 1990 10.13+ Research Agreement between the Trustees of Princeton University (Princeton) and the Company dated January 1, 1991 10.14+ Research Agreement between Princeton and the Company dated May 1, 1991 10.15+ Research Agreement between Princeton and the Company dated May 1, 1991 10.16+ License Agreement between Princeton and the Company dated March 20, 1991 10.17+ License Agreement between Princeton and the Company dated May 29, 1991
110
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.18+ License Agreement between Princeton and Oncotech, Inc. dated September 3, 1987 10.19+ Supported Research Agreement between The University of North Carolina at Chapel Hill ("UNC") and the Company effective July 5, 1988 10.20+ License Agreement between UNC and the Company dated July 5, 1988 10.21+ License Agreement between UNC and the Company dated July 27, 1988 10.22+ Supported Research Agreement between UNC and the Company effective April 1, 1989 10.23+ License Agreement between UNC and the Company dated July 1, 1991 10.24+ Agreement between Celltech Limited and the Company dated May 23, 1991 10.25+ Form of Non-disclosure and Discovery Agreement between employees of the Company and the Company 10.26.1+ Industrial Development Revenue Bonds (1985 ImClone Systems Incorporated Project) 10.26.1.1+ Lease Agreement, dated as of October 1, 1985, between the New York City Industrial Development Agency (NYCIDA) and the Company, as Lessee 10.26.1.2+ Indenture of Trust, dated as of October 1, 1985, between NYCIDA and United States Trust Company of New York (US Trust), as Trustee A 10.26.1.3+ Company Sublease Agreement, dated as of October 1, 1985, between the Company and NYCIDA 10.26.1.4+ Tax Regulatory Agreement, dated October 9, 1985, from NYCIDA and the Company to US Trust, as Trustee 10.26.1.5+ Lessee Guaranty Agreement, dated as of October 1, 1985, between the Company and US Trust, as Trustee 10.26.1.6+ First Supplemental Indenture of Trust, dated as of November 1, 1985 from the NYCIDA to US Trust 10.26.1.7+ Third Supplemental Indenture of Trust, dated as of October 12, 1990 from NYCIDA to US Trust 10.26.2+ Industrial Development Revenue Bonds (1986 ImClone Systems Incorporated Project) 10.26.2.1+ First Amendment to Company Sublease Agreement, dated as of December 1, 1986, between the Company, as Sublessor, and NYCIDA as Sublessee 10.26.2.2+ First Amendment to Lease Agreement, dated as of December 1, 1986, between NYCIDA and the Company, as Lessee 10.26.2.3+ Second Supplement Indenture of Trust, dated as of December 1, 1986 between NYCIDA and US Trust, as Trustee 10.26.2.4+ Tax Regulatory Agreement, dated December 31, 1986, from NYCIDA and the Company to US Trust, as Trustee 10.26.2.5+ First Amendment to Lessee Guaranty Agreement, dated as of December 1, 1986, between the Company and US Trust, as Trustee 10.26.2.6+ Bond Purchase Agreement, dated as of December 31, 1986, between NYCIDA and New York Muni Fund, Inc., as Purchaser 10.26.2.7+ Letter of Representation and Indemnity Agreement, dated as of December 31, 1986, from the Company to NYCIDA and New York Muni Fund, Inc., as Purchaser 10.26.3+ Industrial Development Revenue Bonds (1990 ImClone Systems Incorporated Project) 10.26.3.1+ Lease Agreement, dated as of August 1, 1990, between NYCIDA and the Company, as lessee 10.26.3.2+ Company Sublease Agreement, dated as of August 1, 1990, between the Company, as Sublessor, and NYCIDA
111
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.26.3.3+ Indenture of Trust, dated as of August 1, 1990, between NYCIDA and US Trust, as Trustee 10.26.3.4+ Guaranty Agreement, dated as of August 1, 1990, from the Company to US Trust, as Trustee 10.26.3.5+ Tax Regulatory Agreement, dated August 1, 1990, from the Company and NYCIDA to US Trust, as Trustee 10.26.3.6+ Agency Security Agreement, dated as of August 1, 1990, from the Company, as Debtor, and the NYCIDA to US Trust, as Trustee 10.26.3.7+ Letter of Representation and Indemnity Agreement, dated as of August 14, 1990, from the Company to NYCIDA, New York Mutual Fund, Inc., as the Purchaser and Chase Securities, Inc., as Placement Agent Company to NYCIDA 10.27+ Lease Agreement between 180 Varick Street Corporation and the Company, dated October 8, 1985, and Additional Space and Modification Agreement between 180 Varick Street Corporation and the Company, dated June 13, 1989 10.28+ License Agreement between The Board of Trustees of the Leland Stanford Junior University and the Company effective May 1, 1991 10.29+ License Agreement between Genentech, Inc. and the Company dated December 28, 1989 10.30+ License Agreement between David Segev and the Company dated December 28, 1989 10.31+ Letter of Intent between the Company and Dr. David Segev dated November 18, 1991 10.32+ Agreement between the Company and Celltech Limited dated March 11, 1992 10.33+ Agreement of Sale dated June 19, 1992 between the Company and Korsch Tableting Inc. 10.34+ Research and License Agreement, having an effective date of December 15, 1992, between the Company and Abbott Laboratories 10.35+ Research and License Agreement between the Company and Chugai Pharmaceutical Co., Ltd. dated January 25, 1993 10.36+ License Agreement between the Company and the Regents of the University of California dated April 9, 1993 10.37+ Contract between the Company and John Brown, a division of Trafalgar House, dated January 19, 1993 10.38+ Collaboration and License Agreement between the Company and the Cancer Research Campaign Technology, Ltd., signed April 4, 1994, with an effective date of April 1, 1994. 10.39+ Termination Agreement between the Company and Erbamont Inc. dated July 21, 1993 10.40+ Research and License Agreement between the Company and Cyanamid dated September 15, 1993 10.41+ Clinical Trials Agreement between the Company and the National Cancer Institute dated November 23, 1993 10.42+ License Agreement between the Company and UNC dated December 1, 1993 10.43+ Notice of Termination for the research collaboration between the Company and Chugai Pharmaceutical Co., Ltd. dated December 17, 1993 10.44+ License Agreement between the Company and Rhone-Poulenc Rorer dated June 13, 1994 10.45+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and GFL Ultra Fund Limited dated August 12, 1994 10.46+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and GFL Ultra Fund Limited dated November 4, 1994 10.47+ Offshore Securities Subscription Agreement between ImClone Systems Incorporated and Anker Bank Zuerich dated November 10, 1994
112
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.48+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to capital stock of Cadus Pharmaceutical Corporation 10.49+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to 300,000 shares of common stock of ImClone Systems Incorporated 10.50+ Option Agreement, dated as of April 27, 1995, between ImClone Systems Incorporated and High River Limited Partnership relating to 150,000 shares common stock of ImClone Systems Incorporated 10.51+ Stock Purchase Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.52+ Form of Warrant issued to the members of the Oracle Group 10.53+ Loan Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.54+ Security Agreement, dated as of August 10, 1995, by and between ImClone Systems Incorporated and the members of the Oracle Group 10.55+ Mortgage, dated August 10, 1995, made by ImClone Systems Incorporated for the benefit of Oracle Partners, L.P., as Agent 10.56+ Financial Advisory Agreement entered into between the Company and Genesis Merchant Group Securities dated November 2, 1995 10.57+ Repayment Agreement (with Confession of Judgment, and Security Agreement) entered into between the Company and Pharmacia, Inc. on March 6, 1996 10.58+ License Amendment entered into between the Company and Abbott Laboratories on August 28, 1995, amending the Research and License Agreement between the parties dated December 15, 1992 10.59+ Amendment of September 1993 to the Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.60+ Amendment of October 1993 to the Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.61+ Employment agreement dated May 17, 1996 between the Company and Carl S. Goldfischer 10.62+ Financial Advisory Agreement dated February 26, 1997 between the Company and Hambrecht & Quist LLC 10.63+ Exchange Agreement exchanging debt for common stock dated as of April 15, 1996 among the Company and members of The Oracle Group. 10.64+ Collaborative Research and License Agreement between the Company and CombiChem, Inc. dated October 10, 1997 10.65+ Amendment of May 1996 to Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.66+ Amendment of December 1997 to Research and License Agreement between the Company and Merck KGaA of April 1, 1990 10.67+ Equipment Leasing Commitment from Finova Technology Finance, Inc. 10.68+ Development and License Agreement between the Company and Merck KGaA dated December 14, 1998 10.69+ Lease dated as of December 15, 1998 for the Company's premises at 180 Varick Street, New York, New York
113
EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------ 10.70+ Engagement Agreement, as amended between the Company and Diaz & Altschul Capital LLC 10.71+ Amendment dated March 2, 1999 to Development and License Agreement between the Company and Merck KGaA 10.72 Agreement for Supply of Material dated as of January 1, 1997 between the Company, Connaught Laboratories Limited, a Pasteur Merieux Company, and Merck KGaA 10.73# Development and Supply Agreement dated as of April 30, 1999 between the Company and Boehringer Ingelheim Pharma KG 21.1+ Subsidiaries 23.1 Consent of KPMG LLP 23.2* Consent of Davis Polk & Wardwell (included in Exhibit 5.1) 23.3 Consent of Kenyon & Kenyon 23.4 Consent of Hoffmann & Baron, LLP 24.1* Power of Attorney (included on signature page to Registration Statement filed September 21, 1999) 99.1+ 1996 Incentive Stock Option Plan, as amended 99.2+ 1996 Non-Qualified Stock Option Plan, as amended 99.3+ ImClone Systems Incorporated 1998 Non-Qualified Stock Option Plan 99.4+ ImClone Systems Incorporated 1998 Employee Stock Purchase Plan 99.5+ Option Agreement, dated as of September 1, 1998, between the Company and Ron Martell 99.6++ 1996 Non-Qualified Stock Option Plan, as amended 99.7++ 1996 Incentive Stock Option Plan, as amended
- ------------ * Previously filed. + Previously filed with, or incorporated by reference in, the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. ++ Previously filed with the registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999. # Confidential treatment has been requested for a portion of this exhibit; material subject to the request for confidential treatment has been filed separately with the SEC. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1.1 2,875,000 SHARES IMCLONE SYSTEMS INCORPORATED COMMON STOCK, $.001 PAR VALUE UNDERWRITING AGREEMENT ___________, 1999 2 [___________], 1999 Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Prudential Securities Incorporated Warburg Dillon Read LLC c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: IMCLONE SYSTEMS INCORPORATED, a Delaware corporation (the "COMPANY"), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the "UNDERWRITERS") 2,500,000 shares of its Common Stock, $.001 par value (the "FIRM SHARES"). The Company also proposes to issue and sell to the several Underwriters not more than an additional 375,000 shares of Common Stock, $.001 par value, of the Company (the "ADDITIONAL SHARES"), if and to the extent that you shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "SHARES." The shares of Common Stock, $.001 par value, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK." The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement on Form S-3 (File No. 333-87489), including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS." The term "preliminary prospectus" as used in this Agreement shall mean each preliminary prospectus included in the Registration Statement prior to the time it becomes effective. Unless otherwise indicated, any reference herein to the Registration Statement, the Prospectus or the preliminary prospectus shall include all documents incorporated therein by reference. If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462 Registration Statement. 3 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) Each document, if any, filed or to be filed pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and incorporated by reference in the Prospectus complied, or will comply when so filed, in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) the Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not 3 4 have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or conflict with, result in a breach of any of the terms and provisions of, or constitute a default under the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). 4 5 (k) There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (l) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (m) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be required to register as an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (including, without limitation, all laws and regulations relating to biohazardous materials) ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company and its 5 6 subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its consolidated subsidiaries, except in each case as described or contemplated in the Prospectus. (q) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real or personal property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus. (r) Except as set forth in the Prospectus under the caption "Business Patents and Trade Secrets - Patents Rights; Licenses - C225", the Company and its subsidiaries own or possess all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently employed by them in connection with the business now operated by them and necessary for the conduct of their business as described in the Prospectus (the "COMPANY INTELLECTUAL PROPERTY"), and, except as described in the Prospectus, neither the Company nor any of its subsidiaries has received any notice of any infringement of or conflict with the Intellectual Property rights of others, which, singly or in the aggregate would result in any material adverse effect on the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole. To the best of the Company's knowledge, the Company Intellectual Property does not infringe upon or conflict with the Intellectual Property rights of others, in a manner which, singly or in the aggregate would result in any material adverse effect on the Company and its subsidiaries, taken as a whole. (s) The Company and its subsidiaries have duly and properly filed or caused to be filed with the United States Patent and Trademark Office (the "PTO") 6 7 and applicable foreign and international patent authorities all patent applications described or referred to in the Prospectus (the "COMPANY PATENT APPLICATIONS"), and believe they have complied with the PTO's duty of candor and disclosure for the Company Patent Applications; the Company and its subsidiaries are unaware of any facts material to a determination of patentability regarding the Company Patent Applications not called to the attention of the PTO; the Company and its subsidiaries are unaware of any facts not called to the attention of the PTO which would preclude the grant of a patent for the Company Patent Applications; the Company and its subsidiaries have no knowledge of any facts which would preclude them from having valid license rights or clear title to the Company Patent Applications. (t) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in or contemplated by the Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could result in any material adverse effect on the Company and its subsidiaries, taken as a whole. (u) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are customary in the businesses in which they are engaged (including, without limitation, the aspects of its business involving biohazardous substances); neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (v) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, including without limitation, all such certificates, authorizations and permits required by the United States Food and Drug Administration (the "FDA") or any other federal, state or foreign agencies or bodies engaged in the regulation of pharmaceuticals or biohazardous substances, except where the failure to obtain any such certificate, authorization or permit, singly or in the aggregate, would not have a material adverse effect on the Company or its subsidiaries, taken as a whole; and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate could result in a material adverse effect on the 7 8 condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole. The Company and its subsidiaries are in compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees, including without limitation, all regulations prescribed by the FDA or any other federal, state or foreign agencies or bodies engaged in the regulation of pharmaceuticals or biohazardous substances, except where noncompliance would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (w) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (x) KPMG LLP are, and during the periods covering their report included in the Registration Statement and the Prospectus were, independent accountants with respect to the Company as required by the Securities Act. The financial statements of the Company and its subsidiaries (together with the related notes thereto) included in the Registration Statement present fairly the financial position and results of operations of the Company and its subsidiaries at the respective dates and for the respective periods to which they apply, subject to normal year-end adjustments. Such financial statements (together with the related notes thereto) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved except as otherwise stated therein. (y) The Shares have been approved for quotation on the Nasdaq National Market, subject to official notice of issuance. (z) Except as described in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. All persons who possess such rights have effectively waived them with respect to the offering of the Shares. 8 9 (aa) Each material contract, agreement and license to which the Company or any of its subsidiaries is bound is in full force and effect and is legal, valid, binding and enforceable against the Company, and to the Company's knowledge, against each other party. The Company is not and to the Company's knowledge no other party is in breach or default with respect to any such contract, agreement or license, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under any such contract, agreement or license. No party has repudiated any provision of any such contract, agreement or license. (bb) The Company has reviewed its operations and that of its subsidiaries to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used by the Company and its subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000); as a result of such review, (i) the Company has no reason to believe, and does not believe, that (A) there are any issues related to the Company's preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Registration Statement or Prospectus which have not been accurately described in the Registration Statement or Prospectus and (B) the Year 2000 Problem will have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole, or result in any material loss or interference with the business or operations of the Company and its subsidiaries, taken as a whole; and (ii) the Company reasonably believes, after due inquiry, that the suppliers, vendors, customers or other material third parties used or served by the Company and such subsidiaries are addressing or will address the Year 2000 Problem in a timely manner, except to the extent that a failure to address the Year 2000 Problem by any supplier, vendor, customer or material third party would not have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole. 2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective number of Firm Shares set forth in Schedule I hereto opposite its name at [$________] a share (the "PURCHASE PRICE"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the 9 10 Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to 375,000 Additional Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 90 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing, (C) the issuance by the Company of additional options or warrants under the Company's existing stock-based compensation plans, provided that such stock options or warrants are not exercisable during such 90-day period or (D) the issuance by the Company of shares of Common Stock to employees pursuant to the existing ImClone Systems Incorporated 1998 Employee Stock Purchase Plan. 3. Terms of Public Offering. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at [$_______] a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by you at a price that represents a concession not in excess of [$_______] a share under the Public Offering Price, and that any Underwriter may allow, 10 11 and such dealers may reallow, a concession, not in excess of [$______] a share, to any Underwriter or to certain other dealers. 4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on [___________], 1999, or at such other time on the same or such other date, not later than [__________], 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "CLOSING DATE". The Closing of the offering and sale of the Firm Shares will be held at the offices of Ropes & Gray, 885 Third Avenue, New York, NY 10022. Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than [________], 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "OPTION CLOSING DATE". The Closing of the offering and sale of the Additional Shares will be held at the offices of Ropes & Gray, 885 Third Avenue, New York, NY 10022. Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 5. Conditions to the Underwriters' Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date and the Option Closing Date, as the case may be, are subject to the condition that the Registration Statement shall have become effective not later than [________] (New York City time) on the date hereof. The several obligations of the Underwriters are subject to the following further conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date and the Option Closing Date, as the case may be: 11 12 (i) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (b) The Underwriters shall have received on the Closing Date and the Option Closing Date, as the case may be, a certificate, dated such date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of such date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before such date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date and the Option Closing Date, as the case may be, an opinion of Davis Polk & Wardwell, outside counsel for the Company, dated such date, in the form attached hereto as EXHIBIT B. (d) The Underwriters shall have received on the Closing Date and the Option Closing Date, as the case may be, an opinion of John B. Landes, Esq., General Counsel of the Company, dated such date in the form attached hereto as EXHIBIT C. (e) The Underwriters shall have received on the Closing Date and the Option Closing Date, as the case may be, an opinion dated such date of Hoffmann & Baron, patent counsel to the Company, in the form attached hereto as EXHIBIT D. (f) The Underwriters shall have received on the Closing Date and the Option Closing Date, as the case may be, an opinion of Ropes & Gray, counsel for the Underwriters, dated such date, in a form to be agreed by the Underwriters. The opinions of Davis Polk & Wardwell, John B. Landes, Esq. and Hoffman & Baron described, respectively, in Sections 5(c), 5(d) and 5(e) above 12 13 shall be rendered to the Underwriters at the request of the Company and shall so state therein. (g) The Underwriters shall have received, on each of the date hereof, the Closing Date and the Option Closing Date, a letter dated such date, in form and substance satisfactory to the Underwriters, from KPMG, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (h) The "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date and the Option Closing Date, as the case may be. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such other documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares. 6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish you, without charge, three signed copies of the Registration Statement (including exhibits thereto and documents incorporated by reference) and to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto but including documents incorporated by reference) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(c) below, as many copies of the Prospectus, any documents incorporated by reference, and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. The terms "supplement" and "amendment" or "amend" as used in this Agreement shall include all documents subsequently filed by the Company with the Commission pursuant to the Exchange Act that are deemed to be incorporated by reference in the Prospectus. 13 14 (b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense for nine months following the first date of the public offering of Shares, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request. (e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve-month period ending December 31, 2001 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. 7. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to 14 15 the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all costs and expenses incident to listing the Shares on the Nasdaq National Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 8 entitled "Indemnity and Contribution", and the last paragraph of Section 10 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. 8. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any 15 16 Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Shares, or any person controlling such Underwriter, if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 6(a) hereof. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a), or 8(b) such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in 16 17 the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated, in the case of parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause (i) of this sentence is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) of this sentence but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or 17 18 omission. The Underwriters' respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 9. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in 18 19 financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 10. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 19 20 If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 11. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 20 21 [Underwriting Agreement] Very truly yours, IMCLONE SYSTEMS INCORPORATED By:____________________________ Name: Title: Accepted as of the date hereof Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Prudential Securities Incorporated Warburg Dillon Read LLC Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By:__________________________ Name: Title: 22 COMPANY PATENT APPLICATIONS SCHEDULE I
NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED ----------- --------------- Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Prudential Securities Incorporated Warburg Dillon Read LLC [NAMES OF OTHER UNDERWRITERS] --------- Total....................................................... 2,500,000
23 EXHIBIT A [FORM OF LOCK-UP LETTER] _____________, 1999 Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Prudential Securities Incorporated Warburg Dillon Read LLC c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with ImClone Systems Incorporated, a Delaware corporation (the "COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the several Underwriters, including Morgan Stanley (the "UNDERWRITERS"), of up to 2,875,000 shares (the "SHARES") of the Common Stock, $.001 par value of the Company (the "COMMON STOCK"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 90 days after the date of the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting 24 Agreement or (b) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 90 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. Very truly yours, ------------------------- (Name) ------------------------- (Address) 25 EXHIBIT B [Davis Polk & Wardwell Opinion] __________, 1999 Morgan Stanley & Co. Incorporated Merrill Lynch, Pierce, Fenner & Smith Incorporated Prudential Securities Incorporated Warburg Dillon Read LLC As representatives of the several underwriters named in Schedule I to the Underwriting Agreement referred to below c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Ladies and Gentlemen: We have acted as counsel for ImClone Systems Incorporated, a Delaware corporation (the "Company"), in connection with the Underwriting Agreement dated ________, 1999 (the "Underwriting Agreement") between the Company and you, as representatives of the several underwriters named in Schedule I thereto (the "Underwriters"). Pursuant to the Underwriting Agreement, the Company proposes to sell, and you severally propose to purchase, 2,500,000 shares (the "Firm Shares") of its common stock, par value $.001 per share, and 375,000 additional shares (the "Additional Shares," and, collectively with the Firm Shares, the "Shares"). This opinion is delivered pursuant to Section 5(c) of the Underwriting Agreement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion. We have participated in the preparation of the registration statement of the Company on Form S-3 (File No. 333-87489) and Amendment Nos. 1, 2, 3 [and 4] thereto (other than the documents incorporated by reference therein (the "Incorporated Documents")) relating to the registration of the offering of Shares filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), and have reviewed the 26 Morgan Stanley & Co. Incorporated 2 __________, 1999 Incorporated Documents. In addition, we have been advised that the Shares have been approved for quotation on the Nasdaq National Market, subject to official notice of issuance. The registration statement on Form S-3, as amended at the time it was declared effective, including the Incorporated Documents and the information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A under the Securities Act, is hereinafter referred to as the "Registration Statement", and the related prospectus (including the Incorporated Documents) in the form first used to confirm sales of the Shares is hereinafter referred to as the "Prospectus". We have assumed the conformity of the documents filed with the Commission via the Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"), except for required EDGAR formatting changes, to physical copies of the documents delivered to the Company and submitted for our examination. Capitalized terms used but not otherwise defined herein are used as defined in the Underwriting Agreement. Based upon the foregoing, we are of the opinion that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of Delaware with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (iii) The Shares have been duly authorized and when issued and delivered in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares is not subject to any preemptive or, to our knowledge, other similar rights. (iv) The Underwriting Agreement has been duly authorized, executed and delivered by the Company. (v) The execution and delivery by the Company of, and the performance of its obligations under, the Underwriting Agreement will not contravene any provision of United States federal or New York state law that in our experience is normally applicable to general business corporations in relation to transactions of the type contemplated by the 27 Morgan Stanley & Co. Incorporated 3 __________, 1999 Underwriting Agreement, or the certificate of incorporation or by-laws of the Company, or any agreement, indenture, lease or other instrument to which the Company is a party, or by which any of them or any of its respective properties is bound that is an exhibit to the Registration Statement, including any exhibit incorporated by reference therein. (vi) No consent, approval, authorization or order of, or qualification with, any governmental body or agency under United States federal or New York state law that in our experience is normally applicable to general business corporations in relation to transactions of the type contemplated by the Underwriting Agreement (except that we express no opinion regarding intellectual property law) is required for the performance by the Company of its obligations under the Underwriting Agreement, except such as have been obtained and such as may be required under state securities or Blue Sky laws in connection with the offer and sale of the Shares. (vii) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be required to register as an "investment company", as such term is defined in the Investment Company Act of 1940, as amended. (viii) There is no contract or agreement that is an exhibit to the Registration Statement, including any exhibit incorporated by reference therein, between the Company and any person granting such person the right to require the Company to include any securities owned or to be owned by such person in the securities registered pursuant to the Registration Statement, except for such rights for which a waiver has been obtained with respect to the offering of the Shares. (ix) We do not know of any legal or governmental proceedings pending or threatened to which the Company is a party or to which any of the properties of the Company is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that are not described or filed as required (except that we express no opinion with respect to matters of intellectual property law or environmental law). (x) We have been advised by the staff of the Commission that the Registration Statement was declared effective under the Securities Act and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been 28 Morgan Stanley & Co. Incorporated 4 __________, 1999 instituted or are pending under the Securities Act. We have considered the statements relating to legal matters or documents included in (A) the Prospectus under the captions "Business -- Research Collaborations and Clinical Collaborations -- Collaborations with Merck KGaA," "Description of Capital Stock" and "Underwriting" and (B) the Registration Statement in Item 15. In our opinion, such statements fairly summarize in all material respects such matters or documents. We have not ourselves checked the accuracy, completeness or fairness of, or otherwise verified, the information furnished with respect to other matters in the Registration Statement or the Prospectus. We have generally reviewed and discussed with your representatives, and with certain officers and employees of, and counsel and independent public accountants for, the Company the information furnished, whether or not subject to our check and verification. On the basis of such consideration, review and discussion, but without independent check or verification except for the matters referred to in the immediately preceding paragraph, nothing has come to our attention that causes us to believe that (i) the Registration Statement and Prospectus (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which we express no belief) do not comply as to form in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder or (ii) (x) the Registration Statement and the prospectus included therein (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which we express no belief ) at the time the Registration Statement became effective contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or (y) the Prospectus (except as stated) as of its date and as of the date hereof contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal laws of the United States. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, 29 EXHIBIT C [John Landes Esq. Opinion] (i) the Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole (ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable; (iv) all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and, are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims; (v) (A) the statements in the Prospectus under the caption "Business -- Government Regulation" and (B) the description of agreements under which the Company has licensed technology from third parties in the Prospectus under the caption "Business --Patent Rights; Licenses", in each case insofar as such statements or descriptions constitute summaries of the legal matters documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; and 30 (vi) after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described, of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (vii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares; (viii) except as described in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement, and all persons who possess such rights have effectively waived them with respect to the offering of the Shares; 31 EXHIBIT D [Hoffmann & Baron, LLP Opinion] At the request of ImClone Systems Incorporated (the "Company"), to which we are and have acted as patent counsel, and in accordance with Section 5(e) of the underwriting agreement between the Company and the underwriters, Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Prudential Securities Incorporated, and Warburg Dillon Read LLC regarding the selling by the Company of shares of stock (the "Underwriting Agreement"), we have reviewed and given careful consideration to the sections entitled "Risk Factors-Our Success Depends Upon Our Ability to Protect Our Intellectual Property and Our Proprietary Technology" and "Business-Patents and Trade Secrets" in the Registration Statement and Prospectus. Intellectual Property shall mean all patents, patent rights, licenses, inventions and other proprietary rights, including trade secrets. Company Intellectual Property shall mean the Intellectual Property sufficient to conduct the Company's business as now, or as proposed to be, conducted by the Company as described in the Prospectus. The Company's patent estate is made up of the patent applications listed in Exhibit A (Company Patent Applications) and the issued patents listed in Exhibit B (Company Patents). In the opinion below, any reference to the term "to the best of our knowledge" shall mean within the conscious awareness of the existence or absence of any facts or other information by any lawyer at Hoffmann and Baron, LLP who has performed substantive legal work for the Company. Statements said to be made "after due inquiry" are based solely on our personal knowledge, and on information and representations received from the Company after inquiry sufficient to express a reasonably informed opinion. It is our opinion that: (i) the statements in the Registration Statement and Prospectus under the captions "Risk Factors-Our Success Depends Upon Our Ability to Protect Our Intellectual Property and Our Proprietary Technology" and "Business-Patents and Trade Secrets" insofar as such matters constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (ii) to the best of our knowledge, after due inquiry, there are no legal or governmental proceedings pending (other than prosecution of the Company Patent Applications) relating to the Company, the claimed inventions of the Company Patents, or the Company Patent Applications, and no such proceedings are threatened or contemplated by governmental authorities or others; (iii) to the best of our knowledge, after due inquiry, there are no facts which would preclude the Company from having valid license rights or clear title to the Company Patents or the Company Patent Applications, and based on representations by the Company that the Company has not conveyed to third parties any rights which have not been recorded in the PTO, the 32 Company has valid license rights or clear record title to the Company Intellectual Property free and clear of any liens or encumbrances; (iv) (A) to the best of our knowledge, after due inquiry, the Company has complied with the PTO duty of candor and disclosure for each of the Company Patents and Company Patent Applications, and (B) we have no knowledge, after due inquiry, that the Company lacks or will be unable to obtain any rights or licenses to use all Company Intellectual Property; (v) to the best of our knowledge: (A) there is no reasonable basis for a finding of invalidity of any of the Company Patents that could have a material adverse effect on the business, results of operations, or financial condition of the Company; and (B) we have no reason to believe that any of the Company Patent Applications will not issue as a patent, except to the extent that such failure to issue as a patent would not have a material adverse effect on the business, results of operations, or financial condition of the Company; (vi) to the best of our knowledge, after due inquiry, the Company has not received any notice of conflict with intellectual property rights or claims of others with respect to any products or proposed products of the Company described in the Prospectus, except for one notice of potential conflict of which we notified you in writing; (vii) except for third party rights described in the Prospectus to which the company may require licenses, and other third party rights of which we notified you in writing, licenses to which are, after due inquiry, available on acceptable terms generally known in the industry, based upon a review of the third party rights known to us, there are no patent rights of others which are or would be infringed by the manufacture, sale or use of specific products or processes referred to in the Prospectus, and therefore, in the event of litigation, a court should find that no such third party rights are infringed by the manufacture, sale or use of specific products or processes referred to in the Prospectus; and (viii) (A) we have no reason to believe that the portions of the Registration Statement and the Prospectus under the captions "Risk Factors-Our Success Depends on Our Ability to Protect Our Intellectual Property and Our Proprietary Technology" and "Business-Patents and Trade Secrets" included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (B) we have no reason to believe that the portions of the Prospectus under the captions "Risk Factors-Our Success Depends on Our Ability to Protect Our Intellectual Property and Our Proprietary Technology," and "Business-Patents and Trade Secrets" contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. EX-10.72 3 AGREEMENT FOR SUPPLY OF MATERIAL 1 Exhibit 10.72 AGREEMENT FOR SUPPLY OF MATERIAL This AGREEMENT FOR SUPPLY OF MATERIAL (the "AGREEMENT"), among CONNAUGHT LABORATORIES LIMITED, a Pasteur Merieux Connaught company, incorporated under the laws of Ontario, Canada with offices at 1755 Steeles Avenue West, Toronto, Ontario, Canada M2R 3T4, ("PMC") and IMCLONE SYSTEMS INCORPORATED, a company existing and organized under the laws of Delaware, USA with offices at 180 Varick Street, New York, NY, USA 10014, ("IMCLONE") and MERCK KGaA, a company incorporated under the laws of Germany with offices at Frankfurter Strasse 250, 64271 Darmstadt, Germany, ("MERCK") is effective as of this 1st day of January, 1997 ("EFFECTIVE DATE"), with respect to the following facts and circumstances: WHEREAS PMC has a proprietary interest in and manufactures and sells a product known as BCG vaccine, consisting of BCG in vaccine formulation with its accompanying diluent in a 10-dose vial presentation (hereinafter the "BCG MATERIAL"); and WHEREAS ImClone and Merck severally have a proprietary interest in a monoclonal anti-idiotypic antibody known as BEC2 (hereinafter "BEC2") and jointly are performing clinical and pre-clinical research relating to the treatment and/or prophylaxis of certain human cancers by administration of the BEC2; and WHEREAS ImClone and Merck intend to administer a combination therapy of BEC2 and BCG Material to certain patients with small cell lung carcinoma ("SCLC") in a multi-national Phase III clinical trial being conducted in Europe, Australia and the United States (hereinafter the "SILVA TRIAL") pursuant to the protocol(s) and investigators' brochure(s) (hereinafter the "CLINICAL TRIAL PROTOCOL") attached hereto as Exhibit "A"; and WHEREAS, ImClone and Merck may administer a combination therapy of BEC2 and BCG Material to other patients in such additional clinical trials that are necessary or advisable in the sole discretion of ImClone and Merck in connection with or in furtherance of the SILVA Trial (the "ADDITIONAL CLINICAL TRIALS"); and 2 -2- WHEREAS ImClone and Merck are interested in securing a supply of the BCG Material to be administered with BEC2 in the SILVA Trial and any such Additional Clinical Trials, and PMC is willing to supply the BCG Material to ImClone and Merck on the terms set forth herein. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Trials to be Conducted; Status of Recipient ImClone and Merck are conducting the SILVA Trial and any Additional Clinical Trials together, and will receive supplies of the BCG Material together or independently for the sole purpose of conducting the SILVA Trial and the Additional Clinical Trials (the SILVA Trial and the Additional Clinical Trials are collectively referred to herein as the "CLINICAL TRIALS"). ImClone and Merck shall be referred to for the purposes herein as the "RECIPIENT" and the term so used shall mean ImClone and Merck together or either of them. ImClone and Merck shall be jointly and severally liable in respect of the obligations set forth in this Agreement, except as specifically noted hereinbelow. 2. Supply and Acceptance of Delivery 2(a). Quantities of the BCG Material Subject to the terms of this Agreement and during the seven (7) year period following the Effective Date (hereinafter the "Supply Period"), PMC shall supply to the Recipient, and the Recipient shall accept delivery from PMC of, the BCG Material for use in and during the Clinical Trials on the following dates, in the following quantities and with the following expiry dating: (i) 2,000 vials with February/2000 expiry dating to be shipped to ImClone for the SILVA Trial by no later than July 30, 1998 according to PMC's shipping procedures and labelled according to ImClone's reasonable labelling requirements as set forth in Exhibit "B"; (ii) 2,000 vials with February/2000 expiry dating to be shipped to Merck for the SILVA Trial within five (5) business days of written notice from Merck to PMC, according to PMC's shipping procedures and labelled according to Merck's reasonable labelling requirements as set forth in Exhibit "C"; (iii) 500 vials with February/2000 expiry dating to be shipped to Merck for the SILVA Trial as soon as possible, but in no event later than four (4) months, following written notice from Merck to PMC, according to PMC's shipping procedures and labelled according to Merck's reasonable labelling requirements as set forth in Exhibit "C"; 3 -3- (iv) such additional vials with such expiry dates and shipment dates as shall be reasonably requested by ImClone and Merck for conduct of the Clinical Trials, subject to the provisions of Section 4(a) below and further subject to the following: (A) Recipient shall not request, for any two (2) year period after December 31, 1999 during the Supply Period, any additional vials in a quantity that is in excess of 4,000 vials in the aggregate; (B) Recipient shall not request any additional vials during the years 1998 and 1999; (C) Recipient shall not request any vials after the expiration of the Supply Period; and (D) Recipient shall request additional vials for the conduct of Additional Clinical Trials only in those countries in which the SILVA Trial is being or has been conducted. The parties acknowledge that the restrictions set forth in (A) and (B) above have been derived from PMC's review of its planned production and known commitments for the BCG Material during the Supply Period. In the event Recipient requires vials of the BCG Material for the conduct of the Clinical Trials that exceed such limitations, the parties will discuss whether PMC's then planned production and known commitments would allow for the supply of such additional BCG Material. 2(b). Cost of Supply The parties agree that, subject to compliance by Recipient to the terms of this Agreement, PMC shall supply the BCG Material during the Supply Period to Recipient at no cost for the Recipient's use in the Clinical Trials. 2(c). Delivery; Risk of Loss At Recipient's cost, PMC shall deliver or arrange for the delivery of the BCG Material to Recipient, FOB at a point or points of destination selected by Recipient, to a reputable carrier. Prior to any delivery, Recipient shall forward import permits or other documents, as required for shipment, to PMC to the attention of Ms. Joy Rennick, Logistics Coordinator, (facsimile: 416-667-2275). Upon delivery of the BCG Material, Recipient shall assume all risk of loss or damage for the BCG Material so delivered. All temperature monitoring devices shall be returned by Recipient to PMC to the attention of Ms. Rennick. 4 -4- 2(d). Technical Services Assistance Upon the reasonable request by Recipient, and in consideration of payment by ImClone of PMC's costs and services fees at a rate of One hundred and seventy ($170.00) dollars per hour for clinical/medical personnel and Ninety-eight ($98.00) dollars per hour for regulatory/logistics personnel, PMC shall make, and has made, available its clinical/medical and regulatory/logistics personnel (at their usual place of employment or by telephone) to provide reasonable levels of technical assistance to the Recipient in connection with PMC's Regulatory Manufacturing Documentation for the BCG Material or in connection with the Recipient's Regulatory Filings required for the Clinical Trials. ImClone shall pay PMC, by no later than July 15, 1998, the amount of Twenty-eight thousand ($28,300.00) dollars, representing the sum of: (i) $5,000.00 for the BCG vaccine/BEC2 compatibility test studies conducted and related technician time; (ii) $15,680.00 for 160 hours of regulatory/logistics services assistance provided by Mrs. Doris Rudert-Dolby, Supervisor, Regulatory Affairs; (iii) $2,720.00 for 16 hours of clinical/medical services assistance provided by Dr. Nanda Gosala and/or Dr. Robert Wittes; and, (iv) $4,900.00 for 50 hours of regulatory/logistics services assistance provided by Ms. Joy Rennick, Logistics Coordinator. ImClone agrees to pay for any further technical services provided by PMC and tests conducted by or on behalf of PMC, in connection with this Agreement or the Clinical Trials, at the hourly rates agreed to herein and the costs to PMC of any such tests. The parties agree that the currency for payment shall be Canadian dollars. 2(e). Negotiations for Future Commercial Supply In the event that the Recipient wishes to seek registration for the combination therapy of BEC2 and BCG Material, Recipient shall notify PMC in writing. PMC and the Recipient agree that within sixty (60) days of said written notice from the Recipient, the parties shall initiate good faith negotiations toward the securing of a commercial supply agreement for the purchase by Recipient of BCG Material with terms satisfactory to both parties, including without limitation, purchase price. Failure to reach such agreement during the Term within twelve months (12) of initiation of negotiations, or as of such earlier time when it is clear that the parties cannot reach such agreement, shall be grounds for termination of this Agreement by either PMC or Recipient, upon thirty (30) days written notice to the other. 5 -5- 3. Preparation and Conduct of the SILVA Trial 3(a). Regulatory Filings; Manufacturing Regulatory Documentation At Recipient's sole cost, Recipient shall file and be the owner of record for all Regulatory Filings developed by the Recipient relating to the Clinical Trials. "REGULATORY FILING" shall mean a filing with a regulatory agency, for example, the US Food and Drug Administration ("FDA"), that concerns the Clinical Trials. Recipient owns and shall retain all right, title and interest in and to BEC2 (and any improvements, progeny, derivatives or related materials thereof) and the Regulatory Filings. PMC shall permit the Recipient to cross-reference PMC's Product License Application Supplement and Drug Master File for BCG Material and/or otherwise excerpt portions of or describe PMC's Product License Application Supplement and Drug Master File in the Regulatory Filings, to enable the Recipient to complete Regulatory Filings required for the Clinical Trials. Notwithstanding the foregoing, the parties agree that despite Recipient's cross-referencing PMC's Product License Application Supplement and Drug Master File for BCG Material and/or otherwise excerpting portions of or describing PMC's Product License Application Supplement and Drug Master File in the Regulatory Filings, PMC owns, and shall retain all right, title and interest in and to the BCG Material (and any improvements, progeny, derivatives or related materials thereof) and the Manufacturing Regulatory Documentation. "MANUFACTURING REGULATORY DOCUMENTATION" shall mean a Product License Application, Drug Master File or any other regulatory filing or documentation owned, developed, submitted or prepared by or on behalf of PMC and filed with appropriate regulatory authorities that contains information concerning the BCG Material, including but not limited to information concerning the BCG Material contained in the Regulatory Filings which is excerpted from or describes PMC's Product License Application or Drug Master File or other regulatory filing by or on behalf of PMC which concerns the BCG Material, which information, Recipient agrees and undertakes, shall be deemed and treated as Confidential Information. All non-public information provided by one party to the other in preparing Regulatory Filings and the Manufacturing Regulatory Documentation shall be deemed to be Confidential Information of the disclosing party for the purposes of this Agreement. 3(b). Protocols for Clinical Trials; Results At Recipient's sole cost, Recipient shall be responsible for the design, implementation, and evaluation of any human clinical studies used to obtain clinical data for use in preparing Regulatory Filings related to the Clinical Trials. Recipient shall conduct the Clinical Trials in compliance with current Good Clinical Practices ("cGCP") pursuant to FDA regulations. Recipient, at its sole cost, shall provide PMC with a complete copy of the protocols and investigators' brochures for the Clinical Trials, as well as copies of all reports, abstracts and publications (subject to Section 5(c) herein) concerning the data and results of the Clinical Trials. All right, title and interest in and to the data and results of the Clinical Trials shall vest in Recipient; provided that any information relating to the BCG Material shall remain the sole property of PMC. 6 -6- 3(c). Adverse Reaction Reporting Recipient shall promptly notify PMC of any serious adverse reactions which result from the conduct of the Clinical Trials on the same basis that such reporting is made to the appropriate regulatory authorities. Such notices shall be sent by Recipient to PMC to the attention of Mrs. Doris Rudert-Dolby, Supervisor, Regulatory Affairs (facsimile: 416-667-2912). For this purpose, it is understood that an adverse reaction is subject to expedited reporting to appropriate regulatory authorities if such adverse reaction constitutes an "unexpected adverse reaction" and if the minimum criteria for expedited reporting are met (as such criteria are set forth in the ICH Topic E2A: Clinical Safety Data Management - Definitions and Standards for Expedited Reporting, June 1, 1995). An "UNEXPECTED ADVERSE REACTION" is one the nature or severity of which is not consistent with the information in the relevant source document (i.e., the most recent version of the investigators' brochure). It is further understood that "SCLC-related Deaths" are the end-points of the SILVA Trial and are, therefore, not subject to expedited reporting. 3(d). PMC's Notice in Connection With Actions by Regulatory Authorities PMC shall promptly notify Recipient of any threatened or pending actions by regulatory authorities which may reasonably be believed to affect the safety or efficacy claims of the BCG Material or to affect the supply commitment contained in this Agreement. Any form of such notice that is not in writing shall be promptly followed by notice in writing. 3(e). Recipient's Notice in Connection With Actions by Regulatory Authorities Recipient shall promptly notify PMC of any threatened or pending actions by regulatory authorities which may reasonably be believed to affect the safety or efficacy claims of BEC2 or of the combination therapy of BEC2 and BCG Material or to affect the Clinical Trials. Any form of such notice that is not in writing shall be promptly followed by notice in writing. 3(f). Recipient's Provision of Updated Investigators' Brochure For the purpose of keeping PMC apprised of the status of the Clinical Trials, Recipient shall provide to PMC a copy of all updated investigators' brochures which Recipient is required to file with the FDA or other regulatory agency anywhere. 4. Availability and Manufacture of BCG Material and of BEC2 4(a). BCG Material for Clinical Trials During the Supply Period, PMC shall supply the BCG Material in the quantities and according to the terms set forth in Sections 2(a)(i), (ii), (iii) and (iv); provided, however, that with respect to the quantities and terms set forth in Section 2(a)(iii) and (iv), PMC shall only be required to use reasonable commercial efforts to make available to Recipient such BCG Material as may be requested for the Additional Clinical Trials. With respect to the BCG Material 7 -7- requested pursuant to Sections 2(a)(iii) and 2(a)(iv), in the event of Force Majeure or of supply shortage or production constraint, PMC shall allocate the available quantities of BCG Material among PMC, its affiliates, customers and distributors, including Recipient, in a commercially reasonable manner. Each lot of BCG Material released to the Recipient for the Clinical Trials shall be manufactured in compliance with current Good Manufacturing Practices ("cGMP") pursuant to FDA regulations and according to manufacturing information in the Manufacturing Regulatory Documentation. PMC shall, or shall cause a third party to, perform quality control testing of the BCG Material released to the Recipient to establish compliance with any release specifications required by the Manufacturing Regulatory Documentation. 4(b). BEC2 for Clinical Trials During the Term, Recipient shall use reasonable commercial efforts to have sufficient quantities of BEC2 for use in the Clinical Trials. In the event of Force Majeure or of supply shortage or production constraint, Recipient shall notify PMC as soon as possible so as to permit PMC to allocate the above-noted quantities of BCG Material among PMC, its affiliates, customers and distributors at PMC's sole discretion. Each lot of BEC2 released by Recipient for the Clinical Trials shall be manufactured in compliance with cGMP pursuant to FDA regulations and according to manufacturing information in the Regulatory Filings. Recipient shall, or shall cause a third party to, perform quality control testing of BEC2 to establish compliance with any release specifications required by the Regulatory Filings. 4(c). BCG Material Specifications PMC shall provide BCG Material to the Recipient in the available vialed formulations and vial sizes specified in the then current Manufacturing Regulatory Documentation. PMC shall have no obligation under this Agreement to develop any other vial sizes or formulations of BCG Material for the Recipient. PMC shall use reasonable commercial efforts to maintain the integrity and consistency of all specifications applicable to BCG. In the event that PMC deems it necessary to revise any specifications, procedures or Manufacturing Regulatory Documentation applicable to BCG Material, PMC shall provide reasonable advance notice of any such revision to the Recipient for the sole purpose of permitting Recipient to revise the Clinical Trial Protocol or Regulatory Filings, as required. All specification changes that result in procedures or limits that exceed or differ from those set forth in the Manufacturing Regulatory Documentation shall be submitted to the FDA before being implemented to the extent the FDA so requires such submission. 4(d). Documentation Upon acceptance by Recipient of delivery of the BCG Material, PMC shall provide the Recipient with a Certificate of Analysis applicable to each lot of BCG Material delivered to the Recipient. Complete batch records and sufficient retention samples for the BCG Material delivered to the Recipient shall be maintained at PMC for inspection at any time by the Recipient at PMC's place of business upon reasonable prior written notice to PMC. Any 8 -8- confidential or proprietary information of PMC or of its affiliates contained in such records or samples shall be deemed to be Confidential Information of PMC. 4(e). PMC Facility Audits Upon reasonable prior written notice to PMC, the Recipient may (but shall not be required to) have its representatives, acting reasonably, audit PMC's production of the BCG Material to be used in the Clinical Trials for compliance with cGMP; provided however that such representatives shall have first signed a confidentiality agreement with PMC. Recipient and its representatives shall comply with all applicable health, safety, environmental and security laws and with PMC's policies and procedures while present at PMC's facilities. 4(f). Recall or Withdrawals In the event that a party is notified of a recall or withdrawal of BEC2 or of the BCG Material in any country, or believes such recall or withdrawal is necessary, it shall immediately notify the other parties. The parties will consult on the necessity of, and appropriate actions and mutually acceptable procedures to be taken in connection with, a recall or withdrawal. If such recall or withdrawal is undertaken, the parties shall cooperate in taking all reasonable and appropriate action necessary to complete such recall or withdrawal in a timely fashion. 5. Confidentiality and Disclosure 5(a). General Obligations of Confidentiality For a period of ten (10) years following any disclosure of Confidential Information hereunder, the Recipient and PMC shall maintain in confidence the respective Confidential Information received or obtained from the other, and use such Confidential Information solely for the purposes contemplated and permitted by this Agreement. Each party shall maintain communications to the other parties in confidence. Each party acknowledges that all Confidential Information exchanged or developed hereunder shall be owned by the transferor and shall continue to be owned by the transferor following transfer. "CONFIDENTIAL INFORMATION" shall mean any and all confidential or proprietary information owned by PMC (or its affiliates) or by the Recipient or either of ImClone or Merck (or their affiliates) that is provided to the other parties. Confidential Information shall not be deemed to include information that: (i) is or becomes known publicly through no fault of the receiving party; (ii) is learned by the receiving party from a third party entitled to disclose it; (iii) is developed by the receiving party independently of information obtained from the disclosing party as shown by the receiving party's written records; 9 -9- (iv) is already known to the receiving party before receipt from the disclosing party, as shown by prior written records; or (v) is released with the prior written consent of the disclosing party. 5(b). Permitted Disclosures Notwithstanding Section 5(a) hereof, PMC and the Recipient shall, upon prior written notice to the other parties and only to the extent necessary, have the right to disclose the other parties' Confidential Information to regulatory or government agencies for the purposes of preparing or supplementing any Regulatory Filing or Manufacturing Regulatory Documentation, as applicable, or of otherwise assisting in securing institutional or government approval to clinical test the BCG Material, or as required by law within each country where the Clinical Trials are being conducted. 5(c). Publications The parties acknowledge that the data and results arising from the Clinical Trials should be published and presented except to the extent where such publication or presentation would be reasonably expected to materially diminish the commercial value of the BCG Material, or to affect the patentability of the BCG Material or any improvements thereof. The parties further acknowledge that the Clinical Trials are multi-centre studies. Recipient undertakes and shall ensure that the data and results arising from the Clinical Trials shall not be published or presented by Recipient, by the coordinating investigators or by other participating individuals or entities, until such time as the Clinical Trials are completed and the data and results are analyzed thereafter. Upon completion of the SILVA Trial, Recipient shall ensure that a cooperative clinical administrative body, comprising the coordinating investigators, shall prepare a report which will include a statistical analysis and an appraisal of the final data and results from a medical viewpoint. Interim publication or presentation of the Clinical Trials would include only demographic data, for publicity purposes. Any publication, abstract or presentation, whether verbal or written, of such data, results or report, or excerpts or interpretations thereof, shall be submitted by Recipient to PMC for review, pursuant to the following conditions: (i) Recipient shall ensure that any article, paper, manuscript, report, data, results, abstract, poster or notes shall not be published or presented until the completion of the SILVA Trial and after analysis of the final results of the SILVA Trial; (ii) Recipient shall ensure that any such publication or presentation acknowledges the contribution of the parties and their employees, representatives or consultants as co-authors or as otherwise appropriate; and (iii) Recipient shall ensure that the publishing party deliver to PMC, at least sixty (60) days in advance of any such publication or presentation, any article, paper, manuscript, report, data, results, abstract, poster or notes proposed to be published or presented, in order to permit PMC, acting reasonably: 10 -10- (A) to apply for patents or make such other filings or registrations as deemed advisable, (B) to object to any part of such proposed publication or presentation on the basis that it would be reasonably expected to materially diminish the value of the BCG Material and information related thereto, (C) to require that any Confidential Information be deleted from any such proposed publication or presentation, or (D) to revise such proposed publication or presentation accordingly. Recipient undertakes and shall ensure that similar publication and presentation procedures will be established for any Additional Clinical Trials. 5(d). Use of Names or Trademarks The parties shall not originate any press release concerning the entering into of this Agreement or the subject matter hereof without the prior written approval of the other parties, which approval shall not be unreasonably withheld. The parties shall not have the right to use the name or any trade name or trademark of the other parties without prior written approval. Reference to the existence of this Agreement may be made in the regular course of business of the parties in informational disclosures describing the business of the parties, upon prior written notice to the other parties. 6. Warranties and Representations 6(a). Warranties and Representations of PMC. Subject to Section 7(a), PMC represents and warrants to the Recipient that: (i) PMC is a corporation duly organized, validly existing and in good standing and has all necessary corporate power to enter into and perform its obligations under this Agreement; (ii) the execution, delivery and performance of this Agreement by PMC have been duly authorized and approved by all necessary corporate action, and the Agreement is binding upon and enforceable against PMC in accordance with its terms (subject to bankruptcy and similar laws affecting the rights of creditors generally); (iii) each lot of the BCG Material delivered to the Recipient for the Clinical Trials shall be manufactured, tested and released in compliance with cGMP and the applicable Manufacturing Regulatory Documentation; and 11 -11- (iv) any documentation provided to the Recipient by PMC concerning the BCG Material or Manufacturing Regulatory Documentation shall be accurate to the best of PMC's knowledge and ability. 6(b). Warranties and Representations of the Recipient Recipient and each of ImClone and Merck represents and warrants to PMC that: (i) Recipient consist of corporations duly organized, validly existing and in good standing and have all necessary corporate power to enter into and perform their obligations under this Agreement; (ii) the execution, delivery and performance of this Agreement by the Recipient have been duly authorized and approved by all necessary corporate action, and the Agreement is binding upon and enforceable against the Recipient in accordance with its terms (subject to bankruptcy and similar laws affecting the rights of creditors generally); (iii) Recipient shall use BCG Material in compliance with all applicable laws and regulations and shall conduct the Clinical Trials in compliance with cGMP and cGCP; (iv) Recipient is not aware of any special or unusual hazards that would arise as a result of the combination of BEC2 and BCG Material for the Clinical Trials to be conducted by Recipient; (v) each lot of BEC2 for the Clinical Trials shall be manufactured, tested and released in compliance with cGMP and the applicable Regulatory Filings; provided that, in connection with such release only, each of ImClone and Merck provides such warranty and representation with respect to the territories in which they respectively are responsible for the conduct of the Clinical Trials; (vi) any documentation concerning the Clinical Trials, BEC2 or Regulatory Filings shall be accurate to the best of Recipient's knowledge and ability; and (vii) Recipient does not guarantee any particular results from the conduct of the Clinical Trials. 7. Limitation of Liability; Indemnification 7(a). Limitation of Liability PMC has limited knowledge or awareness of, and has no control over, the manner in which the Recipient intends to use the BCG Material. PMC shall not be liable for any losses, damages, costs or expenses of any nature incurred or suffered by the Recipient or by a third party, arising out of any dispute or other claims or proceedings (including, without limitation, product liability claims and claims by a third party alleging infringement of its intellectual property rights 12 -12- by the use or sale of BCG Material), made or brought as a result of the Clinical Trials or against the Recipient, nor shall PMC be responsible in any way for dealing with any such disputes, claims or proceedings, except to the extent that any such dispute, claim or proceeding arises from (a) a breach by PMC of any warranty set forth in Section 6(a) hereof, or (b) any failure by PMC to manufacture, test, document or release the BCG Material in compliance with cGMP and the applicable Manufacturing Regulatory Documentation. PMC shall not be responsible for any interruption in supply that is caused by Force Majeure. EXCEPT AS SET FORTH IN SECTION 6(a) HEREOF, PMC MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE OR OF NON-INFRINGEMENT OF THIRD PARTY PATENTS. PMC SHALL NOT BE LIABLE FOR ANY LOSS, CLAIM, DAMAGE, EXPENSE OR LIABILITY, OF ANY KIND OR NATURE, WHICH MAY ARISE FROM OR IN CONNECTION WITH THIS AGREEMENT OR WITH THE CLINICAL TRIALS OR FROM THE USE, HANDLING OR STORAGE OF BCG MATERIAL, BEC2 OR THEIR ANCILLARY MATERIALS BY RECIPIENT OR BY ANY AFFILIATES, EMPLOYEES, AGENTS, CONTRACTORS, INVESTIGATORS OR REPRESENTATIVES OF RECIPIENT. NO PARTY TO THIS AGREEMENT SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTIES ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES. 7(b). Recipient's Right to Indemnification PMC hereby agrees to indemnify, defend and hold harmless Recipient and its affiliates, officers, directors, employees and representatives (collectively, the "RECIPIENT'S INDEMNITEES") from and against any liabilities, claims, damages, costs, expense (including reasonable attorneys' fees), and actions (collectively, "CLAIMS") arising out of or resulting from (i) the failure by PMC to manufacture, test, document or release the BCG Material in compliance with cGMP and the applicable Manufacturing Regulatory Documentation or (ii) the breach by PMC or PMC's Indemnitees of any of its obligations or warranties hereunder, except to the extent that any such Claims arise out of, are based upon or result from the gross negligence or willful misconduct of Recipient or Recipient's Indemnitees or a breach by Recipient or Recipient's Indemnitees of any of Recipient's obligations or warranties under this Agreement or under the Clinical Trial Protocol or Regulatory Filings. Recipient shall promptly notify PMC of any Claims, upon becoming aware thereof, and permit PMC at PMC's cost to defend against such Claims and shall cooperate with PMC in the defense thereof. Recipient shall not enter into, or permit, any settlement of any such Claims without the express written consent of PMC. Recipient may, at its option and expense, have its own counsel participate in any proceeding that is under the direction of PMC and will cooperate with PMC or its insurer in the disposition of any such matter. 7(c). PMC's Right to Indemnification Recipient hereby agrees to indemnify, defend and hold harmless PMC and its affiliates, officers, directors, employees and representatives (collectively, "PMC'S INDEMNITEES") from and against any liabilities, claims, damages, costs, expense (including 13 -13- reasonable attorneys' fees), and actions (collectively, "CLAIMS") arising out of or resulting from (i) the Clinical Trials, (ii) the failure by Recipient to manufacture, test, document or release BEC2 in compliance with cGMP and the applicable Regulatory Filings, (iii) the breach by Recipient or Recipient's Indemnitees of any of Recipient's obligations or warranties under this Agreement or under the Clinical Trial Protocol or Regulatory Filings, (iv) the possession, processing, shipment, storage, handling, administration or disposal of any BCG Material supplied to Recipient hereunder, or (v) the possession, manufacture, sale, use, distribution, processing, shipment, storage, handling, administration or disposal of BEC2 by Recipient whether or not any BCG Material is combined thereto, except to the extent that any such Claims arise out of, are based upon or result from the gross negligence or willful misconduct of PMC or PMC's Indemnitees or a breach by PMC or PMC's Indemnitees of any of PMC's obligations or warranties under this Agreement. PMC shall promptly notify Recipient of any Claims, upon becoming aware thereof, and permit Recipient at Recipient's cost to defend against such Claims and shall cooperate with Recipient in the defense thereof. PMC shall not enter into, or permit, any settlement of any such Claims without the express written consent of Recipient. PMC may, at its option and expense, have its own counsel participate in any proceeding that is under the direction of Recipient and will cooperate with Recipient or its insurer in the disposition of any such matter. 7(d). Recipient's Insurance Each of ImClone and Merck shall obtain and maintain separate product liability insurance and clinical trial liability insurance (naming PMC either as an additional insured or policy beneficiary), with an acceptable insurer, in the minimum amount of US$10,000,000 per occurrence. Such insurance may not be cancelled or terminated except upon thirty (30) days' prior written notice to PMC. Such insurance shall be obtained and maintained at the sole cost and expense of ImClone and Merck. From time to time, at the request of PMC, ImClone and Merck will cause certificates of such insurance to be provided to PMC evidencing compliance with their respective obligations set forth herein. 8. Term and Termination 8(a). Expiration This Agreement shall commence on the Effective Date and shall terminate six (6) months after the expiration of the Supply Period, unless earlier terminated as provided in Sections 8(b), (c) and (d) hereof (the "TERM"). 8(b). Termination by Any Party Any party shall have the right to terminate this Agreement, immediately upon written notice of termination to the other parties in the event that: 14 -14- (i) a party fails to perform or observe or otherwise breaches any of its material obligations under this Agreement and such failure or breach continues unremedied for a period of sixty (60) days after receipt by the breaching party of a written notice thereof from the non-breaching party; and (ii) a proceeding or case shall be commenced without the application or consent of the other party and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the following shall be entered and continue unstayed and in effect, for a period of forty-five (45) days from and after the date service of process is effected upon the other party, seeking (A) the other party's liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (B) the appointment of a trustee, receiver, custodian, liquidation or the like of the other party or of all or any substantial portion of their assets, or (C) similar relief in respect of the other party under any law relating to bankruptcy, insolvency, reorganization, winding-up or the composition or readjustment of debts. 8(c). Termination due to Cessation of Clinical Trials In the event Recipient in its sole discretion ceases the Clinical Trials, and so advises PMC in writing in advance, either Recipient or PMC may terminate this Agreement upon thirty (30) days prior written notice to the other parties. 8(d). Termination in Connection With Further Negotiation This Agreement may be terminated by the Recipient or PMC in connection with the failure, during the Term, to enter into a separate agreement for future commercial supply of BCG Material, as further set forth in Section 2(e) hereof. 8(e). Effects of Termination In the event of any termination of this Agreement, all amounts previously invoiced and unpaid or owed to PMC shall be due and payable by Recipient on the date of termination. Following termination of the Agreement, the Recipient shall return to PMC or destroy, at PMC's option, any quantities of BCG Material. The parties agree that: (i) the provisions of Section 2(e), Article 3 and Article 6 shall survive the termination or expiration of this Agreement; (ii) the provisions of Article 5 hereof shall survive the termination or expiration of this Agreement for the term specified in that Article; and (iii) the provisions of Article 7 hereof shall survive termination or expiration of this Agreement only with respect to Claims that arose from acts or circumstances that occurred prior to termination. 9. Miscellaneous 9(a). No Implied Waivers; Rights Cumulative No failure on the part of PMC or the Recipient to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or 15 -15- at law or in equity or otherwise, including, without limitation, the right or power to terminate this Agreement, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. 9(b). Notices All notices, requests and other communications to PMC or the Recipient hereunder shall be in writing (including telecopy or similar electronic transmissions) and shall be personally delivered or sent by telecopy (fax) or other electronic facsimile transmission or by registered mail, or certified mail, return receipt requested, postage prepaid, or by other form of courier requiring receipt in each case to the respective address specified below (or to such address as may be specified in writing to the other party hereto) and shall be effective upon receipt thereof: CONNAUGHT LABORATORIES LIMITED 1755 Steeles Avenue West Toronto, Ontario, CANADA M2R 3T4 Attn: Vice President and General Counsel Facsimile: (416) 667-2860 with a copy to: Senior Vice President, and General Manager, Oncology Business Unit
Facsimile: (416) 667-2990 MERCK KGaA Frankfurter Strasse 250 64271 Darmstadt, GERMANY Attn: Dr. Dieter Orth, License Department Facsimile: 61 51 72 3378 with a copies to: Dr. Jurgen Uhl, Project Manager, Facsimile: 61 51 72 7580, and Lothar Finke, TATONZ, Facsimile: 61 51 72 6905
IMCLONE SYSTEMS INCORPORATED 180 Varick Street New York NY 10014 U.S.A. Attn: General Counsel Facsimile: (212) 645-2054 16 -16- 9(c). Successors and Assigns The terms and provisions of this Agreement shall inure to the benefit of, and be binding upon, PMC, the Recipient, and their respective successors and permitted assigns as provided in this Section. PMC and Recipient shall have the right to assign or otherwise transfer any of its rights and interests, or delegate any of its obligations, to an Affiliate of such party provided that such Affiliate agrees in writing to carry out in full any obligations that are assigned to it. PMC and Recipient shall have the right to assign all of its rights and interests and delegate all of its obligations under this Agreement to any entity that is the successor in interest to the assigning party in any merger, consolidation or sale involving substantially all of the business and assets of the assigning party. Any other assignment or delegation shall only be valid and effective if the other parties have provided their respective prior express written consent. Any attempt to assign or delegate any portion of this Agreement in violation of this Section shall be null and void. Subject to the foregoing, any reference to PMC or the Recipient hereunder shall be deemed to include the successors thereto and permitted assigns thereof. 9(d). Force Majeure No party shall be liable to the others, or be in default under the terms of this Agreement, for its failure to fulfill its obligations hereunder to the extent such failure arises for any reason or cause beyond its control including, without limitation, strikes, lockouts, labor disputes, acts of God, acts of nature, acts of governments or their agencies, fire, flood, storm, power shortages or power failure, war, sabotage, inability to supply and to obtain labor, raw materials, supplies, fuel or utilities, or inability to obtain transportation, or any other circumstance or event beyond the reasonable control of the party (each, "FORCE MAJEURE"), provided that the party relying on the provisions of this Section 9(d) shall give notice to the other parties of its inability to observe or perform the provisions of this Agreement. A party shall notify the other parties if, at any time, it encounters a production or manufacturing problem which in its reasonable opinion could reasonably be expected to adversely affect its ability to supply BEC2 or BCG Material, as applicable, for the Clinical Trials. Should such production or manufacturing be so reduced, the party relying on these provisions shall have the right to allocate such supply for its own use and among its affiliates, customers and distributors, in such manner and on such basis as it may reasonably determine, without compensation or penalty to the other parties. 9(e). Governing Law This Agreement shall be governed by the laws of the Province of Ontario. The parties specifically agree that the International Sale of Goods Act does not apply hereto. 9(f). Entire Agreement This Agreement, together with its Exhibits A, B and C, constitutes, on and as of the Effective Date hereof, the entire agreement of and among PMC, ImClone and Merck with respect to the subject matter hereof, and all prior or contemporaneous understandings or 17 -17- agreements, whether written or oral, between or among PMC, ImClone or Merck with respect to such subject matter are hereby superseded, as of the Effective Date. 9(g) Relationship Each of the parties is an independent contractor. No party is, and nothing in this Agreement shall constitute any party as the employer, employee, principal, agent or partner of, or joint venturer with, any other party. No party has authority to enter into any agreement on behalf of the other parties or to bind the other parties in any other manner, and no party shall act or omit to act so as to suggest that it has such authority. No party shall incur any obligations or liabilities, express or implied, by reason of, or with respect to, the actions or omissions of the other parties or of persons for whom they are responsible. 9(h) Counterparts This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the Effective Date. IMCLONE SYSTEMS INCORPORATED By: ___________________________ Name: _________________________ Title: ________________________ MERCK KGaA By: ___________________________ By: ____________________________ Name: _________________________ Name: __________________________ Title: ________________________ Title: _________________________ CONNAUGHT LABORATORIES LIMITED By: ___________________________ By: ___________________________ Name: _________________________ Name: _________________________ Title: ________________________ Title:_________________________ 18 -18- Exhibit "A" (Protocols, Investigators' Brochures) to Agreement among PMC, ImClone and Merck effective as of January 1, 1997 - -------------------------------------------------------------------------------- 19 [LOGO] The SILVA study - -------------------------------------------------------------------------------- CLINICAL COORDINATOR: STATISTICIAN: DR. C. DEBRUYNE D. CURRAN 83, AV. E. MOUNIER. BTE 11 83, AV. E. MOUNIER. BTE 11 B-1200 BRUSSELS B-1200 BRUSSELS BELGIUM BELGIUM PHONE: + 32 2 774 16 23 PHONE: + 32 2 774 16 70 FAX: + 32 2 772 67 01 FAX: + 32 2 772 67 01 E-MAIL: CDE@EORTC.BE E-MAIL: DCU@EORTC.BE CENTRAL DATA MANAGEMENT: EORTC DATA CENTER 83, AV. E. MOUNIER, BTE 11 B-1200 BRUSSELS BELGIUM PHONE: + 32 2 774 16 11 FAX: + 32 2 772 35 45 REGISTRATION / RANDOMIZATION EUROPE NORTH-AMERICA AUSTRALIA/NEW ZEALAND EORTC DATA CENTER QUINTILES PACIFIC, INC. QUINTILES PTY, INC PHONE: + 32 2 774 16 00 PHONE: + 800 745 8624 PHONE: + 61 299 289 165 FAX: + 32 2 772 35 45 FAX.: + 650 938 3701 FAX.: + 61 299 567 455 EUROCODE (MODEM): + 32 2 772 04 26 EUROCODE (X25): + 206 221 51 24 INTERNET: TELNET ECVAX.EORTC.BE HTTP://WWW.EORTC.BE/EUROCODE SAFETY DESKS EUROPE NORTH-AMERICA AUSTRALIA/NEW ZEALAND EORTC IMCLONE QUINTILES PTY, INC INVESTIGATIONAL AGENT UNIT CLINICAL AFFAIRS CLINICAL HELPDESK SAFETY DESK SAFETY DESK PHONE: + 61 299 567 422 PHONE: +32 2 774 1640 PHONE: + 908 218 9588 FAX.: + 61 299 567 455 FAX.: +32 2 772 8027 FAX.: + 908 231 9885 E- MAIL: E- MAIL: E-MAIL: SAESCLC@QSYD.COM SAFETYDESK@EORTC.BE SAFETYDESK@IMCLONE.COM 2/102 20 [LOGO] The SILVA study - -------------------------------------------------------------------------------- MONITORING / LOCAL DATA CENTER EUROPE NORTH - AMERICA AUSTRALIA/NEW ZEALAND EORTC DATA CENTER QUINTILES PACIFIC, INC. QUINTILES AUSTRALIA PTY 83, AV. E. MOUNIER, BTE 11 331 A EAST EVELYN AVE NORTHPOINT, 100 MILLER B-1200 BRUSSELS MOUNTAIN VIEW STREET BELGIUM CA 94041 NORTH STREET NSW 2060 FAX: + 32 2 772 35 45 USA AUSTRALIA FAX: +650 938 3701 FAX: +61 299 567 455 DRUG SUPPLY EUROPE NORTH-AMERICA AUSTRALIA/NEW ZEALAND DR. WIEGEL CLINICAL AFFAIRS DEPARTMENT MARISSA PEACOCK MERCK KGAA IMCLONE SYSTEMS INC. QUINTILES AUSTRALIA PTY PHONE: +49 6151 72 3845 PHONE: +908 218 9588 PHONE: +61 299 289 165 FAX: +49 6151 72 7965 FAX: +908 231 9885 FAX: +61 299 567 455 SPONSORS EUROPE, AUSTRALIA, AND NEW ZEALAND IN NORTH AMERICA MERCK KGAA. IMCLONE SYSTEMS INC. FRANKFURTER STR. 250 170 VARIK STREET D-64271 DARMSTADT NEW YORK, NY, GERMANY USA 3/102 21 [LOGO] The SILVA study - -------------------------------------------------------------------------------- TABLE OF CONTENTS 1. TRIAL SUMMARY .................................................................. 8 2. RATIONALE ...................................................................... 10 2.1 ANTI-IDIOTYPIC ANTIBODIES .......................................... 10 2.2 BEC2 ANTI-IDIOTYPIC MONOCLONAL ANTIBODY ............................ 11 2.3 CLINICAL EXPERIENCE WITH BEC2 ...................................... 12 3. OBJECTIVES ..................................................................... 15 4. TRIAL DESIGN ................................................................... 15 4.1 GENERAL DESIGN ..................................................... 15 4.2 TREATMENT REGIMENS ................................................. 15 4.3 STRATIFICATION AT RANDOMIZATION .................................... 16 5. PATIENT POPULATION ............................................................. 17 5.1 AT REGISTRATION .................................................... 17 5.1.1 Inclusion criteria ......................................... 17 5.1.2 exclusion criteria ......................................... 17 5.2 AT RANDOMIZATION ................................................... 18 5.2.1 Inclusion criteria ........................................ 18 5.2.2 exclusion criteria ......................................... 18 6. DRUG INFORMATION ............................................................... 19 6.1 GENERAL INFORMATION ................................................ 19 6.2 BEC2/BCG VACCINE PREPARATION ....................................... 19 6.3 STORAGE ............................................................ 21 6.4 POSSIBLE ADVERSE EVENTS ............................................ 21 6.5 PACKAGING AND LABELING OF STUDY MEDICATION ......................... 22 6.6 CONCOMITANT TREATMENTS ............................................. 22 7. CLINICAL EVALUATION, LABORATORY TESTS AND FOLLOW-UP ............................ 23 7.1 AT REGISTRATION .................................................... 23 7.2 RESTAGING (WITHIN 6 WEEKS AFTER END OF INDUCTION THERAPY)........... 23 7.3 AT RANDOMIZATION (WITHIN 6 WEEKS AFTER THE END OF INDUCTION THERAPY) 24 7.4 FIRST 12 WEEKS AFTER RANDOMIZATION ................................. 24 7.4.1 vaccination cohort ......................................... 24 7.4.2 observation cohort ......................................... 25
4/102 22 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 7.5 DURING FOLLOW-UP ................................................... 26 7.5.1 First FU (6 months after randomization) .................... 26 7.5.2 Further FU (starting 9 months after randomization till progression of disease) ..................................... 26 7.6 AFTER PROGRESSION OF THE DISEASE ................................... 26 7.7 SUMMARY TABLE ...................................................... 27 8. MONITORING AND REPORTING OF ADVERSE EVENTS AND ADVERSE DRUG REACTIONS ......................................................................... 28 8.1 DEFINITIONS ........................................................ 28 8.2 REPORTING ADVERSE EVENTS ........................................... 28 8.2.1 Documentation of Adverse Events ............................ 28 8.2.2 General evaluation of side-effects ......................... 29 8.2.3 Toxic deaths ............................................... 29 8.2.4 Evaluation of toxicity ..................................... 29 8.3 REPORTING PROCEDURES ............................................... 29 8.3.1 reporting serious adverse events (SAE) or serious adverse drug reactions (SADR) .................................... 29 8.3.2 reporting non-serious adverse events (AE) and non- serious adverse drug reactions (ADR) ............................. 30 9. REGISTRATION AND RANDOMIZATION PROCEDURES ...................................... 31 9.1 PATIENT REGISTRATION ............................................... 31 9.2 PATIENT RANDOMIZATION .............................................. 32 10. FORMS AND PROCEDURES FOR COLLECTING DATA ...................................... 33 10.1 CASE REPORT FORMS AND SCHEDULE FOR COMPLETION ..................... 33 10.2 PRACTICAL CONSIDERATIONS AND DATA FLOW ............................ 35 11. STATISTICAL CONSIDERATIONS .................................................... 37 11.1 PRIMARY AND SECONDARY ENDPOINTS ................................... 37 11.2 SAMPLE SIZE DETERMINATION ......................................... 37 11.3 DESCRIPTION OF STATISTICAL ANALYSIS ............................... 38 11.3.1 Primary analysis .......................................... 38 11.3.2 Supportive analyses ....................................... 38 11.3.3 Interim Analysis .......................................... 38 11.3.4 Safety .................................................... 39 11.3.5 Quality of Life Assessment ................................ 39 11.3.6 Health Economics data analysis ............................ 40
5/102 23 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 11.3.7 Independent Data Monitoring Committee ..................... 40 12. QUALITY OF LIFE EVALUATION .................................................... 41 12.1 OBJECTIVES ........................................................ 41 12.2 QUESTIONNAIRE ..................................................... 41 12.3 DESIGN ............................................................ 42 12.4 QOL DATA COLLECTION ............................................... 42 13. HEALTH ECONOMICS .............................................................. 43 13.1 OBJECTIVES ........................................................ 43 13.2 HEALTH ECONOMIC VARIABLES ......................................... 44 14. STEERING COMMITTEE ............................................................ 45 15. BIOLOGICAL EFFICACY GROUP ..................................................... 45 16. QUALITY ASSURANCE ............................................................. 45 16.1 CONTROL OF DATA CONSISTENCY ....................................... 45 16.2 EXTERNAL REVIEW OF RESPONSES ...................................... 46 16.3 ON-SITE QUALITY CONTROL ........................................... 46 17. ETHICAL CONSIDERATIONS ........................................................ 46 17.1 PATIENT PROTECTION ................................................ 47 17.2 SUBJECT IDENTIFICATION ............................................ 47 17.3 PATIENT INFORMATION ............................................... 47 17.4 PATIENT CONSENT ................................................... 48 18. INVESTIGATOR COMMITMENT STATEMENT ............................................. 49 18.1 CONFIDENTIALITY STATEMENT ......................................... 49 19. ADMINISTRATIVE RESPONSIBILITIES ............................................... 49 19.1 PROTOCOL AMENDMENTS ............................................... 50 19.2 DEVIATIONS FROM THE PROTOCOL ...................................... 50 20. TRIAL SPONSORSHIP / FINANCING ................................................. 50 21. PATIENT INSURANCE COVERAGE .................................................... 50 22. PUBLICATION POLICY ............................................................ 51 23. ADMINISTRATIVE SIGNATURES ..................................................... 52 24. LIST OF PARTICIPATING COUNTRIES ............................................... 53 25. REFERENCES .................................................................... 54 26. APPENDICES .................................................................... 59 26.1 APPENDIX I: PERFORMANCE STATUS SCALES ............................. 60
6/102 24 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.2 APPENDIX II: DRUG MEDICATION GUIDELINES ........................... 61 26.2.1 Drug supply ............................................... 61 26.2.2 Disposal of study drugs ................................... 61 26.2.3 BEC2/BCG Vaccine Patient Dose Kit ......................... 61 26.3 APPENDIX III: EORTC QUALITY OF LIFE EVALUATION .................... 62 26.3.1 EORTC Quality of Life evaluation: guidelines for administration of questionnaires ................... 62 26.3.2 EORTC QLQ - C30 (version 2.0.) ............................ 64 26.3.3 EORTC QLQ - LC13 .......................................... 66 26.3.4 EORTC Health Thermometer .................................. 67 26.4 APPENDIX IV: PATIENT INFORMATION / INFORMED CONSENT TEMPLATE ...... 68 26.5 APPENDIX V: COMMON TOXICITY CRITERIA (NCIC - CTC) SCALE ........... 73 26.6 APPENDIX VI: DECLARATION OF HELSINKI .............................. 85 26.7 APPENDIX VII: WORKING PROCEDURE ON DATA ENTRY ..................... 89 26.8 APPENDIX VIII: ANCILLARY STUDIES ON BIOLOGICAL EFFICACY ........... 90 26.8.1 General Considerations .................................... 90 26.8.2 Humoral Response .......................................... 91 26.8.3 Other ancillary studies which will be performed in selected centers .............................................. 91 26.9 APPENDIX IX: PPD TESTING .......................................... 93 26.9.1 Test Kits ................................................. 93 26.9.2 General Remarks ........................................... 93 26.9.3 PPD Testing ............................................... 93 26.10 APPENDIX X: INDUCTION THERAPY FLOW CHART ......................... 97 26.11 APPENDIX XI: OVERALL STUDY FLOW CHART ............................ 98 26.12 APPENDIX XII: VACCINATION INSTRUCTIONS ........................... 99 26.13 APPENDIX XIII: LIST OF ABBREVIATIONS ............................. 100 26.14 APPENDIX XIV: STUDY ACKNOWLEDGMENT ............................... 102
7/102 25 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 1. TRIAL SUMMARY TITLE: The SILVA study: Survival in an International phase III prospective randomized LD small cell Lung cancer Vaccination study with Adjuvant BEC2 and BCG, OBJECTIVES: The trial is designed to test the impact on survival of an adjuvant BEC2/BCG vaccination of LD SCLC patients after induction therapy. TYPE OF SUBJECTS: Newly diagnosed patients with LD SCLC, who have a clinical response (CR or PR) at re-staging after first line treatment (chemo - radiotherapy + / - prophylactic cranial irradiation). NUMBER OF SUBJECTS: Approx. 820 patients with LD SCLC will be registered at time of diagnosis in order to be able to randomize 570 responding patients. TRIAL DESIGN: Stratified, randomized, prospective, international intergroup phase III trial. TREATMENT REGIMENS: Induction therapy Each participating center will decide on one of the following three options of first line chemotherapy, of which 4 or 5 cycles will be given: Cisplatin (60 - 100 mg/m(carat)2, day 1) + VP 16 (80 - 120 mg/m(carat)2 day 1,2 and 3); OR Carboplatin (AUC 4 - 6 )* + VP 16 (80 - 120 mg/m(carat)2 day 1,2 and 3); OR Cyclophosphamide (>= 1000 mg/m(carat)2, day 1) + Doxorubicin (>= 40 mg/m(carat)2 day 1) + Etoposide (80 - 120 mg/m(carat)2 day 1, 2 and 3); Chest radiotherapy is mandatory (according to local policy, concomitant or sequential) Prophylactic cranial irradiation is highly recommended for patients with complete response. * Dose (mg) = target AUC (4 - 6) x (Glomerular filtration rate + 25). GFR is based on the Cockroft-Gault formula for creatinine clearance: (140-age) X (weight in kg) GFR = ------------------------------ x 0.85 (female) or x 1.00 (male) 72 x serum creatinine mg/100ml 8/102 26 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Trial treatment: After 5, to a maximum of 7 months from diagnosis and within 6 weeks after completion of ALL induction therapy, responding patients will be RANDOMIZED: STANDARD ARM (OBSERVATION COHORT): Best supportive care, but no cancer specific therapy (cytotoxic, radiation or other tumor reductive therapy) can be given until documented progression of disease EXPERIMENTAL ARM (VACCINATION COHORT): BEC2 (2.5 mg) + BCG intradermal injections (5 in total) at first day of week 0, 2, 4, 6 and 10. Stratification: Institution, Karnofsky (60-70% vs. >= 80%), induction therapy ((VP16 in combination with Cis or Carbo) vs. CDE), response (CR vs. PR) and radiation (concomitant vs. sequential) at time point of randomization. STATISTICAL CONSIDERATIONS: Primary endpoint(s): Overall survival Secondary endpoint(s): Progression free survival, Safety, QoL and Health Economics. Additional ancillary studies on biological efficacy will be performed. Proposed start date: December 1997. Analyses: Overall survival analysis will be performed when a total of 376 deaths are reported. One interim analysis will be conducted when a total of 80 deaths are reported. 9/102 27 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 2. RATIONALE The leading cause of cancer deaths in men and women in the USA is lung cancer. Approximately 25% of all lung cancer patients have small cell lung cancer (SCLC) (Ihde DC et al., 1997) and despite the majority of these patients being successfully treated with primary chemotherapy, often in combination with thoracic irradiation, relapses are common. Despite advances in primary chemotherapy, the median survival for patients with small cell lung cancer (SCLC) has not changed significantly in the last 20 years. The overall prognosis following completion of primary therapy is dependent on the stage of the disease. Patients with limited stage of disease (confined to the thoracic cavity), which accounts for approximately 40% of SCLC cases, achieved responses in 85-95% and a CR rate from 40-60%, with a median survival of 14 months and a two year relapse free survival of 20% with chemotherapy only (Giaccone 1993). The addition of chest radiation to chemotherapy in limited disease has slightly increased survival. A meta-analysis of all randomized trials indicated a 14% reduction in the mortality rate (Pignon et al. 1992). Several attempts have been performed to prevent relapse in SCLC after induction therapy. Among them, poor results have been obtained by interferon's as maintenance therapy (Ihde 1997). New approaches are clearly indicated. 2.1 ANTI-IDIOTYPIC ANTIBODIES Idiotopes are unique antigenic determinants of the variable region of immunoglobulin molecules. Antibodies recognizing these idiotopes are termed anti-idiotypic antibodies (anti-ids). The majority of anti-ids recognize idiotopes within the framework region of the immunizing monoclonal antibody, however, some anti-ids can be shown to recognize the antigen binding site of the immunizing monoclonal antibody and mimic the original antigen. Because of this property, they are of special interest for their potential use as vaccines. Immunization with anti-ids has been shown to induce protective immunity against viral (Gaulton 1986, Ertl 1984, Kennedy 1984), bacterial (Stein 1984, McNamara 1984), and parasitic (Sacks 1985, Gryzych 1985) infections. Anti-id vaccines that mimic carbohydrate or glycolipid antigens offer potential advantages over vaccines utilizing the actual antigen. First, anti-id vaccines can stimulate a humoral and possibly a cellular immune response (Sharpe 1984), while carbohydrate antigens are not generally effective in inducing cellular immunity. Second, anti-id vaccines may be more immunogenic than the non-protein antigens they mimic. An anti-idiotypic antibody mimicking bacterial lipopolysaccharide (LPS) was effective in priming neonatal mice to develop a protective immune response to LPS while LPS itself could not prime the mice (Stein 1984). 10/102 28 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Several anti-ids have been raised against monoclonal antibodies recognizing cell surface tumor antigens. Immunization of animals with these anti-idiotypic antibodies has been shown to result in the generation of antibodies which recognize the original tumor antigen. Some investigators have also observed that animals immunized with anti-idiotypic antibodies demonstrate a cellular immune response by developing a specific delayed-type hypersensitivity reaction against the tumor antigen (Nepom 1984, Raychaudhuri 1986), although others have not been able to demonstrate this (Kahn 1989). Tumor protection studies in mice have shown that immunization with anti-idiotypic monoclonal antibodies can prevent tumor growth in vivo (Raychaudhuri 1986, Dunn 1987). There has been limited experience with immunizing solid tumor patients with anti-idiotypic monoclonal antibodies. In a report by Mittelman et al (1990), 37 patients with metastatic melanoma were treated with three to twelve subcutaneous injections of MF11-30. No toxicity was observed. None of the patients were induced to produce antibodies against melanoma. However, one lymph node complete response was achieved which lasted 43 weeks. The same group (Mittelman 1992), immunized patients with a different anti-idiotypic monoclonal antibody, designated MK2-23, conjugated to keyhole limpet hemocyanin and mixed with BCG (Bacille Calmette-Guerin) as an adjuvant. Of 23 evaluable patients 14 (61%) developed detectable antibodies against melanoma. Three patients experienced a partial tumor response. Toxicity was largely related to the BCG administration and consisted of erythema, induration, and occasional ulceration at the injection sites. Substantial information is available on the use of BCG in different types of cancers as monosubstance for the investigational treatment of malignancies from the period when non-specific immunotherapies were broadly tested in the clinic (Rosenberg 1997). 2.2 BEC2 ANTI - IDIOTYPIC MONOCLONAL ANTIBODY The GD3 ganglioside is reported to be distributed in various tumor cell lines in amounts ranging from 0 percent (colon carcinoma) to 100 percent (metastatic melanoma and small cell lung cancer) (Fuentes 1997, Houghton personal communication). An IgG3 monoclonal antibody, R24, which recognizes the human melanoma GD3 ganglioside was raised in syngenic [(C57BL X BALB/c)F1] mice. Additional syngenic mice were immunized with the R24 monoclonal antibody which resulted in the formation of two anti-idiotypic monoclonal antibodies, designated BEC2 and BEC3 (Chapman 1991). Both were screened for antibody production in New Zealand white rabbits, which express the GD3 ganglioside on normal tissue (brain, adrenal, thymus, spleen, small bowel) in distributions similar to that seen in humans (Iwamori 1978, 1981; Sekine 1985). Both BEC2 and BEC3 induced anti-mouse and anti-R24 antibodies, but only BEC2 induced anti-GD3 antibodies (Chapman 1991). No toxicity's were observed in the rabbits immunized with BEC2 and necropsy results showed no evidence of inflammation within tissues known to express GD3. 11/102 29 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Numerous publications have reported increased immunogenicity, desired serological responses, and mild toxicity's of anti-id MAb in combination with adjuvants (Mittelman 1990, 1992), aluminum salts (Glenny 1926) or aluminum hydroxide-adsorbed vaccine preparations (Aprille 1966). Vaccination with BEC2, a murine anti-idiotvpic monoclonal antibody, could evoke specific IgM and IgG against GD3 in animal models (Chapman and Houghton, 1991). Based on these reports. ImClone Systems Inc., NY, NY sponsored and conducted phase Ib/IIa studies with BEC2 alone and in combination with various adjuvants. 2.3 CLINICAL EXPERIENCE WITH BEC2 Early clinical studies with BEC2 were initiated in 1992 in patients with stage IV melanoma and small cell lung cancer and are summarized in the INVESTIGATOR'S BROCHURE (ImClone/MerckKGaA, 1997). Studies in melanoma: Stage III and IV melanoma patients (n=134) were treated in 8 clinical studies with BEC2 administered at doses ranging from 0.1 to 20.0 mg, with and without adjuvant. BEC2 adverse events were not dose dependent and adverse events most frequently reported were adjuvant related injection site reactions, the severity of which was dependent of the adjuvant administered. Grade 3 injection site reactions were reported with the use of BCG, while injection site reactions associated with the use of all other adjuvants were <= grade 2. In the largest of the 8 studies (n=31), all of the BEC2 or BEC2 plus alum adjuvant related adverse events were grade 1 or 2. The reported adverse events were injection site reactions. In two other studies of BEC2 alone (n=15, n=6), adverse events were limited to grade 1 except for one patient who developed a grade 2 fever. The most common adverse events were mild and transient, and consisted of flu-like symptoms (19%), fatigue (14%), and exacerbation of pre-existing arthritic conditions (14%). The severity of adverse events in the other 5 studies were similar, although the frequency of reported events are lower. Although high titer anti-BEC2 antibodies were detected in the majority of patients treated and production appeared to be related to the adjuvant preparation used, too few patients developed anti-GD3 antibodies to allow conclusions to be drawn (Chapman 1994, McCaffery 1996). In one study BEC2, given subcutaneously (s. c.) at a dose of 2.5 mg for five bi-weekly doses, was tested in a group of 21 stage IV melanoma patients. Eleven of the 21 patients developed antibodies against BEC2 but only one developed antibodies against GD3 (Chapman et al., 1994). Chapman suggested that the augmentation of immunogenicity, by addition of an immune adjuvant, would result in high-titer antibodies against GD3 (Chapman, personal communication). In one report (McCaffery 1996) BEC2/BCG as a fixed combination induced more humoral responses than the use of other adjuvants or the Mab alone. 12/102 30 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Studies in SCLC: GD3 is a ganglioside of particular interest as a target for immunotherapy in SCLC as it is present on SCLC rumor cells (Grant et al., 1996; Cordon-Cardo, personal communication). A pilot study in limited disease (LD) and extensive disease (ED) SCLC patients (n = 8) receiving i.d. BEC2, combined with BCG adjuvant, was reported during the ASCO 1996 meeting. The only grade 3 toxicity was local skin reactions likely related to BCG vaccination. Grade 2 toxicity were mainly fever and malaise. The median survival has not been reached after 36 months (Grant et al., 1996). Updated summary information (n = 15) for the BEC2 trial in SCLC (Grant 1997) Patients with Limited Disease (n = 8)
------------------------------------------------------------------------------------------------ Diagnosis End of induction Vaccination Last FU Survival Cause of death (dd/mm/yy) therapy (dd/mm/yy) (dd/mm/yy) (dd/mm/yy) status ------------------------------------------------------------------------------------------------ 07/04/92 17/09/92 12/02/93 15/04/97 dead progression ------------------------------------------------------------------------------------------------ 28/09/92 15/03/93 31/08/93 13/06/97 alive ------------------------------------------------------------------------------------------------ 13/11/92 05/04/93 27/07/93 29/06/97 alive ------------------------------------------------------------------------------------------------ 11/11/94 24/04/95 13/10/95 29/07/96 dead chronic obstructive pulmonary disease ------------------------------------------------------------------------------------------------ 19/05/95 15/10/95 02/02/96 15/04/97 alive ------------------------------------------------------------------------------------------------ 08/09/95 ??/??/95 26/04/96 08/04/97 alive ------------------------------------------------------------------------------------------------ 04/10/95 15/03/96 31/05/96 03/01/97 dead progression ------------------------------------------------------------------------------------------------ 21/07/95 19/02/96 07/06/96 07/01/97 dead progression ------------------------------------------------------------------------------------------------
13/102 31 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Patients with Extensive Disease (n = 7)
------------------------------------------------------------------------------------------------ Diagnosis End of induction Vaccination Last FU Survival Cause of death (dd/mm/yy) therapy (dd/mm/yy) (dd/mm/yy) (dd/mm/yy) status ------------------------------------------------------------------------------------------------ 06/07/92 08/01/93 12/02/93 24/03/94 dead progression ------------------------------------------------------------------------------------------------ ??/10/92 05/10/93 01/06/93 02/07/97 alive ------------------------------------------------------------------------------------------------ ??/09/92 22/03/93 15/06/93 18/02/94 dead progression ------------------------------------------------------------------------------------------------ 05/07/94 15/06/95 07/12/95 19/02/96 dead motor vehicle accident ------------------------------------------------------------------------------------------------ 06/03/95 01/07/95 08/09/95 04/01/96 dead progression ------------------------------------------------------------------------------------------------ 08/12/95 29/03/96 17/05/96 24/06/97 alive ------------------------------------------------------------------------------------------------ ??/12/95 15/03/96 07/06/96 30/09/96 dead progression ------------------------------------------------------------------------------------------------
The 1997 toxicity and serology profiles remain essentially unchanged from that reported in 1996. All of the above data suggest that the GD3 ganglioside expressed by melanoma and SCLC tumors are relevant targets for immune therapy using BEC2 and this study will further investigate that opportunity in LD SCLC patients. 14/102 32 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 3. OBJECTIVES The trial is designed to test the impact of an adjuvant BEC2/BCG vaccination of LD SCLC patients on survival. Secondary endpoints are "Progression free survival", Safety, QoL and Health Economics. Additional ancillary studies on Biological Efficacy will be performed. 4. TRIAL DESIGN 4.1 GENERAL DESIGN This is a stratified randomized prospective international intergroup phase III trial. Patients are registered into the study after establishing the diagnosis of primary LD SCLC before the start of the induction therapy or within the first cycle of induction therapy, given that this therapy is according to what is mandatory by the protocol. 4.2 TREATMENT REGIMENS Induction therapy Each participating center will decide on one of the following three options of first line chemotherapy, of which 4 or 5 cycles will be given: Cisplatin (60 - 100 mg/m(carat)2, day 1) + VP 16 (80 - 120 mg/ m(carat)2, day 1,2 and 3); OR Carboplatin (AUC 4 - 6)* + VP 16 (80 - 120 mg/ m(carat)2, day 1,2 and 3); OR Cyclophosphamide (>= 1000 mg/ m(carat)2, day 1) + Doxorubicin (>= 40 mg/m(carat)2, day 1) + Etoposide (80 - 120 mg/ m(carat)2, day 1, 2 and 3); Chest radiotherapy is mandatory (according to local policy, concomitant or sequential) Prophylactic cranial irradiation is highly recommended for patients with complete response. * Dose (mg) = target AUC (4 - 6) x (Glomerular filtration rate + 25). GFR is based on the Cockroft-Gault formula for creatinine clearance: (140-age) X (weight in kg) GFR = ------------------------------ x 0.85 (female) or x 1.00 (male) 72 x serum creatinine mg/100ml 15/102 33 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Trial treatment: Timing: After 5, to a maximum of 7 months from diagnosis and within 6 weeks after completion of ALL induction therapy, responding patients will be RANDOMIZED: STANDARD ARM (OBSERVATION COHORT): Best supportive care, but no cancer specific therapy (cytotoxic, radiation or other tumor reductive therapy) can be given until documented progression of disease EXPERIMENTAL ARM (VACCINATION COHORT): BEC2 (2.5 mg) + BCG intradermal injections (5 in total) at first day of week 0, 2, 4, 6 and 10. Treatment will always consist of 5 vaccinations over a period of 10 to 12 weeks unless one of the following should occur: o intolerable toxicity precluding further treatment o progression of disease o patient refusal o occurrence of pregnancy Patients discontinuing therapy in the absence of progression should not receive any other cancer treatment before their disease progresses, unless this is clearly not in the interest of the patient. If a patient has not continued to present him-/herself in the course of the study, the investigator must determine the reason and the circumstances as completely and accurately as possible. 4.3 STRATIFICATION AT RANDOMIZATION Patients will be stratified by institution, Karnofsky performance status (60-70% versus 80-100%), induction therapy ((VP16 in combination with Cis or Carbo) vs. CDE), radiation (concomitant vs. sequential) and response to induction therapy (CR versus PR) using the minimization technique (Pocock & Simon 1975). 16/102 34 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 5. PATIENT POPULATION Please note that there are two time points in the trial where inclusion/exclusion criteria will be checked: REGISTRATION * RANDOMIZATION (after restaging) * within one month from start of induction therapy is allowed. However, it is preferred to register before first line treatment Before patient registration in the trial, written informed consent must be obtained and documented according to national and local regulatory requirements and the local rules followed in the institution. = A patient who has not been registered will not be accepted for randomization. 5.1 AT REGISTRATION 5.1.1 INCLUSION CRITERIA o Histo - cytological proven SCLC o Limited disease (VA classification, Zelen 1973) o Age >= 18years o Karnofsky performance status >=60% (Appendix I) o Patient should be fit enough to receive adequate chemo-radiotherapy treatment o Written informed consent 5.1.2 EXCLUSION CRITERIA o Prior surgery, chemo-and/or radiotherapy for SCLC o History of tuberculosis o Known to be HIV positive o Severe active infections such as hepatitis B o Splenectomy or spleen radiation in history o Prior therapy with proteins of murine origin o Investigational agent or immune therapy within 1 month prior to start induction therapy o Serious unstable chronic illnesses o Chronic use of SYSTEMIC antihistaminics, NSAID or systemic corticosteroids 17/102 35 [LOGO] The SILVA study - -------------------------------------------------------------------------------- o Any previous malignancy except adequately treated CIS of cervix or non melanoma skin cancer or if previous malignancy was more than 5 years prior and there are no signs of recurrence o Pregnancy, breast feeding or absence of adequate contraception for fertile patients. o Any psychological, familial, sociological or geographical condition potentially hampering compliance with the study protocol and follow-up schedule; those conditions should be assessed with the patient before registration in the trial. 5.2 AT RANDOMIZATION 5.2.1 INCLUSION CRITERIA o Patient completed adequate first line chemo-radiotherapy treatment as mandated by the protocol o Patients with clinical response at restaging (CR or PR) according to the WHO handbook, Geneva 1979 o Purified Protein Derivative - negative to >= 5 TU (Tuberculin Units), see Appendix IX o Karnofsky performance status >= 60% (Appendix I) o Adequate bone marrow, liver, heart and renal functions: ASAT (GOT), serum creatinine< 1.5 x upper normal laboratory value, WBC count> 3.0 x 10(carat)9/1 and platelets count> 100 x 10(carat)9/1. 5.2.2 EXCLUSION CRITERIA o Serious unstable chronic illnesses o Chronic use of SYSTEMIC antihistaminics, NSAID or systemic corticosteroids o Active infections requiring SYSTEMIC antibiotics, antiviral, or antifungal treatments 18/102 36 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 6. DRUG INFORMATION 6.1 GENERAL INFORMATION The BEC2 study agent, an anti-idiotypic murine monoclonal antibody, is released for clinical use by ImClone Systems Inc., USA under appropriate manufacturing conditions as those specified and stipulated in the United States Code of Federal Regulations (US 21 CRF) and all guideline documents issued by the US Food and Drug Administration as they pertain to biologic and biotechnology-derived drugs as an injectable liquid in single use vials. Each vial is designed to deliver 1.0 ml of a preservative-free solution containing 2.5 mg/ml of study agent. BEC2 will be supplied free of charge to the patient. BCG study agents consist of one amber glass vial containing 1.5 mg of a lyophilized powder and one vial containing 1.50 mL of an accompanying preservative-free BCG diluent manufactured and released for clinical studies by Pasteur Merieux Connaught, Canada. The lyophilized powder is an attenuated strain of Mycobacterium bovis [Bacillus Calmette Guerin (BCG)] containing 8 - 32 x 10(carat)6 colony-forming units (CFU)/mL when reconstituted with 1.50 mL of BCG diluent. The BCG diluent consists of preservative-free phosphate buffered normal saline (PBS) plus a surfactant (Tween 80) in a single use vial. The BCG study agents will be supplied free of charge to the patient. For the EORTC 08971 study, a single-dose vaccine package consisting of instructions for preparation of the BEC2/BCG vaccine and five vials [1 each of BEC2 for injection, lyophilized BCG powder, BCG diluent, preservative-free PBS and a sterile empty vial]. The PBS and sterile, empty vial are additional study supplies needed for the preparation of the BEC2/BCG vaccine. Each of the five vials is individually labeled and the vaccine package is labeled in a tamper-evident manner. Investigators are NOT to use any vaccine package or components of a vaccine package in which the tamper-evident seal is broken. The vaccine package will be supplied free of charge to the patient. 6.2 BEC2/BCG VACCINE PREPARATION The BEC2/BCG vaccine will be prepared for administration by reconstituting the BCG powder with BCG diluent and mixing appropriately. Three different volumes of BCG diluent are to be used to reconstitute the BCG powder, 0.30 mL for Treatment 1, 1.20 mL for Treatment 2, and 1.50 mL for Treatment 3, 4, and 5, creating a reconstituted BCG solutions containing l.0x10(carat)8, 2.5,x10(carat)7, and 2.0x10(carat)7 CFU/mL respectively. For Treatments 1 and 2, 0.2 mL of the reconstituted BCG solution are to be mixed directly with BEC2 to create the BEC2/BCG vaccine (No intermediate dilution's of the reconstituted BCG solution are required for Treatments 1 and 2). Intermediate dilution's (1:4, 1:8 and 1:40) of the reconstituted BCG solution are required for Treatments 3, 4, and 5 prior to creating the BEC2/BCG vaccine. The intermediate dilution's are prepared with a syringe by combining 1.00 mL, 0.50 mL, and 0.10 mL of the reconstituted BCG solution with 3.00 mL, 3.50 mL, and 3.90 mL, respectively, of PBS in the sterile empty vial and mixing appropriately. Combine 0.2 mL (of either the reconstituted BCG solution for Treatments 1 and 2 or the intermediate dilution of BCG for Treatments 3, 4, and 5) with the 1 mL (2.5 mg) vial of BEC2 solution and mix appropriately. The final BCG concentrations in the BEC2/BCG vaccine will be 2.0x10(carat)7, 5.0x10(carat)6, 1.0x10(carat)6, 5.0x10(carat)5 and 1.0x10(carat)5 CFU/dose for Treatments 1 through 5 respectively. Suggested mixing procedures are summarized in the following table: 19/102 37 [LOGO] The SILVA study - -------------------------------------------------------------------------------- VOLUME REQUIREMENTS FOR BEC2/BCG VACCINE PREPARATION
- ------------------------------------------------------------------------------------------------------------------ STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 ------------------------------------------------------------------------------------------------ Treatment BCG diluent PBS added Reconstituted BCG Reconstituted or BEC2 BEC2/BCG Number added to to sterile added to sterile vial diluted BCG added to vaccine BCG vial BEC2 powder - ------------------------------------------------------------------------------------------------------------------ 1 0.30 mL 0.00 mL 0.00 mL 0.20 ML 1.00 mL 1.20 mL - ------------------------------------------------------------------------------------------------------------------ 2 1.20 mL 0.00 mL 0.00 mL 0.20 mL 1.00 mL 1.20 mL - ------------------------------------------------------------------------------------------------------------------ 3 1.50 mL 3.00 mL 1.00 mL 0.20 mL 1.00 mL 1.20 mL - ------------------------------------------------------------------------------------------------------------------ 4 l.50 mL 3.5O mL 0.5O mL 0.20 m1 l.OO mL l.20 mL - ------------------------------------------------------------------------------------------------------------------ 5 l.50 mL 3.9O mL 0.lO mL 0.2O mL 1.OO mL l.20 mL - ------------------------------------------------------------------------------------------------------------------ BEC2 alone N/A. N/A. N/A. N/A. 1.OO mL N/A. - ------------------------------------------------------------------------------------------------------------------
A detailed handout with information on the preparation of the vaccine will be distributed. NOTE: Only components of the BEC2/BCG vaccine package are to be used for the preparation of the BEC2/BCG vaccine. Under NO CIRCUMSTANCES are substitution of other components allowed for the preparation of the BEC2/BCG vaccine. The prepared BEC2/BCG vaccine must be refrigerated at +2(degree)C to +8(degree)C (+36(degree)F to +46(degree)F) temperatures and protected from ambient light prior to use. The immediate (within one hour of preparation) use of the BEC2/BCG vaccine is highly recommended. Each 1.2 mL of BEC2/BCG vaccine will be injected intradermally at multiple sites (for detailed instructions see Appendix XII). The BEC2/BCG vaccine must not be injected into limbs with no lymph nodes (surgical resection). Intravasal injection of the BEC2/BCG vaccine must be avoided under all circumstances. Any equipment, supplies or receptacles that the BEC2/BCG vaccine contacts should be disposed of at the investigational center as infectious, chemotherapy or biohazardous waste. CAUTION: - BCG is a live bacterial suspension and precautions must be taken for the appropriate handling and disposal. NEVER REMOVE THE RUBBER STOPPER FROM ANY VIAL CONTAINING LYOPHILIZED BCG POWDER OR BCG LIQUID. Simultaneous preparation of BCG under a sterile hood with any other drug is to be avoided. Following BCG preparation, disinfect the sterile hood by appropriate methods and allow adequate time to re-sterilize before subsequent use. PRECAUTION: - BCG is NOT to be administered to any patient as a single agent. Patients may only receive intradermal injections of either the combined BEC2/BCG vaccine or BEC2 alone (BEC2 may only be administered as a single agent to patients who have experienced a grade 4 skin reaction to the BCG component of the BEC2/BCG vaccine - see section 6.4). 20/102 38 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 6.3 STORAGE The BEC2/BCG vaccine package (containing 5 vials, 1 each of BEC2 for injection, lyophilized BCG powder, BCG diluent, preservative-free PBS, and a sterile, empty vial) must be stored under refrigeration at +2(degree)C to +8(degree)C (+36(degree)F to +46(degree)F) and protected from light. Do not freeze the BEC2/BCG vaccine package. The BEC2/BCG vaccine package must be kept in a secure, limited access storage area under the recommended storage conditions. 6.4 POSSIBLE ADVERSE EVENTS Allergic reactions may occur during or following the administration of BEC2 or BEC2/BCG vaccine. As a routine precaution, patients treated with BEC2 or BEC2/BCG vaccine will be observed for one hour after the injection of the vaccine with resuscitation equipment and other agents (epinephrine, prednisone equivalents, etc.) available. Should an allergic reaction to the BEC2 or BEC2/BCG vaccine occur, the patient must be treated according to the best available medical practices. Patients should be instructed to report any delayed reactions to the investigator immediately. NOTE - In the event that a patient experiences a grade 1 or 2 allergic reaction to BEC2 or BEC2/BCG vaccine, the patient may be pre-medicated with an antihistamine (i.e., Diphenhydramine HCL) prior to receiving the next injection of BEC2 or BEC2/BCG vaccine. Patients who experience a grade 3 or 4 allergic reaction to BEC2 or BEC2/BCG vaccine will have treatments terminated and be discontinued from the study. Allergy to any component of BEC2, including murine products or by-product, or to BCG, including monosodium glutamate or Tween 80, or grade 4 anaphylactic reactions to the BEC2/BCG vaccine are contraindications to vaccination. PRECAUTION: - Concomitant use of antimicrobial or immunosuppressive agents may interfere with the adjuvant activity of BCG. The concomitant use of steroids with BEC2/BCG vaccine may cause a BCG related systemic infection which may be treated with antituberculosis medication. Immunisation with BEC2/BCG vaccine should be deferred during the course of a moderate or severe febrile illness or acute infection. Expected adverse event of BEC2/BCG for this study include injection side reaction of pain, inflammation, hematoma, hemorrhageor grade 3 skin toxicities of ulceration or scar formation, in addition to regional lymphadenopathy. Adverse events reported for all indications of the BCG product include lymphadenopathy, suppurative lymphadenitis, osteomyelitis, arthritis, lupoid reactions, and rare occurrences of disseminated BCG infections, granulomatous illness (e.g. mild fever to severe hepatitis or pneumonitis; single cases were lethal in immunocompromised patients). 21/102 39 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 6.5 PACKAGING AND LABELING OF STUDY MEDICATION The study medication will be packaged and each vial will be labeled. Components of the labels will be: Content, Volume, Lot Number, Expire date, storage conditions, mentioning the investigational usage only, warnings. 6.6 CONCOMITANT TREATMENTS No concomitant chemotherapy, immunotherapy, radiation therapy, immune-suppressant therapy, systemic corticosteroids or chronic use of anti-histamines will be allowed during secondary therapy. Analgesics, sedatives, antibiotics, antihistamines or other medication as well as red blood cells, platelet or fresh frozen plasma transfusions may be given to assist in the management of pain, infection, and other complications of the malignancy. All concomitant medications and any changes in these, will be recorded, from day of randomization until last follow-up visit, on the case report forms and in the patient's medical chart, noting the type of medication, the dose, duration, and indication. PRECAUTION: The concomitant use of steroids with BEC2/BCG may cause a BCG related systemic infection. If necessary, the infection may be treated with anti-tuberculosis drugs. NOTE: Concomitant antimicrobial or immunosuppressive agents may interfere with the adjuvant activity of BCG. 22/102 40 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 7. CLINICAL EVALUATION, LABORATORY TESTS AND FOLLOW-UP The initial clinical examination, evaluation of the disease as well as blood counts and serum chemistry should be performed within 14 days before the start of treatment. All investigations performed before this date must be repeated. 7.1 AT REGISTRATION - - Relevant medical history of the patient will be recorded - - Pathological proven SCLC - - Karnofsky performance status - - Chest X-ray (in two projections) - - Chest CT-scan (including supraclavicular lymphnodes) and upper abdomen CT (including adrenal glands) - - Brain CT- or MRI scan - - Bone scan and bone marrow examinations are strongly recommended - - Hematology including: Hb, WBC, differential, platelets - - Biochemistry including: serum creatinine, LDH, ASAT (GOT), sodium, potassium, calcium and glucose - - Screening tests for active infections (and if applicable (beta) HCG for fertile woman) 7.2 RESTAGING (WITHIN 6 WEEKS AFTER END OF INDUCTION THERAPY) - - Chest X-ray - - Chest CT-scan (including supraclavicular lymphnodes) and upper abdomen CT (including adrenal glands) - - No clinical evidence of distant metastases by physical examination - -------------------------------------------------------------------------------- Patients who completed ADEQUATE chemo-radiotherapy treatment and having a PR or CR at re-staging must be checked for randomization eligibility criteria. - -------------------------------------------------------------------------------- THE PPD SHOULD BE TESTED A.S.A.P. IN PATIENTS ELIGIBLE FOR RANDOMIZATION. 23/102 41 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 7.3 AT RANDOMIZATION (WITHIN 6 WEEKS AFTER THE END OF INDUCTION THERAPY) - - Purified Protein Derivative - negative to >= 5 TU (Tuberculin Units) - - Clinical examination should include Karnofsky Performance Status, weight and vital signs (temperature, pulse, blood pressure). - - Hematology including: Hb, WBC, differential, platelets - - Biochemistry including: serum creatinine, LDH, ASAT (GOT), sodium, potassium. calcium and glucose - - Serum sample for humoral response - - ECG (three lead) - - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) together with the EORTC Health Thermometer (see chapter 12) - - Economic evaluation assessment: concomitant medications and hospitalizations (see chapter 13) 7.4 FIRST 12 WEEKS AFTER RANDOMIZATION 7.4.1 VACCINATION COHORT Vaccination with BEC2/BCG is planned 5 times on day 1 of week 0, 2, 4, 6 and week 10: every attempt is made to do this on schedule. Should that not be possible for reasons other than toxicity, it should be accomplished not earlier than 1 day before or 2 days after the scheduled time point. In case of severe toxicity (NCIC-CTC grade 3 or 4) the administration of the next vaccination may be postponed by a total of two weeks throughout the whole vaccination period (Vaccination has to be completed within a total of 12 weeks). The decision if the next vaccination is postponed for some days or the vaccination is ceased at all, shall also incorporate the subjective perception of the individual patient. Before each vaccination: - Karnofsky performance status - Clinical symptoms reporting - Clinical signs of disease progression - Serum sample for humoral response At week 6: - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) together with the EORTC Health Thermometer 24/102 42 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Two weeks after last vaccination (week 12): - Karnofsky performance status - Clinical symptoms reporting - Clinical signs of disease progression - Serum sampling for humoral response - Chest X-ray - Hematology including: Hb, WBC, differential, platelets - Biochemistry including: serum creatinine, LDH, ASAT (GOT), sodium, potassium, calcium and glucose - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) together with the EORTC Health Thermometer - Economic evaluation assessment (concomitant medications and hospitalizations) 7.4.2 OBSERVATION COHORT 6 weeks after randomization: - Karnofsky performance status - Clinical symptoms reporting - Clinical signs of disease progression - Serum sample for humoral response - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) together with the EORTC Health Thermometer 12 weeks after randomization: - Kamofsky performance status - Clinical symptoms reporting - Clinical signs of disease progression - Serum sample for humoral response - Chest X-ray - Hematology including: Hb, WBC, differential, platelets - Biochemistry including: serum creatinine, LDH, ASAT (GOT), sodium, potassium, calcium and glucose - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) together with the EORTC Health Thermometer - Economic evaluation assessment (concomitant medications and hospitalizations) 25/102 43 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 7.5 DURING FOLLOW-UP 7.5.1 FIRST FU (6 MONTHS AFTER RANDOMIZATION) - Karnofsky performance status - Clinical symptoms reporting - Clinical signs of disease progression - Serum sample for humoral response - Chest X-ray - Hematology including: Hb. WBC, differential, platelets - Biochemistry including: serum creatinine, LDH, ASAT (GOT), sodium, potassium, calcium and glucose - EORTC Health thermometer - Economic evaluation assessment (concomitant medications and hospitalizations) 7.5.2 FURTHER FU (starting 9 months after randomization till progression of disease) 7.5.2.1 every 3 months - Karnofsky performance status - Clinical signs of disease progression - Chest X-ray - EORTC Health thermometer - Economic evaluation assessment (concomitant medications and hospitalizations) 7.5.2.2 every 6 months - Hematology including: Hb, WBC, differential, platelets - Quality of Life assessment: QLQ-C30 version 2.0 complemented with the Lung Module (QLQ-LC13) As soon as progression appears during disease evaluation, a new Chest CT-scan (including supraclavicular lymphnodes) and upper abdomen CT (including adrenal glands) should be done to confirm the progression of disease. 7.6 AFTER PROGRESSION OF THE DISEASE The patient should be followed every 3 months for survival. Additional anti-tumor therapy will be recorded together with the EORTC Health Thermometer and Economic evaluation assessments. 26/102 44 7.7 SUMMARY TABLE
- ----------------------------------------------------------------------------------------------- At At At registration restaging randominization - ----------------------------------------------------------------------------------------------- within 14 days for definition of timing within 14 days prior to start ref. to chapter 7.2 prior to start - ----------------------------------------------------------------------------------------------- Informed consent o - ----------------------------------------------------------------------------------------------- Histology / Cytology o - ----------------------------------------------------------------------------------------------- Medical history o ### - ----------------------------------------------------------------------------------------------- Clinical examination* o - ----------------------------------------------------------------------------------------------- Performance status o o - ----------------------------------------------------------------------------------------------- ECG o - ----------------------------------------------------------------------------------------------- Screening tests** o - ----------------------------------------------------------------------------------------------- Clinical Evidence of o Disease progression - ----------------------------------------------------------------------------------------------- Haematology*** o o - ----------------------------------------------------------------------------------------------- Serum chemistry**** o o - ----------------------------------------------------------------------------------------------- Blood sampling for o Humoral Response - ----------------------------------------------------------------------------------------------- PPD results # o - ----------------------------------------------------------------------------------------------- Chest X-ray o o - ----------------------------------------------------------------------------------------------- Chest CT-scan o o incl. upper abdomen - ----------------------------------------------------------------------------------------------- Quality of Life o - ----------------------------------------------------------------------------------------------- Health thermometer o - ----------------------------------------------------------------------------------------------- Economic evaluation o - ----------------------------------------------------------------------------------------------- Clinical symptoms o - ----------------------------------------------------------------------------------------------- Vaccination - ----------------------------------------------------------------------------------------------- First 12 weeks period After treatment - ----------------------------------------------------------------------------------------------------------------- week 0,2,4,6,10 week 6 and 12 first FU=6 until PD after PD months after every 3 months every 3 months random - ----------------------------------------------------------------------------------------------------------------- Informed consent - ----------------------------------------------------------------------------------------------------------------- Histology / Cytology - ----------------------------------------------------------------------------------------------------------------- Medical history - ----------------------------------------------------------------------------------------------------------------- Clinical examination* - ----------------------------------------------------------------------------------------------------------------- Performance status o o o o - ----------------------------------------------------------------------------------------------------------------- ECG - ----------------------------------------------------------------------------------------------------------------- Screening tests** - ----------------------------------------------------------------------------------------------------------------- Clinical Evidence of o o o o Disease progression - ----------------------------------------------------------------------------------------------------------------- Haematology*** (carat) o + - ----------------------------------------------------------------------------------------------------------------- Serum chemistry**** (carat) o - ----------------------------------------------------------------------------------------------------------------- Blood sampling for o o o Humoral Response - ----------------------------------------------------------------------------------------------------------------- PPD results # - ----------------------------------------------------------------------------------------------------------------- Chest X-ray (carat) o o - ----------------------------------------------------------------------------------------------------------------- Chest CT-scan @ incl. upper abdomen - ----------------------------------------------------------------------------------------------------------------- Quality of Life o # - ----------------------------------------------------------------------------------------------------------------- Health thermometer o o o o - ----------------------------------------------------------------------------------------------------------------- Economic evaluation (carat) o o o - ----------------------------------------------------------------------------------------------------------------- Clinical symptoms o o o - ----------------------------------------------------------------------------------------------------------------- Vaccination o - -----------------------------------------------------------------------------------------------------------------
## All inclusion and exclusion criteria should be fulfilled * Clinical examination including weight and vital signs (temperature, pulse blood pressure) ** Screening tests for active infections and if applicable also (beta)HCG *** Hematology includes hemoglobin, white blood cells, differential and platelets counts **** Biochemistry includes serum creatinine, LDH, ASAT (GOT), sodium, potassium, calcium and glucose # PPD results of the PPD test using a commercially available standard test (Appendix IX) (carat) Examinations to be performed only at week 12 @ As soon as progression appears during disease evaluation, a new Chest CT-scan (including supraclavicular lymphnodes) and upper abdomen CT (including adrenal glands) should be done to confirm the progression of disease. + Will be performed on a 6 monthly basis until progression of disease - -------------------------------------------------------------------------------- Only for vaccination cohort - -------------------------------------------------------------------------------- 27/102 45 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 8. MONITORING AND REPORTING OF ADVERSE EVENTS AND ADVERSE DRUG REACTIONS 8.1 DEFINITIONS Adverse Drug Reactions (ADR) (in the pre-marketing phase with new medicinal products) are all noxious and unintended responses to a medicinal product related to any dose. An Adverse Event (AE) is any untoward medical occurrence or experience in a patient or clinical investigation subject which occurs following the administration of the trial medication regardless of the dose or causal relationship. This can include any unfavorable and unintended signs (such as rash or enlarged liver), or symptoms (such as nausea or chest pain), an abnormal laboratory finding (including blood tests, x-rays or scans) or a disease temporarily associated with the use of the study medication. (Note: For the purpose of this trial, in an attempt to eliminate bias adverse events will be reported in both treatment cohorts i.e. in the observation cohort regardless of whether or not the patient received trial medication). Serious Adverse Events (SAE) or Serious Adverse Drug Reactions (SADR) are defined as any undesirable experience occurring to a patient, whether or not considered related to the investigational drug. Adverse events and adverse drug reactions which are considered as serious are those which result in: o death (excluding SCLC related death) o a life -threatening event (i.e. the patient was at immediate risk of death at the time the reaction was observed) o a permanently disabling event o hospitalization or prolongation of hospitalization o persistent or significant disability/incapacity o a congenital anomaly/birth defect 8.2 REPORTING ADVERSE EVENTS 8.2.1 DOCUMENTATION OF ADVERSE EVENTS Adverse events which occur during the induction therapy consisting of non-investigational treatment regimens do not need to be reported. All adverse events and serious adverse events will be monitored and reported in all patients (vaccination cohort and observation cohort). In this trial it was decided to define the AE observation period from randomization to the second follow up visit (6 months after randomization) for the following reasons. The investigational treatment is a vaccine and therefore is expected to act much longer in the patients organism than a small molecule. The vaccine can not be detected in the circulation by standard methods of pharmacokinetics, however, toxicity relating to the administered vaccine has to be monitored. From humoral response studies it is well known that all patients receiving BEC2/BCG vaccination will develop anti-BEC2-antibodies (= human anti murine antibodies [HAMA]) of the IgG-class within 6 28/102 46 [LOGO] The SILVA study - -------------------------------------------------------------------------------- weeks after vaccination at the latest. When high titters of HAMA are established there is rapid clearance of any protein molecule of murine origin. Thus, it has to be assumed that no BEC2 will be present in the patient after the establishment of HAMA, since it will be rapidly cleared. As a consequence, monitoring and reporting of all adverse events and all serious adverse events will be performed until 6 months after randomization. Any AE that occurs in the course of clinical study, must principally be monitored and followed until: - it has receded - pathological laboratory findings have returned to normal - steady state has been achieved or - it has been shown to be unrelated to the study medication 8.2.2 GENERAL EVALUATION OF SIDE-EFFECTS All reported adverse events should be graded according to the "Common Toxicity Criteria" defined by the NCI (US) and extended by the NCIC (Canada) (see Appendix V). Non hematological acute side effects will be assessed and reported separately for each cycle of therapy, and graded according to the "Common Toxicity Criteria" defined by the NCI (US) and extended by the NCIC (Canada) (see Appendix V). 8.2.3 TOXIC DEATHS Toxic death is defined as death due to toxicity. This must be reported on the summary form: the cause of death must be reported as "toxicity". The evaluation of toxic deaths is independent of the evaluation of response (patients can die from toxicity after a complete assessment of the response to therapy) 8.2.4 EVALUATION OF TOXICITY All patients who have been randomized will be included in overall toxicity analyses. 8.3 REPORTING PROCEDURES 8.3.1 REPORTING SERIOUS ADVERSE EVENTS (SAE) OR SERIOUS ADVERSE DRUG REACTIONS (SADR) All Serious Adverse Events (SAE) and Serious Adverse Drug Reactions (SADR) must be reported to the respective safety desk by fax within 24 hours of the initial observation of the event. Details should be documented on the specified Serious Adverse Event Form. Death related to SCLC is the primary end-point and therefore will be excluded from reporting. It should be recognized that Serious Adverse Events (SAE) and Serious Adverse Drug Reactions (SADR) are subject to rapid reporting to Regulatory Authorities by the sponsor (or any other party having taken over the sponsor's reporting obligations) of the countries participating in the trial (as defined by the national laws). This is not applicable to SAE or SADR which are considered unrelated to the study product whether expected or not. 29/102 47 [LOGO] The SILVA study - -------------------------------------------------------------------------------- In order to comply with regulatory reporting requirements, every possible effort should be made to submit the completed documentation of any reported serious adverse events or serious adverse drug reactions to the safety desk within 10 calendar days of the initial report of the event. ALL FORMS MUST BE DATED AND SIGNED BY THE RESPONSIBLE INVESTIGATOR. The assessment of causality is made by the investigator using the following as a guideline: UNRELATED: There is no temporal coincidence between intake of study medication and occurrence of the adverse event (e.g. no active medication was taken). or There is a temporal coincidence between the intake of study medication and occurrence of the adverse event, but the adverse event can be attributed to other obvious reasons (e.g. underlying disease, concomitant medication, other causal factors). Contribution by the study medication is excluded. REMOTE: There is a temporal coincidence between intake of study medication and occurrence of the adverse event, but there are one or more obvious other reasons which are known to explain the adverse event. A contribution of the study medication is unlikely (according to present scientific knowledge no pharmacological explanation is possible). POSSIBLE :There is a temporal coincidence between intake of study medication and occurrence of the adverse event. A contribution of the study medication is possible (e.g. due to the pharmacological properties of the study medication), but other explanations are also possible (e.g. underlying disease, concomitant medication). PROBABLE: There is a temporal coincidence between intake of study medication and occurrence of the adverse event. A contribution of the study medication is probable (e.g. due to the pharmacological properties of the study medication). Improvement or recovery is noted after withdrawal of study medication. Specific findings (e.g. positive allergy testing or antibodies against the study medication) definitely indicate a contribution by the study medication. NOT ASSESSABLE: The available information is insufficient to assess causality. 8.3.2 REPORTING NON-SERIOUS ADVERSE EVENTS (AE) AND NON-SERIOUS ADVERSE DRUG REACTIONS (ADR) All Adverse Events (AE) and Adverse Drug Reactions (ADR) will be recorded on the toxicity forms. The investigator will decide if those events are related to the medicinal product (i.e. unrelated, remote, possible, probable, and not assessable) and the decision will be recorded on the toxicity forms. PLEASE REPORT SERIOUS ADVERSE EVENTS BY FAX WITHIN 24 HOURS OF INITIAL OBSERVATION TO THE LOCAL SAFETY DESK (REFERENCES SEE PAGE 2). 30/102 48 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 9. REGISTRATION AND RANDOMIZATION PROCEDURES 9.1 PATIENT REGISTRATION Registration should be done by calling the Local Data Center from 9.00 AM to 6.00 PM from Monday through Friday (please find phone numbers on page 2). A patient will be registered by the Local Data Center after verification of eligibility criteria through the EuroCODE or the INTERNET network. Patient registration must be done within one month from start of induction therapy. A PATIENT WHO HAS NOT BEEN REGISTERED WILL NOT BE ACCEPTED FOR RANDOMIZATION. A list of questions to be answered during the registration procedure is included in the registration check-list, which is part of the case report forms. This check-list should be completed by the responsible investigator before the patient is registered. o protocol number? o institution number? o callers name? o name of the responsible investigator? o patient's initials (maximum 4 letters)? o patient's chart number (if available)? o patient's birth date (day/month/year)? o eligibility criteria: - all eligibility criteria will be checked; - actual values of the eligibility parameters will be requested when applicable o DATE foreseen for first line treatment? At the end of the registration procedure, a number will be allocated to the patient (patient sequential identification number). This number has to be recorded on the registration check-list, along with the date of registration. The sequential identification number attributed to the patient at the end of the registration procedure identifies the patient and must be reported on all case report forms. AFTER FIRST LINE TREATMENT, PATIENTS NEED TO BE RE-STAGED. PATIENTS WITH CR OR PR AT RE-STAGING MUST BE RANDOMIZED THROUGH THE FOLLOWING RANDOMIZATION PROCEDURE: 31/102 49 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 9.2 PATIENT RANDOMIZATION Randomization should be done by calling the Local Data Center from 9.00 AM to 6.00 PM from Monday through Friday (please find phone numbers on page 2). A patient will be randomized by the Local Data Center after verification of eligibility criteria through the EuroCODE or the INTERNET network. This must be done BEFORE the start of the investigational treatment A list of questions to be answered during the randomization procedure is included in the randomization check-list, which is part of the case report forms. This check-list should be completed by the responsible investigator before the patient is randomized. o protocol number ? o institution number ? o callers name ? o name of the responsible investigator ? o registration or randomization ? o patient's initials (maximum 4 letters) ? o patient's birth date (day/month/year) ? o eligibility criteria: - all eligibility criteria will be checked; - actual values of the eligibility parameters will be requested when applicable Allocation to the study arm will be automatically attributed. 32/102 50 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 10. FORMS AND PROCEDURES FOR COLLECTING DATA 10.1 CASE REPORT FORMS AND SCHEDULE FOR COMPLETION Data will be reported on the EORTC forms and faxed to the Local Data Center (see page 2) Original Case Report Forms will be collected at the end of the trial by the local monitor. Case report forms must be completed according to the following schedule: A. Before registration: o the patient must be registered by phone to the Local Data Center (page 31). o the following set of forms has to be completed and faxed to the Local Data Center: the registration check-list (form 1) the on-study form (form 2) a laboratory data form (form 3) The optimal way to work is to complete the registration check-list and, if possible, the above set of forms first, and to register the patient by calling the Local Data Center as soon as data are complete; the date of registration and patient sequential identification number are then completed on the check-list, and the whole set can be faxed to the Local Data Center within one week. B. At time of re-staging: o a re-staging form (form 4) C. At randomization: o the randomization check list (form 5) o QLQ-C30 (version 2.0) with the QLQ-LC13 o the Health Thermometer o Economic evaluation form (form 6) o a laboratory data form (form 3) o an clinical symptom form (form 7) The optimal way to work is to complete the randomization check-list and, if possible, the above set of forms first, and to randomize the patient by calling the Local Data Center as soon as data are complete; the date of randomization and patients treatment arm are then completed on the check-list, and the whole set can be faxed to the Local Data Center within one week. 33/102 51 [LOGO] The SILVA study - -------------------------------------------------------------------------------- D. First 12 weeks after randomization Vaccination cohort (week 0, 2, 4, 6, 10) o a treatment form for each period of vaccination, every 2 weeks (form 8) o an clinical symptom form for each period of vaccination, every 2 weeks (form 7) o the Health Thermometer (only at week 6) o QLQ-C30 (version 2.0) with the QLQ-LC13 (only at week 6) Observation cohort (week 6) o a "treatment" form (form 8) o an "clinical symptom" form (form 7) o the Health Thermometer o QLQ-C30 (version 2.0) with the QLQ-LC13 E. Week 12 and week 24 after randomization (for all patients) o an clinical symptom form (form 7) o Economic evaluation form (form 6) o a laboratory data form (form 3) o a disease evaluation form (form 9) o the Health Thermometer o QLQ-C30 (version 2.0) with the QLQ-LC13 (only at week 12) F. Further follow-up (starting 9 months after randomization till progression of disease) Every 3 months o a disease evaluation form (form 9) o the Health Thermometer o Economic evaluation form (form 6) 34/102 52 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Every 6 months o a laboratory data form (form 3) o QLQ-C30 (version 2.0) with the QLQ-LC13 G. After disease progression and upon patient death o a follow-up form (form 10) o the Health Thermometer o Economic evaluation form (form 6) o a death report (form 99) ALL FORMS MUST BE DATED AND SIGNED BY THE RESPONSIBLE INVESTIGATOR. 10.2 PRACTICAL CONSIDERATIONS AND DATA FLOW The investigator has to keep a written or electronic patient file for every patient participating in the clinical study. In this file the available demographic and medical information of a patient has to be documented (name, date of birth, sex, patient history, concomitant diseases and medication, examinations performed and clinical findings as mutually agreed upon forehand observed clinical symptoms (if applicable) etc.). It must be possible to identify each patient by using this patient file. The period during which the patient is participating in the clinical study must be clearly stated. Additionally, any other documents with source data, especially original print-outs of data that were generated by technical equipment have to be filed (e.g. laboratory value listings, ECG recordings etc.). All these documents have to bear at least patient initials, patient number and the printing date. The main objective is to obtain a complete documentation from each patient. The case report forms must be filled in completely and legibly (with either blue or black ball-point pen, acceptable for use on official documents) and signed by the investigator as soon as the requested information is available, according to the above described schedule. It is the responsibility of the investigator to check that all case report forms are FAXED to the Local Data Center and that they are completely and correctly filled out. Any amendments and corrections necessary shall be undertaken and countersigned by the investigator, stating the date of the amendment/correction. Errors must remain legible and may not be deleted with correction aids (e.g. Tipp.Ex). The investigator must state his/her reason for the correction of important data. In the case of a missing data/remarks, the entry spaces provided for in the CRF should be canceled out so as to avoid 35/102 53 [LOGO] The SILVA study - -------------------------------------------------------------------------------- unnecessary follow up inquiries. The CRF's are documents and must be suitable for submission to authorities. The original copy will be collected at the end of the study (when number of events is reached) and they will be returned to the sponsors. A copy of these final CRF's must be kept at the investigators site, at the local data center and at the EORTC data center. The EORTC Data Center will perform consistency checks on the CRF's and issue Query Forms in case of inconsistent data. Those Query Forms must be answered during the monitoring visits and signed by the investigator. The original must stay at the investigators site together with the original, corrected CRF's and a copy of both forms (CRF and Query) must be faxed back to the EORTC Data Center. The original of the CRF's at the investigator's site may not be modified unless modifications are reported on a Query From, and the Query Form reference is indicated on the CRF. The investigator shall insure that documents forwarded contain no mention of any patient names. It shall be the duty of the investigator to ensure that the patient-identification sheets are stored at least 15 years beyond the end of the clinical study. All original patient files must be stored for the longest possible time permitted by the regulations of the hospital, research institute, or practice in question. 36/102 54 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 11. STATISTICAL CONSIDERATIONS 11.1 PRIMARY AND SECONDARY ENDPOINTS Primary endpoint is overall survival, calculated by the time interval (in days) from randomization to death regardless of cause. The survival times for patients who are alive at the end of the study are censored. Secondary endpoints are progression-free survival, safety, QoL and Health Economics. Progression free survival is defined by the time interval from randomization to disease progression or death (whichever occurs first). The progression free survival time of patients who are alive at the end of the study with no disease progression are censored. Progression-free survival data are interval censored. Therefore the determination of disease progression has to follow an exact time schedule, which is the same for all patients. Follow-up examinations will be done every 3 months until death After progression the patient will be followed up for determination of survival. QoL will be evaluated at randomization, at 12 weeks and then six monthly until progression. The Health Thermometer and resource utilization data will be collected at randomization and then every 3 months until patients death. 11.2 SAMPLE SIZE DETERMINATION The patients are recruited at diagnosis of LD SCLC. After completion of induction therapy, patients with CR or PR (fulfilling all inclusion / exclusion criteria) will be randomized. These two phases will be referred to as "registration phase" and "randomization phase". To detect a 40% increase in the median duration of survival in the BEC2/BCG arm, 376 deaths are necessary, using a two-sided (alpha) of 5% (Collet 1996) and a power of 90% (allowing for one interim analysis as described in section 11.3.3) Assuming a median survival in the observation group of 15 months (since randomization), a randomization phase of 2 years and another 2 years of follow-up after randomizing the last patient, an estimate of 10% for drop-outs, 570 patients should be randomized and a number of about 820 patients to be registered (assuming that about 70% of enrolled patients will be eligible for randomization). The analysis will be performed when 376 deaths have been observed among the randomized patients. These figures allow for one interim analysis as described in section 11.3.3. 37/102 55 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 11.3 DESCRIPTION OF STATISTICAL ANALYSIS Comparison at baseline will be assessed in a descriptive manner. 11.3.1 PRIMARY ANALYSIS The primary analysis of efficacy will be performed on all randomized patients according to the intention-to-treat principle. Differences in survival will be assessed by the log-rank test. Survival curves are calculated for each treatment group with Kaplan-Meier estimates. 11.3.2 SUPPORTIVE ANALYSES o Same as 11.3.1, based on all eligible patients (according to the inclusion / exclusion criteria), irrespective of the compliance to protocol treatment. o A multivariate Cox proportional hazards model (Cox, 1970) with a backward variable selection procedure at the 5% level of significance will explore the prognostic value of the following variables: age (as a continuous variable), gender, Karnofsky performance status (60-70 vs. 80-100), induction therapy (VP16 in combination with Cis or Carbo vs. CDE), radiation (concomitant vs. sequential), the continent (Europe vs. North America vs. Australia), LDH level, Na level, Ca level, serum creatinine, WBC and WBC subsets count and thrombocytes count. The treatment effect, adjusted for the significant factors in the Cox model, will also be estimated and reported. The assumption of proportional hazards will be checked. This Cox model will also explore the effect of the interaction of these covariates with randomized treatment in order to assess whether the treatment comparisons are consistent across different values of the covariates. o All explorative tests will be performed two-sided at a significance level fixed at (alpha) = 5 %. 11.3.3 INTERIM ANALYSIS The statistician of the trial will monitor the total number of deaths. One interim analysis will be conducted when a total of 80 deaths are reported. The analysis report will present all aspects of the trial. An alpha-spending function (Lan and DeMets, 1983) (in order to be flexible with respect to the timing of the analysis) with an O'Brien-Fleming boundary (O'Brien and Fleming, 1979) will be used. For example, if the interim analysis is performed when a total of exactly 80 deaths are reported, the P value should be less than 0.000021 in order to statistically conclude a difference between the two treatment arms. In this case, the final analysis will be performed with a significance value of 0.04999. The nominal significance levels, however, will be calculated using the program EaST. If the interim analysis shows statistically significant results, the IDMC will advise the SILVA Steering Committee to consider early disclosure of the results. As for all other reports, besides the report which will be sent to the IDMC, no efficacy data per treatment arm will be presented. 38/102 56 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 11.3.4 SAFETY Incidence and type of clinical symptoms and side effects will be summarized by treatment groups. We anticipate an underestimation of adverse events in the control arm because of difference in follow-up schedule during the first 12 weeks. A descriptive report of adverse events will be performed. 11.3.5 QUALITY OF LIFE ASSESSMENT Data will be scored according to the algorithm described in the EORTC QLQ-C30 scoring manual. All scales and single items are scored on categorical scales and linearly transformed to 0-100 scales where: o A high score for a functional scale represents a high or healthy level of functioning. o A high score for the global health status/QoL represents high QoL. o A high score for a symptom scale or item represents a high level of symptomatology/problems Data will be analyzed using descriptive statistics for the subscales and single items for each study group at each of the assessment points. Compliance of completing QoL questionnaires will be investigated at each time point. The global health status/QoL scale (EORTC Scoring Procedures Manual) will be used as an overall measure for QoL. Quality of Life between the two treatment groups will be compared using the longitudinal mixed data model (PROC Mixed in SAS). The model will allow the change of QoL in the two groups over time to be investigated. The main effects for demographic and clinical factors will also be analyzed (see factors mentioned in 11.3.2). Mean group scores on the EORTC Health Thermometer will be transformed to a utility Time Trade-Off score using a power function (Stiggelbout et al., 1996). These adjusted scores will be used as the quality adjusted factor in the cost-utility analysis. 39/102 57 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 11.3.6 HEALTH ECONOMICS DATA ANALYSIS Life years saved will be calculated either by non-parametric approach or by a parametric approach depending on the shape of distribution. The identified resource units and the effectiveness variables are the basis to calculate incremental cost-effectiveness and cost-utility ratios. The robustness of the results will be examined by extensive sensitivity analysis. In the light of insufficient knowledge about the main sources of uncertainty in the data, one approach to this will be to use threshold analysis, where critical values (i.e. such that change the direction of the results) of the variables will be determined. Another approach will be to use the endpoints of confidence intervals for data collected in the clinical trial to identify the range of values to test, combined with high and low boundary estimates for "deterministic" data for variables taken from outside the trial (i.e. cost data). 11.3.7 INDEPENDENT DATA MONITORING COMMITTEE An Independent Data Monitoring Committee (IDMC) will be established comprising of at least 5 independent experts (2 medical oncologists, two immunotherapists and one statistician) who have no conflict of interest and agree with the outline of the protocol. None of the members of the IDMC should be among the participants in the trial. The committee will meet when the interim analysis has been performed by the statistician of the trial. All possible aspects of the trial will be the subject of the interim analysis (see section 11.3.3). Following this meeting, the IDMC will report to the Steering Committee and may recommend changes in the conduct of the trial. The IDMC may call additional meetings if at any time there is concern about any aspect of the trial. All data presented at the meetings will be considered confidential. 40/102 58 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 12. QUALITY OF LIFE EVALUATION Reducing mortality and morbidity is still the most important factor in clinical research. Nevertheless, issues such as reducing side effects, symptom relief and patients satisfaction have also become relevant parameters in the evaluation of medical strategies. Cancer treatments may produce adverse effects and diminish the QoL even when survival is extended. Progress in the acceptance of new cancer therapies is sometimes critically dependent on their QoL consequences. Thus, formal assessment of QoL is important because mere extension of survival may not be directly correlated with an improved QoL. Health related QoL is a multidimensional concept which represents the physiological, psychological and social influences of the disease and the therapeutic process from the patients perspective (Schipper 1990). It comprises four principal components: physical, psychological and social well-being, and daily-life functioning. 12.1 OBJECTIVES In this study QoL is a secondary endpoint. The main objective of QoL assessment within this clinical trial is to determine the impact of vaccination on overall health/QoL. The H(o) hypothesis will be tested that there is no difference between patients in both arms during and after treatment. A secondary objective is to evaluate the effect of vaccination on the various symptoms and functioning scales as treatment related side-effects may have a (temporary) negative influence on the health related domains of QoL of these patients. The aim of QoL evaluation in this study is to get a better understanding of the effects of vaccination in terms of frequency and degree of treatment related side-effects from the perspective of the patients. For this purpose a detailed questionnaire including symptoms and functioning will be used. Since a cost-effectiveness analysis will also be performed in this study it is relevant to combine the three outcome measures, i.e., length of life, QoL and economic aspects of the two treatment arms in one overall outcome measure such as quality and cost adjusted survival by using e.g. a Quality Adjusted Life Years (QALY) model. In order to be able to do this, a valuation of the health related QoL is needed. For this purpose the EORTC Health Thermometer will be used, which is a single question. 12.2 QUESTIONNAIRE The instruments used are the EORTC core questionnaire (QLQ-C30 version 2.0), the lung cancer module QLQ-LC13) and the EORTC Health Thermometer. The QLQ-C30 is a well-validated and accepted instrument to measure various domains that constitute QoL. It is a self-administered questionnaire consisting of 30 questions. It incorporates 5 functional scales, 3 symptom scales, and a global health/QoL scale. The remaining single items assess additional symptoms commonly reported by cancer patients, as well as the perceived financial impact of disease and treatment. All scales and single items meet the standards for reliability. The reliability and validity of the questionnaire is highly consistent across different language-cultural groups (Aaronson et al., 1993; 1994). 41/102 59 [LOGO] The SILVA study - -------------------------------------------------------------------------------- The QLQ-C30 will be complemented by the EORTC lung module (QLQ-LC13). This 13-item module (Bergmann et al., 1994) comprises one multi-item scale and a series of single items assessing lung cancer-associated symptoms and side effects from conventional therapy, which has been developed to assess disease specific symptoms in lung cancer patients. The EORTC Health Thermometer comprises a single question in which the patient is asked to rate his/her current health related QoL on a 0 to 100 scale, where 100 stands for "perfect health" and 0 for "worst imaginable health". All instruments can be found in Appendix III of this protocol. 12.3 DESIGN QoL will be evaluated in a longitudinal design in all patients entered in this study. Baseline assessment will be performed at or prior to randomization. Subsequent assessments will take place at week 6 and 12 after randomization. Subsequent assessments will be performed every 6 months until progression. Since the EORTC Health Thermometer will be used to adjust survival taking into account QoL, it is imperative that this is assessed on a more regular basis. Therefore the EORTC Health Thermometer will be used during follow-up at all timepoints in which clinical data will be collected (see Appendix III). 12.4 QOL DATA COLLECTION QLQ-C30 questionnaires must be filled out at the hospital when the patients comes to the hospital for a scheduled visit. The questionnaire will be handed out to the patients by the investigator or a study nurse prior to seeing the doctor for clinical evaluations. Patients will be asked to fill out the questionnaires as completely and accurately as possible. The average time to complete the entire questionnaire is approximately 10-15 minutes. The compliance of the QoL assessments will be reviewed twice a year and will be a part of the descriptive report by Data Center for the Group's plenary sessions. Mastercopies of the QoL questionnaires (EORTC QLQ-C30, the QLQ-LC13, and the EORTC Health Thermometer) will be sent to the institution together with CRF's. The clinical forms will include a question whether the QoL forms have been filled in -and if not, the reason why. Guidelines for the administration of QLQ-C30 and QLQ-LC13 questionnaires are added in Appendix III. 42/102 60 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 13. HEALTH ECONOMICS Lung cancer is one of the leading causes of cancer deaths throughout the world, particularly among people aged 60 and older. Small cell lung cancer (SCLC) represents approximately 20-25% of all lung cancers (Evans et al. 1996; Rosenthal et al, 1992; Onkos 1995). Approximately 40% of patients who are diagnosed with SCLC have limited-stage disease (Onkos 1995). The median survival is short and long-term survivors are uncommon. In view of poor survival rates between 13 and 16 months for patients with limited disease (Rosenthal et al, 1992), even with aggressive combined modality treatment, the cost/outcome relation of potentially expensive therapies is an issue which needs to be addressed. Currently there are only few evaluations available on the costs of care in SCLC. According to a Canadian study (Evans et al, 1995), diagnosis and initial treatment of limited disease SCLC incurred average direct costs of $18691 per case (reported in 1988 Canadian dollars). Annual follow up costs after the first year amount to $944. The costs to determine relapse are established to be $1590, while palliative radiotherapy and terminal care account for $10544. That means, about 40% of the overall costs are associated with end of life care. From the governments or payers perspective in Canada the main cost driver in the management of SCLC is hospitalization. According to an Australian analysis (Rosenthal et al, 1992), the direct median overall cost per patient for limited disease SCLC is $18234 (reported in 1990 Australian dollars), and again hospitalization is identified to be the main cost component. In the Australian setting, the relative proportions of overall costs for initial chemotherapy, radiotherapy and bed-days are 16%, 19% and 38% respectively. The remaining expenditures relate to investigations (7%), follow up and the management of relapse (12%). The treatment costs of terminal care have not been considered in this evaluation. Finally, in an North American study (Baker et al, 1991) the Continuous Medicare History Sample File is used to derive an estimate of the lifetime direct medical expenses attributable to lung cancer without distinction of cancer cell type and stage. In agreement with the other analyses, inpatient hospital care constitutes anew the major source of expense. 13.1 OBJECTIVES In the setting of this clinical trial, only data on the quantities of resources consumed will be collected, without any attempt at attaching pecuniary values to it. In a further step, however, the main costs of vaccination treatment versus observation will be calculated from the payer's perspective. As unit costs for the various types of resources there will be used official reimbursement rates, fees or charges taken from official fee schedules for various procedures and services, hospital acquisition prices for drugs, etc. Total average cost will be calculated as the sum of the various resources multiplied with their unit costs. If indicated by the outcomes of the clinical trial, cost-effectiveness and cost-utility analysis will be performed by relating the incremental costs for the treatment group compared to the observation group to the different outcomes. 43/102 61 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 13.2 HEALTH ECONOMIC VARIABLES Resource Utilization: - -------------------------------------------------------------------------------- Concomitant drugs - generic name - galenic form at each visit after - dose randomization - duration of therapy - -------------------------------------------------------------------------------- Hospitalizations - number of hospitalizations at each visit after - length of stay randomization - ward - reasons for admission - -------------------------------------------------------------------------------- Additional anti-tumor - type of therapy after progression therapy - doses - schedules - -------------------------------------------------------------------------------- Vaccination therapy starts only after completion of conventional treatment and has no impact on the initial treatment phase. Therefore, the economic features of chemotherapy and radiation are not considered in this study. Data collection on resource consumption centers on medication, therapeutic measures, and hospitalization, because a) this information can be measured without any change of clinical study design, b) any outpatient resource utilization during the symptom free follow up period is expected to be relatively low and irrespective of previous therapy (the investigations are essentially protocol driven), and c) in the course of the disease, hospitalization is the main cost component. Effectiveness: - -------------------------------------------------------------------------------- Life years gained - comparison of overall to be described retrospec- survival tively at the time of data analysis - -------------------------------------------------------------------------------- Quality Adjusted Life - health state valuation Chapter 12 Years gained (QALY's) via rating scale (Health Thermometer) - -------------------------------------------------------------------------------- 44/102 62 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 14. STEERING COMMITTEE The steering committee will be composed of the Chairman of the trial, a representative of each cooperative group, a representative of the EORTC Data Center, the statistician of the trial, a representative of Merck KGaA and a representative of ImClone Systems Inc. They will be responsible for the conduct of the study at the operational level. This incorporates the review of the progress of the trial, discussion of the safety reports and any other aspects of the trial except of efficacy data. Also the writing and approval of amendments based on mutual agreement is to be done by this group. The Steering Committee will meet every 6 months. Telephone conferences shall be held if necessary. All activities of the Steering committee shall be documented by minutes which have to be approved by all members of the committee. 15. BIOLOGICAL EFFICACY GROUP The biological efficacy group will be responsible for the set up and coordination of the "ancillary studies". Centers which run such studies will be represented in this group (active members) as well as permanent advisors. This group shall meet on a regular basis. 16. QUALITY ASSURANCE It is agreed that the course of the clinical study shall be followed up at regular intervals by the responsible monitors. They, as well as the representatives of Merck KGaA and Imclone Inc. or designees and the appropriate regulatory authority, are permitted to inspect the study documents (study protocol, CRF's, study medication, original study-relevant patient's records). All patient data shall be treated confidentially. 16.1 CONTROL OF DATA CONSISTENCY Data forms will be entered in the database of the EORTC Data Center by a double data entry procedure. Computerized and manual consistency checks will be performed on newly entered forms; Query Forms will be issued in case of inconsistencies. Consistent forms will be validated by the Data Manager to be entered on the master database. Inconsistent forms will be kept "on-hold" until full resolution of inconsistencies. 45/102 63 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 16.2 EXTERNAL REVIEW OF RESPONSES Two external boards will review the primary diagnosis. restaging and relapse data. Extra-mural review of radiology Two independent radiologists shall review all CT scans from the following time points: o Primary Diagnosis o Restaging o Time of Relapse If the extent of disease at relapse for one particular should suggest that there might have been a progress of disease at earlier follow ups, X-rays from all follow ups have to be reviewed from this case. Extra-mural review of pathology Two independent pathologists will review a set of representative slides (histology or cytology) which the diagnosis SCLC was based upon. For this reviewing original slides shall be sent to the reviewers and will be returned to the institution. Reviews will only be done of those patients who were randomized. 16.3 ON-SITE QUALITY CONTROL On-site quality control will be performed. The aim of these site visits will be: o to assess the consistency of the data reported on the case report forms with the source data o to resolve all previous unanswered queries This quality control will be carried out retrospectively, based on data already available at the Data Center. All modifications, amendments and/or additions will be reported on query forms. This will enable a complete documentation of the modifications brought to the original case report forms, in accordance with the GCP standards and the EORTC policy. 17. ETHICAL CONSIDERATIONS Before the start of the study, the study protocol shall be submitted to a recognized Ethics committee for approval/appraisal; the Ethics committee's written approval/appraisal of the study shall be appended to the study documents. Any serious reservations brought forward by the Ethics Committee against the performance of the clinical study in the present form must be resolved before the study is commenced. The membership of the Ethical committee should follow local guidelines and possibly meet the ICH requirements. 46/102 64 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 17.1 PATIENT PROTECTION The responsible investigator will ensure that this study is conducted in agreement with either the Declaration of Helsinki (Tokyo, Venice, Hong Kong and South Africa amendments), or the laws and regulations of the country, whichever provides the greatest protection of the patient. The protocol has been written, and the study will, be conducted according to the ICH-guidelines for Good Clinical Practice. The protocol will be approved by the EORTC Protocol Review Committee and by the Local, Regional or National Review Boards. For all countries involved: The national regulatory authorities will be notified of the clinical trial in accordance with the national laws and requirements. 17.2 SUBJECT IDENTIFICATION A sequential identification number will be automatically attributed to each patient registered in the trial. This number will identify the patient. However, in order to avoid identification errors, patients initials (maximum of 4 letters), date of birth and local chart number will be reported on the case report forms. 17.3 PATIENT INFORMATION An unconditional prerequisite for participation of a patient in the clinical study is his/her consent after having been informed about the following points: - - objectives of the study - - therapeutic effects of and potential adverse reactions to the study medication - - potential benefit of participation in the study and therapeutic alternatives - - risks and additional examinations that the study may entail - - for women, the warning that clinical studies may not be carried out in pregnant women and that pregnancy should therefore be avoided. If pregnancy occurs, the investigator must be notified immediately. - - possible risks upon discontinuation of the study - - procedure of the study, allocation to the individual treatment groups - - the expected duration of the patients participation in the trial - - the approximate number of patients involved in the trial - - permitted and non-permitted concomitant medication and dietary aspects 47/102 65 [LOGO] The SILVA study - -------------------------------------------------------------------------------- - - insurance coverage, mentioning that the patient may undertake additional medical treatment during the time period of vaccination only after consultation of the investigator - - voluntary nature of participation in the study and the possibility to withdraw from the study at any time without stating reasons and without any disadvantages - - opportunity for obtaining further information - - mention that the patient may not have taken part in any other clinical study during the past 30 days - - mention that any change in any concomitant medication must be reported to the investigator immediately - - consent for the forwarding of the anonymous case report forms to the monitors of the CRO's and the EORTC Data Center and later to Merck KGaA/Imclone Inc. and the possibility for the inspection of study-relevant data by third parties (e. g. Merck KGaA supervisory or regulatory agencies) in agreement with data-protection regulations - - permission from the patient for inspection of medical records in the strictest confidence by personnel appointed by Merck KGaA and Imclone Inc. and Regulatory Bodies. The investigator must inform the patient verbally. The information should be given both verbally as well as in writing. The wording must be chosen in such a way as for the content to be fully and readily understandable for laypersons. 17.4 PATIENT CONSENT For all countries: The consent of the patient to participate in the clinical study has to be given in writing prior to participation in the study. The consent shall be confirmed in the CRF by the investigator. The signed and dated declaration of informed consent shall remain at the investigator's site and must be stored in the patient file. This consent must be obtained in accordance with local governmental regulations and must be approved by the IRB/Ethical committee of the investigational center. A template of the patient information is enclosed in this protocol (Appendix IV). Documented informed consent must be obtained for all patients included in the study before they are registered at the EORTC Data Center. This must be done in accordance with the national and local regulatory requirements and the local rules followed in the institution. 48/102 66 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 18. INVESTIGATOR COMMITMENT STATEMENT Investigators will only be authorized to register patients in this trial when they have returned the following: o a commitment statement, indicating that they will fully comply with the protocol, including an estimation of their accrual, and a statement of conflict of interest disclosure form o a copy of the letter of acceptance of the protocol and informed consent by their local ethical committee o updated Curriculum Vitae o the list of the institutional laboratory normal ranges (for labs required by the protocol) As soon as all the documents have been received, the new investigator will be added to the "authorization list", and will be allowed to register patients in the trial. Patients registrations from centers not (yet) included on the authorization list will not be accepted. 18.1 CONFIDENTIALITY STATEMENT The investigator must agree to maintain the confidentiality of the study at all times and must not reveal information relating to the Investigator's Brochure, protocol, CRF's or associated documents without the express permission of both sponsors. 19. ADMINISTRATIVE RESPONSIBILITIES The Study Coordinator (in cooperation with the EORTC Data Center) will be responsible for writing the protocol, reviewing all case report forms and documenting his/her review on evaluation forms, discussing the contents of the reports with the Data Manager and/or the Statistician, the sponsors, and publishing the study results. He will also be generally responsible for answering all clinical questions concerning eligibility, treatment, and evaluation of the patients. STUDY COORDINATOR: PROF. G. GIACCONE The EORTC Data Center will be responsible for reviewing the protocol, collecting case report forms, controlling the quality of the reported data, and generating reports and analyses in cooperation with the Study Coordinator. All methodological questions should be addressed to the EORTC Data Center. THE SPONSOR WILL BE RESPONSIBLE FOR DRUG DISTRIBUTION (SEE PAGE 3) 49/102 67 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 19.1 PROTOCOL AMENDMENTS Should any change be required to the signed, final protocol, a protocol amendment must be prepared. Written approval must be obtained for all amendments from the Steering Committee, the Protocol Review Committee at the EORTC and at Merck and ImClone prior to implementation. Thereafter the amendment will be distributed to the centers for signing by the investigator and submission to the appropriate Ethics Committee before implementation at that center. 19.2 DEVIATIONS FROM THE PROTOCOL Deviations from the protocol - especially the prescription of doses NOT scheduled in the study protocol -, other modes of administration, other indications, and longer treatment periods shall not be permissible and shall not be covered by the statutory patient insurance scheme. 20. TRIAL SPONSORSHIP / FINANCING In Europe, Australia, and New Zealand: In North America: Merck KGaA. ImClone Systems Inc. 21. PATIENT INSURANCE COVERAGE In Europe, Australia and New Zealand: Merck KGaA has insurance cover for the clinical trial (Colonia Insurance, Germany: policy numbers 60 22 60 10204 and 60 22 60 10209) which provides compensation for subjects participating in the trial and indemnity to any person connected with the performance of the trial arising out the negligence resulting in bodily injury and/or property damage. It will be invalidated by: o Failure of the investigator to comply with the terms of the protocol o Negligence of the investigator and any person connected with the performance of the trial. The investigator will indemnify and hold Merck KGaA harmless from any claim caused by the above exceptions. The investigator will notify Merck KGaA whenever he becomes aware of a potential claim. In North America: ImClone Systems Incorporated has insurance coverage for clinical trials (Columbia Casualty Insurance Company, Chicago IL, USA: policy number ADT 102 863 8853 and provides coverage to clinical investigators conducting Human Clinical Trials for ImClone in compliance with FDA procedures and the Federal Food, Drug, and Cosmetic Act as set forth in the Code of Federal Regulations, Title 21. This policy extends coverage to worldwide as long as the Human Clinical Trial is in compliance with country/local ordinances, standards, filings, and regulatory requirements and test subjects have provided written consent prior to the commencement of the trial. 50/102 68 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 22. PUBLICATION POLICY After conclusion of the study, a report shall be written by the EORTC Data Center and the Coordinating Investigator that will include a statistical analysis and an appraisal of the results from a medical viewpoint. This report shall be based on the items listed in this study protocol. The final publication of the trial results will be written on the name of all participating groups. None of the participating groups should present any of the data before publication of the final results of the overall trial. A draft manuscript will be completed within 6 months from the final report, which will be produced 18-24 months after the last patient has completed treatment. After review by the co-authors and the sponsors, this manuscript will be sent to a major scientific journal. Authors of the manuscript may include the Study Coordinator, the investigators who have included more than 5% of the eligible patients in the trial (by order of inclusion), investigators who contributed significant work on the biological mechanism of action of the vaccine, and the Data Center coordinator and statistician in charge of the trial. Interim publication or presentation of the study may include demographic and toxicity data, but no data on activity may be made publicly available before the recruitment is discontinued. All publications, abstracts or presentations including data from the present trial will be submitted for review to the Steering Committee at least two weeks prior to submission for abstracts, and four weeks prior to submission for manuscripts and slides for presentation. However, the sponsors will not be able to veto any publication. An additional report for registration of the drug will be written by the sponsors. 51/102 69 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 23. ADMINISTRATIVE SIGNATURES Dr G Giaccone --------------------------- ---------------------- Study Coordinator Date EORTC LCCG D. Curran --------------------------- ---------------------- Biostatistician Date EORTC Data Center Dr Lothar H. Finke --------------------------- ---------------------- For Merck KGaA Date Dr Harlan W. Waksal --------------------------- ---------------------- For ImClone Systems Inc. Date Dr Larry Blankstein --------------------------- ---------------------- For Quintiles Inc. Date Dr. P. Therasse --------------------------- ---------------------- Director EORTC Data Center Date 52/102 70 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 24. LIST OF PARTICIPATING COUNTRIES EUROPE EORTC Lung Cancer Cooperative Group Spanish Lung Group Other individual centers in Europe NORTH AMERICA Memorial Sloan Kettering Cancer Center Individual centers of the Veterans' Administration Other individual centers in North America AUSTRALIA/NEW-ZEALAND Australian / New-Zealand individual centers 53/102 71 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 25. REFERENCES Aprille MA, Wardlaw AC. Aluminum compounds as adjuvants for vaccines and toxoids in man: a review. Can J Public Health 1966: 57:343-360 Biometrics 1979; 35:549-556. Stiggelbout AM, Eijkemans MJC, Kiebert GM, Kievit J, Leer JWH, De Haes JCJM. The "utility" of the visual analog scale in medical decision making and technology assessment. International Journal of Technology Assessment in Health Care, 1996; 12: 291-298. Chapman PB, Houghton AN. Induction of IgG antibodies against GD3 in rabbits by an antiidiotypic monoclonal antibody. J Clin Invest 1991; 88:186-192. Chapman PB, Livingston P0, Morrison ME, Williams L, Houghton AN. Immunization of melanoma patients with antiidiotypic monoclonal antibody of BEC2 (which mimics GD3 ganglioside): Pilot trials using no immunological adjuvant. Vaccine Research 1994; 3:59-68. Collet, D. Modelling survival data in medical research. Chapman and Hall, London, 1996 Cox DR. Analysis of Binary Data. Methuen, London, 1970. Dunn PL, Johnson CA, Styles JM, Pease SS, Dean CJ. Vaccination with syngenetic monoclonal anti-idiotype protects against tumor challenge. Immunology 1987; 60:181-186. Elashoff J.D. nQuery Advisor User's Guide. Dixon Associates, Los Angeles, CA, 1995: Ertl HCJ, Finberg RW. Sendai Virus-specific T-cell clones: Induction of cytolytic T cells by an anti-idiotypic anti-body directed against a helper T-cell clone. Proc Natl Acad Sci, USA 1984; 81:2850-2854. Fuentes R., Ailman R., Mason MD. Ganglioside expression in lung cancer cell lines. Lung Cancer 18:21-33, 1997 Gaulton GN, Sharpe AH, Chang DW, Fields BN, Greene MI. Syngenetic monoclonal internal image anti-idiotopes as prophylactic vaccines. J. Immunol 1986; 137:2930-2936. Giaccone G, Dalesio O, McVie GJ et al . Maintenance Chemotherapy in Small Cell Lung Cancer: Long Term Results of a Randomized Trial. J. Clin. Oncology 1993, 11:1230-40. Glenny AT, Pope CG, Waddington H, Wallace U. XXIII - The antigenic value of toxoid precipitated by potassium alum. J Pathol Bacteriol 1926; 29:38-39. 54/102 72 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Grant SC, Kris MG, Miller V. Yao TJ. Houghton AN, Chapman PB. Long survival in 15 patients (pts) with small cell lung cancer (SCLC) immunized with BEC2 plus BCG after initial therapy: An update. Proceedings of the thirty third annual meeting of the American Society of Clinical Oncology (ASCO) 1997; 16:454a (A1630). Grant SC, Yao TJ, Kris MG, Rigas JR, Pisters KMW, Miller V, Houghton AN, Chapman PB. Long survival following immunization with BEC2 plus BCG after initial therapy for small cell lung cancer (SCLC). Proceedings of the thirty second annual meeting of the American Society of Clinical Oncology (ASCO) 1996; 15:555 (A1806). Gryzych JM, Capron M, Lambert PH, Dissous C, Torres S, Capron A. An anti-idiotype vaccine against experimental schistosomiasis. Nature 1985; 316:74-76. Ihde DC, Pass HI, Glatstein E. Small cell lung cancer. In DeVita VT, Hellman S, Rosenberg SA, eds. Cancer. Principles and Practice of Oncology, ed 5. section 3, pp 911-949, Philadelphia: Lippincott-Raven 1997 Investigator's Brochure: BEC2 Anti-Idiotypic Murine Monoclonal Antibody, Version 3.1, November 13, 1997, Merck KGaA and ImClone Systems Inc. Iwamori M, Nagai Y. A new chromatographic approach to the resolution of individual gangliosides. Biochys Acta 1978; 528:257-267. Iwamori M, Nagai Y. Ganglioside composition of rabbit thymus. Biochim Biophys Acta 1981; 665:205-213. Iwamori M, Nagai Y. Isolation and characterization of GD3 ganglioside having a novel disialosyl residue from rabbit thymus. J Biol Chem 1978; 253:8328-8331. Iwamori M. Nagai Y. Comparative study on ganglioside compositions of various rabbit tissues. Tissue-specificity in ganglioside molecular species of rabbit thymus. Biochim Biophys Acta 1981; 665:214-220. Kahn M, Hellstrom I, Estin CD, Hellstrom KE. Monoclonal anti-idiotypic antibodies related to the p97 human melanoma antigen. Cancer Res 1989; 49:3157-3162. Karnofsky DA, Abelmann WH, Craver LF, Burchenal JH. The use of the nitrogen mustards in the palliative treatment of carcinoma. Cancer, 1948, 1:634. Kennedy RC, Melnick JL, Dreesman GR. Antibody to hepatitis B virus induced by injecting antibodies to the idiotype. Science 1984; 223:930-931. Lan KKG, DeMets DL. Discrete sequential boundaries for clinical trials. Biometrica 1983; 70:659-563. 55/102 73 [LOGO] The SILVA study - -------------------------------------------------------------------------------- McCaffery M, Yao T-J, Williams L, Livingston P, Hougton A, Chapman P. Immunization of melanoma patients with BEC2 anti-idiotypic monoclonal antibody that mimics GD3 ganglioside: enhanced immunogenicity when combined with adjuvant. Clinical Cancer Research 1996; 2:679-686. McNamara MK, Ward RE, Kohler H. Monoclonal idiotype vaccine against Streptococcus pneumonia infection. Science 1984; 226:1325-1326. Mittelman A, Chen ZJ, Kageshita T, et al. Active specific immunotherapy in patients with melanoma. A clinical trial with mouse anti-idiotypic monoclonal antibodies elicited with syngeneic anti-high-molecular-weight melanoma-associated antigen monoclonal antibodies. J Clin Invest 1990; 86:2136-2144. Mittelman A, Chen ZJ, Yang H, Won GY, Ferrone S. Human high molecular weight melanoma-associated antigen (HMW-MAA) mimicry by mouse anti-idiotypic monoclonal antibody MK2-23: Induction of humoral anti-HMW-MAA immunity and prolongation of survival in patients with stage IV melanoma. Proc Natl Acad Sci, USA 1992; 89:466-470. Nepom GT, Nelson KA, Hol SL, Hellstrom I, Hellstrom KE. Induction of immunity to a human tumor marker by in vivo administration of anti-idiotypic antibodies in mice. Proc Natl Acad Sci, USA 1984; 81:2864-2867. O'Brien PC, Fleming TR. A multiple testing procedure for clinical trials. Pignon JP, Arriagada R, Ihde DC, et al. A meta-analysis of thoracic radiotherapy for small-cell lung cancer. New Engl. J. Med. 327, 1618-1624, 1992. Pocock SJ and Simon R. Sequential treatment assignment with balancing for prognostic factors in the controlled clinical trial. Biometrics, 1975; 31:103-115. Raychaudhuri S, Saeki Y, Fuji H, Kohler H. Tumor-specific idiotype vaccines. I. Generation and characterization of internal image tumor antigen. J Immunol 1986; 137:1743-1749. Rosenberg SA, DeVita VT, HeIlman 5, eds. Cancer. Principles and Practice of Oncology, ed 5. Chapter 18, pp 361-364 Philadelphia: Lippincott-Raven 1997 Sacks Dl, Kirchoff LV, Hieny S. Sher A. Molecular mimicry of a carbohydrate epitope on a major surface glycoprotein of Trypanosoma cruzi by using anti-idiotype antibodies. J Immunol 1985; 135:4155-4159. Sekine M, Ariga T, Miyatake T, Kase R, Suzuki A., Yamakawa T. An interspecies comparison of gangliosides and neutral glycolipids in adrenal glands. J Biochem 1985;97:1219-1227. 56/102 74 [LOGO] The SILVA study - -------------------------------------------------------------------------------- Sharpe AH, Gaulton GN, McDade KK. Fields BN. Greene MI. Syngeneic monoclonal anti-idiotype can induce cellular immunity to reovirus. J Exp Med 1984;160:l195-1205. Stein KE, Soderstrom T. Neonatal administration of idiotype or anti-idiotype primes for protection against Eschericia coli K13 infection in mice. J Exp Med 1984;160:l00l-1011. WHO handbook for reporting results of Cancer treatment. WHO offset publication number 48, Geneva 1979. Zelen M. Keynote Address on Biostatistics and Data Retrieval. Cancer Chemotherapy 1973,4:31-42 57/102 75 [LOGO] The SILVA study - -------------------------------------------------------------------------------- References for QoL B Bergmann, NK Aaronson, S Ahmedzai, S Kaasa, M Sullivan for the EORTC Study Group on Quality of Life; The EORTC QLQ-LC13: a modular supplement to the EORTC core quality of life questionnaire (QLQ-C30) for use in lung cancer clinical trials. Eur J Cancer (1994) 30A(5): 635-642. H Schipper, J Clinch, V Powell; Definitions and conceptual issues; In Spilker B (ed.) Quality of life assessment in clinical trials, pp. 11-24, Raven Press, New York, 1990. NK Aaronson et al.; The European Organization for Research and Treatment of Cancer QLQ-C30: A Quality of Life instrument for use in international clinical trials in onkology. J Natl Cancer Inst (1993) 85(5):365-376. NK Aaronson, A Cull, S Kaasa, MAO Sprangers for the EORTC Study Group on Quality of Life; The European Organization for Research and Treatment of Cancer (EORTC) modular approach to quality of life assessment in oncology. Int. J. Ment. Health (1994) 23(2): 75-96. References for health economics MA Rosenthal, PJ Webster, VJ Gebski, RC Stuart-Harris, AO Langlands, J Boyages;The cost of treating small cell lung cancer; The Medical Journal of Australia (1992) 156:605-610 MS Baker, LG Kessler, N Urban, RC Smucker; Estimating the treatment costs of breast and lung cancer; Medical Care (1991) 29 No.1: 40-49 Onkos, Small Cell Lung Cancer; Decision0Resources,0Inc.; Waltham, Massachussetts; October 1995 WK Evans, BP Will, JM Berthelot, MC Wolfson; Diagnostic and therapeutic approaches to lung cancer in Canada and their costs; British Journal of Cancer (1995) 72: 1270-1277 WK Evans, BP Will, JM Berthelot, MC Wolfson; The economics of lung cancer management in Canada; Lung Cancer (1996) 14: 19-29 58/102 76 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26. APPENDICES I. Performance Status Scale (Karnofsky / WHO) II. Drug medication guidelines III. EORTC Quality of Life evaluation IV. Patient information / informed consent template V. Common toxicity criteria (NCIC - CTC) scale VI. Declaration of Helsinki VII. Working procedure on data entry VIII. Ancillary studies on biological efficacy IX. PPD testing X. Induction therapy flow chart XI. Overall study flow chart XII. Vaccination instructions XIII. List of abbreviations XIV. Study acknowledgment 59/102 77 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.1 APPENDIX I: PERFORMANCE STATUS SCALES - -------------------------------------------------------------------------------- STATUS SCALES STATUS - -------------------------------------------------------------------------------- KARNOFSKY ZUBROD-ECOG- % WHO Normal, no complaints 100 0 normal activity Able to carry on normal activities 90 1 Symptoms, but fully ambulatory Minor signs or symptoms of disease Normal activity with effort 80 Cares for self. Unable to carry on 70 2 Symptomatic, but normal activity or to do active work in bed <50% of the day. Requires occasional assistance, but 60 able to care for most of his needs Requires considerable assistance 50 3 Needs to be in bed and frequent medical care >50% of the day, but not bedridden Disabled. Requires special care and 40 assistance Severely disabled. Hospitalization 30 4 Unable to get out indicated though death non imminent of bed Very sick. Hospitalization 20 necessary. Active supportive treatment necessary Moribund 10 Dead 0 5 Dead - -------------------------------------------------------------------------------- From: Minna J.D., Higgins G.A and Glatstein E.J. Cancer of the lung. In: DeVita V, Hellman S., Roxenberg S., (Eds.). Cancer: Principles and Practice of Oncology, Lippincott, Philadelphia, 1984, p.536. 60/102 78 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.2 APPENDIX II: DRUG MEDICATION GUIDELINES 26.2.1 DRUG SUPPLY Study material will be supplied by the sponsors free of charge. Distribution of the study medication will be conducted from three different distributors in the particular regions involved in this trial (see page 3): In Europe: Study drug will be supplied to the centers by Merck KGaA In North America: Study drug will be supplied to the centers by ImClone Systems Inc. In Australia and New Zealand: Study drug will be supplied to the centers by Quintiles Pty. under the authority of Merck KGaA Depending on the commitment of the individual centers with regard to the expected inclusion rate, the centers will be pre-stocked with a basic supply of study medication. All regional distributors will receive on-line notice of randomization by EUROCODE. Re-supply will be shipped to the centers automatically. In case that there were any problems with regard to supply of the study medication or the study medication itself the following institutions should be contacted: 26.2.2 DISPOSAL OF STUDY DRUGS The study medication may not be used for any purpose other than the study in question, since the insurance coverage shall otherwise become null and void. Opened containers of BEC2, BCG, used transfer vials, or any product, equipment, supplies or receptacles that contact the BEC2, BCG, or BEC2//BCG vaccine must be considered chemotherapy or biohazardous waste and disposed of accord to the documented procedures of the investigational center. The documented procedure must be available for review and approved by the sponsors or their designees prior to initiating the study. Unopened BEC2/BCG vaccine packages may be returned to the sponsors or their designees at the completion of the investigational study or as directed by the sponsors or their designees. 26.22 BEC2/BCG VACCINE PATIENT DOSE KIT 1) one vial BCG, lyophilized (2 mL amber vial, containing lyo powder BCG) 2) BCG Diluent (2 mL clear glass vial, containing 1.5 mL clear liquid) 3) BEC2 (2 mL clear glass vial, containing 1 mL clear liquid) 4) Sterile Empty Vial 5) Phosphate-buffered Saline All vials will be in a single foam-inserted carton of approximate size of 13 cm long, 3.5 cm wide and 6 cm high with an outer label. Each patient kit will contain all materials necessary to administer one patient dose of therapy regardless of which dose in the regime it may be. 61/102 79 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.3 APPENDIX III: EORTC QUALITY OF LIFE EVALUATION 26.3.1 EORTC QUALITY OF LIFE EVALUATION: GUIDELINES FOR ADMINISTRATION OF QUESTIONNAIRES The instructions given below are intended to provide some general guidelines for collecting quality of life (QoL) data in EORTC studies. These instructions apply for all types of questionnaires. 1. Who is the responsible person (RP) for QoL data collection? The overall-responsible person for QoL data collection is the study-coordinator of the trial. However, for practical reasons it is strongly recommended that one person is responsible for the organization of QoL data collection in each institution. This can be a physician, data manager, (research) nurse or a psychologist. Such a person should have the full protocol at his/her disposal as well as the questionnaire. This person would also be the intermediate contact point in case of any necessary clarification asked by the Data Center. 2. Who should fill out the questionnaire? In principle it is the patient him/herself who has to fill out QoL forms and preferably without help from others. In case a patient is too sick to fill out the questionnaire or if the patient is not able to fill out the questionnaire for reasons such as forgetting his/her glasses, another person could read the questions without making any comments and report the answers on the forms. If a patient received this type of help, please note this on the form. 3. What instructions should be given to the patient? At entry in a study, the RP should give the patient an explanation of the objective of the study and instructions for filling out questionnaires. The patient should be informed that participation in the QoL protocol is voluntary and that the information provided is confidential (identification is only for administrative purposes and includes patient's initials, date of birth and today's date). The following issues should be explained to the patient: * The schedule of assessments. * The questionnaire is a self administered questionnaire that should be filled out preferably by the patient him(her)self. * The patient should (circle) the choice that best corresponds to his/her situation. * There is no right or wrong answer to any of these questions. * All questions should be answered. The RP should make sure that the patient understands the instructions. At each subsequent assessment as defined by the protocol, the patient should receive the questionnaire by the RP or by other appropriate staff if the RP is not available. 4. Where should the patient fill out the questionnaire? 62/102 80 [LOGO] The SILVA study - -------------------------------------------------------------------------------- The patient should complete the questionnaire in the clinic, and, ideally in a quiet, private room. If this is not possible, the waiting room is an acceptable alternative. In general it does not take more than 5 to 10 minutes to fill out a questionnaire, but patients should be given the time they need to answer all questions. 5. When should the patient fill out the questionnaire? When a QoL assessment is planned, the questionnaire should be given to the patient preferably before the meeting with the physician, ensuring that the patient has enough time to complete the questionnaire. If the patient receives a therapy, the questionnaire should be filled out before administration of the treatment. The questionnaire should not be taken home and/or mailed. 6. Review of the completed questionnaire. After the patient has filled out the questions, the person handling the questionnaire should: * Check the answers for omissions, for incorrectly completed questions and for inconsistent answers; If this is the case: * Please ask the patient for the reason of omissions or incorrect answers. If the patient prefers not to answer a question this should be noted on the form; * Additional explanation may be provided, but the questions should not be rephrased; * Any additional comments could be added by the person handling the questionnaire (if possible in English) followed by his name and signature. 7. Missing forms. If for some reason the patient is unable or does not wish to complete a quality of life questionnaire the reason and the date of visit should be documented on the questionnaire and returned to the person responsible for completing the CRF's (case record forms). 8. Mailing to the Data Center. The questionnaire should be faxed to the Data Center with the CRF's. As it is not possible to retrospectively collect missing quality of life forms, please make sure the patient completes the questionnaire at the time-point when he/she is supposed to fill it out. Thank you very much for your cooperation. If you have any remarks on this leaflet or if you need further information, please contact: Quality of Life Unit - EORTC Data Center: Phone: +32 2 774 16 06 Fax: +32 2 772 67 01 63/102 81 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.3.2 EORTC QLQ - C30 (VERSION 2.0.) We are interested in some things about you and your health. Please answer all of the questions yourself by circling the number that best applies to you. There are no "right" or "wrong" answers. The information that you provide will remain strictly confidential. Please fill in your initials: _____________ Your birthdate (Day, Month, Year): __________________ Today's date (Day, Month, Year): __________________ NO Yes 1. Do you have any trouble doing strenuous activities, like carrying a heavy shopping bag or a suitcase? 1 2 2. Do you have any trouble taking a long walk? 1 2 3. Do you have any trouble taking a short walk outside of the house? 1 2 4. Do you have to stay in a bed or a chair for most of the day? 1 2 5. Do you need help with eating, dressing, washing yourself or using the toilet? 1 2 During the past week: Not at A Quite Very All Little a Bit Much 6. Were you limited in doing either your work or other daily activities? 1 2 3 4 7. Were you limited in pursuing your hobbies or other leisure time activities? 1 2 3 4 8. Were you short of breath? 1 2 3 4 9. Have you had pain? 1 2 3 4 10. Did you need to rest? 1 2 3 4 11. Have you had trouble sleeping? 1 2 3 4 12. Have you felt weak? 1 2 3 4 13. Have you lacked appetite? 1 2 3 4 14. Have you felt nauseated? 1 2 3 4 15. Have you vomited? 1 2 3 4 Please go on to the next 64/102 82 [LOGO] The SILVA study - -------------------------------------------------------------------------------- During the past week: Not at A Quite Very All Little a Bit Much 16. Have you been constipated? 1 2 3 4 17. Have you had diarrhea? 1 2 3 4 18. Were you tired? 1 2 3 4 19. Did pain interfere with your daily activities? 1 2 3 4 20. Have you had difficulty in concentrating on things, like reading a newspaper or watching television? 1 2 3 4 21. Did you feel tense? 1 2 3 4 22. Did you worry? 1 2 3 4 23. Did you feel irritable? 1 2 3 4 24. Did you feel depressed? 1 2 3 4 25. Have you had difficulty remembering things? 1 2 3 4 26. Has your physical condition or medical treatment interfered with your family life? 1 2 3 4 27. Has your physical condition or medical treatment interfered with your social activities? 1 2 3 4 28. Has your physical condition or medical treatment caused you financial difficulties? 1 2 3 4 For the following questions please circle the number between 1 and 7 that best applies to you 29. How would you rate your overall health during the past week? 1 2 3 4 5 6 7 Very Poor Excellent 30. How would you rate your overall quality of life during the past week? 1 2 3 4 5 6 7 Very Poor Excellent 65/102 83 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.3.3 EORTC QLQ - LCl3 Patients sometimes report that they have the following symptoms. Please indicate the extent to which you have experienced these symptoms during the past week. - -------------------------------------------------------------------------------- During the past week: Not at A Quite Very All Little a Bit Much 31. How much did you cough? 1 2 3 4 32. Did you cough blood? 1 2 3 4 33. Were you short of breath when you rested? 1 2 3 4 34. Were you short of breath when you walked? 1 2 3 4 35. Were you short of breath when you climbed stairs? 1 2 3 4 36. Have you had a sore mouth or tongue? 1 2 3 4 37. Have you had trouble swallowing? 1 2 3 4 38. Have you had tingling hands or feet? 1 2 3 4 39. Have you had hair loss? 1 2 3 4 40. Have you had pain in your chest? 1 2 3 4 41. Have you had pain in your arm or shoulder? 1 2 3 4 42. Have you had pain in other parts of your body? 1 2 3 4 If yes, where _______________________________ 43. Did you take any medicine for pain? 1 No 2 Yes If yes, how much did it help? 1 2 3 4 66/102 84 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.3.4 EORTC HEALTH THERMOMETER Health can be defined as a state of physical, psychological, and social well-being. We would like to ask you to indicate on the scale below, how good or bad you consider your overall health state during the past week. Please draw a horizontal line at the most appropriate point on the scale somewhere between 100 and 0, where 100 stands for 'Perfect health' and 0 means 'Worst imaginable health'. ------------------------------------- Example: if during the past week your overall health state has been almost perfect, your mark on the thermometer would be close to 100. [GRAPHIC OMITTED] ------------------------------------- ------------------------------------- During the past week: how do you rate your overall health state? ------------------------------------- [GRAPHIC OMITTED] 67/102 85 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.4 APPENDIX IV: PATIENT INFORMATION/INFORMED CONSENT TEMPLATE PROPOSAL FOR PATIENT INFORMED CONSENT FOR CLINICAL RESEARCH You are being asked to participate in a clinical research study. In order to decide whether or not you should agree to be part of this research study, you should understand enough about its risks and benefits to make an informed consent. This process is known as informed consent. This consent form gives detailed information about the research study which the doctor will discuss with you. Once you understand the study, you will be asked to sign this form if you wish to participate. You will receive a copy to keep as a record. The research study being proposed to you is: SURVIVAL IN AN INTERNATIONAL PHASE III PROSPECTIVE RANDOMIZED LD SMALL CELL LUNG CANCER VACCINATION STUDY WITH ADJUVANT BEC2 AND BCG PURPOSE OF RESEARCH STUDY The purpose of this study is to determine whether immunization with the antibody BEC2 in combination with BCG can stimulate your immune system to make antibodies against small-cell lung cancer cells that might still remain in your body. Antibodies are substances made by the immune system to target foreign invaders such as bacteria. BEC2 is a mouse antibody containing a portion that resembles G(D3) ganglioside. G(D3) is a substance found on the majority of small cell lung cancers. BCG is a strain of the microbe Mycobacterium bovis and has been used to immunize against tuberculosis. BCG has been used for many years with vaccines to boost the effects of these vaccines. We are adding BCG to BEC2 in an attempt to improve the ability of BEC2 to stimulate your immune system. When BEC2 is injected into the body, the immune system will recognize BEC2 as foreign, since it was made in a mouse, and produce antibodies against BEC2. It is expected that some of these antibodies will be against the portion of BEC2 that resembles G(D3) and that these antibodies will also react with G(D3) on any small-cell lung cancer that might still be present in your body. We hope that these antibodies will kill any remaining small-cell lung cancer cells in your body and prevent the tumor from coming back. The overall study design will consist of the following three parts: Diagnosis, Standard Induction Therapy, and Restaging First of all your doctor has to establish the diagnosis of limited disease small cell lung cancer. Subsequently, a standard induction therapy will be given to you, consisting of a combination of 2 or 3 anticancer drugs, for 4 or 5 cycles. In addition, you will receive radiation therapy to your chest. You may also undergo radiation therapy to the brain, if your physician recommends this additional treatment. The success of the induction therapy will be evaluated within a period of 6-8 weeks after administration of the last chemotherapy or radiation therapy. Even if your tumor responds (decreases significantly in size or resolves completely following chemotherapy), the cancer may 68/102 86 [LOGO] The SILVA study - -------------------------------------------------------------------------------- recur. The clinical research study can only be offered to you if the induction therapy results in a complete or partial remission. This means that the tumor as found at initial diagnosis has to be reduced by a minimum of 50% at restaging by chest-X-ray, clinical examination, and computed tomography of the thorax and upper abdomen. DESCRIPTION OF RESEARCH PROCEDURES The aim of a clinical study is to prove or disprove that the new treatment is superior to established treatment modalities and has acceptable side effects. In this controlled clinical trial half of the patients will be treated with the investigational treatment and half will not receive any farther treatment after completion of standard induction therapy. This controlled clinical research study can only offered to you if the standard induction therapy results in complete or partial remission. This means that the tumor as found at initial diagnosis has been reduced by a minimum of 50% at restaging by chest X-ray, computed tomography of the thorax and upper abdomen and clinical examination. To achieve a proper assignment of patients to both patients groups a procedure called randomization will be performed. This is an assignment by chance. You will be randomized to either the observation or experimental arm. If you are assigned to the observation arm, you will receive no cancer specific therapy until you have documented progression of disease. If you are assigned to the experimental arm, you will receive 5 injections of BEC2 with BCG as an outpatient over the course of ten weeks. BEC2 and BCG will be mixed together and injected into the skin in your arms and legs. The first four injections will be given two weeks apart; 1 month later you will be given the fifth injection. Treatment will be stopped if you show progression of disease or if you refuse further treatment. Approx. 60 ml blood will be drawn prior to each injection. Additional blood samples may be requested after completing the course of vaccinations. These blood tests are designed to detect whether your immune system is producing antibodies against G(D3) ganglioside. In addition, these blood tests can help detect side effects that might be caused by BEC2 and/or BCG. You will be followed, starting 6 months after randomisation until you have progression of disease. The total duration of the study, beginning from induction therapy through vaccination and follow-up, is approx. 24 months. Approximately 820 patients will be registered at time point of diagnosis in order to be able to randomize 570 responding patients. RISKS of the investigational treatment Injection of BCG into the skin will result in inflammation, redness, swelling, itching and crusting at the sites of injection. A low-grade fever, lasting 4-24 hours after each immunization, may occur. The inflamed injections sites may drain a small amount of fluid for up to several weeks. The inflammation will resolve and heal, and can leave a scar. BCG is a live but weakened bacteria, and there is a small chance that a generalized infection could develop although this is very unlikely. If a generalized infection were to develop it would be treated with antibiotics. After receiving immunization with BCG certain tests for tuberculosis will become positive, however this does not mean that you have tuberculosis. Side effects previously observed with the combination BEC2/BCG vaccine include: fever, muscle aches, fatigue/general body weakness, elevated blood glucose levels, flu-like symptoms, dry mouth, increased liver enzyme levels, and pain, inflammation and scarring at the injection site. G(D3) is found in a few normal tissues in addition to small cell lung cancer cells. Therefore, if immunization with BEC2 induces antibodies against G(D3), it is theoretically possible that these 69/102 87 [LOGO] The SILVA study - -------------------------------------------------------------------------------- antibodies might also attack normal tissue and cause damage. For example, inflammation of the adrenal gland could result in blood pressure changes. Since BEC2 is a mouse protein, allergic reactions are possible. Generalized allergic reactions, such as hives and itching, may occur. When very high doses of mouse monoclonal antibodies (higher than we intend to use in this study) have been injected intravenously into patients, more pronounced allergic reactions were seen, such as wheezing, chest discomfort, fever, diarrhea, and nausea. Life-threatening allergic reactions (anaphylactic shock) or death can theoretically occur but are considered unlikely. Since BEC2 is a mouse monoclonal antibody, you might not be eligible for future treatment with other mouse monoclonal antibodies, as a result of your participation in this trial. In the initial studies with BEC2, no significant allergic reactions or deaths due to BEC2/BCG were observed. BEC2 is a mouse monoclonal antibody. BEC2 has no known effect on the thyroid gland but may interfere with the results of laboratory tests to evaluate thyroid function. The antibody may also interfere with certain other laboratory tests. RISKS of the standard induction therapy. Side effects of chemotherapy and radiotherapy are well known, and will be in detail explained to you by your doctor. They may slightly vary depending on the drugs used, the schedule and the timing. Side effects of chemotherapy usually consist of nausea and vomiting, hairloss, reduction of white blood cells and platelets. Side effects of radiation therapy may include pain with swallowing and fatigue. General RISKS and considerations Treatment under this protocol may involve unforeseeable risks to an unborn child if a woman should become pregnant during the course of these immunizations. For this reason, women of childbearing age must use effective contraceptive during participation in this study. In addition, male patients should take the necessary precautions to prevent pregnancy. You will be informed of any new findings which might affect your willingness to participate. If you are injured as a results of your participation in this research study, emergency care, hospitalization and outpatient care will be made available by the hospital. If you seek additional help whilst you are taking part in this study, for what ever reason, your doctor must be informed. BENEFITS Although we hope that this research study will be of benefit to you, or that it will help others, we cannot guarantee that it will help you directly. FINANCIAL COST You are responsible for the costs of routine physician visits and the usual laboratory tests. There will be no charge to you for the BEC2 vaccine or for tests performed to measure your immunity. If you are injured as a result of your participation in this research study, care will be provided to you. 70/102 88 [LOGO] The SILVA study - -------------------------------------------------------------------------------- INSURANCE There is a possibility that unforeseen adverse events can occur with any medication however you will be protected by an insurance policy against such risk. (Colonia Insurance Germany, Policy Number: 60 20 60 10204). This is in accordance with the laws of your country and will be available for all patients taking part in this study. PRIVACY Your research and hospital records are confidential. Your name or any other personally identifying information will not be used in reports or publications resulting from this study. A record of your progress in this study will be passed on to the EORTC data center and finally to the sponsors of this trial, Merck KGaA and ImClone Systems Inc.. All documents received by the sponsors and other parties acting in the name of the sponsors will be strictly confidential and will be only identified by a trial number and your initials. A copy of this documents will be held with your patient files. Moreover, your progress in the study will be checked against your clinical records by sponsors or firms acting in the names of the sponsor's employees. By signing this informend consent form you authorize representatives of the The Food and Drug Administration, the EMEA, or other authorized agents and the sponsors to inspect your medical records. RIGHT TO REFUSE OR WITHDRAW The choice to enter or not to enter this study is yours. You are in a position to make a decision if you understand what the doctor has explained and what you have read about the research study and other possible forms of care. If you decide not to participate, you will be offered other treatment based on your needs and your cancer. If you begin the study, you still have a right to withdraw at any time. If you should withdraw, you will be offered other available care which suits your needs and medical condition. TERMINATION OF STUDY Treatment with the investigational drug may be ended if your small cell lung cancer recurs, if the doctors treating you see side effects that they consider dangerous, if you refuse to have the treatments as recommended by your doctor or if you refuse to have the tests needed to determine whether the treatment is safe and effective, or if you become pregnant. This research study has been reviewed by INSTITUTION'S Institutional Review Board. This Board is legally responsable for making sure that research with patients is appropriate and that the patient's rights and welfare are protected. The physician in charge of this research study is ______________, telephone number _____________ If you need more information about this study before you decide to join, or at any other time, you may wish to contact him. In the event that you do decide to participate, he should also be called if there are side effects from the treatment. A non-physician whom you may call for information about the consent process, research patient's rights, or research-related injury is _______________, telephone number _________ 71/102 89 [LOGO] The SILVA study - -------------------------------------------------------------------------------- PATIENT INFORMED CONSENT FOR CLINICAL RESEARCH Title: SURVIVAL IN AN INTERNATIONAL PHASE III PROSPECTIVE RANDOMIZED LD SMALL CELL LUNG CANCER VACCINATION STUDY WITH ADJUVANT BEC2 AND BCG Purpose: To determine whether immunization with BEC2 in combination with BCG following chemotherapy in patients with limited disease small-cell lung cancer results in longer survival than chemotherapy alone. The study will also study the "progression free survival" in the two separate treatment groups, toxicities associated with the study agents BEC2 and BCG, and the effect of these agents on the patients quality of life. STATEMENT OF PHYSICIAN OBTAINING INFORMED CONSENT I have fully explained this research study to the patient ______________ In my judgment, and the patient's, there was sufficient access to information, including risks and benefits, to make an informed decision. DATE:_________________ PHYSICIAN'S SIGNATURE:___________________ PHYSICIAN'S NAME:________________________ PATIENTS STATEMENT I have read the description of the clinical research study or have had it translated into a language I understand. I have also talked it over with the doctor to my satisfaction. I understand that my participation is voluntary. I know enough about the purpose, methods, risks, and benefits of the research study to judge that I want to take part in it. PATIENTS NAME:___________________________ PATIENTS SIGNATURE:______________________ DATE:_________________ 72/102 90 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.5 APPENDIX V: COMMON TOXICITY CRITERIA (NCIC - CTC) SCALE
==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== ALLERGY ==================================================================================================================================== AL LER Allergy none transient rash, fever urticaria, fever = serum sickness, anaphylaxis < 38(degrees)C, 38(degrees)C, bronchospasm, req 100.4(degrees)F 100.4(degrees)F, mild parenteral meds bronchospasm ----------------------------------------------------------------------------------------------------------- Fever felt to be caused by drug allergy should be coded as ALLERGY (AL LER). Non allergic drug fever (e.g. as from biologics) should be coded under FLU-LIKE SYMPTOMS (FL FEV). If fever is due to infection, code INFECTION only (IN FEC or IN NEU). NB: Protocols requiring detailed reporting of hypersensitivity reactions, will include a Hypersensitivity Reaction module. - ------------------------------------------------------------------------------------------------------------------------------------ AL OTH other * none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== BLOOT/BONE MARROW (SI UNITS) ==================================================================================================================================== BL WBC White >=4.0 10(caret)9/1 3.0 - 3.9 2.0 - 2.9 1.0 - 1.9 < 1.0 Blood Count (WBC) - ------------------------------------------------------------------------------------------------------------------------------------ BL PLT Platelets WNL 10(caret)9/1 75.0 - normal 50.0 - 74.9 25.0 - 49.9 < 25.0 - ------------------------------------------------------------------------------------------------------------------------------------ BL HGB WNL g/1 100 - normal 80 - 99 65 - 79 < 65 Hemoglobin (Hgb) - ------------------------------------------------------------------------------------------------------------------------------------ BL GRA >= 2.0 10(caret)9/1 1.5 - 1.9 1.0 - 1.4 0.5 - 0.9 < 0.5 granulocytes (i.e. neuts + bands) - ------------------------------------------------------------------------------------------------------------------------------------ BL LYM >= 2.0 10(caret)9/1 1.5 - 1.9 1.0 - 1.4 0.5 - 0.9 < 0.5 Lymphocytes - ------------------------------------------------------------------------------------------------------------------------------------ BL HEM none mild, no transfusion gross, 1-2 units gross, 3-4 units massive, > 4 Hemorrhage (includes transfusion per transfusion per units transfusion resulting from bruise/hematoma, episode episode per episode thrombocytopenia petechiae) (clinical) - ------------------------------------------------------------------------------------------------------------------------------------ BL OTH Other * none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== CANCER RELATED SYMPTOMS ==================================================================================================================================== CA DEA Death - - - - - from malignant disease within 30 days of treatment * (grade 5) - ------------------------------------------------------------------------------------------------------------------------------------ CA PAI Cancer none pain, but no treatment pain controlled with pain controlled uncontrollable pain pain * req non-opioids with opioids - ------------------------------------------------------------------------------------------------------------------------------------ CA SEC Second none - - present - malignancy * - ------------------------------------------------------------------------------------------------------------------------------------ CA OTH Other * none mild moderate severe life threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== CARDIOVASCULAR ==================================================================================================================================== CD ART Arterial * none - - transient events (e.g. permanent event (non myocardial) transient ischemic (e.g. cerebral attack) vascular accident) - ------------------------------------------------------------------------------------------------------------------------------------ CD VEN Venous * none superficial (excludes deep vein thrombosis deep vein thrombosis pulmonary embolism IV site not req anticoagulant req anticoagulant reaction -> code therapy therapy SK LTO) - ------------------------------------------------------------------------------------------------------------------------------------ CD DYS none asymptomatic, recurrent or req therapy req monitoring, or Dysrhythmias transient, req no persistent, hypotension, or therapy req no therapy ventricular tachy- cardia, or fibrillation - ------------------------------------------------------------------------------------------------------------------------------------ CD EDE Edema * none 1+ or dependent in 2+ or dependent 3+ 4+, generalized (eg. peripheral evening only throughout day anasarca edema) ==================================================================================================================================== ==================================================================================================================================== CD FUN Function none asymptomatic, decline asymptomatic, decline mild CHF, responsive severe or refractory of resting ejection of resting ejection to therapy CHF fraction of >=10% but fraction by >20% of < 20% of baseline baseline value value - ------------------------------------------------------------------------------------------------------------------------------------ CD HBP none or no change asymptomatic, transient recurrent or persistent req therapy hypertensive crisis Hypertension increase by > 20mm increase by Hg (D)or to > 150/100 > 20mm Hg (D) or to if previously WNL. > 150/100 if previously No therapy req WNL. No therapy req - ------------------------------------------------------------------------------------------------------------------------------------ CD LBP none or no change changes req no therapy req fluid replacement req therapy + req therapy + Hypotension (incl. transient or other hospitalization: hospitalization for orthostatic therapy but no resolves within 48hrs > 48hrs after stopping hypotension) hospitalization of stopping agent agent - ------------------------------------------------------------------------------------------------------------------------------------ CD ISC Ischemia none non-specific T wave asymptomatic, ST + T angina without acute myocardial (myocardial) flattening wave changes evidence for infarction infarction suggesting ischemia - ------------------------------------------------------------------------------------------------------------------------------------ CD PAI none pain, but no treatment pain controlled with pain controlled with uncontrollable pain Pain (chest) * req non-opioids opioids - ------------------------------------------------------------------------------------------------------------------------------------ CD PER none asymptomatic effusion pericarditis (rub, symptomatic effusion tamponade, drainage Pericardial no intervention req chest pain, drainage req urgently req; or ECG changes) constrictive pericarditis req surgery - ------------------------------------------------------------------------------------------------------------------------------------ CD TAC none mild moderate severe life threatening Sinus tachycardia * - ------------------------------------------------------------------------------------------------------------------------------------ CD OTH Other * none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== COAGULATION ==================================================================================================================================== CG FIB Fibrinogen WNL 0.99-0.75 x N 0.74-0.50 x N 0.49-0.25 x N <= 0.24 x N - ------------------------------------------------------------------------------------------------------------------------------------ CG PT WNL 1.01-1.25 x N 1.26-1.50 x N 1.51-2.00 x N > 2.00 x N Prothrombin time - ------------------------------------------------------------------------------------------------------------------------------------ CG PTT Partial WNL 1.01-1.66 x N 1.67-2.33 x N 2.34-3.00 x N > 3.00 x N thromboplastin time - ------------------------------------------------------------------------------------------------------------------------------------ CG OTH Other * none mild moderate severe life threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== DENTITION (TEETH) ==================================================================================================================================== DE DEC none mild moderate severe - Tooth decay* - ------------------------------------------------------------------------------------------------------------------------------------ DE PAI none pain, but no treatment pain controlled with pain controlled with uncontrollable pain Toothache* non-opioids opioids - ------------------------------------------------------------------------------------------------------------------------------------ DE OTH Other * none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== ENDOCRINE* ==================================================================================================================================== EN AME no irregular menses >= 3 months - - Amenorrhea - ------------------------------------------------------------------------------------------------------------------------------------ EN CUS normal mild pronounced - - Cushingoid - ------------------------------------------------------------------------------------------------------------------------------------ EN FLA none mild or < 1/day moderate & >= 1/day frequent & interferes - Hot flashes with normal function - ------------------------------------------------------------------------------------------------------------------------------------ EN GYN normal mild pronounced or painful - - Gynecomastia - ------------------------------------------------------------------------------------------------------------------------------------ EN IMP normal decrease in normal - absense of function - Impotence/Libido function - ------------------------------------------------------------------------------------------------------------------------------------ EN OTH Other none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== FLU-LIKE SYMPTOMS ==================================================================================================================================== FL FEV fever in none 37.1 - 38.0(degrees)C 38.1 - 40.0(degrees)C > 40.0(degrees)C > 40.0(degrees)C absence of infect.* 98.7 - 100.4(degrees)F 100.5 - 104.4(degrees)F > 104.0(degrees)F (104.0(degrees)F) (incl. drug fever) for < 24 hrs for > 24 hrs or fever accompanied by hypotension --------------------------------------------------------------------------------------------------------- Fever felt to be caused by drug allergy should be coded as ALLERGY (AL LER). Non allergic drug fever (e.g. as from biologics) should be coded under FLU-LIKE SYMPTOMS (FL FEV). If fever is due to infection, code INFECTION only (IN FEC or IN NEU). - ------------------------------------------------------------------------------------------------------------------------------------ FL HAY Hayfever* none mild moderate severe - (includes sneezing, nasal stuffiness, post-nasal drip) - ------------------------------------------------------------------------------------------------------------------------------------ FL JOI Arthralgia* none mild moderate severe - (joint pain) - ------------------------------------------------------------------------------------------------------------------------------------ FL LET Lethargy* none mild, fall of 1 level in moderate, fall of 2 severe, fall of 3 - (fatigue, malaise) perf. status level in perf. status levels in perf. status - ------------------------------------------------------------------------------------------------------------------------------------ FL MYA Myalgia* none mild moderate severe - (muscle ache) - ------------------------------------------------------------------------------------------------------------------------------------ FL RIG none mild or brief pronounced or/and cyanosis - Rigors/Chills* prolonged (Gr 3 incl cyanosis) - ------------------------------------------------------------------------------------------------------------------------------------ FL SWE Sweating* none mild moderate severe - (diaphoresis) - ------------------------------------------------------------------------------------------------------------------------------------ FL OTH Other* none mild moderate severe life threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== GASTROINTESTINAL ==================================================================================================================================== GI ANO Anorexia* none mild moderate severe dehydration - ------------------------------------------------------------------------------------------------------------------------------------ GI APP none mild moderate - - Appetite increased* - ------------------------------------------------------------------------------------------------------------------------------------ GI ASC Ascites none mild moderate severe life threatening (non malignant)* - ------------------------------------------------------------------------------------------------------------------------------------ GI DIA Diarrhea none increase of 2-3 stools increase of 4-6 stools increase of 7-9 stools increase of >= 10 stools per day; or mild per day, or nocturnal per day, or per day, or grossly increase of loose stools; or moderate incontinence, bloody diarrhea, or watery colostomy increase in loose malabsorption, or grossly bloody output compared to watery colostomy severe increase in loose clostomy output or pre-trt output compared to watery colostomy loose watery colostomy pre-trt output compared with output req parenteral pre-trt support; dehydration - ------------------------------------------------------------------------------------------------------------------------------------ GI DPH none dys.or odyn. not req dys. or odyn. req trt dys. or odyn. lasting dys. or odyn. with Esophagitis/ trt, or painless ulcers > 14 days despite trt 10% loss of body wt, dysphagia/ on esophagoscopy dehydration, hosp. req odynophagia* (incl recall reaction) - ------------------------------------------------------------------------------------------------------------------------------------ GI DRY Mouth, none mild moderate severe - nose dryness* - ------------------------------------------------------------------------------------------------------------------------------------ GI FIS Fistula* none - - req intervention req operation (intestinal, esophageal, rectal) - ------------------------------------------------------------------------------------------------------------------------------------ GI GAS none mild moderate severe - Flatulence* - ------------------------------------------------------------------------------------------------------------------------------------ GI HEA none mild moderate severe - Heartburn* (incl. dyspepsia) - ------------------------------------------------------------------------------------------------------------------------------------ GI HEM none mild, no transfusion gross, 1-2 units gross, 3-4 units massive > 4 units Gastrointestinal transfusion per transfusion per episode transfusion per episode bleeding* episode ----------------------------------------------------------------------------------------------------------- Bleeding resulting from thrombocytopenia should be coded under BL HEM, not GI ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== GI NAU Nausea none able to eat reasonable intake significantly no significant intake - intake decreased but can eat - ------------------------------------------------------------------------------------------------------------------------------------ GI OBS Small no - intermittent, no req intervention req operation bowel obstruction* intervention - ------------------------------------------------------------------------------------------------------------------------------------ GI PAI none pain, but no treatment pain controlled with pain controlled with uncontrollable pain Gastrointestinal req non-opioids opioids pain/cramping* (incl. rectal pain) - ------------------------------------------------------------------------------------------------------------------------------------ GI PRO Proctitis none perianal itch, tenesmus or ulcerations tenesmus or ulcerations mucosal necrosis with (rectal) hemorrhoids relieved with therapy, or other symptoms not hemorrhage or other anal fissure relieved with therapy life threatening proctosis - ------------------------------------------------------------------------------------------------------------------------------------ GI STO Stomatitis/ none painless ulcers, painful erythema, painful erythema, mucosal necrosis oral erythema, or mild edema, or ulcers, edema, or ulcers, and and/or req parenteral soreness but can eat cannot eat or enteral support, dehydration - ------------------------------------------------------------------------------------------------------------------------------------ GI TAS Taste, none mild moderate severe - sense of smell altered* - ------------------------------------------------------------------------------------------------------------------------------------ GI ULC none antacid req vigourous medical uncontrolled by perforation or bleeding Gastritis/ulcer* management or non- medical management; surgical art req surgery for GI ulceration - ------------------------------------------------------------------------------------------------------------------------------------ GI VOM Vomiting none 1 episode in 24hrs 2-5 episodes in 24 hrs 6-10 episodes in > 10 episodes in 24hrs 24hrs or req parenteral support, dehydration - ------------------------------------------------------------------------------------------------------------------------------------ GI OTH Other* none mild moderate severe life threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== GENITO-URINARY ==================================================================================================================================== GU BLA none light epithelial generalized severe generalized necrosis, or contracted Bladder changes* atrophy, or minor telangiectasia telangiectasia (often bladder (capacity < 100 telangiectasia with petechiae) or ml), or fibrosis reduction in bladder capacity (< 15 ml) - ------------------------------------------------------------------------------------------------------------------------------------ GU CRE WNL < 1.5 x N 1.5 - 3.0 x N 3.1 - 6.0 x N > 6.0 x N Creatinine - ------------------------------------------------------------------------------------------------------------------------------------ GU CYS Cystitis* none mild symptoms, req no symptoms relieved symptoms not relieved severe (life threatening) (non bacterial) intervention completely with ther. despite therapy cystitis -------------------------------------------------------------------------------------------------------------- Urinary tract infection should be coded under infection not GU - ------------------------------------------------------------------------------------------------------------------------------------ GU FIS Fistula* none - - req intervention req operation (vaginal, vesicovaginal) - ------------------------------------------------------------------------------------------------------------------------------------ GU FRE none freq of urination or freq of urination or freq with urgency and - Frequency* nocturia twice pre-trt nocturia < hourly nocturia >= hourly habit - ------------------------------------------------------------------------------------------------------------------------------------ GU HEM negative micro only gross, no clots gross + clots req transfusion Hematuria, bleeding per vagina -------------------------------------------------------------------------------------------------------------- Bleeding resulting from thrombocytopenia should be coded under BL HEM not GU. - ------------------------------------------------------------------------------------------------------------------------------------ GU INC none mild moderate severe - Incontinence* - ------------------------------------------------------------------------------------------------------------------------------------ GU OBS Ureteral none unilateral, no surgery bilateral, no surgery not complete bilateral, complete bilateral obstruction* req but stents, obstruction nephrostomy tubes or surgery req - ------------------------------------------------------------------------------------------------------------------------------------ GU PAI Genito- none pain, but no treatment pain controlled with pain controlled with uncontrollable pain urinary pain * (eg : req non-opioids opioids dysuria, dysmenorrhea, dyspareunia) ==================================================================================================================================== ==================================================================================================================================== GU PRT no change 1 + 2-3 + 4 + nephrotic syndrome Proteinuria or < 0.3 g/% or 0.3-1.0 g/% or > 1.0 g/% or < 3 g/l or 3-10 g/l or > 10 g/l - ------------------------------------------------------------------------------------------------------------------------------------ GU VAG Vaginitis* none mild, no trt req moderate, relieved severe, not relieved life threatening (+/- vaginal with trt with trt discharge) (non-infectious) - ------------------------------------------------------------------------------------------------------------------------------------ GU OTH Other* none mild moderate severe life-threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== HEPATIC ==================================================================================================================================== HP ALK Alk. within normal <= 2.5 x N (Normal) 2.6 - 5.0 x N 5.1 - 20.0 x N > 20 x N Phos or limits (WNL) 5'nucleotidase - ------------------------------------------------------------------------------------------------------------------------------------ HP ALT WNL <= 2.5 x N (Normal) 2.6 - 5.0 x N 5.1 - 20.O x N > 20 x N Transaminase SGPT (ALT) - ------------------------------------------------------------------------------------------------------------------------------------ HP AST WNL <= 2.5 x N (Normal) 2.6 - 5.0 x N 5.1 - 20.0 x N > 20 x N Transaminase SGOT (AST) - ------------------------------------------------------------------------------------------------------------------------------------ HP BIL WNL - < 1.5 x N 1.5 - 3.0 x N > 3.0 x N Bilirubin - ------------------------------------------------------------------------------------------------------------------------------------ HP CLI Liver no change from - - precoma hepatic coma (clinical) baseline - ------------------------------------------------------------------------------------------------------------------------------------ HP LDH LDH* WNL <= 2.5 x N (Normal) 2.6 - 5.0 x N 5.1 - 20.0 x N > 20 x N - ------------------------------------------------------------------------------------------------------------------------------------ HP OTH none mild moderate severe life-threatening Other* - ------------------------------------------------------------------------------------------------------------------------------------ Viral Hepatitis should be coded as infection rather than liver toxicity. ==================================================================================================================================== ==================================================================================================================================== INFECTION ==================================================================================================================================== IN FEC none mild, no active therapy moderate, localized sever systemic life threatening Infection infection, active infection, req sepsis, specify therapy req parenteral trt, site specify site - ------------------------------------------------------------------------------------------------------------------------------------ IN NEU Febrile none - - present - Neutropenia* ------------------------------------------------------------------------------------------------------------------- Absolute Fever felt to be caused by drug allergy should be coded as ALLERGY (AL LER). Non-allergy drug fever (eg. as from granulocyt biologics) should be coded under FLU-LIKE SYMPTOMS (FL FEV). If fever is due to infection, code INFECTION only count < 1.0 x (IN FEC or IN NEU). 10(caret)9/1, fever >= 38.5 (degrees)C treated with (or ought to have been treated with) IV antibiotics ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== METABOLIC (SI UNITS) ==================================================================================================================================== MT AMY Amylase WNL < 1.5 x N 1.5 - 2.0 x N 2.1 - 5.0 x N > 5.1 x N - ------------------------------------------------------------------------------------------------------------------------------------ MT HCA < 2.64 mmol/l 2.64 - 2.88 2.89 - 3.12 3.13 - 3.37 > 3.37 Hypercalcemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LCA > 2.10 mmol/l 2.10 - 1.93 1.92 - 1.74 1.73 - 1.51 <= 1.50 Hypocalcemia - ------------------------------------------------------------------------------------------------------------------------------------ MT HGL < 6.44 mmol/l 6.44 - 8.90 8.91 - 13.8 13.9 - 27.8 > 27.8 or Hyperglycemia ketoacidosis - ------------------------------------------------------------------------------------------------------------------------------------ MT LGL > 3.55 mmol/l 3.03 - 3.55 2.19 - 3.02 1.66 - 2.18 < 1.66 hypoglycemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LKA no change or > 3.5 3.1 - 3.5 2.6 - 3.0 2.1 - 2.5 <= 2.0 Hypokalemia* mmol/l - ------------------------------------------------------------------------------------------------------------------------------------ MT LMA > 0.70 mmol/l 0.70 - 0.58 0.57 - 0.38 0.37 - 0.30 <= 0.29 Hypomagnesemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LNA no change or > 135 131 - 135 126 - 130 121 - 125 <= 120 Hyponatremia* mmol/l - ------------------------------------------------------------------------------------------------------------------------------------ MT 0TH Other* none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== METABOLIC (SI UNITS) ==================================================================================================================================== MT AMY Amylase WNL < 1.5 x N 1.5 - 2.0 x N 2.1 - 5.0 x N > 5.1 x N - ------------------------------------------------------------------------------------------------------------------------------------ MT HCA < 2.64 mmol/l 2.64 - 2.88 2.89 - 3.12 3.13 - 3.37 > 3.37 Hypercalcemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LCA > 2.10 mmol/l 2.10 - 1.93 1.92 - 1.74 1.73 - 1.51 <= 1.50 Hypocalcemia - ------------------------------------------------------------------------------------------------------------------------------------ MT HGL < 6.44 mmol/l 6.44 - 8.90 8.91 - 13.8 13.9 - 27.8 > 27.8 or Hyperglycemia ketoacidosis - ------------------------------------------------------------------------------------------------------------------------------------ MT LGL > 3.55 mmol/l 3.03 - 3.55 2.19 - 3.02 1.66 - 2.18 < 1.66 hypoglycemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LKA no change or > 3.5 3.1 - 3.5 2.6 - 3.0 2.1 - 2.5 <= 2.0 Hypokalemia* mmol/l - ------------------------------------------------------------------------------------------------------------------------------------ MT LMA > 0.70 mmol/l 0.70 - 0.58 0.57 - 0.38 0.37 - 0.30 <= 0.29 Hypomagnesemia - ------------------------------------------------------------------------------------------------------------------------------------ MT LNA no change or > 135 131 - 135 126 - 130 121 - 125 <= 120 Hyponatremia* mmol/l - ------------------------------------------------------------------------------------------------------------------------------------ MT 0TH Other* none mild moderate severe life threatening ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== NEUROLOGIC ==================================================================================================================================== NE CER none slight incoordination, intention tremor, locomotor ataxia cerebellar necrosis Cerebellar dysdiadochokinesis dysmetria, slurred speech, nystagmus - ------------------------------------------------------------------------------------------------------------------------------------ NE CON none or no change mild moderate severe, ileus > 96 hrs Constipation obstipation - ------------------------------------------------------------------------------------------------------------------------------------ NE COR Cortical none mild somnolence moderate somnolence severe somnolence, coma, seizures, (includes confusion, toxic psychosis drowsiness) disorientation, hallucinations - ------------------------------------------------------------------------------------------------------------------------------------ NE DIZ none mild moderate severe - Dizziness* (includes fainting) (includes lightheadedness) - ------------------------------------------------------------------------------------------------------------------------------------ NE EXT none mild agitation moderate agitation torticollis, - Extrapyramidal/ (includes restlessness) oculogyric crisis Involuntary severe agitation movement* - ------------------------------------------------------------------------------------------------------------------------------------ NE HED Headache none mild moderate or severe unrelenting and - but transient severe - ------------------------------------------------------------------------------------------------------------------------------------ NE HER none or no change asymptomatic hearing tinnitus, symptomatic hearing loss hearing changes or Altered hearing loss on audiometry hearing changes not interfering with deafness not only req hearing aid or trt function but correctable correctable with hearing aid or trt - ------------------------------------------------------------------------------------------------------------------------------------ NE INS Insomnia* none mild moderate severe - - ------------------------------------------------------------------------------------------------------------------------------------ NE MOO Mood no change mild anxiety or moderate anxiety or severe anxiety or suicidal ideation depression depression depression - ------------------------------------------------------------------------------------------------------------------------------------ NE MOT Motor none or no change subjective weakness, mild objective objective weakness paralysis no objective findings weakness without with impairment of significant impairment function of function - ------------------------------------------------------------------------------------------------------------------------------------ NE PAI none pain, but no treatment pain controlled with pain controlled uncontrollable pain Neurologic pain* req non-opioids with opioids (eg : jaw pain) - ------------------------------------------------------------------------------------------------------------------------------------ NE PER no change change, not disruptive disruptive to patient harmful to others psychosis Personality to patient or family or family or self change* - ------------------------------------------------------------------------------------------------------------------------------------ NE SEN Sensory none or no change mild paresthesias of deep mild or moderate sensory loss or - tendon reflexes (including objective sensory paresthesias that tingling) loss, moderate interfere with paresthesias function - ------------------------------------------------------------------------------------------------------------------------------------ NE VIS Vision none or no change blurred vision - symptomatic blindness subtotal loss of vision - ------------------------------------------------------------------------------------------------------------------------------------ NE 0TH Other* none mild moderate severe life-threatening (includes pain) ------------------------------------------------------------------------------------------------------------------ Code chest vain CD PAI, muscle aches (myalgia) FL MYA, abdominal pain GI PAI, and local pain at IV site SK LTO. For all other types of pain (eg. bone pain), code NE 0TH. ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== OCULAR ==================================================================================================================================== OC CAT Cataract* none mild moderate severe - - ------------------------------------------------------------------------------------------------------------------------------------ OC CJN none erythema or chemosis req trt steroids or corneal ulceration - Conjunctivis/ not req steroids or antibiotics or visible Keratitis antibiotics opacification - ------------------------------------------------------------------------------------------------------------------------------------ OC DRY Dry eye normal mild req artificial tears severe req enucleation - ------------------------------------------------------------------------------------------------------------------------------------ OC GLA no change - - yes - Glaucoma - ------------------------------------------------------------------------------------------------------------------------------------ OC PAI Eye none pain, but no treatment pain controlled with pain controlled uncontrollable pain pain * req non-opioids with opioids - ------------------------------------------------------------------------------------------------------------------------------------ OC TEA Tearing * none mild moderate severe - (watery eyes) - ------------------------------------------------------------------------------------------------------------------------------------ OC 0TH Other none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== OSSEOUS (BONE) ==================================================================================================================================== OS PAI Bone none pain, but no treatment pain controlled with pain controlled uncontrollable pain pain * req non-opioids with opioids - ------------------------------------------------------------------------------------------------------------------------------------ OS 0TH Other none mild moderate severe life threatening (eg. avascular necrosis) ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== PULMONARY ==================================================================================================================================== PU CMD Carbon > 90% decrease to 76 - 90% decrease to 51 - 75% decrease to 26 - 50% decrease to <= 25% Monoxide Diffusion of pretreatment of pre-trt of pre-trt of pre-trt of pre-trt Capacity (DLCO)* value - ------------------------------------------------------------------------------------------------------------------------------------ PU COU Cough* norm mild moderate severe - - ------------------------------------------------------------------------------------------------------------------------------------ PU EDE none - out-patient management in-patient management req incubation Pulmonary edema* - ------------------------------------------------------------------------------------------------------------------------------------ PU EFF none mild moderate severe life threatening Pleural effusion* (non-malignant) - ------------------------------------------------------------------------------------------------------------------------------------ PU FIB Pulmonary normal radiographic changes, - changes with - fibrosis* no symptoms symptoms - ------------------------------------------------------------------------------------------------------------------------------------ PU HEM none mild, no transfusion gross, 1 - 2 units gross, 3 - 4 units massive, > 4 units Hemoptysis* transfusion per transfusion per transfusion per episode episode episode --------------------------------------------------------------------------------------------------------------- Bleeding resulting from thrombocytopenia should be coded under BL HEM, not PU - ------------------------------------------------------------------------------------------------------------------------------------ PU HIC none mild moderate severe - Hiccoughs* - ------------------------------------------------------------------------------------------------------------------------------------ PU PAI none pain, but not treatment pain controlled pain controlles uncontrollable pain Pulmonary pain* req non-opioids with opioids - ------------------------------------------------------------------------------------------------------------------------------------ PU PNE normal radiographic changes, steriods req oxygen req req assisted Pneumonitis* symptoms do not req ventilation (non-infectious) steriods - ------------------------------------------------------------------------------------------------------------------------------------ PU SOB Shortness none or no change asymptomatic, with dyspnea on significant dyspnea at normal dyspnea at rest, of breath (dyspnea) abnormality in PFT's exertion level of activity, apnea with cyanosis (incl wheezing) apnea without cyanosis - ------------------------------------------------------------------------------------------------------------------------------------ PU VOI Voice none mild moderate severe - changes* (incl. hoarseness, loss of voice) - ------------------------------------------------------------------------------------------------------------------------------------ PU 0TH Other* none mild moderate severe life-threatening - ------------------------------------------------------------------------------------------------------------------------------------ Pneumonia should be considered infection and not graded as pulmonary toxicity unless felt to be resultant from pulmonary changes directly induced by treatment ====================================================================================================================================
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==================================================================================================================================== GRADE 0 1 2 3 4 ==================================================================================================================================== ==================================================================================================================================== SKIN ==================================================================================================================================== SK ALO Alopecia no loss mild hair loss pronounced or total total body hair - head hair loss loss - ------------------------------------------------------------------------------------------------------------------------------------ SK CHA none localized pigmentation generalized subcut.fibrosis or generalized Skin changes* (eg. changes pigmentation changes localized shallow ulcerations or photosensitivity) or atrophy ulceration necrosis - ------------------------------------------------------------------------------------------------------------------------------------ SK DES none dry desquamation moist desquamation confluent moist - Desquamation* desquamation - ------------------------------------------------------------------------------------------------------------------------------------ SK DRY Dry skin* none mild moderate severe - - ------------------------------------------------------------------------------------------------------------------------------------ SK FAC Flushing* none mild moderate severe - (eg:-facial) - ------------------------------------------------------------------------------------------------------------------------------------ SK HEM none mild, not transfusion gross, 1 - 2 units gross, 3 - 4 units massive, > 4 units Bruising/bleeding transfusion per transfusion per transfusion per episode episode episode --------------------------------------------------------------------------------------------------------------- Bleeding from thrombocytopenia should be coded under BL HEM, not SK - ------------------------------------------------------------------------------------------------------------------------------------ SK LTO none pain pain and swelling, ulceration plastic surgery Local toxicity with inflammation or indicated (reaction at IV site) phlebitis - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ SK NAI none mild moderate severe - Nail changes* - ------------------------------------------------------------------------------------------------------------------------------------ SK PAI Skin pain* none pain, but no treatment pain controlled with pain controlled with uncontrollable pain (include sclap non-opioids opioids pain) - ------------------------------------------------------------------------------------------------------------------------------------ SK RAS Rash/Itch* none or no change scattered macular or scattered macular or generalized exfoliative (not to due to papular eruption or papular eruption or symptomatic macular, dermatitis or allergy) (includes) erythema that is erythema with pruritus papular, or ulcerating recall reaction) asymptomatic or other associated vesicular eruption dermatitis symptoma - ------------------------------------------------------------------------------------------------------------------------------------ SK 0TH Other* none mild moderate severe life threatening ==================================================================================================================================== ==================================================================================================================================== WEIGHT ==================================================================================================================================== WT GAI < 5.0% 5.0 - 9.9% 10.0 - 19.9% >= 20.0% - Weight Gain - ------------------------------------------------------------------------------------------------------------------------------------ WT LOS < 5.0% 5.0 - 9.9% 10.0 - 19.9% >= 20.0% - Weight Loss ==================================================================================================================================== ==================================================================================================================================== OTHER ==================================================================================================================================== OT 0TH Other* none mild moderate severe life-threatening --------------------------------------------------------------------------------------------------------------- For toxicity which do not have an existing code, but do fit into an existing toxicity category, use "other" variable in the appropriate toxicity category (eg. code sinus tachycardia CARDIOVASCULAR OTHER (CD 0TH). Only toxicities which do not fit into existing categories should be coded OTHER OTHER (OT 0TH). ====================================================================================================================================
84/102 102 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.6 APPENDIX VI: DECLARATION OF HELSINKI WORLD MEDICAL ASSOCIATION DECLARATION OF HELSINKI Recommendations guiding physicians in biomedical research involving human subjects Adopted by the 18th World Medical Assembly Helsinki, Finland, June 1964 and amended by the 29th World Medical Assembly Tokyo, Japan, October 1975 35th World Medical Assembly Venice, Italy, October 1983 and the 41st World Medical Assembly Hong Kong, September 1989 and the 48th General Assembly Somerset West, Republic of South Africa, October 1996 Introduction It is the mission of the physician to safeguard the health of the people. His or her knowledge and conscience are dedicated to the fulfilment of this mission. The Declaration of Geneva of the World Medical Association binds the physician with the words, "The health of my patient will be my first consideration," and the International Code of Medical Ethics declares that, "A physician shall act only in the patient's interest when providing medical care which might have the effect of weakening the physical and mental condition of the patient." 85/102 103 [LOGO] The SILVA study - -------------------------------------------------------------------------------- The purpose of biomedical research involving human subjects must be to improve diagnostic, therapeutic and prophylactic procedures and the understanding of the etiology and pathogenesis of disease. In current medical practice most diagnostic, therapeutic or prophylactic procedures involve hazards. This applies especially to biomedical research. Medical progress is based on research which ultimately must rest in part on experimentation involving human subjects. In the field of biomedical research a fundamental distinction must be recognised between medical research in which the aim is essentially diagnostic or therapeutic for a patient, and medical research, the essential object of which is purely scientific and without the implication of direct diagnostic or therapeutic value to the person subjected to the research. Special caution must be exercised in the conduct of research which may effect the environment, and the welfare of animals used for research must be respected. Because it is essential that the results of laboratory experiments be applied to human beings to further scientific knowledge and to help suffering humanity, the World Medical Association has prepared the following recommendations as a guide to every physician in biomedical research involving human subjects. They should be kept under review in the future. It must be stressed that the standards as drafted are only a guide to physicians all over the world. Physicians are not relieved from criminal, civil and ethical responsibilities under the laws of their own countries. I. Basic principles 1. Biomedical research involving human subjects must conform to generally accepted scientific principles and should be based on adequately performed laboratory and animal experimentation and on a thorough knowledge of the scientific literature. 2. The design and performance of each experimental procedure involving human subjects should be clearly formulated in an experimental protocol which should be transmitted for consideration, comment and guidance to a specially appointed committee independent of the investigator and the sponsor provided that this independent committee is in conformity with the laws and regulations of the country in which the research experiment is performed. 3. Biomedical research involving human subjects should be conducted only by scientifically qualified persons and under the supervision of a clinically competent medical person. The responsibility for the human subject must always rest with a medically qualified person and never rest on the subject of the research, even though the subject has given his or her consent. 4. Biomedical research involving human subjects cannot legitimately be carried out unless the importance of the objective is in proportion to the inherent risk to the subject. 5. Every biomedical research project involving human subjects should be preceded by careful assessment of predictable risks in comparison with foreseeable benefits to the subject or to others. Concern for the interests of the subject must always prevail over the interests of science and society. 6. The right of the research subject to safeguard his or her integrity must always be respected. Every precaution should be taken to respect the privacy of the subject and to minimize the impact of the study on the subject's physical and mental integrity and on the personality of the subject. 86/102 104 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 7. Physicians should abstain from engaging in research projects involving human subjects unless they are satisfied that the hazards involved are believed to be predictable. Physicians should cease any investigation if the hazards are found to outweigh the potential benefits. 8. In publication of the results of his or her research, the physician is obliged to preserve the accuracy of the results. Reports of experimentation not in accordance with the principles laid down in this Declaration should not be accepted for publication. 9. In any research on human beings, each potential subject must be adequately informed of the aims, methods, anticipated benefits and potential hazards of the study and the discomfort it may entail. He or she should be informed that he or she is at liberty to abstain from participation in the study and that he or she is free to withdraw his or her consent to participation at any time. The physician should then obtain the subject's freely-given informed consent, preferably in writing. 10. When obtaining informed consent for the research project the physician should be particularly cautious if the subject is in a dependent relationship to him or her or may consent under duress. In that case the informed consent should be obtained by a physician who is not engaged in the investigation and who is completely independent of this official relationship. 11. In case of legal incompetence, informed consent should be obtained from the legal guardian in accordance with national legislation. Where physical or mental incapacity makes it impossible to obtain informed consent, or when the subject is a minor, permission from the responsible relative replaces that of the subject in accordance with national legislation. Whenever the minor child is in fact able to give consent, the minor's consent must be obtained in addition to the consent of the minor's legal guardian. 12. The research protocol should always contain a statement of the ethical considerations involved and should indicate that the principles enunciated in the present Declaration are complied with. II. Medical research combined with professional care (Clinical research) 1. In the treatment of the sick person, the physician must be free to use a new diagnostic and therapeutic measure, if in his or her judgement it offers hope of saving life, re-establishing health or alleviating suffering. 2. The potential benefits, hazards and discomfort of a new method should be weighed against the advantages of the best current diagnostic and therapeutic methods. 3. In any medical study, every patient - including those of a control group, if any - should be assured of the best proven diagnostic and therapeutic method. This does not exclude the use of inert placebo in studies where no proven diagnostic or therapeutic method exist. 4. The refusal of the patient to participate in a study must never interfere with the physician-patient relationship. 87/102 105 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 5. If the physician considers it essential not to obtain informed consent. the specific reasons for this proposal should be stated in the experimental protocol for transmission to the independent committee (I, 2) 6. The physician can combine medical research with professional care, the objective being the acquisition of new medical knowledge, only to the extent that medical research is justified by its potential diagnostic or therapeutic value for the patient. III. Non-therapeutic biomedical research involving human subjects (Non-clinical biomedical research) 1. In the purely scientific application of medical research carried out on a human being, it is the duty of the physician to remain the protector of the life and health of that person on whom biomedical research is being carried out. 2. The subjects should be volunteers - either healthy persons or patients for whom the experimental design is not related to the patient's illness. 3. The investigator or the investigating team should discontinue the research if in his/her or their judgement it may, if continued, be harmful to the individual. 4. In research on man, the interest of science and society should never take precedence over considerations related to the wellbeing of the subject. 88/102 106 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.7 APPENDIX VII: WORKING PROCEDURE ON DATA ENTRY -------------------------------- Working Procedure on Data Entry: -------------------------------- ---------- -------------- ---------- US Centers AUS/NZ Centers EU centers ---------- -------------- ---------- | | | | fax of CRF-page | fax of CRF-page | | | | | | | ------------- ------------- ----------------- Quintiles RTP Quintiles Pty EORTC data center ------------- ------------- | | | | | | | |----------> Check on the Fax: | PlausiChecks, |-------------------------------> List of Questions ------------------ ----------------------------------------| | | | | | | | | ------------- ------------- | | Quintiles RTP Quintiles Pty <------------| | ------------- ------------- | | | | | | | ---------------------------------------------------------- first visit of the monitor to the study site: * let change original CRF pages based on queries * collect new copies of CRF ---------------------------------------------------------- 89/102 107 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.8 APPENDIX VIII: ANCILLARY STUDIES ON BIOLOGICAL EFFICACY Besides the clinical end points of this trial ancillary studies will investigate the biological mechanism of action in which a vaccination with BEC2/BCG acts in humans. 26.8.1 GENERAL CONSIDERATIONS The BEC2/BCG combination therapy is designed not to be a direct interventional therapy or to be directly cytotoxic to tumor cells. The therapy is designed as a vaccine or immunotherapy that, upon administration, would induce cancer patients to generate immune responses that would potentially have an anti-tumor effect. Therefore, study of the mechanism of action of a BEC2/BCG therapy would be a study of the immune responses to the therapy and potential effects of those responses. BEC2/BCG may be acting through immunologic mechanisms resulting in the targeting of residual tumor cells and by that prevent re-growth of tumor load which may be later present as clinical relapse of metachronous metastasis. The target antigen of BEC2/BCG is the tumor-associated antigen GD3, a glycosphingolipid. In order to evaluate the possibility that BEC2/BCG may elicit a specific immunologic response to the GD3 antigen, select patient populations will be evaluated for the development of B cell and T cell responses. However, there is a potential that the specific immune-response induced by BEC2/BCG may act as a starting point for subsequent immune reactions which, while not being necessarily 6D3-specific, will be specific for the individual patients tumor. Thus, ancillary biological assays will not only focus on the specific anti-GD3 response but also try to evaluate both humoral and cellular immune reactions induced by BEC2/BCG. For statistical analysis it is desired to incorporate as many patients as possible both from the vaccination and from the follow up cohort into these ancillary study. Nevertheless, the assays on T-cell function, Th1/Th2-shift, and minimal residual disease are very sophisticated demanding elaborate structures and capabilities from the participating centers such as cell culture capability, expedited sample shipment, liquid nitrogen freezing and storage equipment. As a consequence ancillary studies except of the anti-GD3-humoral response monitoring may not be done in all centers. Furthermore, not all centers which meet the prerequisites to undertake those studies may do the whole panel of them because of the high demands on logistics and personnel. 90/102 108 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.8.2 HUMORAL RESPONSE The anti-BEC2 / GD3-specific B cell responses will be determined through the evaluation of serial serum samples from individuals immunized with BEC2/BCG. Serum of all vaccinated patients will be evaluated for the development of antibodies to BEC2 and to GD3 (anti-GD3) following immunization. In addition, a quantitative assessment of the titer of anti-GD3 antibodies, the temporal relationship of immunization with BEC2/BCG to the time of anti-GD3 response development, and the correlation of antibody response to patient survival will be evaluated. The demand on blood sampling is the following: 10 ml per sample point, samples at registration, restaging, vaccination visits, first and second follow up visit, every three months during subsequent follow up total volume to be drawn during this trial: 110 ml Additionally, circulating cytokines may be measured if the results from "Th1 / Th2" data should indicate that doing so may be useful. For details see below. 26.8.3 OTHER ANCILLARY STUDIES WHICH WILL BE PERFORMED IN SELECTED CENTERS 26.8.3.1 Minimal residual disease Recurrence of SCLC is believed to be due to minimal residual disease in patients following treatment with conventional therapy. BEC2/BCG may act to induce an immune response that eliminates these residual tumor cells. An assay using nested PCR-detection of Gastrin-related peptide-messenger-RNA isolated from mononuclear cell fractions prepared from full blood will be used to assay the prevalence of circulating SCLC-cells in patients treated in this trial. For these studies a separate informed consent form will be given to the patient. 91/102 109 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.8.3.2 TH1 / TH2 shift It has been recently found that SCLC tumors not only secrete growth factors that induced anergy, but also that a certain proportion of SCLC-patients are and remain anergic defined by their cytokine response regardless of chemotherapy. Subsequent to induction chemotherapy these patients relapse significantly faster than immune-competent patients. Thus, it is significant to analyze if adjuvant vaccination with BEC2/BCG induces circumvention of this anergy and to evaluate longitudinal if clinical characteristics, such as time to relapse and survival, correlate with the patients immune status. For these studies a separate informed consent form will be given to the patient. 26.83.3 Cellular Immunity Cytotoxic T cell responses generated through BEC2/BCG therapy may also play a role in reducing or eliminating residual tumor in patients. A set of assays on isolated T-cells will focus on the immune-reactivity (cytokine release, mitosis) to SCLC-tumor antigens (SCLC-cell preps, specific antigens, GD3) and the Adjuvant BCG. Again, for these studies a separate informed consent form will be given to the patient. 92/102 110 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.9 APPENDIX IX: PPD TESTING 26.9.1 TEST KITS Commercially available test kits shall be used for PPD testing. All approved test kits are acceptable. 26.9.2 GENERAL REMARKS All Patients to be randomized must be free from a history of previous Tuberculosis and negative to 5 IU purified protein derivative (PPD) of tuberculin . The purpose of the PPD-testing procedure is to identify individuals who do not have a history of known Tuberculosis but show a strong reaction to Tuberculin when exposed to that antigen. Similarly, these patients are very likely to react to the BCG component of the BEC2/BCG-vaccination with grade III or IV skin toxicity right after the first vaccination. This would be both an intolerable burden to the patient and second it is likely to hamper the biological efficacy of the vaccination at all. As a consequence, patients who already react with a strong skin reaction to as little as 5 IU PPD shall be excluded from vaccination. For tuberculin testing intracutaneous tuberculin testing by intradermal injection of the test dose is mandated. Tine or stamp type of tests may not be used in this study. 26.93 PPD TESTING The reaction to intracutaneously injected tuberculin is a delayed (cellular) hypersensitivity reaction. The reaction which characteristically shows a delayed course, reaching its peak more than 24 hours after administration, consists of induration due to cell infiltration and occasionally vesiculation and necrosis. Clinically, a delayed hypersensitivity reaction to tuberculin is a manifestation of previous infection with M. Tuberculosis or a variety of non-tuberculosis bacteria. In most cases sensitization is induced by natural mycobacterial infection or by vaccination with BCG Vaccine. The sensitization following infection with mycobacteria occurs primarily in the regional lymph nodes. Small lymphocytes (T lymphocytes) proliferate in response to the antigenic stimulus to give rise to specifically sensitized lymphocytes. After several weeks, these lymphocytes enter the blood stream and circulate for long periods of time. Subsequent re-stimulation of these sensitized lymphocytes with the same or a similar antigen, such as the intradermal injection of tuberculin, evokes a local reaction mediated by these cells. The tuberculin reaction is characterized by the early predominance of mononuclear cells (small and medium sized lymphocytes and monocytes). Only a small proportion of these cells appear to be lymphocytes sensitized to tuberculin. Most cells are brought into the reaction through the release of biologically active substances by sensitized lymphocytes. An increase in vascular permeability leading to erythema and edema also occurs in tuberculin reactions. Characteristically, delayed hypersensitivity reactions to tuberculin begin at 5 to 6 hours, are maximal at 48 to 72 hours and subside over a period of days. In those who are elderly or those who 93/102 111 [LOGO] The SILVA study - -------------------------------------------------------------------------------- are being tested for the first time reactions may develop slowly and may not peak until after 72 hours. Immediate hypersensitivity reactions to tuberculin or to constituents of the diluent can also occur. Not all infected persons will have a delayed hypersensitivity reaction to a tuberculin test. A large number of factors has been reported to cause a decreased ability to respond to the tuberculin test in the presence of tuberculous infection including viral infections (measles, mumps, chickenpox), live virus vaccinations (measles, mumps, polio), overwhelming tuberculosis, other bacterial infections, drugs (corticosteroids and many other immunosuppressive agents), and malignancy 26.9.3.1 Usage For the initial intracutaneous (Mantoux) tuberculin test it is customary to use 5 U. S. unites (TU) per test dose of 0.1 ml. 26.9.3.2 Contraindications PPD-Tests should not be administered to known tuberculin positive reactors because of the severity of reactions (e. g., vesiculation, ulceration or necrosis) that may occur at the test site in highly sensitive persons. 26.9.3.3 Warnings Avoid injecting PPD subcutaneously. If this occurs, no local reaction will develop, but a general febrile reaction and/or acute inflammation around old tuberculosis lesions may occur in highly sensitive individuals. 26.9.3.4 Precautions a) General A separate STERILE syringe and needle must be used for each individual injection to prevent possibility of transmission of viral hepatitis or other infectious agents from one person to another. The possibility of allergic reactions in individuals sensitive to the components of the product should be borne in mind. Epinephrine Hydrochloride Solution (1:1000) should be readily available for use in case an anaphylactic or acute hypersensitivity reaction occurs. Failure to store and handle PPD-Testing reagents as recommended will result in a loss of potency and inaccurate test results. b) Information for patients Reactivity to the test may be depressed or suppressed for as long as 5 to 6 weeks in individuals who have received concurrent or recent immunization with certain virus vaccines (measles, influenza), who have had viral infections (rubeola, influenza, mumps and probably others) or who are receiving corticosteroids or immunosuppressive agents. 94/102 112 [LOGO] The SILVA study - -------------------------------------------------------------------------------- In those who are elderly or being tested for the first time reactions may develop slowly and may not peak until after 72 hours. Vesiculation, ulceration or necrosis may appear at the test site in highly sensitive persons. Pain, pruritus and discomfort at the test site may also occur. Positive reactions are 10 mm or more to 5 TU. Doubtful tuberculin reactions are 5 to 9 mm to 5 TU. c) Drug interactions Reactivity to the test may be depressed or suppressed in individuals who are receiving corticosteroids or immunosuppressive agents. Reactivity to PPD may be temporarily depressed by certain live virus vaccines (measles, mumps, rubeola). Therefore, if a tuberculin test is to be performed, it should be administered either before or simultaneously with the injection of measles, mumps and rubella vaccines in combined form or as separate antigens. d) Carcinogenesis, mutagenesis, impairment of fertility The product is not used for extended treatment over a long period of time. 26.9.3.5 Drug Interactions Reactivity to the test may be depressed or suppressed in individuals who are receiving corticosteroids or immunosuppressive agents. Reactivity to PPD may be temporarily depressed by certain live virus vaccines (measles, mumps, rubeola). Therefore, if a tuberculin test is to be performed, it should be administered either before or simultaneously with the injection of measles, mumps and rubeola vaccines in combined form or as separate antigens (see also PRECAUTIONS). Adverse Reactions In highly sensitized individuals, strongly positive reactions including vesiculation, ulceration or necrosis may occur at the test site. Cold packs or topical steroid preparations may be employed for symptomatic relief of the associated pain, pruritus and discomfort. Strongly positive reactions may result in scarring at the test site. Immediate erythematous or other reactions may occur at the injection site. The reason(s) for these infrequent occurrences are presently unknown. 26.9.3.6 Dosage and Administration THE TEST: The PPD test is performed by intracutaneously injecting, with a syringe and needle, 0.1 ml of PPD solution. 5 TU per test dose shall be used. The result is read 48 to 72 hours after administration and induration only is considered in interpreting the test. 26.9.3.6.1 Method of administration: The following procedure is recommended for performing the PPD test: 95/102 113 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 1. The site of the test is the flexor surface of the forearm about 4 inches below the bend of the elbow. 2. The skin of the forearm is first cleansed with alcohol and allowed to dry. 3. The test dose (0.1 ml) of Tuberculin PPD is administered with a 1 ml syringe calibrated in tenths and fitted with a short, one-half inch, 26 or 27 gauge needle. 4. Disposable sterile syringes and needles may be used. 5. The rubber cap of the vial should be wiped with a sterile piece of cotton moistened with alcohol and allowed to dry. The needle is then inserted gently through the cap and the required amount of the Tuberculin PPD is drawn into the syringe. 6. The point of the needle is inserted into the most superficial layers of the skin with the needle bevel pointing upward. If the intracutaneous injection is performed properly, a definite white bleb will rise at the needle point, about 10 mm (3/8") in diameter. This will disappear within minutes. No dressing is required. In the event of a subcutaneous injection (i. e., no bleb formed), the test should be repeated immediately at another site. Parenteral drug products should be inspected visually for particulate matter and discoloration prior to administration, whenever solutions and container permit. 26.9.3.6.2 Interpretation of the test: The test should be read 48 to 72 hours after administration. Sensitivity is indicated by induration, usually accompanied by erythema. The widest diameter of distinctly palpable induration should be recorded in millimeters (mm). Presence of edema and necrosis should also be recorded. A positive reaction indicates a sensitivity to tuberculin, which may be the result of a previous infection with mycobacteria. This infection, likely due to Mycobacterium Tuberculosis, may have occurred years ago or may be of recent origin. Reactions should be interpreted as follows: POSITIVE REACTION -- Any palpable induration measuring 10 mm or more is considered a positive reaction. In the case of tuberculosis suspects or close contacts of individuals with tuberculosis an induration of 5 mm or even smaller should be interpreted as a positive reaction and appropriate additional follow-up measures initiated. DOUBTFUL REACTION -- Induration measuring 5 to 9 mm indicated a doubtful reaction. NEGATIVE REACTION -- Induration of less than 5 mm is considered negative. Patients with a doubtful or negative reaction may be randomized, given a negative history of typical or atypical Tuberculosis. 96/102 114 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.10 APPENDIX X: INDUCTION THERAPY FLOW CHART Treatment Flow Chart Dx Restaging | | | | ------------------- Vaccine / Control ------------------- ----- ------------------- 4 * ETO/Pt Rad. ------------------- ----- - -------------------------------------------------------------------------------- ------ Rad. ------------------- ------------------- 4 * ETO/Pt Vaccine / Control ------------------- ------------------- - -------------------------------------------------------------------------------- ------------------- ----- ------------------- 5 * CDE Rad. Vaccine / Control ------------------- ----- ------------------- - -------------------------------------------------------------------------------- ===================================================== =========== | =========== ============================= | | | | | | | max 20 weeks | | 10 weeks | max. | | max 6 weeks | | | | | | 2 weeks | | | 97/102 115 [LOGO] The SILVA study - -------------------------------------------------------------------------------- 26.11 APPENDIX XI: OVERALL STUDY FLOW CHART Diagnosis | | ----------------------- | Registration | Induction Therapy | within | 1 month after start Chemo + Radiation | of induction | ----------|------------ | | | | | --------------------------------------- | ------------------ Restaging | | PR / CR NC / Progression | 5-7 months -----|-------------------|------------- | from diagnosis | | | | | | ----------- pre-randomization | ------------------ Rando- drop out | mization | ----|------| | 12 weeks | | | | ----------| | ---------- | | ------------------ Control ---------------------------- | Group Vaccination Group | n = 285 n = 285 | ------------------ ---------- BEC2/BCG 5X (10 weeks) | ---------------------------- | ~ 2 year | | 98/102 116 [GRAPHIC] The SILVA study - -------------------------------------------------------------------------------- 26.12 APPENDIX XII: VACCINATION INSTRUCTIONS The vaccination shall be done strictly intradermal. Both subcutaneous and intravasal injection has to be avoided under all circumstances. The area to vaccination shall be disinfected with a skin-disinfectant before vaccination. Please make absolutely sure, that the disinfecting liquid has completely dried before the administration is done! Every single dose (1.2 ml) shall be given in eight (8) intradermal injections. Injections shall be administered as a grid made of two columns and four rows. Space between two injections shall be -- one (1) cm. For the first dose the right upper arm shall be used (in left handed persons start with the left upper arm). Second shall be given to the opposite upper arm. Third dose shall be given to the left upper limb, fourth to the right upper limb and fifth again to the left thigh. Please refer to the following sketches for illustration: [GRAPHIC] 99/102 117 [GRAPHIC] The SILVA study - -------------------------------------------------------------------------------- 26.13 APPENDIX XIII: LIST OF ABBREVIATIONS (degree)C centigrade AE/AE's adverse event/s ASAT aspartate-amino-transferase = GOT ASCO American Society of Clinical Oncology anti-ids anti-idiotypic antibodies AUC 5 Carboplatin AUS Australia BCG Bacille Calmette-Guerin CDE Cyclophosphamide, Doxorubicin, Etoposide regimen CET Central European time CFU Colony forming unit CIS Carcinoma in situ CR Complete Remission CT computed tomography CRF case report form D day Dx Diagnosis EaST Early stopping Rule ECG Electrocardiogram ED extensive disease EORTC European Organization for the Research and Treatment of Cancer F Fahrenheit FDA Food and Drug Administration GCP good clinical practice GD3 ganglioside fraction GD3 GMP good manufacturing practice GOT glutamine oxalacetic transferase h hour(s) HAMA human anti-mouse antibodies HBsAg hepatitis B virus surface antigen BHCG beta-human chorionic gonadotropin HIV human immune deficiency virus HE health economics HMW-MAA high molecular weight melanoma associated antigen HR heart rate IDMC Independent Data Monitoring Committee i.d. intradermally i. v. intravenous IgG immunoglobulin gamma LD limited disease LDH lactate dehydrogenase LPS lipopolysaccharide MAb monoclonal antibody NCI National Cancer Institute (of the United States of America) NCIC-CTC National Cancer Institute Canada-common tox. criteria 100/102 118 [GRAPHIC] The SILVA study - -------------------------------------------------------------------------------- NSAID non-steroidal anti-inflammatory drugs NY New York NZ New Zealand PBS phosphate buffered saline PCR polymerase chain reaction PD progressive disease PPD purified protein derivative PR partial remission PT prothrombin time PTT partial thromboplastin time QALY quality adjusted life years QoL Quality of Life SAE serious adverse event SCLC small cell lung cancer SGOT serum GOT TU tuberculin units USA The United States of America V visit VA Veterans Administration VP Etoposide (VP-16) vs. versus W week WBC white blood count WHO World Health Organization 101/102 119 [GRAPHIC] The SILVA study - -------------------------------------------------------------------------------- 26.14 APPENDIX XIV: STUDY ACKNOWLEDGMENT STUDY ACKNOWLEDGMENT I have read the protocol and agree that it contains all necessary details for carrying out the study as described. I will conduct this protocol as outlined therein and will make a reasonable effort to complete the study within the time designated. I will provide copies of the protocol and access to all information furnished by the EORTC Data Center to study personnel under my supervision. I will discuss this material with them to ensure that they are fully informed about the drug and the study. - ---------------------------------------------------------- Investigator's printed name and signature Date - ---------------------------------------------------------- Monitor Date Protocol Number: EORTC 08971 Site: ____________________________ 102/102 120 -19- Exhibit "B" (Section 2(a), ImClone's labelling requirements) to Agreement among PMC, ImClone and Merck effective as of January 1, 1997 - -------------------------------------------------------------------------------- 121 Exhibit B BCG (lyophilized) 1.5 mg (An Active Immunizing Agent) For Intracutaneous Injection Only Dose as per Clinical Protocol Lot: Exp.: For Investigational Use Only MUST NOT BE ADMINISTERED AS A SINGLE AGENT Mfg.: Connaught Laboratories Limited North York, ONT Canada 122 -20- Exhibit "C" (Section 2(a), Merck's labelling requirements) to Agreement among PMC, ImClone and Merck effective as of January 1, 1997 - -------------------------------------------------------------------------------- 123 Exhibit C BCG (lyophilized) 1.5 mg (An Active Immunizing Agent) For Intracutaneous Injection Only Use according to study protocol EORTC 08971 only Lot: Exp.: For Clinical Trial Use Only MUST NOT BE ADMINISTERED AS A SINGLE AGENT Mfg.: Connaught Laboratories Limited, North York, ONT Canada Sponsor: Merck KGaA, 64271 Darmstadt, Germany EX-10.73 4 DEVELOPMENT AND SUPPLY AGREEMENT 1 EXHIBIT 10.73 CONFIDENTIAL TREATMENT REQUESTED April 30th, 1999 TABLE OF CONTENTS 1. DEFINITIONS 1.1 BI PHARMA KG 1.2 BI PHARMA KG Confidential Information 1.3 Cell Line 1.4 Certificate of Analysis 1.5 cGMP 1.6 C225 1.7 Effective Date 1.8 IMCLONE 1.9 IMCLONE Confidential Information 1.10 Master Cell Bank (MCB) 1.11 Manufacturer's Working Cell Bank (MWCB) 1.12 Phase I 1.13 Phase II 1.14 Phase III 1.15 Process 1.16 Product 1.17 Project 1.18 Project Fee 1.19 Project Manager 1.20 Project Team 1.21 Specifications 1.22 Start Date 2. COOPERATION BETWEEN THE PARTIES IN THE COURSE OF THE PROJECT 2.1 Designation of Project Manager 2.2 Project Team 2.3 Cooperation 2.4 Access to facilities 3. IMCLONE'S TASKS AND RESPONSIBILITIES 3.1 License to Use of IMCLONE Cell Line and Intellectual Property 3.2 Materials and Information to be Provided 3.3 Activities to be Performed
December 28, 1998 *** CONFIDENTIAL TREATMENT REQUESTED 2 Page 2 4. BI PHARMA KG'S TASKS AND RESPONSIBILITIES 4.1 BI PHARMA KG's Tasks 4.2 Control of Cell Line 4.3 Quarantine and Testing 4.4 Phase I/II Development Program 4.5 Responsibility for Failed Fermentations and Downstream Operations 4.6 Materials and Information to be Delivered 4.7 Product to be Delivered 4.8 Prior Approval 4.9 Retention Samples 4.10 Additional Work 5. PHASE I/II TO BE CONDUCTED ON FIXED-FEE BASIS 6. PHASE I/II PROJECT FEE 7. ADDITIONAL WORK / FUTURE ACTIVITIES 7.1 Additional Work 7.2 Future Activities 7.3 Others 8. OWNERSHIP OF PROJECT DATA 8.1 General 8.2 Intellectual Property Rights solely covering the Product 8.3 All other Intellectual Property Rights 9. REPRESENTATIONS. WARRANTIES AND INDEMNIFICATION 9.1 IMCLONE 9.2 BI PHARMA KG 10. LIMITATION OF LIABILITY 10.1 No Warranty of Merchantability of Fitness 10.2 Limitation of Liability 10.3 Maximum Amount
*** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 3 Page 3 11. CONFIDENTIALITY 11.1 BI PHARMA KG 11.2 IMCLONE 11.3 Exceptions 11.4 Others 12. TERM AND TERMINATION 12.1 Term 12.2 Right to Terminate 12.3 Effect of Termination 13. MISCELLANEOUS 13.1 Force Majeure 13.2 Publicity 13.3 Notices 13.4 Applicable Law 13.5 Compliance with Laws 13.6 Independent Contractors 13.7 Waiver 13.8 Severability 13.9 Entirety 13.10 Assignment
*** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 4 Page 4 CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT (C225) THIS CONTRACT RESEARCH AND DEVELOPMENT AGREEMENT ("Agreement") is made as of April 30, 1999 by and among ImClone Systems Incorporated, ("IMCLONE"), having its principal business offices at 180 Varick Street, New York, New York 10014, U.S.A. and Boehringer Ingelheim Pharma KG ("BI PHARMA KG") a German corporation having its principal place of business at Birkendorfer Stra(beta)e 65, 88397 Biberach an der Riss, Federal Republic of Germany. BACKGROUND - ---------- IMCLONE is the proprietor of a hybridoma cell line [ *** ] which produces a monoclonal antibody C225 directed against Epidermal Growth Factor Receptor (EGFR) as a result of stable transfection with a C225 expression construct, as well as methods for the purification and analysis of C225. BI PHARMA KG owns specialized cell culture, processing, protein purification and Iyophilization facilities that may be suitable for production of C225, and employs personnel who have experience in production of proteins by cell culture and purification processes as well as in registration of biopharmaceuticals. IMCLONE desires to have BI PHARMA KG personnel evaluate, further develop, supply and scale-up the production process for C225 in BI PHARMA KG's facilities. IMCLONE and Dr. Karl Thomae GmbH (as of 01.01.1998 and in this Agreement substituted by BI Pharma KG as the contractual assignee of all rights and obligations thereunder) have previously entered into a Material Transfer Agreement for Evaluation dated November 10/24, 1997 to evaluate potential production and supply of C225. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 5 Page 5 AGREEMENT - --------- IN CONSIDERATION OF the mutual covenants set forth in this Agreement, BI PHARMA KG and IMCLONE hereby agree as follows: 1. DEFINITIONS 1.1 "BI PHARMA KG" shall mean Boehringer Ingelheim Pharma KG. 1.2 "BI PHARMA KG Confidential Information" shall mean all technical and other information relating to BI PHARMA KG's facilities and associated technologies that is disclosed or supplied to, IMCLONE by BI PHARMA KG (except IMCLONE Confidential Information) pursuant to this Agreement, whether patented or unpatented, including, without limitation, trade secrets, know-how, processes, concepts, experimental methods and results and business and scientific plans. 1.3 "Cell Line" shall mean the IMCLONE cell line [ *** ] that expresses the Product. 1.4 "Certificate of Analysis" shall mean a document to be established by mutual agreement describing testing methods and results. 1.5 "cGMP" shall mean the regulatory requirements for current good manufacturing practices promulgated by the FDA under the Federal Food, Drug and Cosmetic Act, as amended, 21 C.F.R. Section 210 et seq and 21 C.F.R. Section 600-610, as applicable. 1.6 "C225" shall mean a chimerized monoclonal antibody directed against EGFR produced by the Cell Line. 1.7 "Effective Date" shall mean the date first above written, which shall be the effective date of this Agreement. 1.8 "IMCLONE" shall mean ImClone Systems Incorporated or an affiliate of ImClone Systems Incorporated. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 6 Page 6 1.9 "IMCLONE Confidential Information" shall mean the Cell Line, Process, Product and all technical, scientific or business and other materials and information that are disclosed or supplied to BI PHARMA KG by IMCLONE or developed on behalf of IMCLONE by BI PHARMA KG (excluding BI PHARMA KG Confidential Information) pursuant to this Agreement whether patented or unpatented, including, without limitation, trade secrets, know-how, processes, concepts, experimental methods and results and business and scientific plans. 1.10 "Master Cell Bank (MCB)" shall mean a cell bank established by BI PHARMA KG derived from a suspension serum-free adapted cell line to be produced at BI PHARMA KG. 1.11 "Manufacturer's Working Cell Bank (MWCB)" shall mean a cell bank established by BI PHARMA KG derived from the MCB. 1.12 "Phase I" shall refer to process transfer of the Process to a [ *** ] scale at BI PHARMA KG, continued scale-up to a [ *** ] and [ *** ] pilot fermentation scale and establishment of a downstream purification process according to APPENDIX 1, all of which has been completed as of the Effective Date. 1.13 "Phase II" shall refer to demonstrating the process at small scale [ *** ], performing Product equivalency testing and establishing a filling process of the corresponding Product as well as the scale-up to [ *** ] pilot scale and cGMP production of clinical grade material at that scale to be undertaken by BI PHARMA KG pursuant to this Agreement and according to the updated Master Projectplan (APPENDIX 1.1) dated November 1998. The agreed upon process format for Phase II of the project is given in APPENDIX 6. [ *** ]. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 7 Page 7 1.14 "Phase III" shall refer to a second project, which may be implemented by separate agreement between IMCLONE and BI PHARMA KG following completion of Phase II activities, involving scaling the Process from the [ *** ] fermentation scale implemented in Phase II to the [ *** ]. 1.15 "Process" shall refer to a proprietary IMCLONE process for using the Cell Line, including defined procedures, equipment and analytical methodologies for in-process control, release testing and Product characterization, that has been used by IMCLONE to produce the Product at the laboratory scale, which shall be disclosed by IMCLONE to BI PHARMA KG to enable BI PHARMA KG to carry out the Project or, if and when applicable, the modified process after further development and scale up by BI PHARMA KG to the [ *** ] fermentation scale. 1.16 "Product" shall mean the biologically active C225 produced by the Cell Line in accordance with the Process. 1.17 "Project" shall mean the Phase I and Phase II contract research program described herein, in which IMCLONE shall transfer the Process to BI PHARMA KG to be implemented, scaled-up and evaluated at the [ *** ] fermentation scale in and by BI PHARMA KG's facility and equipment. The primary objectives of the Project will be to transfer, establish and scale up the Process in the BI PHARMA KG facility, successfully demonstrate that Product can be reproducibly manufactured in BI PHARMA KG's facilities at [ *** ] scale, and generate a report compiling a summary of data generated in the Project. The proposed workscopes and timelines for the Project are laid down in the Master Projectplans attached hereto as APPENDIX 1 and APPENDIX 1.1. Phase I has been completed as of the date of this Agreement. 1.18 "Project Fee" shall have the meaning specified in Section 6 hereof. 1.19 "Project Manager" shall have the meaning specified in Section 2.1 hereof. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 8 Page 8 1.20 "Project Team" shall have the meaning specified in Section 2.2 hereof. 1.21 "Specifications" shall mean the specifications for the Product and the respective test methods attached hereto as APPENDIX 5 on the basis of the specifications provided by IMCLONE and as such specifications may be amended from time to time by mutual agreement of IMCLONE and BI PHARMA KG according to further development of the Process and Product. 1.22 "Start Date" shall mean February 1, 1998 (according to the Master Projectplan APPENDIX 1). 2. COOPERATION BETWEEN THE PARTIES IN THE COURSE OF THE PROJECT 2.1 Designation of Project Manager. BI PHARMA KG and IMCLONE shall each identify a Project Manager, and if they choose, the supervisor of the Project Manager. The Project Manager or the Project Manager's supervisor will be exclusively responsible for communicating all instructions and information concerning the Project to the other party and shall be the person or people to whom such instructions and information are communicated by the other party. Each Project Manager or the Project Manager's supervisor will be available on a weekly basis for consultation at prearranged times during the course of the Project or as may otherwise be reasonably required or advisable. In the absence of the Project Manager or the Project Manager's supervisor, a substitute shall be appointed. Additional modes or methods of communication and decision making may be implemented with the mutual consent of each party. 2.2 Project Team. BI PHARMA KG and IMCLONE shall each name representatives to a Project Team, which shall consist of knowledgeable specialists in appropriate disciplines who shall be responsible for planning and executing the Project and any subsequent interactions between the parties. At regular intervals, the Project Managers shall schedule meetings between each company's representatives for the purpose of communicating Project updates and providing a forum for strategic decision making and rapid resolution of issues. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 9 Page 9 Joint Project meetings shall be conducted by telephone-conference, video-conference and face to face meetings. Meeting minutes shall be prepared jointly by the Project Managers to record all issues discussed and decisions made, subject to final approval of such minutes by both parties. Such minutes are considered to be accepted by a party when there is no objection made by such a party within a period of 7 (seven) days after such minutes have been received by the respective party. The present list of the members of the Project Team is attached hereto as APPENDIX 2. 2.3 Cooperation. BI PHARMA KG and IMCLONE each agree to work together collaboratively on the Project as reasonably expeditiously as possible, with the objective of completing the Project according to the mutual agreed timelines (see APPENDIX 1 and APPENDIX 1.1). In the course of the Project, BI PHARMA KG will at all times take into consideration and implement the recommendations of IMCLONE as long as they do not negatively influence other BI PHARMA KG biotech operations and are agreed upon by the Project Team. In the absence of explicit instructions from IMCLONE, BI PHARMA KG shall be entitled to employ its reasonable judgment in carrying out the Project. BI PHARMA KG shall be entitled to rely upon any instructions or directives provided by the IMCLONE Project Manager or the IMCLONE Project Manager's supervisor and, subject to Sections 4.5 and 4.7 below shall not be responsible for failure to achieve any objective or the inability to adhere to any guideline due to technical failures, incomplete direction or documentation of Process variables, or other causes beyond the control of BI PHARMA KG. 2.4 Access to facilities. IMCLONE shall permit personnel of BI PHARMA KG, upon reasonable prior written notice to IMCLONE, to visit its facilities during appropriate times to observe the Process and certain analytical procedures for C225 as conducted by IMCLONE. BI PHARMA KG shall permit IMCLONE, upon reasonable prior notice to BI PHARMA KG, to review the originals of all batch records and other primary documents at its facilities and shall allow IMCLONE personnel to be present in its facilities at appropriate times (e.g. to observe the implementation of the Process). While visiting the facility of the other party, personnel of BI PHARMA KG and IMCLONE shall comply with all security and safety policies and procedures of the other party. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 10 Page 10 3. IMCLONE'S TASKS AND RESPONSIBILITIES 3.1 License to Use of IMCLONE Cell Line and Intellectual Property. IMCLONE hereby grants to BI PHARMA KG a limited, non-exclusive right and license, without the right to sublicense, to use IMCLONE Confidential Information, including but not limited to the Cell Line and Process, solely for the purpose of enabling BI PHARMA KG to carry out its tasks and responsibilities under this Agreement with respect to the Project. 3.2 Materials and Information to be Provided. To enable BI PHARMA KG to begin the Project, IMCLONE shall provide: (a) 10 vials of the MCB and/or MWCB for Project start, additional quantities may be requested. (b) a description of IMCLONE's methods for testing of the Cell Line and its progenitor cell line. (c) documentation describing the exact composition of the [ *** ] and a sufficient quantity of actual medium to enable BI PHARMA KG to begin to culture the Cell Line upon receipt from IMCLONE; (d) a description of the Cell Line and of genetic construct used for expression of the Product (for registration according to German gene technology law ("Gentechnikgesetz")), and (e) at BI PHARMA KG's reasonable request any additional information concerning the Process, analytical test methods, reference materials, and any critical reagents to facilitate the Project. 3.3 Activities to be Performed. As the Project is carried out, IMCLONE shall: (a) use reasonable efforts to perform the work and tasks as set forth and detailed in APPENDIX 3. (b) at BI PHARMA KG's request and subject to Section 2.4 above, arrange for BI PHARMA KG personnel to visit IMCLONE's production facility to observe and record the Process as carried out by IMCLONE in its facility. Any such records shall be considered IMCLONE Confidential Information. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 11 Page 11 4. BI PHARMA KG'S TASKS AND RESPONSIBILITIES 4.1 BI PHARMA KG's Tasks. In the course of this Agreement BI PHARMA KG shall perform the work and tasks as laid down and detailed in APPENDIX 4 hereto. 4.2 Control of Cell Line. BI PHARMA KG shall maintain (for safety reasons in two different buildings) the Cell Line in safe and secure storage under its control in its facilities and shall not permit the transfer of the Cell Line to any third party that is not specifically authorized in writing by IMCLONE (except to a contract laboratory used for the characterization of the MCB or MWCB under substantially the same requirement of confidentiality). BI PHARMA KG shall comply with all applicable regulatory requirements relating to general safety and biosafety in handling the Cell Line and any raw materials used in the Project. 4.3 Quarantine and Testing. BI PHARMA KG will quarantine and test samples of the Cell Line already provided to it in order to verify that the Cell Line is suitable for introduction into BI PHARMA KG's facilities. The quarantine and testing time is estimated to be about 2 (two) months. 4.4 Phase I/II Development Program. Following quarantine testing of the MWCB (see APPENDIX 4) BI PHARMA KG will transfer and establish the production process at laboratory scale ( [ *** ] fermentation scale) on the basis of Process information supplied by IMCLONE. The agreed upon process format for Phase II of the Project is given in APPENDIX 6. Material derived from such a process will be tested for analytical equivalence with reference material from IMCLONE. Remaining quantities may be used by IMCLONE at its discretion. A scale-up will then be performed to the [ *** ] fermentation scale and cGMP material [ *** ] for clinical trials will be produced at this scale. The workscopes and timelines for such a program are given in the Master Projectplans (see APPENDIX 1 and APPENDIX 1.1). The production of further clinical material at [ *** ] fermentation scale, if required by IMCLONE, has to be agreed upon separately in writing, and shall be reflected in an amendment to this Agreement in accordance within the terms set forth herein. 4.5 Responsibility for Failed Fermentations and Downstream Operations. Responsibility for Failed Fermentations and Downstream Operations. (a) IMCLONE acknowledges that the Project is experimental in nature and that no favorable or useful result can be assured by BI PHARMA KG. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 12 Page 12 Accordingly, subject to the provisions of this Section 4.5, BI PHARMA KG shall not be responsible to IMCLONE for any failure of fermentations or downstream operations including, but not limited to, purification, or inability to obtain useful yields of Product or the success of the shift to the protein A process for reasons not under BI PHARMA KG's control, and the Project Fee shall be payable in full regardless of result unless the Project is terminated prior to its scheduled completion pursuant to Section 12 hereof. (b) BI PHARMA KG shall be responsible for all bioreactor fermentations and downstream operations including, but not limited to, purification that fail for reasons under BI PHARMA KG's control including, but not limited to, operator error, mechanical failure, or contamination and BI PHARMA KG shall repeat any such failed fermentations and downstream operations at its expense to complete the workscopes to be performed during the Project according to Section 4.4 above. 4.6 Materials and Information to be Delivered. BI PHARMA KG will provide IMCLONE with the following materials and information at the times indicated: (a) a summary of the test results generated during the 2 (two) months quarantine period within 30 (thirty) days following the end of such period; (b) within 2 (two) months following completion of each Phase of the Project (Phase I and Phase II), a report to IMCLONE, as laid down detailed in APPENDIX 7 including, a summary of the data BI PHARMA KG collects in the course of the Project and Certificates of Analysis for release of Product for clinical use, if any; (c) other interim results as reasonable in appropriate time periods or requested by IMCLONE, as mutually agreed by the Project Team. 4.7 Product to be Delivered. BI PHARMA KG shall supply Product to IMCLONE from the [ *** ] pilot scale and all purified Product (cGMP grade) from the [ *** ] scale runs performed by BI PHARMA KG. BI PHARMA KG shall also provide IMCLONE with samples of vialed Product that is produced by it. All Product delivered, if any, shall conform with the Specifications which have to be mutually agreed upon as laid down in APPENDIX 5 and BI PHARMA KG shall issue a Certificate of Analysis covering such Specifications. If the Product is asserted by IMCLONE not to meet the Specifications, both parties shall re-test the Product. If IMCLONE and BI PHARMA KG are not able to agree, whether the Product meets the Specifications or *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 13 Page 13 not and the parties are unable to resolve their differences, then either party may refer the matter to an independent specialized institution of international reputation agreeable to both parties for final analysis, which shall be binding on both parties hereto. All Product produced in the course of the Project shall be retained by BI PHARMA KG and stored under conditions specified by IMCLONE (and reasonably acceptable to BI PHARMA KG) not longer than 1 (one) year, and delivered to IMCLONE as instructed by IMCLONE and at the cost and risk of IMCLONE. 4.8 Prior Approval. Prior to implementing any deviation from the Project, BI PHARMA KG shall notify IMCLONE and obtain the written approval of the Project Manager of IMCLONE or other person designated in writing by IMCLONE. 4.9 Retention Samples. According to a sampling plan to be agreed upon by the Project Team, BI PHARMA KG shall isolate, identify and retain samples of raw materials used in fermentations carried out in the course of the Project, of Process media at appropriate time points in each fermentation, and of Product at each stage of purification. Retention samples shall be provided promptly to IMCLONE at its request. Shipment shall be at the cost and risk of IMCLONE. 4.10 Additional Work. On request of IMCLONE, BI PHARMA KG shall perform additional development work to sustain the progress of the Project on conditions in terms of money, time and scope to be subject to mutual agreement of the parties hereto and defined in an amendment to the Master Projectplans attached hereto as APPENDIX 1 and APPENDIX 1.1. 5. PHASE I/II TO BE CONDUCTED ON FIXED-FEE BASIS The Project shall be conducted by BI PHARMA KG for IMCLONE on a fixed fee basis, in consideration of payment by IMCLONE of the Project Fee. The estimated duration of the Project shall be 21 (twenty-one) months from the Start Date as outlined in APPENDIX 1 and APPENDIX 1.1. Phase I of the Project has been completed as of the Effective Date. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 14 Page 14 6. PHASE I/II PROJECT FEE IMCLONE shall pay BI PHARMA KG a Project Fee of DM 8, 950,000 (eightmillionninehundredandfiftythousand Deutsche Mark) for the services provided in carrying out the Project as defined in APPENDIX 1 and APPENDIX 1.1, regardless of the favorability or usefulness of the results (see Section 4.5 above). Of this amount to date DM 3,130,000 has been paid for the completion of Phase I. This fee includes all fees for BI PHARMA KG's services under the Master Projectplans for Phase I and Phase II, including but not limited to, fees for Cell Line validation, facility use, raw material testing, in-process testing services including bulk and finished product testing, environmental monitoring as appropriate, and other calibration and validation activities required to facilitate the successful completion of the technology transfer and production of the clinical grade material at the [ *** ] fermentation scale. Disposal of organic and hazardous waste is included in the Project Fee. The Project Fee shall be payable in installments, each non-refundable when paid, as described in APPENDIX 1 and APPENDIX 1.1. To the extent BI PHARMA KG is required to repeat any fermentations or downstream operations pursuant to Section 4.5 (b) above, any installment related to the completion of the fermentation or downstream operation or delivery of the Product, as the case may be, shall not be payable until such fermentation or downstream operation or delivery of Product, as the case may be, has been completed. The cost of commercially available materials purchased by IMCLONE for use at BI PHARMA KG to support development in GLP and cGMP shall be creditable to the applicable invoice. Each invoice shall be payable within 30 (thirty) days following receipt thereof. 7. ADDITIONAL WORK / FUTURE ACTIVITIES 7.1 Additional Work. BI PHARMA KG and IMCLONE may confer to determine if additional work relating to Phase I or Phase II should be undertaken pursuant to subsequent agreement between BI PHARMA KG and IMCLONE. Neither party shall be obligated to conduct any further undertakings on behalf of the other except as may be mutually agreed and set forth in a subsequent written agreement. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 15 Page 15 7.2 Future Activities. In the event IMCLONE requires additional Product for the conduct of clinical Phase III and/or for commercial supply and IMCLONE determines in its sole discretion not to be the producer of that additional quantities of Product, then IMCLONE and BI PHARMA KG shall engage in good faith negotiations with respect to an agreement(s) for such additional supply to contain usual and customary terms for similar agreements under comparable circumstances. If the parties are unable to agree to terms (including, but not limited to terms regarding quantity of Product) within 120 (onehundredtwenty) days after BI PHARMA KG is informed of IMCLONE's detailed request in writing, then IMCLONE may engage in negotiations for such supply with other third parties; provided, however, that IMCLONE shall not consummate any such agreement with any third parties on terms that are in the aggregate more favorable than those terms offered by BI PHARMA KG to IMCLONE without first giving BI PHARMA KG an opportunity to accept the agreement(s) on the terms offered to such third parties. In case BI PHARMA KG will not exercise its right to enter into negotiations with IMCLONE regarding an agreement to govern clinical Phase III and/or commercial supply within 30 (thirty) days after the written request of IMCLONE or if the parties are not able to conclude such final agreement within 120 (onehundredtwenty) days after BI PHARMA KG has received the written request of IMCLONE or if BI PHARMA KG has not accepted the agreement(s) on the third party terms, then BI PHARMA KG shall be deemed to have waived its rights granted under this Section 7.2. 7.3 Others. IMCLONE shall not assert any right to use BI PHARMA KG facilities at any future date as a result of its use of BI PHARMA KG facilities pursuant to this Agreement, nor shall BI PHARMA KG assert any right to use or have access to the Cell Line, Process, Product, MCB or MWCB as a result of its activities pursuant to this Agreement. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 16 Page 16 8. OWNERSHIP OF PROJECT DATA 8.1 General. All information and intellectual property rights relating to the transfer of information under Section 4.6 above, with the exception of BI PHARMA KG Confidential Information, shall be the sole and exclusive property of IMCLONE and IMCLONE shall have the right to use such information for any purpose without further obligation to BI PHARMA KG. For the purpose of this Agreement all information regarding BI PHARMA KG's facility and technical equipment shall be considered BI PHARMA KG'S Confidential Information. 8.2 Intellectual Property Rights solely covering the Product. Any and all intellectual property rights solely covering the Product, including, but not limited to, patents and patent applications arising out of the activities performed under this Agreement shall be the sole and exclusive property of IMCLONE, which shall have the sole right to file such applications and will meet all costs in relation thereto. Upon request of IMCLONE, BI PHARMA KG will assign any and all rights as necessary to vest such ownership in IMCLONE. 8.3 All other Intellectual Property Rights. All other intellectual property rights that arise out of the activities performed under this Agreement, and that do not cover solely the Product shall be the sole and exclusive property of BI PHARMA KG and IMCLONE shall be granted a non-exclusive, royalty-free and worldwide license solely for use to the Product. 9. REPRESENTATIONS. WARRANTIES AND INDEMNIFICATION 9.1 IMCLONE. IMCLONE hereby represents, warrants and agrees that: (a) IMCLONE is free to supply the Cell Line and IMCLONE Confidential Information to BI PHARMA KG; (b) IMCLONE is not aware of any special or unusual hazards involved in handling the Cell Line or Product; *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 17 Page 17 (c) IMCLONE has full corporate authority to enter into this Agreement and this Agreement is binding upon IMCLONE in accordance with its terms; and (d) IMCLONE shall indemnify, defend and hold BI PHARMA KG, its affiliates, and their respective officers, employees and agents harmless from and against all third party losses, damages, costs and expenses (including, without limitation, reasonable attorneys' fees), including injury to persons or damage to property resulting from (i) any breach of the representations and warranties made by IMCLONE under this Section, or (ii) any claim of infringement of the intellectual property rights of a third party based upon BI PHARMA KG's activities using the Cell Line or in implementing or using the Process or producing the Product in accordance with the instructions and documentation provided by IMCLONE or developed in the course of the Project, except those which result from the gross negligence or willful misconduct of an indemnified person or entity and those for which BI PHARMA KG would have been liable if BI PHARMA KG had used cell lines or processes other than Cell Lines or Processes, or produced products other than Products. 9.2 BI PHARMA KG. BI PHARMA KG hereby represents, warrants and agrees that: (a) BI PHARMA KG has the lawful right to use the facilities and BI PHARMA KG Confidential Information to be used for purposes set forth in this Agreement; (b) BI PHARMA KG is not aware of any special or unusual hazards that would arise as a result of its carrying out of the Project as planned; (c) BI PHARMA KG has full corporate authority to enter into this Agreement and this Agreement is binding upon BI PHARMA KG in accordance with its terms; and (d) BI PHARMA KG shall indemnify, defend and hold IMCLONE its affiliates and their respective officers, employees and agents harmless from and against all third party losses, damages, costs and expenses (including, without limitation, reasonable attorneys' fees), including injury to persons or damage to property, resulting from (i) any breach of the representations and warranties made by BI PHARMA KG under this Section, or (ii) any claim that BI PHARMA KG has violated any applicable local law or ordinance in carrying out *** CONFIDENTIAL TREATMENT REQUESTED February 12th, 1999 10.73-2.doc 18 Page 18 its manufacturing responsibilities under this Agreement or (iii) any claim of infringement of the intellectual property rights of a third party, except those which result from gross negligence or willful misconduct of an indemnified person or entity and those based on BI PHARMA KG activities using the Cell Line or in implementing or using the Process or producing the Product in accordance with the instructions and documentation provided by IMCLONE or developed in the course of the Project. (e) BI PHARMA KG warrants that the Project shall be conducted as laid down in APPENDIX 1 and APPENDIX 1.1 and in accordance with this Agreement and, when appropriate, in compliance with cGMP, and that any documentation of Project results or procedures provided to IMCLONE by BI PHARMA KG shall be accurate in all material respects. With regard to the results see Section 4.5 above. 10. LIMITATION OF LIABILITY 10.1 No Warranty of Merchantability or Fitness. Subject to Section 9.2 above, BI PHARMA KG shall provide the results of the Project to IMCLONE without any warranty of any kind, express or implied, including, without limitation, any warranties of merchantability or fitness for a particular purpose. 10.2 Limitation of Liability. IMCLONE acknowledges that BI PHARMA KG has no control over the manner in which IMCLONE intends to use any Product or results obtained in the Project. BI PHARMA KG shall not be liable to IMCLONE for any losses, damages, costs or expenses of any nature incurred or suffered by IMCLONE or by a third party, arising out of any dispute or other claims or proceedings made by or brought against IMCLONE with respect to use of the results of the Project, or the use of any Product by IMCLONE or by a third party (including, without limitation, product liability claims and claims by a third party alleging infringement of its intellectual property rights), except as to those under Section 9.2 (d) above, nor shall BI PHARMA KG be responsible in any way for dealing with any such disputes, claims or proceedings; provided that it shall cooperate with IMCLONE with respect to any such disputes or claims to the extent of providing necessary or advisable information in connection with IMCLONE's defense. *** CONFIDENTIAL TREATMENT REQUESTED February 12th, 1999 10.73-2.doc 19 Page 19 10.3 Maximum Amount. BI PHARMA KG undertakes to use its best efforts to perform the Project under the Master Projectplans and to meet the target dates set forth in APPENDIX 1 and APPENDIX 1.1 hereto. However, due to the biological nature of the work to be performed hereunder BI PHARMA KG's liability under this Agreement and its indemnification and hold harmless obligations shall in no event amount to more than 10% (ten percent) of the Project Fee. This limitation does not apply to willful breach or misconduct of BI PHARMA KG or its officers, employees or agents. 11. CONFIDENTIALITY 11.1 BI PHARMA KG. BI PHARMA KG shall not disclose IMCLONE Confidential Information to any person other than its employees or employees of affiliated companies of the Boehringer Ingelheim group who are bound by similar obligations of confidentiality and who have a need to know such information in order to perform their duties in carrying out the Project hereunder. 11.2 IMCLONE. IMCLONE shall not disclose any BI PHARMA KG Confidential Information to any person other than: (a) its employees or consultants who are bound by substantially similar obligations of confidentiality and who have a need to know such information in order to provide direction to BI PHARMA KG or evaluate the results of the Project; or (b) regulatory authorities, for example, the FDA, that require such information in order to review an IND or other regulatory filing. 11.3 Exceptions. The obligations of confidentiality applicable to IMCLONE Confidential Information and BI PHARMA KG Confidential Information shall not apply to any information that is: (a) known publicly or becomes known publicly through no fault of the recipient; (b) learned by the recipient from a third party entitled to disclose it; *** CONFIDENTIAL TREATMENT REQUESTED February 12th, 1999 10.73-2.doc 20 Page 20 (c) developed by the recipient independently of information obtained from the disclosing party as evidenced by prior written records of the recipient; (d) already known to the recipient before receipt from the disclosing party, as shown by its prior written records; (e) required to be disclosed by law, regulation or the order of a judicial or administrative authority; provided that the recipient notifies the disclosing party immediately upon receipt at any such order or becoming aware of any such law or regulation, or released with the prior written consent of the disclosing party. 11.4 Others. No right or license under any patent or proprietary right is granted hereunder by virtue of the disclosure of IMCLONE Confidential Information or BI PHARMA KG Confidential Information except as expressly provided herein. The obligations of both parties under this Section 11 shall survive the expiration or termination of this Agreement. Both IMCLONE and BI PHARMA KG shall use reasonable and customary precautions to safeguard IMCLONE Confidential Information and BI PHARMA KG Confidential Information, including ensuring that all employees or consultants who are provided access to such information are informed of the confidential and proprietary nature of such information and understand that all such information is required to be maintained confidential. 12. TERM AND TERMINATION 12.1 Term. This Agreement shall come into force as of the date first above written and commence retroactively as of the Start Date and, unless terminated earlier as provided herein, shall terminate upon the date of payment of the last sum due hereunder, or upon the date when the last services required to be performed hereunder are performed, whichever date shall last occur unless specifically extended by further written agreement. 12.2 Right to Terminate. If it becomes apparent to either party at any stage of the Project that it will not be possible to carry out the Project for scientific or technical reasons or as a result of Force Majeure (as described in Section 13 below), the parties shall permit 30 (thirty) business days for discussion to *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 21 Page 21 resolve, if possible, the scientific or technical issue giving rise to the problem. If the parties fail to resolve the problem within this 30 (thirty) day period, either party shall have the right to terminate this Agreement, effective upon written notice to the other. In the event of such a termination initiated by IMCLONE, the amount due to BI PHARMA KG hereunder shall equal all expenses reasonably incurred by BI PHARMA KG prior to such termination in respect of the purchase of supplies or raw materials plus an allocation of the balance of the Project for the period prior to such termination and for a period of 8 (eight) weeks thereafter. BI PHARMA KG shall cease all work following notice by IMCLONE of termination, and shall attempt in good faith to minimize expenses hereunder by, for example, canceling any orders that can be canceled. Either party may terminate this Agreement effective upon written notice if either of the following events occurs: (a) The other party commits a breach of this Agreement and the breach is not remedied within 30 (thirty) days after the receipt of notice identifying the breach, requiring its remedy and stating the intent of the party to terminate in the absence of remedy; or (b) The other party (i) becomes unable to pay its debts as they become due, (ii) suspends payment of its debts, (iii) enters into or becomes subject to corporate rehabilitation or bankruptcy proceedings or liquidation or dissolution, (iv) makes an assignment for the benefit of its creditors or (v) seeks relief under any similar laws for debtor's relief. 12.3 Effect of Termination. Upon the expiration or termination of this Agreement: (a) At the request of IMCLONE, BI PHARMA KG shall deliver at the cost and risk of IMCLONE all vials of the Cell Line, the MCB and the MWCB, as well as description of all methods relating thereto to IMCLONE or its designee and shall promptly return all IMCLONE Confidential Information to IMCLONE; except for a single copy and/or sample for documentation purposes only and (b) IMCLONE shall promptly return all BI PHARMA KG Confidential Information to BI PHARMA KG, except for a single copy and/or sample for documentation purposes only. *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 22 Page 22 The respective rights of BI PHARMA KG and IMCLONE to indemnification as set forth in Sections 9 and 10 above shall survive termination of this Agreement with respect to any claims that relate to or derive from the Project, or any acts or failures to act, of either BI PHARMA KG or IMCLONE in connection with the Project that occur prior to termination. 13. MISCELLANEOUS 13.1 Force Majeure. Neither party shall be in breach of this Agreement if there is any failure of performance under this Agreement (except for payment of any amounts incurred hereunder prior to Force Majeure) occasioned by any act of God, fire, act of government or state, war, civil commotion, insurrection, embargo, prevention from or hindrance in obtaining energy or other utilities, labor disputes of whatever nature or any other reason beyond the control of either party. 13.2 Publicity. Except as required by law (e.g. SEC-requirements), no press release or other form of publicity regarding the Project or this Agreement shall be permitted to be published unless both parties have indicated their consent to the form of the release. Notwithstanding the foregoing, IMCLONE may elect to issue a press release or other form of publicity regarding the Project at any time, but shall first notify BI PHARMA KG of such issuance and provide BI PHARMA KG with an opportunity to comment thereon. Nothing in this Section 13.2 shall prevent the parties from disclosing this Agreement as required by applicable laws, rules or regulations. 13.3. Notices. Any notice required or permitted to be given hereunder by either party shall be in writing and shall be (i) delivered personally, (ii) sent by registered mail, return receipt requested, postage prepaid or (iii) delivered by facsimile with immediate telephonic confirmation of receipt, to the addresses or facsimile numbers set forth below: If to BI PHARMA KG: Boehringer Ingelheim Pharma KG Birkendorfer Strasse 65 D-88397 Biberach an der Riss Federal Republic of Germany Attention: Dr. Wolfram Carius Fax: + 0049 73 51/54-98049 Phone + 0049 73 51/54-9421 *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 23 Page 23 If to IMCLONE: ImClone Systems Incorporated 180 Varick Street, 7th Floor New York, New York 10014 Attention: Mr. John B. Landes, Vice President, Business Development and General Counsel Fax: 001 212 645 1405 Phone: 001 212 645 2054 Each notice shall be deemed given (i) on the date it is received if it is delivered personally, (ii) 1 (one) day after the date it is postmarked if it is sent by certified United States mail, return receipt requested, postage prepaid or (iii) on the date it is received if it is sent by facsimile with immediate telephonic confirmation of receipt. 13.4. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of Germany without regard to its choice of law principles. The courts of the place of domicile of BI PHARMA KG shall have exclusive jurisdiction over all legal matters and proceedings hereunder. 13.5 Compliance with Laws. BI PHARMA KG shall perform the work hereunder in conformance with GLP/cGMP, as applicable, and all German and/or EU laws, ordinances and governmental rules or regulations pertaining thereto. 13.6. Independent Contractors. Each of the parties hereto is an independent contractor and nothing herein contained shall be deemed to constitute the relationship of partners, joint venturers, nor of principal and agent between the parties hereto. Neither party shall hold itself out to third persons as purporting to act on behalf of, or serving as the agent of, the other party. 13.7. Waiver. No waiver of any term, provision or condition of this Agreement whether by conduct or otherwise in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision or condition or of any other term, provision or condition of this Agreement. 13.8 Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction all other provisions shall continue in full force and effect. The parties hereby agree to attempt to substitute for *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 24 Page 24 any invalid or unenforceable provision a valid or enforceable provision which achieves to the greatest extent possible the economic legal and commercial objectives of the invalid or unenforceable provision. 13.9 Entirety. This Agreement, including any exhibits and appendices attached hereto and referenced herein, constitutes the full understanding of the parties and a complete and exclusive statement of the terms of their agreement, and no terms, conditions, understandings or agreements purporting to modify or vary the terms thereof shall be binding unless it is hereafter made in writing and signed by both parties. 13.10 Assignment. Neither party may assign this Agreement to a third party, except an affiliate (including a subsidiary or division), and either IMCLONE or BI PHARMA KG may assign this Agreement in connection with the sale of all or substantially all of such party's assets or similar transaction. This Agreement shall be binding upon the successors and assigns of the parties and the name of a party appearing herein shall be deemed to include the names of its successors and assigns. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date. Biberach, ...............1999 New York, April 30, 1999 BOEHRINGER INGELHEIM PHARMA KG IMCLONE SYSTEMS INCORPORATED ppa. Dr. Jacob Prof. R. G. Werner By: John B. Landes Member of the Board Head of Industrial Biopharmaceuticals Title: VP, General Counsel *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 25 Page 25 APPENDICES: - ----------- Appendix 1: Master Projectplan including Project Timeline Appendix 1.1: Updated Master Projectplan including Project timeline Appendix 2: Project Team Appendix 3: IMCLONE's Tasks in Detail Appendix 4: BI PHARMA KG's Tasks in Detail Appendix 5: Test Methods and Specifications for C225 Appendix 6: Protein A Process Format Appendix 7: Summary Data Reports for Phase I and Phase II *** Confidential Treatment Requested February 12th, 1999 10.73-2.doc 26 Appendix 1 Page 1 of 2 - ------------------------------------------------------------------------------- Master Projectplan: C225 ImClone Systems, Inc./BI Pharma KG Forecast of proposed Workscope and Cost Estimate - ------------------------------------------------------------------------------- [ ***] 27 Appendix 1.1 Page 1 of 4 - ------------------------------------------------------------------------------- Update May 1999 Master Projectplan: C225 ImClone Systems, Inc./BI Pharma KG Forecast of proposed Workscope and Cost Estimate - ------------------------------------------------------------------------------- [ ***] 28 Appendix 2
- ------------------------------------------------------------------------------------------------------------- Function Boehringer Ingelheim ImClone - ------------------------------------------------------------------------------------------------------------- Project Team Leader Dr. Helmut Hoffmann Mr. Ronald Martell (?) Ms. Martie Bohn - ------------------------------------------------------------------------------------------------------------- Head of Process Development Dr. Helmut Hoffmann (?) - ------------------------------------------------------------------------------------------------------------- Cell Banking and Characterization, Dr. Stefanos Grammatikos Ms. Betsy Hornberger Virus Testing Dr. Daniel Velez Dr. S. Joseph Tarnowski - ------------------------------------------------------------------------------------------------------------- Small Scale Cell Culture Labs Dr. Wolfgang Noe Mr. Joel Goldstein Mr. Rajeew Gupta Dr. Daniel Velez Dr. S. Joseph Tarnowski - ------------------------------------------------------------------------------------------------------------- Fermentation Pilot Plant Dr. Ralph Kempken Mr. Joel Goldstein Mr. Rajeew Gupta - ------------------------------------------------------------------------------------------------------------- Downstream Processing Dr. Joachim Walter Dr. Daniel Velez Mr. Joel Goldstein Dr. S. Joseph Tarnowski - ------------------------------------------------------------------------------------------------------------- Protein Analytical Chemistry Dr. Michael Schluter Ms. Betsy Hornberger - ------------------------------------------------------------------------------------------------------------- Process Validation Mr. Norbert Hentschel Mr. Glen Noonan - ------------------------------------------------------------------------------------------------------------- Filling Mr. Hans Hormann Mr. Edward Patten - ------------------------------------------------------------------------------------------------------------- Regulatory Dr. Uwe Bucheler Ms. Gretchen Toolan - ------------------------------------------------------------------------------------------------------------- Documentation Dr. Uwe Bucheler Mr. Edward Patten - ------------------------------------------------------------------------------------------------------------- Quality Assurance Mrs. Bettina Schulz - ------------------------------------------------------------------------------------------------------------- Contract Mrs. Kipping - -------------------------------------------------------------------------------------------------------------
29 APPENDIX 3 IMCLONE'S TASKS IN DETAILS [ *** ] *** Confidential Treatment Requested 30 APPENDIX 4 BI PHARMA KG's Tasks in Detail [ *** ] *** Confidential Treatment Requested 31 APPENDIX 5: TEST METHODS AND SPECIFICATIONS FOR C225 [ *** ] *** Confidential Treatment Requested 32 APPENDIX 6 [ *** ] A Process Format [***] *** Confidential Treatment Requested 33 APPENDIX 7 SUMMARY DATA REPORTS FOR PHASE I AND PHASE II EX-23.1 5 CONSENT OF KPMG LLP 1 EXHIBIT 23.1 ACCOUNTANTS' CONSENT The Board of Directors ImClone Systems Incorporated: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG LLP Princeton, New Jersey November 1, 1999 EX-23.3 6 CONSENT OF KENYON & KENYON 1 Exhibit 23.3 [Letterhead of Kenyon & Kenyon] CONSENT OF SPECIAL PATENT COUNSEL We hereby consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 and related Prospectus of ImClone Systems Incorporated. By: /s/ Kenyon & Kenyon -------------------------- Kenyon & Kenyon New York, New York November 1, 1999 EX-23.4 7 CONSENT OF HOFFMANN & BARON, LLP 1 Exhibit 23.4 [Letterhead of Hoffmann & Baron, LLP] CONSENT OF PATENT COUNSEL We hereby consent to the reference to our firm under the caption "Experts" in the Registration Statement on Form S-3 and related Prospectus of ImClone Systems Incorporated. By: /s/ Hoffmann & Baron, LLP -------------------------- Hoffmann & Baron, LLP Syosset, New York November 1, 1999 -----END PRIVACY-ENHANCED MESSAGE-----