-----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, Rk32l3LdGO4ZUowga+s4IhRML8Vt82r7rPUvv+llnKfROokAYC/JxO+MnmCR0vRn xhCHasI2r4HK9JX2ZsCoYg== 0000912057-00-054096.txt : 20001220 0000912057-00-054096.hdr.sgml : 20001220 ACCESSION NUMBER: 0000912057-00-054096 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED MAGNETICS INC CENTRAL INDEX KEY: 0000792977 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 042742593 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14732 FILM NUMBER: 791883 BUSINESS ADDRESS: STREET 1: 61 MOONEY ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6173543929 MAIL ADDRESS: STREET 1: 61 MOONEY ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-K405 1 a2033252z10-k405.txt FORM 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 0-14732 ADVANCED MAGNETICS, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2742593 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 61 MOONEY STREET 02138 CAMBRIDGE, MASSACHUSETTS (Zip Code) (Address of principal executive offices)
(Registrant's telephone number, including area code) (617) 497-2070 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE, AMERICAN STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [/X/] As of December 12, 2000, there were 6,773,932 shares of the registrant's Common Stock, $.01 par value per share, outstanding. The aggregate market value of the registrant's voting stock held by nonaffiliates as of December 12, 2000 was approximately $15,418,525. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement for its 2000 Annual Meeting of Stockholders, scheduled to be held on February 6, 2001, are incorporated by reference in Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ADVANCED MAGNETICS, INC. MAKES SUCH FORWARD-LOOKING STATEMENTS UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. IN THIS ANNUAL REPORT ON FORM 10-K, WORDS SUCH AS "MAY," "WILL," "EXPECTS," "INTENDS," AND SIMILAR EXPRESSIONS (AS WELL AS OTHER WORDS OR EXPRESSIONS REFERENCING FUTURE EVENTS, CONDITIONS OR CIRCUMSTANCES) ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED, PROJECTED, ANTICIPATED OR INDICATED IN ANY FORWARD-LOOKING STATEMENTS. ANY FORWARD-LOOKING STATEMENT SHOULD BE CONSIDERED IN LIGHT OF FACTORS DISCUSSED IN ITEM 7 UNDER "CERTAIN FACTORS THAT MAY EFFECT FUTURE RESULTS." THE COMPANY CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THEY ARE MADE. THE COMPANY DISCLAIMS ANY OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY SUCH STATEMENTS TO REFLECT ANY CHANGE IN COMPANY EXPECTATIONS OR IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS MAY BE BASED, OR THAT MAY AFFECT THE LIKELIHOOD THAT ACTUAL RESULTS WILL DIFFER FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. ITEM 1. BUSINESS: COMPANY OVERVIEW Advanced Magnetics, Inc., a Delaware corporation ("Advanced Magnetics" or the "Company"), develops, manufactures and markets organ-specific contrast agents to improve the diagnostic capabilities of soft tissue magnetic resonance imaging ("MRI") scans. The Company's liver contrast agent, Feridex I.V.-Registered Trademark-, is approved and marketed in Europe, Japan, the United States, Argentina, South Korea, China and Israel. The Company's oral contrast agent, GastroMARK-Registered Trademark-, used for delineating the bowel in MRI procedures, is approved and marketed in Europe and the United States. The Company has received an approvable letter, subject to certain conditions, from the U.S. Food and Drug Administration ("FDA") for Combidex-Registered Trademark-, the Company's contrast agent for the diagnosis of lymph node disease. Code 7228, the Company's lead MRI contrast agent in the development pipeline, is currently in Phase II clinical studies. The product is being evaluated for MRI applications in both cardiology and oncology. MRI is a diagnostic imaging technique that is used to visualize internal abnormalities and changes in structure. Contrast agents increase the usefulness of MRI by allowing radiologists to differentiate structures and organs with greater diagnostic confidence. Currently, the primary use of MRI is for studies of the central nervous system, abdominal structures and joints, such as the knee and shoulder. The Company believes that the development of effective contrast agents would allow MRI to be used for a wider range of applications, such as the diagnosis and staging of cancer, and should increase the use of MRI as a diagnostic imaging technique, in turn generating additional demand for MRI contrast agents. The liver and the lymphatic system are among the principal sites where metastases of many common cancers (including colon, prostate and breast cancer) are discovered. The Company believes that MRI exams of the liver produced with contrast agents provide more diagnostic information and permit the identification of smaller abnormalities than images produced by MRI studies without contrast agents or images produced by contrast enhanced computed tomography ("CECT"). Additionally, the Company believes that MRI exams of lymph nodes using a contrast agent provide increased confidence in the diagnosis of metastatic disease. As a result, MRI contrast agents can allow for more accurate diagnosis and monitoring of treatment results and may be a cost-effective way to assess medical treatments and to improve patient outcomes. CECT is currently the primary imaging technique used to confirm a preliminary or suspected diagnosis of liver cancer. FERIDEX I.V. is the first organ-specific MRI contrast agent designed specifically 1 for the liver and is marketed in the United States, Europe, Japan, Argentina, South Korea, China and Israel. With respect to the lymphatic system, there are no contrast agents currently available. An MRI contrast agent that localizes to and causes contrast enhancement of the lymph nodes, such as COMBIDEX, could allow for more accurate disease diagnosis and monitoring of treatment results. To facilitate the marketing and distribution of its contrast agents, the Company has entered into strategic relationships with certain established pharmaceutical companies. These marketing and distribution partners, both in the United States and abroad, include: (i) Guerbet S.A. ("Guerbet"), a leading European producer of contrast agents, in Western Europe and Brazil; (ii) Eiken Chemical Co., Ltd., ("Eiken"), one of Japan's leading medical diagnostics manufacturers, in Japan; (iii) Berlex Laboratories, Inc. ("Berlex"), the leading U.S. marketer of MRI contrast agents, in the United States; (iv) Cytogen Corp. ("Cytogen") a U.S. marketer of oncology products, in the United States; and (v) Mallinckrodt Inc. ("Mallinckrodt"), a unit of Tyco, Inc. and a leading manufacturer of contrast agents, in the United States. The Company was incorporated in Delaware in November 1981. The Company's principal offices are located at 61 Mooney Street, Cambridge, Massachusetts 02138, and its telephone number is (617) 497-2070. MRI CONTRAST AGENTS DIAGNOSTIC IMAGING. Diagnostic imaging is generally a non-invasive method to visualize internal structures, abnormalities or anatomical changes in order to diagnose disease and injury. Today, the most widely accepted imaging techniques include x-rays, ultrasound, nuclear medicine, Computed Tomography ("CT") and MRI. Since the introduction of x-rays, doctors have sought increasingly accurate and detailed non-invasive visualization of soft tissue for diagnostic purposes. Diagnostic imaging is frequently used to determine whether a cancer has metastasized or recurred and where it is located, as well as to assist physicians in determining whether a treated cancer has shrunk. In addition, diagnostic imaging is used in the diagnosis of disease affecting the cardiovascular and central nervous systems as well as the diagnosis of broken bones and injuries in certain joints, such as the knee and shoulder. The choice of diagnostic imaging technique to be used in any particular circumstance depends upon a variety of factors, including the particular disease or condition to be studied, image quality, availability of imaging machines, availability of contrast agents, cost and managed health care policies. There is no imaging technique that is considered superior to all others for most or all applications. MAGNETIC RESONANCE IMAGING. Introduced in the 1980's, MRI is the diagnostic imaging technique of choice for the central nervous system and is widely used for the imaging of ligaments and tendons. MRI provides high-quality spatial resolution and does not use radiation. In MRI procedures, the patient is placed within the core of a large magnet where radio frequency signals are transmitted into the patient's body. The interaction of the radio frequency signal with the patient's body produces signals that are processed by a computer to create cross-sectional images. CONTRAST AGENTS. Contrast agents play a significant role in improving the quality of diagnostic images by increasing the contrast between different internal structures or types of tissues in various disease states and medical conditions of interest. Consequently, contrast agents, which are administered intravenously or orally, are widely used when available. MRI contrast agents currently marketed in the United States are used primarily in imaging the central nervous system. The availability of effective contrast agents often determines the choice of imaging technique for a particular procedure. Currently available imaging techniques can be of limited usefulness in visualizing certain soft-tissue structures. For example, diagnostic imaging of lymph nodes, a common site of metastasis for some frequently occurring cancers such as breast cancer and prostate cancer, is currently limited because, the Company believes, there are no effective contrast agents for differentiating diseased tissue from normal nodes. 2 TECHNOLOGY Advanced Magnetics' core imaging agent technology is based on the characteristic properties of extremely small, polysaccharide-coated superparamagnetic iron oxide particles. The Company's core competencies are the ability to design such particles for particular applications and manufacture the particles in controlled sizes. The superparamagnetic particles range in size from approximately one-thousandth to one-twentieth the size of a normal red blood cell. When placed in a magnetic field, superparamagnetic iron oxide particles become strongly magnetic, but lose their magnetism once the field is removed. Once inside the targeted organ or area of study, the powerful magnetic properties of the Company's iron oxide particles result in images that show greater soft tissue contrast and thus increase the information available to the reviewing physicians. The Company's technology and expertise enable it to synthesize, sterilize and stabilize superparamagnetic particles in a manner necessary for their use in pharmaceutical products such as MRI contrast agents to aid in the diagnosis of cancer and other diseases. The Company's rights to its contrast agent technology are derived from and protected by license agreements, patents, patent applications and trade secrets. See "Patents and Trade Secrets." PRODUCTS The following table summarizes applications and potential applications, marketing partners and current U.S. and foreign status for each of the Company's products. ADVANCED MAGNETICS' PRODUCTS
PRODUCT APPLICATIONS MARKETING PARTNERS U.S. STATUS FOREIGN STATUS - --------------------- -------------------- ----------------------- ---------------- --------------------- COMBIDEX Diagnosis of lymph Cytogen (United States) Approvable EU Dossier filed node disease. Guerbet (western Europe Letter received December 1999. and Brazil). June 2000, subject to certain conditions. FERIDEX I.V. Diagnosis of liver Berlex (United States), Approved and Approved and marketed lesions. Eiken (Japan), Guerbet marketed. in Japan and in most (western Europe and EU countries. Brazil). GASTROMARK Marking of the bowel Guerbet (western Europe Approved and Approved and marketed in abdominal and Brazil), marketed. in several EU imaging. Mallinckrodt (United countries, including States). France. CODE 7228 Magnetic Resonance Cytogen for oncology Phase II European protocols in Angiography, primary applications (United clinical trials development. and secondary tumor States) scheduled to imaging, lymph node Guerbet (western Europe begin January imaging. and Brazil). 2001.
"Phase I clinical trials" refers to the first phase of human pharmaceutical clinical trials in which testing for the safety and tolerance of the product is conducted on a small group of normal subjects. "Phase II clinical trials" and "Phase III clinical trials" are the second and third phases of human clinical trials, where preliminary dosing and efficacy studies are conducted and where additional testing for efficacy and safety is conducted on an expanded patient group. "NDA" is a New Drug Application that is filed with the U.S. Food and Drug Administration ("FDA") when seeking marketing approval for a product in the United States. "Dossier" is the EU equivalent of an NDA and is filed with the Committee for Proprietary Medicinal Products, the EU equivalent of the FDA. For a further 3 description of the substantial regulatory requirements subsequent to the completion of preclinical testing, see "Government Regulation and Reimbursement." COMBIDEX. The Company believes that COMBIDEX will be useful in the diagnostic imaging of lymph nodes. Lymph nodes are frequently the site for metastases of different types of cancer, particularly breast cancer and prostate cancer. Effective imaging of lymph nodes could play a role in determining appropriate patient management. There are currently no available non-invasive methods for distinguishing between lymph nodes enlarged by the infiltration of cancerous cells as opposed to inflammation. Since CT, the only imaging modality currently used for imaging lymph nodes, cannot distinguish between inflamed nodes and cancerous nodes, the current practice is to assume that enlarged nodes are cancerous and to perform a biopsy to establish their true status. Nodes less than ten millimeters in size are often assumed to be normal. The Company believes that COMBIDEX will enable doctors using MRI to have improved diagnostic confidence in differentiating between normal and diseased lymph nodes, irrespective of node size, because COMBIDEX only accumulates in normal lymph node tissue and can therefore facilitate differentiation between tumorous nodes and inflamed nodes. The Company has granted exclusive rights to market and sell COMBIDEX in the United States to Cytogen and in western Europe and Brazil to Guerbet. See "Licensing and Marketing Arrangements." FERIDEX I.V. The liver is a principal site for metastasis of primary cancer originating in other parts of the body, particularly colon cancer, a common cancer in the United States. Identification of metastatic tumors in the liver has a significant impact on physicians' treatment plans for cancer because proper staging of disease affects treatment plans. Diagnosis of metastases at an early stage can be difficult because small tumors are frequently not accompanied by detectable physical symptoms. The Company believes that contrast-enhanced MRI exams using FERIDEX I.V. allow for the ability to image liver tumors that may not be visible with CT scanning or ultrasound, the most widely used techniques for liver imaging, and that liver scans may now be done using contrast-enhanced MRI instead of, or in addition to, CT scanning and ultrasound. Marketing of FERIDEX I.V. began in October 1996 by Berlex Laboratories ("Berlex") in the United States. Berlex is the Company's exclusive marketing partner for FERIDEX I.V. in the United States. FERIDEX I.V. was approved in August 1994 by the European Union's (the "EU") Committee for Proprietary Medicinal Products and most of the member states of the EU have since issued local approvals to market the product. Guerbet began marketing the product in Europe in late 1994. Eiken received approval for marketing the product in Japan in July 1997 and received pricing approval in September 1997. FERIDEX I.V. was launched in Japan in September 1997 through Eiken's affiliate Tanabe Seiyaku, Ltd. See "Licensing and Marketing Arrangements." GASTROMARK. MRI imaging of organs and tissues in the abdomen without contrast agents is difficult because these organs and tissues cannot be easily distinguished from the loops of the bowel. GASTROMARK, the Company's oral contrast agent for marking of the bowel, when ingested, flows through and darkens the bowel. By more clearly identifying the intestinal loops, GASTROMARK improves visualization of adjacent abdominal tissues, such as the pancreas. In April 1997, the Company's marketing partner, Mallinckrodt, launched GASTROMARK in the United States. The Company has licensed the marketing rights to GASTROMARK on an exclusive basis to Guerbet in Western Europe and Brazil. During fiscal 1993, Guerbet received marketing approval for the product in several European countries including France, and marketing of the product in Europe began. See "Licensing and Marketing Arrangements". CODE 7228. Code 7228 is a blood pool agent, an agent that stays in the blood stream for an extended period of time, that may be useful as a contrast agent for Magnetic Resonance Angiography ("MRA") as well as cardiac perfusion. In addition, Code 7228 may be useful for the detection of 4 metastatic and primary tumors, including breast cancer, and may also improve tumor border delineation. The product is currently entering Phase II clinical studies. The Company has granted exclusive rights to market Code 7228 for oncology applications in the United States to Cytogen and exclusive rights to market and sell Code 7228 in western Europe and Brazil to Guerbet. See "Licensing and Marketing Arrangements". LICENSING AND MARKETING ARRANGEMENTS BERLEX. In February 1995, the Company entered into a license and marketing agreement and a supply agreement with Berlex, granting Berlex exclusive marketing rights to FERIDEX I.V. in the United States. Under the terms of the agreements, Berlex paid a $5,000,000 license fee upon execution of the agreements and paid an additional $5,000,000 license fee in October 1996 upon the Company's delivery of FDA-approved product to Berlex. In addition, Berlex pays the Company for manufacturing the agent and royalties on sales of the agent. Under the terms of the license and marketing agreement, Berlex pays for 60% of ongoing development expenses associated with FERIDEX I.V. These agreements expire in 2010 but can be terminated earlier upon the occurrence of certain specified events. Under the terms of the license and marketing agreement, the Company has the right to terminate the exclusive marketing rights based on the failure of Berlex to achieve minimum sales targets, but has not exercised that right at this time. CYTOGEN. In August 2000, the Company entered into a license and marketing agreement and a supply agreement with Cytogen Corporation ("Cytogen"). The Company granted Cytogen the exclusive right to market and sell COMBIDEX and CODE 7228 for oncology applications in the United States and agreed to grant to Cytogen the exclusive right to market and sell FERIDEX I.V. in the United States if the Company's existing marketing agreement for FERIDEX I.V. terminates for any reason. Upon signing of the agreements, the Company received 1,500,000 shares of Cytogen common stock as a non-refundable license fee. An additional 500,000 shares of Cytogen common stock were placed in escrow and will be released to the Company upon satisfaction of certain milestones under the agreements. Cytogen has agreed to pay the Company for manufacturing and supplying the products and royalties on sales. These agreements have an initial ten-year term with automatic five year extensions, but can be terminated earlier upon the occurrence of certain specified events. EIKEN. In 1988, the Company entered into a manufacturing and distribution agreement with Eiken, granting Eiken the exclusive right to manufacture and distribute FERIDEX I.V. in Japan. Eiken was responsible for conducting clinical trials and securing the necessary regulatory approval in Japan. Under the terms of the agreement, Eiken paid the Company a license fee of $1,500,000. In addition, Eiken pays royalties based upon sales. The agreement terminates on the later of (i) the expiration of the last to expire technology patent or (ii) ten years after the date all necessary approvals were obtained. In 1990, the Company entered into a manufacturing and distribution agreement with Eiken, granting Eiken the exclusive right to manufacture and distribute GASTROMARK and COMBIDEX in Japan. In addition, for a period of 180 days after the Company files an IND for any future Advanced Magnetics' MRI contrast agents, Eiken has the right of first refusal to manufacture and distribute such product in Japan. Upon execution of this agreement, Eiken paid the Company a license fee of $1,000,000. Additionally, Eiken agreed to pay the Company royalties on sales of all products sold by Eiken under the agreement. The agreement is perpetual but terminable upon certain specified events. Due to market conditions in Japan, Eiken has decided not to market GASTROMARK or COMBIDEX and rights to these products in Japan have reverted back to the Company. Additionally, Eiken has decided not to exercise its option to develop Code 7228 in Japan. GUERBET. In 1987, the Company entered into a supply and distribution agreement with Guerbet. Under this agreement, Guerbet has been appointed the exclusive distributor of FERIDEX I.V. in 5 western Europe (under the tradename Endorem-TM-) and Brazil. Guerbet is responsible for conducting clinical trials and securing the necessary regulatory approvals in the countries in its territory. Guerbet paid the Company license fees and has agreed to pay royalties based on sales. The Company is entitled to receive an additional percentage of Guerbet's sales in return for selling to Guerbet its requirements for the active ingredient used in ENDOREM. The agreement terminates on the later of (i) the expiration of the last to expire technology patent or (ii) ten years after the date all necessary approvals were obtained in France. In 1989, the Company entered into a second supply and distribution agreement with Guerbet granting Guerbet an exclusive right in western Europe and Brazil to manufacture and sell GASTROMARK (under the tradename Lumirem-TM-) and any future Advanced Magnetics MRI contrast agents that Guerbet decides to market. Guerbet has taken the rights to COMBIDEX (under the tradename Sinerem-TM-) and Code 7228. Under the terms of this second distribution agreement, Guerbet paid the Company a license fee in 1989. In addition, Guerbet has agreed to pay the Company both royalties and a percentage of net sales as the purchase price for the active ingredient of the licensed products. The Company is required to sell to Guerbet its requirements for the active ingredient used in the contrast agents. The agreement is perpetual but terminable upon certain specified events. MALLINCKRODT. In 1990, the Company entered into a manufacturing and distribution agreement for GASTROMARK with Mallinckrodt Inc. ("Mallinckrodt"). Under this agreement, Mallinckrodt received the exclusive right to manufacture and co-market GASTROMARK in the United States, Canada and Mexico. Under this agreement, Advanced Magnetics reserved the right to sell the product through its own direct sales personnel. Mallinckrodt paid $1,350,000 in license fees and a $500,000 non-refundable milestone payment upon FDA approval of GASTROMARK. Additionally, the Company receives royalties based on Mallinckrodt's GASTROMARK sales as well as a percentage of sales for supplying the active ingredient. The agreement is perpetual but terminable upon certain specified events. SQUIBB DIAGNOSTICS. Under an agreement with Squibb Diagnostics, a division of Bristol-Myers Squibb Co., the Company is obligated to pay up to a maximum of $2,750,000 in royalties in connection with product sales of COMBIDEX. MANUFACTURING AND SUPPLY ARRANGEMENTS The Company's Cambridge, Massachusetts facility is registered with the FDA and is subject to "current Good Manufacturing Practices" ("cGMP") as prescribed by the FDA. The Company currently manufactures FERIDEX I.V. bulk product for sale to Guerbet, manufactures FERIDEX I.V. finished product for sale to Berlex and manufactures GASTROMARK bulk product for sale to Guerbet and Mallinckrodt. The Company intends to manufacture COMBIDEX formulated drug product for commercial use, subject to FDA approval, and Code 7228 finished product for clinical use. The Company intends to use a contract manufacturer for final manufacturing of COMBIDEX. PATENTS AND TRADE SECRETS The Company considers the protection of its technology to be material to its business. The Company's policy is to aggressively protect its competitive technology position by a variety of means, including applying for patents in the United States and in appropriate foreign countries. The Company has been granted 28 U.S. patents, has several patent applications pending, and has filed counterpart patent applications in several foreign countries. The Company has assigned three of its U.S. patents to another company. In addition, the Company is a party to various license agreements, including nonexclusive cross-licensing arrangements covering MRI technology with Nycomed Imaging A.S. of Oslo, Norway ("Nycomed") and Schering AG ("Schering") of Berlin, Germany. The Company's proprietary position depends in part on these licenses, and termination of the licenses for any reason 6 could have a material adverse effect on the Company by limiting or prohibiting the commercial sale of its products. Although the Company believes that further patents will be issued on pending applications, no assurance to this effect can be given. The patent positions of pharmaceutical and biopharmaceutical firms, including Advanced Magnetics, are generally uncertain and involve complex legal and factual questions. The claims which are included in pending or future patent applications may not be issued, any issued patents may not provide the Company with competitive advantages or may be challenged by others, and the existing or future patents of third parties may have an adverse effect on the ability of the Company to commercialize its products. The Company also intends to rely on its trade secrets, know-how, continuing technological innovations and licensing opportunities to maintain and develop its competitive position. Although the Company seeks to protect its proprietary information, others might independently develop the same or similar information, design around its patents, obtain unauthorized access to the Company's proprietary information or misuse information to which the Company has granted access. Litigation may be necessary to enforce any patents issued to the Company or to determine the scope of other person's proprietary rights in court or administrative proceedings. Any litigation or administrative proceeding could result in substantial costs to the Company and distraction of the Company's management. An adverse ruling in any litigation or administrative proceeding could have a material adverse effect on the Company's business, financial condition and results of operations. COMPETITION The pharmaceutical and biopharmaceutical industries are subject to intense competition and rapid technological change. Certain companies, including the Company's collaborators, which have greater human and financial resources dedicated to product development and clinical testing than the Company, are developing MRI contrast agents. The Company's collaborators are not restricted from developing and marketing competing products and, as a result of certain cross license agreements among the Company and certain of its competitors (including one of its collaborators), the Company's competitors will be able to utilize certain of the Company's technology in the development of competing products. The Company may not be able to compete successfully with these companies. In addition, further product and technological developments may make other imaging modalities more compelling than MRI and adversely impact sales of the Company's products. The Company believes that its ability to compete successfully in the MRI contrast agent market will depend on a number of factors including the implementation of effective marketing campaigns by the Company and/or its marketing and distribution partners, development of efficacious products, timely receipt of regulatory approvals and product manufacturing at commercially acceptable costs. In addition, market acceptance of both MRI as an appropriate technique for imaging certain organs, especially the liver and the lymphatic system, and the use of the Company's products as part of such imaging is critical to the success of its contrast agent products. Although the Company believes that its contrast agents offer advantages over competing MRI, CT or X-ray contrast agents, competing contrast agents might receive greater acceptance. In addition, to the extent that other diagnostic techniques such as CT and X-ray may be perceived as providing greater value than MRI, any corresponding decrease in the use of MRI could have an adverse effect on the demand for the Company's contrast agent products. The Company may not be able to successfully market its products alone or with its partners, develop efficacious products, obtain timely regulatory approvals, manufacture products at commercially acceptable costs, gain satisfactory market acceptance or otherwise successfully compete in the future. There are several MRI contrast agents for imaging lesions of the liver on the market and in various phases of clinical testing in the United States and abroad. Schering has two products, Resovist, a carboxydextran superparamagnetic iron oxide formulation, and Eovist, a chelated gadolinium 7 compound. The Company believes that Schering has filed for European and Japanese approval of Resovist; clinical trials are proceeding in the United States. Eovist is believed to be in Phase III trials in Europe. Nycomed has received marketing approval in the United States and Europe for its MnDPDP product, Teslascan, for MRI of liver lesions. Bracco S.p.A. has received marketing approval in Europe for Gadolinium BOPTA (MultiHance), a chelated gadolinium compound for MR imaging of liver lesions and we believe they may have filed for approval in the United States as well. To the Company's knowledge, there are no approved products or drug candidates in human clinical development for the contrast-enhanced imaging of lymph nodes other than COMBIDEX and Code 7228. Although the Company is unaware of any such products, those products may exist and could have a material adverse effect on the marketing of the Company's products. In the area of oral contrast agents, Pharmacyclics, Inc. filed an NDA in late 1995 for GADOLITE, its gadolinium-based product candidate which is currently not approved by the FDA. Bracco S.p.A received marketing approval in December 1997 in the United States for Lumenhance, its liposomal encapsulated oral manganese compound, but it is not being marketed at this time. In October 1997, the FDA approved Ferriseltz, an oral MRI agent from Oncomembrane Inc. It is not known how, or if, Bracco and Oncomembrane are planning to market these products. These competitive products or other products developed by the Company's competitors my be more effective than any products developed by the Company or render the Company's technology obsolete. In addition, further technological and product developments may make other imaging modalities more competitive. Many of these companies, as well as other imaging companies, have substantially greater capital, research and development, manufacturing and marketing resources and experience than the Company and represent significant competition for Advanced Magnetics. Such companies may succeed in developing technologies and products that are more effective or less costly than any that may be developed by the Company and may also prove to be more successful than the Company in production and marketing. Furthermore, products developed by the Company's competitors may be more effective than any products developed by the Company or render the Company's technology obsolete. GOVERNMENT REGULATION AND REIMBURSEMENT The production and marketing of the Company's products and its ongoing research and development activities are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the United States and other countries. Pharmaceutical products intended for therapeutic use or for intravenous or oral administration in humans are principally governed by FDA regulations in the United States and by comparable government regulations in foreign countries. Various federal, state and local statutes and regulations also govern or influence the research and development, manufacturing, safety, labeling, storage, record-keeping, distribution and marketing of such products. The process of completing pre-clinical and clinical testing and obtaining the approval of the FDA and similar health authorities in foreign countries to market a new drug product requires a significant number of years and the expenditure of substantial resources. Failure to obtain requisite governmental approvals, failure to obtain approvals of the scope requested or withdrawal or suspension by the FDA or foreign authorities of any approvals will delay or preclude the Company or its licensees or collaborators from marketing the Company's products or limit the commercial use of the products and will have a material adverse effect on the Company's business, financial condition and results of operations. The steps required by the FDA before a new human pharmaceutical product (including a contrast agent) may be marketed in the United States include: (a) pre-clinical laboratory tests, in vivo pre-clinical studies and formulation studies; (b) the submission to the FDA of a request for authorization to conduct clinical trials subject to an Investigational New Drug ("IND") exemption, to 8 which the FDA must not object, before human clinical trials may commence; (c) adequate and well-controlled human-clinical trials to establish the safety and efficacy of the drug for its intended use; (d) submission to the FDA of an NDA; (e) approval and validation of manufacturing facilities used in production of the pharmaceutical product; and (f) review and approval of the NDA by the FDA before the drug product may be shipped or sold commercially. Pre-clinical tests include the laboratory evaluation of product chemistry and formulation, as well as animal studies to assess the potential safety and efficacy of the product. Pre-clinical test results are submitted to the FDA as a part of the IND. Clinical trials are typically conducted in three sequential phases, although the phases may overlap. Phase I involves the initial administration of the drug to a small group of humans, either healthy volunteers or patients, to test for safety, dosage tolerance, absorption, distribution, metabolism, excretion and clinical pharmacology and, if possible, early indications of effectiveness. Phase II involves studies in a small sample of the actual intended patient population to assess the preliminary efficacy of the investigational drug for a specific clinical indication, to ascertain dose tolerance and the optimal dose range and to collect additional clinical information relating to safety and potential adverse effects. Once an investigational drug is found to have some efficacy and an acceptable clinical safety profile in the targeted patient population, Phase III studies can be initiated to further establish safety and efficacy of the investigational drug in a broader sample of the target patient population. The results of the clinical trials together with the results of the pre-clinical tests and complete manufacturing information are submitted in an NDA to the FDA for approval. The FDA may suspend clinical trials at any point in this process if it concludes that patients are being exposed to an unacceptable health risk. Both before and after approval is obtained, a product, its manufacturer, and the holder of the NDA for the product are subject to comprehensive regulatory oversight. Violations of regulatory requirements at any stage, including the pre-clinical and clinical testing process, the approval process, or thereafter (including after approval) may result in various adverse consequences, including the FDA's delay in approving or refusal to approve a product, withdrawal of an approved product from the market, and/or the imposition of criminal penalties against the manufacturer and/or NDA holder. In addition, later discovery of previously unknown problems may result in restrictions on such product, manufacturer, or NDA holder, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of the Company's products under development. If an NDA is submitted to the FDA, the application may not be reviewed and approved by the FDA in a timely manner, if at all. Among the conditions for NDA approval is the requirement that a prospective manufacturer's manufacturing procedures conform to cGMP requirements, which must be followed at all times. In complying with those requirements, manufacturers (including a drug sponsor's third-party contract manufacturers) must continue to expend time, money and effort in the area of production and quality control to ensure compliance. Once the FDA determines that a product is approvable, it will issue an action letter indicating if any additional information must be provided or if any additional conditions must be met prior to final approval. The labeling of the product must also be approved by the FDA prior to final approval of the product. Even after initial FDA approval has been obtained, further studies, including post-market studies, may be required to provide additional information. Results of such post-market programs may limit or expand the further marketing of the product. Even if initial marketing approval is granted, such approval may entail limitations on the indicated uses for which a product may be used and impose labeling requirements which may adversely impact the Company's ability to market its products. Finally, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. Domestic manufacturing establishments are subject to periodic inspections by the FDA in order to assess, among other things, cGMP compliance. To supply product for use in the United States, foreign manufacturing establishments must comply with cGMP and are subject to periodic inspection by the 9 FDA or by regulatory authorities in certain of such countries under reciprocal agreements with the FDA. Failure to maintain compliance with cGMP regulations and other applicable manufacturing requirements of various regulatory agencies could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is also subject to foreign regulatory requirements governing development, manufacturing and sales of pharmaceutical products that vary widely from country to country. Approval of a drug by applicable regulatory agencies of foreign countries must be secured prior to the marketing of such drug in those countries. The regulatory approval process may be more or less rigorous from country to country and the time required for approval may be longer or shorter than that required in the United States. The Company is subject to regulation under local, state and federal law regarding occupational safety, laboratory practices, handling of chemicals, environmental protection and hazardous substances control. The Company possesses a Byproduct Materials License from the Commonwealth of Massachusetts for receipt, possession, manufacturing and distribution of radioactive materials. The Company holds Registration Certificates from the United States Drug Enforcement Administration and the Commonwealth of Massachusetts Department of Public Health for handling controlled substances. The Company is registered with the United States Environmental Protection Agency ("EPA") as a generator of hazardous waste. All hazardous waste disposal must be made in accordance with EPA and Commonwealth of Massachusetts requirements. The Company is subject to the regulations of the Occupational Safety and Health Act and has in effect a safety program to assure compliance with these regulations. In both the United States and foreign markets, the Company's ability to commercialize its products successfully also depends in part on the extent to which reimbursement for the costs of such products and related treatments will be available from government health administration authorities, private health insurers and other third-party payors. Significant uncertainty exists as to the reimbursement status of newly approved health care products and products used for indications not approved by the FDA. If adequate reimbursement levels are not maintained by government and other third-party payors for the Company's products and related treatments, the Company's business, financial condition and results of operations may be materially adversely affected. MAJOR CUSTOMERS Two companies, Berlex and Guerbet, accounted for approximately 27% and 22% respectively, of the Company's revenues in fiscal 2000. No other customer accounted for more than 10% of total revenues in fiscal 2000. EMPLOYEES As of December 12, 2000, the Company had approximately 24 full-time employees, 16 of whom were engaged in research and development. The Company's success depends in part on its ability to recruit and retain talented and trained scientific personnel. The Company has been successful to date in obtaining such personnel, but may not be so in the future. None of the Company's employees is represented by a labor union, and the Company considers its relations with its employees to be excellent. FOREIGN OPERATIONS The Company has no foreign operations. Revenues in fiscal 2000, 1999 and 1998 from customers and licensees outside of the United States, principally in Europe and Japan, amounted to 35%, 19% and 26% respectively, of the Company's total revenues. 10 PRODUCT LIABILITY INSURANCE The use of any of the Company's potential products in clinical trials and the sale of any approved products may expose the Company to liability claims resulting from the use of products or product candidates. These claims might be made by customers (including corporate partners), clinical trial subjects, patients, pharmaceutical companies or others. The Company maintains product liability insurance coverage for claims arising from the use of its products whether in clinical trials or approved commercial usage. However, coverage is becoming increasingly expensive and the Company may not be able to maintain insurance at a reasonable cost. The Company's insurance may not provide sufficient amounts to protect the Company against liability that could have a material adverse effect on the Company's business, financial condition and results of operations. The Company may not be able to obtain commercially reasonable product liability insurance for any product approved for marketing in the future or that insurance coverage and the resources of the Company would be sufficient to satisfy any liability resulting from product liability claims. A product liability claim or series of claims brought against the Company could have a material adverse effect on its business, financial condition and results of operations, whether or not the plaintiffs in such claims ultimately prevail. RESEARCH AND DEVELOPMENT The Company is committed to internal research and development as a method of producing new products, improving existing products and growing revenues. The Company spent $4,623,468, $7,952,331 and $8,961,796 in each of the last three fiscal years respectively on research and development. ITEM 2. PROPERTIES: The Company's principal operations are located in a modern, Company-owned building of approximately 25,000 square feet in Cambridge Massachusetts. The Company believes this facility is adequate for its current and anticipated short-term needs and that it will be able to lease comparable space, if necessary. However, the acquisition and required regulatory approvals for additional pharmaceutical manufacturing space can be time consuming and expensive. If the Company desired to expand its manufacturing capacity it might not be able to do so on a timely basis, if at all. Additionally, the Company leases premises of approximately 5,200 square feet in Princeton, New Jersey that was previously used for the Company's clinical development group. This lease expires on September 30, 2003. ITEM 3. LEGAL PROCEEDINGS: The Company and certain of its officers were sued in an action entitled DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Civil Action No. 92-12157-WGY, in the United States District Court for the District of Massachusetts on September 3, 1992. The plaintiff, a former consultant to the Company, claims that he was incorrectly omitted as an inventor or joint inventor on certain of the Company's patents and on pending applications, and seeks injunctive relief and unspecified damages. In addition, the complaint also alleges state law claims for breach of contract, breach of good faith and fair dealing, breach of implied contract, misappropriation of trade secrets, conversion, negligent misrepresentation, misrepresentation, unjust enrichment and unfair trade practices. The District Court has stayed this federal action pending resolution of an appeal in the State Court of summary judgment in the Company's favor as well as resolution of a jurisdictional issue. As noted below, the Massachusetts Appeals Court has decided the appeal, but the federal action remains stayed as of this date. While the outcome of the action cannot be determined, the Company believes the action is without merit and intends to defend the action vigorously. The Company may not be able to successfully defend this action and the failure by the Company to prevail for any reason could have an adverse effect on it's future business, financial condition and results of operations. 11 The Company and certain of its officers were sued in DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Civil Action No. 93-02846-C, in the Superior Court Department of the Massachusetts Trial Court for Middlesex County. This case involves claims of breach of contract, breach of good faith and fair dealing, breach of implied contract, unjust enrichment and unfair trade practices that were originally dismissed by, but later remanded to, the Federal Court in the above-mentioned action, as well as a new count alleging tortious interference with contractual or advantageous relations. The Superior Court granted partial summary judgment in the Company's favor and dismissed the unfair trade practices and tort counts. The plaintiff's contract claims have been dismissed with prejudice and final judgment was entered against the plaintiff. The plaintiff filed an appeal in DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Appeal No. 98-P-1749, in the Massachusetts Appeals Court, on January 25, 1999. On October 13, 2000, the Massachusetts Appeals Court reversed the grant of partial summary judgment in the Company's favor and ordered that the unfair trade practice and tort claims be reinstated. The Superior Court has redocketed the claims as directed by the Appeals Court, and it is anticipated that the litigation in state court will now move forward. While the outcome of the action cannot be determined, the Company believes the action is without merit and intends to defend the action vigorously. The Company may not be able to successfully defend this action and the failure by the Company to prevail for any reason could have an adverse effect on its future business, financial condition and results of operations. The Company filed suit on October 7, 1997 against Sanofi Pharmaceuticals, Inc. (formerly known as Sanofi Winthrop, Inc.) and Sanofi SA (collectively, the "Defendants") in the Superior Court of the Commonwealth of Massachusetts. The action is entitled ADVANCED MAGNETICS, INC. V. SANOFI PHARMACEUTICALS, INC. AND SANOFI SA, Civil Action No. 97-5222B. The Company claims that the Defendants tortiously interfered with a license, supply and marketing agreement (the "Agreement"), and seeks unspecified monetary damages. In addition, the Company seeks a declaration that the Defendants do not have any rights under the Agreement and that the Company has not breached the Agreement. Sanofi Pharmaceuticals, Inc., filed counterclaims against the Company on February 4, 1998 seeking compensatory damages of $11,500,000 and multiple damages as a result of the Company's alleged breach of the Agreement. On November 13, 1998 the Company filed an amended complaint adding claims for unfair competition and breach of contract against the Defendants. On November 23, 1998, the Defendants answered the Company's amended complaint, and Sanofi Pharmaceuticals, Inc. served a new set of counterclaims seeking compensatory damages of $15,000,000 and multiple damages as a result of the Company's alleged conduct. On June 15, 1999, the court granted partial summary judgment in favor of the Company and against the Defendants, declared that the Company did not breach the Agreement, was not unjustly enriched, and did not violate Mass. Gen. Laws ch. 93A, and dismissed Sanofi Pharmaceuticals, Inc.'s counterclaims for breach of contract, unjust enrichment, conversion, account annexed and violation of Mass. Gen. Laws ch. 93A. On October 29, 1999, the Company served a second motion for partial summary judgment which, among other things, requests judgment in its favor on Sanofi Pharmaceuticals, Inc.'s remaining counterclaims against the Company and for judgment in its favor on the Company's breach of contract claim against Defendants. Also on October 29, 1999, Defendants served a motion for partial summary judgment which, among other things, requests judgment in its favor on the Company's remaining claims. On October 4, 2000, the Court granted the Company's motion and entered judgment on all remaining claims brought by Sanofi Pharmaceuticals, Inc. In addition, the Court granted in part and denied in part Defendants' motion for summary judgment. Only the Company's breach of contract claim against Sanofi SA remains in the case. On November 21, 2000, Sanofi SA and Sanofi Pharmaceuticals, Inc. served a Motion for Entry of Separate and Final Judgment, seeking to have the Court certify final judgment on all issues decided on summary judgment except for the Company's breach of contract claim against Sanofi SA. Sanofi SA and Sanofi Pharmaceuticals seek final judgment certification in order to obtain an immediate appeal on the summary judgment decisions. On December 1, 2000, the Company served a memorandum in 12 opposition to the motion for final and separate judgment. On December 5, 2000, the Court set a trial date for March 19, 2001 on the Company's remaining claim. While the final outcome of this litigation cannot be determined, the Company intends to pursue its remaining claim. In the event that the judgments in the Company's favor are reversed on appeal, the Company intends to defend those claims vigorously. However, in such an event, the Company may not be able to successfully defend those claims and the failure of the Company to prevail for any reason could impair the Company's financial resources and disrupt the Company's future operating plans. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: No matters were submitted to a vote of the company's security holders during the quarter ended September 30, 2000. EXECUTIVE OFFICERS OF THE REGISTRANT: JEROME GOLDSTEIN, 61, is a founder of the Company and has been Chief Executive Officer, Chairman of the Board of Directors and Treasurer since the Company's organization in November 1981. Mr. Goldstein was a co-founder of Clinical Assays, Inc., serving from 1972 to 1980 as Vice President and then as President. Mr. Goldstein is the husband of Marlene Kaplan Goldstein, Secretary of the Company. LEONARD M. BAUM, 47, joined the Company in October 1994 as Senior Vice President and has been President and Chief Operating Officer since May 1997. From 1986 to 1994, Mr. Baum was employed as Senior Director, Worldwide Regulatory Affairs/Drug Safety by Squibb Diagnostics. Mr. Baum is also a member of the Board of Directors. PAULA M. JACOBS, 56, joined the Company in January 1986 as Vice President--Development. From 1981 to 1986, Dr. Jacobs was employed at Seragen, Inc., first as Production Manager and later as General Manager of the Research Products Division. DENNIS LAWLER, 46, joined the Company in February 1989 as Director of Quality Control and has been Vice President--Quality Control since January 1997. Prior to February 1989, Mr. Lawler was employed at CIS-US, first as Senior Quality Control Analyst, then as a Production Manager and then as a Plant Manager. JEROME M. LEWIS, 51, joined the Company in April 1986 as a Senior Scientist and has been Vice President--Scientific Operations since February 1991. Prior to April 1986, Dr. Lewis was employed as a senior scientist by Petroferm Ltd., a biotechnology company. JAMES A. MATHESON, 56, joined the Company in May 1996 as Vice President--Finance. Prior to May, 1996, Mr. Matheson was Controller of Diatech Diagnostics, Inc. MARK C. ROESSEL, 50, joined the Company in January 1982 as Director of Regulatory Affairs and has been Vice President--Regulatory Affairs since January 1995. Prior to January 1982, Mr. Roessel was Compliance Manager of the Clinical Assay Division of Baxter International, Inc. MARLENE KAPLAN GOLDSTEIN is a founder of the Company and has been Secretary of the Company since the Company's organization in November 1981. 13 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS: The Company's common stock is listed on the American Stock Exchange under the symbol AVM. The table below sets forth the high and low sales price of the Company's common stock on the American Stock Exchange for the fiscal quarters of 2000 and 1999.
FISCAL QUARTER ----------------------------------------- FIRST SECOND THIRD FOURTH -------- -------- -------- -------- 2000 High........................................ 4 11/16 10 3/4 8 7/8 8 1/8 Low.......................................... 3 3 13/16 6 1/8 3 1/4 1999 High........................................ 11 3/8 7 3/4 5 5/8 5 1/4 Low.......................................... 5 3 1/2 3 7/16 3 1/8
On December 12, 2000 there were approximately 280 stockholders of record. The Company believes that the number of beneficial holders of Common Stock is approximately 2,200. The last reported sale price of the Common Stock on December 12, 2000 was $2.50 per share. The Company has never declared or paid a cash dividend on its capital stock. 14 ITEM 6. SELECTED FINANCIAL DATA: The selected financial data set forth below has been derived from the audited financial statements of the Company. This information should be read in conjunction with the financial statements and notes thereto set forth elsewhere herein. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED SEPTEMBER 30, ---------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------ ----------- ----------- ----------- ------------- Statement of Operations Data: Revenues: License fees......................................... $ 1,124,049 $ -- $ -- $ 5,500,000 $ -- Royalties............................................ 825,000 680,000 980,542 363,445 50,000 Product sales........................................ 1,253,537 1,966,059 1,399,871 1,580,357 12,762 Contract research and development.................... 106,003 581,429 399,897 62,920 6,810 Interest, dividends and net gains and losses on sales of securities...................................... 765,330 4,202,568 3,623,836 3,495,049 1,761,450 ------------ ----------- ----------- ----------- ------------- Total revenues..................................... 4,073,919 7,430,056 6,404,146 11,001,771 1,831,022 Costs and Expenses: Cost of product sales................................ 239,228 454,642 237,945 311,678 2,550 Contract research and development expenses........... 3,195 37,056 6,514 8,815 -- Company-sponsored research and development expenses........................................... 4,623,468 7,952,331 8,961,796 9,304,327 9,671,897 Selling, general and administrative expenses......... 3,013,796 3,694,038 3,701,410 1,437,599 1,871,568 ------------ ----------- ----------- ----------- ------------- Total costs and expenses........................... 7,879,687 12,138,067 12,907,665 11,062,419 11,546,015 Other Income: Other income....................................... -- 265,593 -- 264,800 -- ------------ ----------- ----------- ----------- ------------- Income (loss) before provision for income taxes, minority interest in subsidiary, and cumulative effect of accounting change.......................... (3,805,768) (4,442,418) (6,503,519) 204,152 (9,714,993) Minority interest in subsidiary........................ -- -- (194,178) -- -- Income tax (benefit) provision......................... -- -- -- (379,022) -- ------------ ----------- ----------- ----------- ------------- Income (loss) before cumulative effect of accounting change............................................... (3,805,768) (4,442,418) (6,309,341) 583,174 (9,714,993) Cumulative effect of accounting change*................ (7,457,717) -- -- -- -- ------------ ----------- ----------- ----------- ------------- Net income (loss)...................................... $(11,263,485) $(4,442,418) $(6,309,341) $ 583,174 $ (9,714,993) ============ =========== =========== =========== ============= Basic and diluted income (loss) before cumulative effect of accounting change per share................ $ (0.56) $ (0.66) $ (0.93) $ 0.09 $ (1.44) Cumulative effect of accounting change per share*...... (1.11) -- -- -- -- ------------ ----------- ----------- ----------- ------------- Basic and diluted net income (loss) per share.......... $ (1.67) $ (0.66) $ (0.93) $ 0.09 $ (1.44) ------------ ----------- ----------- ----------- ------------- Weighted average shares outstanding: Basic................................................ 6,758,825 6,766,934 6,752,863 6,744,946 6,762,748 Diluted.............................................. 6,758,825 6,766,934 6,752,863 6,813,984 6,762,748 ------------ ----------- ----------- ----------- -------------
* In fiscal 2000, the Company changed its method of accounting for revenue from license agreements.
AT SEPTEMBER 30, ---------------------------------------------------------------------- 2000 1999 1998 1997 1996 ------------ ----------- ----------- ----------- ------------- Balance sheet data: Working capital........................................ $ 25,706,905 $22,020,107 $27,278,502 $37,422,235 $ 33,605,818 ------------ ----------- ----------- ----------- ------------- Total assets........................................... $ 35,667,591 $27,816,359 $34,114,708 $44,976,181 $ 41,066,373 ------------ ----------- ----------- ----------- ------------- Stockholders' equity................................... $ 14,305,632 $27,054,709 $32,919,398 $43,423,058 $ 40,132,545 ------------ ----------- ----------- ----------- -------------
15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: OVERVIEW Since its inception in November 1981, Advanced Magnetics, Inc., (the "Company") has focused its efforts on developing its core superparamagnetic iron oxide particle technology to develop magnetic resonance imaging ("MRI") contrast agents. The Company has funded its operations with cash from license fees from corporate partners, royalties, sales of its products, fees from contract research performed for third parties, the proceeds of financings and income earned on invested cash. The Company's success in the market for diagnostic products will depend, in part, on the Company's ability to successfully develop, test, produce and market its products; obtain necessary governmental approvals in a timely manner; attract and retain key employees; and successfully respond to technological and other changes in the marketplace. The Company's operating results may continue to vary significantly from quarter to quarter or from year to year depending on a number of factors, including: the timing of payments from corporate partners and research grants; the introduction of new products by the Company; the timing and size of orders from the Company's customers; and the acceptance of the Company's products. The Company's current planned expense levels are based in part upon expectations as to future revenue. Consequently, profits may vary significantly from quarter to quarter or year to year based on the timing of revenue. Revenue or profits in any period will not necessarily be indicative of results in subsequent periods and the Company may not achieve profitability or grow revenue in the future. A substantial portion of the Company's expenses consist of research and development expenses. In an effort to reduce expenditures and improve efficiency, the Company closed its Princeton, New Jersey office and reduced the number of employees engaged in clinical development activities. All of the Company's operating activities have been consolidated into the Cambridge office in order to improve managerial oversight and inter-departmental coordination and cooperation. The Company may rely to a greater degree on contract research and development providers in the future and expects that research and development expenses will continue to be a significant portion of the Company's total expenses. In fiscal 2000, the Company adopted Securities and Exchange Commission ("SEC") Staff Accounting Bulleting No. 101 ("SAB 101"). The effect of applying this change in accounting principle is a cumulative charge of $7,457,717, or $1.11 per share, in the first quarter. This cumulative change in accounting principle reflects the reversal of license fees and milestone payments that had been recognized in prior years. Recognition of these deferred payments is expected to occur over the remaining life of the related agreement. RESULTS OF OPERATIONS FISCAL 2000 COMPARED TO FISCAL 1999 REVENUES Total revenues for the fiscal year ended September 30, 2000 were $4,073,919 compared to $7,430,056 for the fiscal year ended September 30, 1999. License fee revenues for the fiscal year ended September 30, 2000 were $1,124,049, consisting of $735,575 in revenue associated with the license and marketing agreement with Berlex Laboratories, Inc. ("Berlex"), of which $727,582 was included in the cumulative effect of accounting change adjustment described below, and $388,474 of license fee revenue from Cytogen Corporation ("Cytogen") related to a license and marketing agreement. There were no license fee revenues for the fiscal year ended September 30, 1999. 16 In August 2000, the Company entered into a License and Marketing Agreement with Cytogen Corporation, which covers COMBIDEX and Code 7228 for oncology imaging. At the time of signing that Agreement, the Company received shares of common stock of Cytogen with a market value of $13,546,875 as a non-refundable licensing fee. Approximately $388,000 of that fee was recognized as revenue in fiscal 2000. Recognition of the remainder of the fee as revenue has been deferred and is expected to be recognized as future expenses related to the development of COMBIDEX and Code 7228 are incurred. Royalties for the fiscal year ended September 30, 2000 were $825,000 as compared to $680,000 in fiscal 1999. The increase in royalties is primarily the result of increases in sales by the Company's Japanese partner. Product sales for the fiscal year ended September 30, 2000 were $1,253,537 compared to $1,966,059 for the fiscal year ended September 30, 1999. Product sales in fiscal 1999 included sales of $918,402 at the Company's former subsidiary, Kalisto Biologicals ("Kalisto"), for the nine months that Kalisto's sales were consolidated. There was an increase of $207,634 in sales of contrast agent products by the Company in fiscal 2000. Contract research and development revenues were $106,003 during the fiscal year ended September 30, 2000 compared to $581,429 in the fiscal year ended September 30, 1999. The decrease reflects the completion of certain development activities, the costs of which were reimbursed under an agreement with Guerbet S.A. ("Guerbet") and the completion of work under a grant from the National Institutes of Health ("NIH"). Interest, dividends and gains and losses on sales of securities resulted in revenues of $765,330 for the fiscal year ended September 30, 2000 compared to $4,202,568 for the fiscal year ended September 30, 1999. The decrease was primarily due to a net loss on sales of securities of $62,450 during the fiscal year ended September 30, 2000 compared to a net gain of $3,555,957 for the fiscal year ended September 30, 1999. Interest income for the fiscal year ended September 30, 2000 was $729,805 compared to $534,733 for the fiscal year ended September 30, 1999 due to an increase in interest-bearing cash equivalents. Dividend income of $97,975 for the year ended September 30, 2000 was $13,903 less than the $111,878 for the fiscal year ended September 30, 1999. This decrease is due to reduced holdings of dividend earning securities during the year. COSTS AND EXPENSES The cost of product sales for the fiscal year ended September 30, 2000 was $239,228 compared to $454,642 for the fiscal year ended September 30, 1999. Cost of product sales in fiscal 1999 included $326,666 at the Company's former subsidiary, Kalisto, for the nine months that results from Kalisto were consolidated. The cost of product sales for fiscal 2000 was 19% of product sales and for fiscal 1999 was 23% of product sales. This decrease on an absolute and percentage basis is attributable to deconsolidation of Kalisto. Kalisto product sales had a higher cost of sales than the Company's products. Contract sponsored research and development costs of $3,195 were incurred during fiscal 2000, compared to $37,056 in fiscal 1999, and relate to costs incurred providing development services to Guerbet. The decrease in costs reflects the completion of such services during fiscal 2000. Research and development expenses for the fiscal year ended September 30, 2000 were $4,623,468, a decrease of $3,328,863 compared to $7,952,331 for the fiscal year ended September 30, 1999. The decrease was primarily attributable to a reduction in direct, company-sponsored research and development programs related to the clinical development of COMBIDEX. Selling, general and administrative expenses for the fiscal year ended September 30, 2000 were $3,013,796 compared to expenses of $3,694,038 for the fiscal year ended September 30, 1999. Selling, general and administrative expenses during the fiscal year ended September 30, 2000 included one-time 17 charges of approximately $815,750 related to the termination of a proposed merger with Cytogen and the subsequent signing of a License and Marketing Agreement, and approximately $326,630 in expenses and accruals related to the closing of the clinical development office in Princeton, New Jersey. The Company expects that selling, general and administrative expenses for fiscal 2001 will continue to decrease. INCOME TAXES There was no income tax provision or benefit for the fiscal years ended September 30, 2000 and 1999. CUMULATIVE EFFECT OF ACCOUNTING CHANGE In fiscal 2000, the Company adopted SEC Staff Accounting Bulleting No. 101 ("SAB 101"). The effect of applying this change in accounting principle is a cumulative charge of $7,457,717, or $1.11 per share. This cumulative change in accounting principle reflects the reversal of license fees and milestone payments that had been recognized in prior years. Previously, the Company had recognized license fee revenue when the fees were non-refundable, a technology transfer occurred, no explicit commitment or obligation for scientific achievement existed, and the other portions of the agreement, principally supply and royalty, were priced at fair value. Under the new accounting method applied retroactive to October 1, 1999, these payments are recorded as deferred revenue to be recognized over the remaining term of the related agreement. For the year ended September 30, 2000, the Company recognized $727,582 in revenue that was included in the cumulative effect adjustment as of October 1, 1999. EARNINGS In the fiscal year ended September 30, 2000, the Company recorded a net loss from operations of ($3,805,768), or ($0.56) per share, together with a charge related to the cumulative effect of a change in accounting principle of ($7,457,717), or ($1.11) per share, for a total net loss of ($11,263,485), or ($1.67) per share. In the fiscal year ended September 30, 1999, the Company recorded a net loss of ($4,442,418), or ($0.66) per share. FISCAL 1999 COMPARED TO FISCAL 1998 REVENUES Total revenues for the fiscal year ended September 30, 1999 were $7,430,056 compared to $6,404,146 for the fiscal year ended September 30, 1998. There were no license fee revenues for the fiscal years ended September 30, 1999 and 1998. Royalties for the fiscal year ended September 30, 1999 were $680,000 as compared to $980,542 in fiscal 1998. The decrease in royalties is associated with the product launch of FERIDEX I.V. in Japan that occurred during the year ended September 30, 1998. Product sales for the fiscal year ended September 30, 1999 were $1,966,059 compared to $1,399,871 for the fiscal year ended September 30, 1998. Product sales in fiscal 1999 included an increase in sales of $697,548 at the Company's former subsidiary, Kalisto, for the nine months that Kalisto's sales were consolidated, offset by a decrease in product sales by the Company of $131,360. Contract research and development revenues were $581,429 during the fiscal year ended September 30, 1999 compared with $399,897 in the fiscal year ended September 30, 1998. The increase in fiscal year 1999 reflects the reimbursement of certain development costs of approximately $473,000 under an agreement with Berlex and approximately $108,000 under an agreement with Guerbet. 18 Interest, dividends and gains and losses on sales of securities resulted in revenues of $4,202,568 for the fiscal year ended September 30, 1999 compared to $3,623,836 for the fiscal year ended September 30, 1998. The increase was primarily due to a net gain on sales of securities of $3,555,957 for the fiscal year ended September 30, 1999 compared to a net gain of $2,473,826 for the fiscal year ended September 30, 1998. Interest income for the fiscal year ended September 30, 1999 was $534,733 compared to $978,546 for the fiscal year ended September 30, 1998 due to a decrease in interest-bearing securities. Dividend income of $111,878 for the year ended September 30, 1999 was $59,587 less than the $171,464 for the fiscal year ended September 30, 1998. COSTS AND EXPENSES The cost of product sales for the fiscal year ended September 30, 1999 was $454,642 compared to $237,945 for the fiscal year ended September 30, 1998. The cost of product sales for fiscal 1999 was 23% of product sales and for fiscal 1998 was 17% of product sales. This change is attributable to the increased proportion of Kalisto product sales relative to sales of the Company's products (prior to July 1, 1999) which have a higher cost of sales than the Company's products. Contract sponsored research and development costs of $37,056 were incurred during fiscal 1999, compared to $6,514 in fiscal 1998, and relate to costs incurred providing development services to Guerbet. Research and development expenses for the fiscal year ended September 30, 1999 were $7,952,331, a decrease of $1,009,465 compared to $8,961,796 for the fiscal year ended September 30, 1998. The decrease was primarily attributable to a reduction in direct, company-sponsored research and development programs. Kalisto's expenditures for the nine-month period also decreased during the fiscal year ended September 30, 1999. Selling, general and administrative expenses for the fiscal year ended September 30, 1999 were $3,694,038, compared to expenses of $3,701,410 for the fiscal year ended September 30, 1998. Selling, general and administrative expenses during the fiscal year ended September 30, 1999 included payments related to reductions in the Company's workforce. INCOME TAXES There was no income tax provision or benefit for the fiscal years ended September 30, 1999 and 1998. EARNINGS In the fiscal year ended September 30, 1999, the Company recorded a net loss of ($4,442,418), or ($0.66) per share. In the fiscal year ended September 30, 1998, the Company recorded a net loss of ($6,309,341), or ($0.93) per share. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000, the Company's cash and cash equivalents totaled $16,120,738, compared with $17,052,636 at September 30, 1999. In addition, the Company had marketable securities of $14,051,850 at September 30, 2000, including shares of Cytogen common stock received in payment for license fees, as compared to $4,804,785 on September 30, 1999. Net cash used in operating activities was $3,587,508 in the fiscal year ended September 30, 2000 compared to net cash used in operating activities of $6,733,531 in the fiscal year ended September 30, 1999. The decrease in cash used in operating activities was due primarily to a decrease of $4,745,316 in payments to suppliers and employees as a result of a substantial reduction in costs and expenses. Cash provided by investing activities was $2,593,642 for the fiscal year ended September 30, 2000 compared to $16,154,403 provided by investing activities in the fiscal year ended September 30, 1999. Cash provided by investing activities in the fiscal year ended September 30, 2000 included proceeds from the sale of marketable 19 securities of $4,433,874 offset by the purchase of marketable securities of $1,744,075. Cash provided by investing activities for the fiscal year ended September 30, 1999 included proceeds from maturing United States treasury notes of $7,500,000 and proceeds from the sale of marketable securities of $11,305,551 offset by the purchase of marketable securities of $2,291,869. In November 2000, the Board of Directors authorized the purchase of up to 1,000,000 shares of the Company's common stock on the open market at prevailing market prices. Capital expenditures in the fiscal year ended September 30, 2000 were $36,333 compared to $280,891 in the fiscal year ended September 30, 1999. The decrease in expenditures reflects the Company's focus on controlling costs. The capital expenditures in both years related to laboratory, production and computer equipment. The Company has no current commitment for any significant expenditures on property, plant and equipment. Management believes that funds for future needs can be generated from existing cash balances, cash generated from investing activities and cash generated from operations. In addition, the Company will consider from time to time various financing alternatives and may seek to raise additional capital through equity or debt financing or to enter into corporate partnering arrangements. Funding may not be available on terms acceptable to the Company, if at all. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" which is effective for fiscal years beginning after June 15, 2000. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability, measured at its fair value. SFAS No. 133 also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Adoption of this standard will increase or decrease the recorded value of options the Company may, in the future, acquire, and result in gains or losses being included in net income. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED IN ANY FORWARD-LOOKING STATEMENTS, AS A RESULT OF CERTAIN FACTORS, INCLUDING WITHOUT LIMITATION, THOSE SET FORTH IN THE FOLLOWING SECTION AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. IN ADDITION TO THE OTHER INFORMATION IN THIS ANNUAL REPORT ON FORM 10-K, THE FOLLOWING STATEMENTS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING ADVANCED MAGNETICS AND ITS BUSINESS. NO ASSURANCE OF REGULATORY APPROVAL. Prior to marketing, every product candidate must undergo an extensive regulatory approval process in the United States and in every other country in which the Company intends to test and market its product candidates and products. This regulatory process includes testing and clinical trials of product candidates to demonstrate safety and efficacy and can require many years and the expenditure of substantial resources. Data obtained from preclinical testing and clinical trials are subject to varying interpretations, which can delay, limit or prevent FDA or foreign regulatory approval. In addition, changes in FDA or foreign regulatory approval policies or requirements may occur or new regulations may be promulgated which may result in delay or failure to receive FDA or foreign regulatory approval. Delays and related costs in obtaining regulatory approvals could delay product commercialization and revenue and consume the Company's resources, both financial and managerial. Regulatory approvals may not be obtained for COMBIDEX and Code 7228 or any other products developed by the Company. Although the Company has received an approvable letter from the FDA for COMBIDEX for lymph node indications, final approval remains subject to the satisfaction of certain conditions imposed by the FDA and labeling must be resolved. Failure to obtain 20 requisite governmental approvals or failure to obtain approvals of the scope requested could delay and may preclude the Company or its licensees or other collaborators from marketing the Company's products or limit the commercial use of the products. Regulatory approvals may entail limitations on the indicated uses of the Company's products and impose labeling requirements which may adversely impact the Company's ability to market its products. Even if regulatory approval is obtained, a marketed product and its manufacturer are subject to continuing regulatory review. Noncompliance with the regulatory requirements of the approval process at any stage may result in various adverse consequences, including the FDA's delay in approving or its refusal to approve a product, withdrawal of an approved product from the market or, under certain circumstances, the imposition of criminal penalties. Any such adverse consequences could seriously harm the Company's business, financial condition and results of operations. LACK OF MARKETING AND SALES HISTORY. Advanced Magnetics has limited experience in marketing and selling its products and product candidates and relies on its corporate partners to market and sell FERIDEX I.V. and GASTROMARK and has agreed to do so for COMBIDEX and Code 7228 for oncology applications, pending FDA approval. In order to achieve commercial success for any product candidate approved by the FDA for which the Company does not have a marketing partner, the Company may have to develop a marketing and sales force or enter into arrangements with others to market and sell its products. Advanced Magnetics may not be successful in attracting and retaining qualified marketing and sales personnel and may not be able to enter into marketing and sales agreements with others on acceptable terms, if at all. Furthermore, Advanced Magnetics or its corporate partners may not be successful in marketing and selling the Company's products. UNCERTAINTY OF PRODUCT ADOPTION AND DEVELOPMENT. The Company has not generated significant revenues on royalties from the sale of its products by its marketing partners. Although on the market since 1996 and 1997 respectively, FERIDEX I.V. and GASTROMARK still represent a new technology platform for physicians to adopt. If the Company's approved products are not adopted by physicians, revenues will be delayed or fail to materialize. While the Company has filed an NDA for COMBIDEX and received an "approvable" letter in June 2000 for its principal indication, the diagnosis of lymph node disease, significant additional development efforts, including human clinical testing, may be required prior to approval for commercial sale. Code 7228 and any other product candidates will require significant additional research and development efforts before commercialization. The development of new pharmaceutical products is highly uncertain and the Company's development programs may not be completed successfully, and products, including COMBIDEX, FERIDEX I.V., or GASTROMARK, may not be widely adopted or commercially successful. DEPENDENCE ON COLLABORATIVE RELATIONSHIPS. The Company's strategy for the development, commercialization and marketing of its product candidates has been to enter into strategic alliances with various corporate partners, licensees, and other collaborators. The Company relies on its marketing and distribution partners to market and sell its approved products, FERIDEX I.V. and GASTROMARK, both in the U.S. and in foreign countries. In some cases, the Company has granted exclusive rights to these partners. If these partners are not successful in marketing the Company's products, the Company's ability to generate revenue would be harmed. In addition, the Company might incur additional costs in an attempt to enforce its contractual rights, renegotiate agreements, find new partners or market its own products. In some cases, the Company is dependent upon some of its collaborators to conduct preclinical and clinical testing, to obtain FDA and foreign regulatory approvals and to manufacture and market products. The Company may not derive any revenues or profits from these arrangements and the Company may not be able to enter into future collaborative relationships even if it desires to do so. If any of the Company's collaborators breaches its agreement with the Company or otherwise fails to perform, such event could impair the Company's revenue and impose additional costs. 21 UNCERTAINTIES RELATING TO CLINICAL TRIALS. Before obtaining regulatory approvals for the commercial sale of any of its product candidates, the Company must demonstrate through extensive preclinical testing and human clinical trials that the product is safe and efficacious. The results from preclinical testing and early clinical trials of products under development by the Company may not be predictive of results obtained in subsequent clinical trials. Clinical trials are often conducted with patients in the most advanced stages of disease. During the course of treatment, these patients can die or suffer adverse medical effects for reasons that may not be related to the product being tested, but which can nevertheless adversely affect clinical trial results or approvals by the FDA. Clinical testing of pharmaceutical products is itself subject to approvals by various governmental regulatory authorities. Advanced Magnetics may not be permitted by regulatory authorities to commence or continue clinical trials. Any delays in or termination of the Company's clinical trial efforts could negatively effect the Company's future prospects and stock price. UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT. In both the United States and foreign markets, the Company's ability to commercialize its products may depend in part on the extent to which reimbursement for the costs of such products and related treatments will be available from government health administration authorities, private health insurers and other third-party payors. In the United States, there has been, and the Company expects that there will continue to be, a number of federal and state proposals to reform the health care system. Significant uncertainty exists as to the reimbursement status of both newly-approved health care products and products used for indications not approved by the FDA. If adequate reimbursement levels are not instituted by government and other third-party payors for the Company's products and related treatments, the adoption and sale of the Company's products may be limited and its ability to generate revenue may be materially adversely affected. NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL. The Company has expended and will continue to expend substantial funds to complete the research, development, clinical trials, regulatory approvals and other activities through final commercialization of its products. It is possible that the Company may need additional financing to satisfy its capital and operating requirements relating to the development, manufacturing and marketing of its products. The Company may seek such financing through arrangements with collaborative partners and through public or private sales of the Company's securities, including equity securities. The Company may not be able to obtain financing on acceptable terms, if at all. Any additional equity financings could be dilutive to the Company's stockholders. If adequate additional funds are not available, the Company may be required to curtail significantly one or more of its research and development programs or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its products and product candidates on terms that it might otherwise find unacceptable. COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE. The pharmaceutical and biopharmaceutical industries are subject to intense competition and rapid technological change. The Company has many competitors, many of which have substantially greater capital and other resources than the Company and represent significant competition for Advanced Magnetics. These companies may succeed in developing technologies and products that are more effective or less costly than any that may be developed by the Company, and may be more successful than the Company in developing, manufacturing and marketing products. Developments by others may render the Company's products or product candidates or technologies obsolete or noncompetitive. The Company's collaborators or customers may choose to use competing technologies or products. UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. The patent positions of pharmaceutical and biopharmaceutical firms, including Advanced Magnetics, are generally uncertain and involve complex legal and factual questions. Because of the substantial length of time and expense associated with bringing new products through development and regulatory approval to the marketplace, the 22 pharmaceutical and biopharmaceutical industries place considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. The Company may not be successful or timely in obtaining any patents for which it submits applications. The breadth of the claims obtained may not provide any significant protection of the Company's technology. The degree of protection afforded by patents for licensed technologies or for future discoveries may not be adequate to protect the Company's proprietary technology. Moreover, patents issued to Advanced Magnetics may be contested, invalidated or circumvented. Future patent interference proceedings involving patents of either the Company or its licensors may have a material adverse effect on the Company's business. Claims of infringement or violation of the proprietary rights of others may be asserted against the Company. If Advanced Magnetics is required to defend against such claims or to protect its own proprietary rights against others, the Company may incur substantial costs. In the future, Advanced Magnetics may be required to obtain additional licenses to patents or other proprietary rights of others. Such licenses may not be available on acceptable terms, if at all. The failure to obtain such licenses could result in delays in marketing the Company's products or the inability to proceed with the development, manufacturing or sale of its products and product candidates requiring such licenses. In addition, the termination of any of the Company's existing licensing arrangements could impair the Company's revenues and impose additional costs. The Company also relies upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain its competitive position, which it seeks to protect, in part, by confidentiality agreements with its corporate partners, collaborators, employees and consultants. These agreements, however, may be breached. The Company may not have adequate remedies for any such breach, and the Company's trade secrets might otherwise become known or be independently discovered by its competitors. In addition, the Company cannot be certain that others will not independently develop substantially equivalent or superseding proprietary technology, or that an equivalent product will not be marketed in competition with the Company's products, thereby substantially reducing the value of the Company's proprietary rights. UNCERTAINTIES IN MANUFACTURING. The Company manufactures bulk FERIDEX I.V. and GASTROMARK as well as FERIDEX I.V. finished product for sale by its marketing partners and intends to, pending FDA approval, manufacture COMBIDEX finished product in its Massachusetts facilities. These facilities are subject to current Good Manufacturing Practices ("cGMP") regulations prescribed by the FDA. The Company may not be able to continue to operate at commercial scale in compliance with the cGMP regulations. Failure to operate in compliance with cGMP regulations and other applicable manufacturing requirements of various regulatory agencies could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the Company is dependent on contract manufacturers for the final production of COMBIDEX. In the event that the Company is unable to obtain or retain manufacturing for this product, it will not be able to develop and commercialize it as planned. The Company may not be able to enter into agreements for the manufacture of future products with manufacturers whose facilities and procedures comply with cGMP and other regulatory requirements or that such manufacturers will be able to deliver required quantities of product that conform to specifications in a timely manner. POTENTIAL PRODUCT LIABILITY; UNCERTAINTIES RELATED TO INSURANCE. The Company maintains product liability insurance coverage for claims arising from the use of its products in clinical trials and commercial use. However, coverage is becoming increasingly expensive and the Company may not be able to maintain insurance at a reasonable cost. Furthermore, the Company's insurance may not provide sufficient coverage amounts to protect the Company against liability that could have a material adverse effect on the Company's business, financial condition and results of operations. Insurance coverage may not be sufficient to satisfy any liability or cover costs resulting from product liability claims, so that a product liability claim could reduce or eliminate the Company's resources, whether or not the plaintiff in such claim ultimately prevailed. 23 ATTRACTION AND RETENTION OF KEY EMPLOYEES. Because of the specialized nature of its business, Advanced Magnetics is highly dependent on its ability to attract and retain qualified scientific and technical personnel for the research and development activities conducted or sponsored by the Company. Furthermore, the Company's possible expansion into areas and activities requiring additional expertise, such as product distribution and marketing and sales, may require the addition of new management personnel and the development of additional expertise by existing management personnel. There is intense competition for qualified personnel in the areas of the Company's activities, and the Company may not be able to continue to attract and retain the qualified personnel necessary for the development of its business. The failure to attract and retain such personnel or to develop such expertise could impose limits on the Company's business operations. VOLATILITY OF COMMON STOCK PRICE. The market prices for securities of biopharmaceutical and pharmaceutical companies, including the Company, have historically been highly volatile. Fluctuations in operating results may cause the market price of the Company's Common Stock to be volatile. In addition, the market prices for securities of biopharmaceutical and pharmaceutical companies have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of such companies. Various factors and events, including announcements by the Company or its competitors concerning technological innovations, new products, clinical trial results, agreements with collaborators, governmental regulations, developments in patent or other proprietary rights, public concern regarding the safety of products developed by the Company or others, may have a significant impact on the market price of the Company's Common Stock and dividend policy. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company owns financial instruments that are sensitive to market risks as part of its investment portfolio. The investment portfolio is used to preserve the Company's capital until it is required to fund operations, including the Company's research and development activities and includes shares of Cytogen common stock received as a license fee. None of these market-risk sensitive instruments are held for trading purposes. The investment portfolio contains instruments that are subject to a decline in equity markets. Equity Market Risk--The Company's investment portfolio includes publicly-traded stocks of domestic issuers. Assuming a decline of 10% in the market for domestic stocks generally, the Company's equity investments may be expected to decline a corresponding 10%, resulting in a hypothetical reduction of the value of the net assets of the Company (as of September 30, 2000) of approximately 4% as compared to a hypothetical reduction of the value of the net assets of the Company (as of September 30, 1999) of less than 2%. This change is due to the increase of the Company's holdings of marketable securities primarily as a result of the acceptance by the Company of 1,500,000 shares of Cytogen common stock as an up-front licensing fee as part of a license and marketing agreement. The Company retained approximately 1,200,000 of those shares at September 30, 2000. The use of a 10% estimate in the decline of equity securities is strictly for estimation and evaluation purposes only. The value of the Company's assets may rise or fall by a greater amount depending on actual general market performances and the value of individual securities owned by the Company. 24 ITEM 8. FINANCIAL STATEMENTS: The Company's Financial Statements and related Report of Independent Accountants are presented in the following pages. The financial statements included in this Item 8 are as follows: Report of Independent Accountants Financial Statements: Balance Sheets--September 30, 2000 and 1999 Statements of Operations--for the years ended September 30, 2000, 1999 and 1998 Statements of Comprehensive Income--for the years ended September 30, 2000, 1999 and 1998 Statements of Stockholders' Equity--for the years ended September 30, 2000, 1999 and 1998 Statements of Cash Flows--for the years ended September 30, 2000, 1999 and 1998 Reconciliation of Net Income (Loss) to Net Cash Used in Operating Activities--for the years ended September 30, 2000, 1999 and 1998 Notes to Financial Statements 25 INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants........................... 27 Balance Sheets--September 30, 2000 and 1999................. 28 Statements of Operations--for the years ended September 30, 2000, 1999 and 1998....................................... 29 Statements of Comprehensive Income--for the years ended September 30, 2000, 1999 and 1998......................... 30 Statements of Stockholders' Equity--for the years ended September 30, 2000, 1999 and 1998......................... 31 Statements of Cash Flow--for the years ended September 30, 2000, 1999 and 1998....................................... 32 Reconciliation of Net Income (Loss) to Net Cash Used in Operating Activities--for the years ended September 30, 2000, 1999 and 1998....................................... 33 Notes to Financial Statements............................... 34
26 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Advanced Magnetics, Inc.: In our opinion, the accompanying balance sheets and the related statements of operations, comprehensive income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Advanced Magnetics, Inc. at September 30, 2000 and September 30, 1999, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note B to the financial statements, in fiscal 2000 the Company changed its method of accounting for revenue from license agreements. PricewaterhouseCoopers LLP Boston, Massachusetts November 8, 2000 27 ADVANCED MAGNETICS, INC. BALANCE SHEETS
SEPTEMBER 30, --------------------------- 2000 1999 ASSETS ------------ ------------ Current assets: Cash and cash equivalents................................... $ 16,120,738 $ 17,052,636 Marketable securities....................................... 14,051,850 4,804,785 Accounts receivable......................................... 639,740 648,201 Inventories................................................. 91,456 80,480 Prepaid expenses............................................ 187,481 195,655 ------------ ------------ Total current assets.................................... 31,091,265 22,781,757 Property, plant and equipment: Land........................................................ 360,000 360,000 Buildings................................................... 4,618,296 4,610,827 Laboratory equipment........................................ 8,013,973 8,007,095 Furniture and fixtures...................................... 782,525 760,538 ------------ ------------ 13,774,794 13,738,460 Less--accumulated depreciation and amortization............. (9,620,094) (9,065,660) ------------ ------------ Net property, plant and equipment........................... 4,154,700 4,672,800 Other assets................................................ 421,626 361,802 ------------ ------------ Total assets............................................ $ 35,667,591 $ 27,816,359 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................ $ 611,891 $ 118,465 Accrued expenses............................................ 786,832 581,534 Income taxes payable........................................ 61,651 61,651 Deferred revenues........................................... 3,923,986 -- ------------ ------------ Total current liabilities............................... 5,384,360 761,650 Deferred revenues........................................... 15,977,599 -- ------------ ------------ Total liabilities....................................... 21,361,959 761,650 Commitments and contingencies Stockholders' equity: Preferred stock, par value $.01 per share, authorized 2,000,000 shares; none issued............................. -- -- Common stock, par value $.01 per share, authorized 15,000,000 shares; issued and outstanding 6,773,932 shares as of September 30, 2000 and 6,752,027 shares as of September 30, 1999........................................ 67,739 67,521 Additional paid-in capital.................................. 44,267,120 44,205,370 Retained earnings (deficit)................................. (28,110,546) (16,847,061) Accumulated other comprehensive income...................... (1,918,681) (371,121) ------------ ------------ Total stockholders' equity................................ 14,305,632 27,054,709 ------------ ------------ Total liabilities and stockholders' equity.............. $ 35,667,591 $ 27,816,359 ============ ============
The accompanying notes are an integral part of the financial statements. 28 ADVANCED MAGNETICS, INC. STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, ---------------------------------------- 2000 1999 1998 ------------ ----------- ----------- Revenues: License fees.......................................... $ 1,124,049 $ -- $ -- Royalties............................................. 825,000 680,000 980,542 Product sales......................................... 1,253,537 1,966,059 1,399,871 Contract research and development..................... 106,003 581,429 399,897 Interest, dividends and net gains and losses on sales of securities....................................... 765,330 4,202,568 3,623,836 ------------ ----------- ----------- Total revenues.................................... 4,073,919 7,430,056 6,404,146 Costs and expenses: Cost of product sales................................. 239,228 454,642 237,945 Contract research and development expenses............ 3,195 37,056 6,514 Company-sponsored research and development expenses... 4,623,468 7,952,331 8,961,796 Selling, general and administrative expenses.......... 3,013,796 3,694,038 3,701,410 ------------ ----------- ----------- Total costs and expenses.......................... 7,879,687 12,138,067 12,907,665 Other income: Other income........................................ -- 265,593 -- Minority interest in subsidiary....................... -- -- (194,178) ------------ ----------- ----------- Loss before cumulative effect of accounting change.... (3,805,768) (4,442,418) (6,309,341) Cumulative effect of accounting change (Note B)....... (7,457,717) -- -- ------------ ----------- ----------- Net income (loss)..................................... $(11,263,485) $(4,442,418) $(6,309,341) ============ =========== =========== Basic and diluted loss before cumulative effect of accounting change per share......................... $ (0.56) $ (0.66) $ (0.93) Cumulative effect of accounting change per share...... (1.11) -- -- ------------ ----------- ----------- Basic and diluted net loss per share.................. $ (1.67) $ (0.66) $ (0.93) ============ =========== =========== Weighted average shares outstanding: Basic............................................... 6,758,825 6,766,934 6,752,863 ------------ ----------- ----------- Diluted............................................. 6,758,825 6,766,934 6,752,863 ------------ ----------- ----------- Pro forma amounts assuming accounting change is applied retroactively: Net loss.............................................. $ (3,805,768) $(4,039,639) $(5,861,228) Basic and diluted net loss per share.................. (0.56) (0.60) (0.87)
The accompanying notes are an integral part of the financial statements. 29 ADVANCED MAGNETICS, INC. STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED SEPTEMBER 30, ----------------------------------------- 2000 1999 1998 ------------ ----------- ------------ Net loss............................................. $(11,263,485) $(4,442,418) $ (6,309,341) Other comprehensive income: Unrealized gains (losses) on securities............ (1,610,010) 2,206,167 (1,753,901) Reclassification adjustment for (gains) losses included in net income........................... 62,450 (3,555,957) (2,473,826) ------------ ----------- ------------ Other comprehensive loss............................. (1,547,560) (1,349,790) (4,227,727) ------------ ----------- ------------ Comprehensive loss................................... $(12,811,045) $(5,792,208) $(10,537,068) ============ =========== ============
The accompanying notes are an integral part of the financial statements. 30 ADVANCED MAGNETICS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1999 AND 2000 --------------------------------------------------------------------------------- ACCUMULATED COMMON STOCK ADDITIONAL RETAINED OTHER TOTAL -------------------- PAID-IN EARNINGS COMPREHENSIVE STOCKHOLDERS' SHARES AMOUNT CAPITAL (DEFICIT) INCOME EQUITY --------- -------- ----------- ------------ ------------- ------------- Balance at September 30, 1997....... 6,740,626 $67,406 $44,244,558 $ (6,095,302) $ 5,206,396 $43,423,058 ========= ======= =========== ============ =========== =========== Shares issued in connection with the exercise of stock options......... 39,846 399 163,456 -- -- 163,855 Shares surrendered in connection with the exercise of stock options........................... (2,190) (22) (28,722) -- -- (28,744) Shares issued in connection with employee stock purchase plan...... 5,876 59 54,587 -- -- 54,646 Common shares repurchased........... (16,800) (168) (156,181) -- -- (156,349) Other comprehensive income (loss)... -- -- -- -- (4,227,727) (4,227,727) Net loss............................ -- -- -- (6,309,341) -- (6,309,341) --------- ------- ----------- ------------ ----------- ----------- Balance at September 30, 1998....... 6,767,358 $67,674 $44,277,698 $(12,404,643) $ 978,669 $32,919,398 ========= ======= =========== ============ =========== =========== Shares issued in connection with the exercise of stock options......... 1,329 13 10,397 -- -- 10,410 Shares surrendered in connection with the exercise of stock options........................... (1,027) (10) (10,388) -- -- (10,398) Shares issued in connection with employee stock purchase plan...... 2,267 23 7,435 -- -- 7,458 Common shares repurchased........... (17,900) (179) (79,772) -- -- (79,951) Other comprehensive income (loss)... -- -- -- -- (1,349,790) (1,349,790) Net loss............................ -- -- -- (4,442,418) -- (4,442,418) --------- ------- ----------- ------------ ----------- ----------- Balance at September 30, 1999....... 6,752,027 $67,521 $44,205,370 $(16,847,061) $ (371,121) $27,054,709 ========= ======= =========== ============ =========== =========== Shares issued in connection with the exercise of stock options......... 5,250 52 20,956 -- -- 21,008 Shares surrendered in connection with the exercise of stock options........................... (2,488) (25) (17,967) -- -- (17,992) Shares issued in connection with employee stock purchase plan...... 19,143 191 58,761 -- -- 58,952 Other comprehensive income (loss)... -- -- -- -- (1,547,560) (1,547,560) Net loss............................ -- -- -- (11,263,485) -- (11,263,485) --------- ------- ----------- ------------ ----------- ----------- Balance at September 30, 2000....... 6,773,932 $67,739 $44,267,120 $(28,110,546) $(1,918,681) $14,305,632 ========= ======= =========== ============ =========== ===========
The accompanying notes are an integral part of the financial statements. 31 ADVANCED MAGNETICS, INC. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, --------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Cash flows from operating activities: Cash received from customers........................... $ 1,615,566 $ 2,834,912 $ 1,637,449 Cash paid to suppliers and employees................... (6,624,397) (11,369,713) (12,686,577) Dividends and interest received........................ 827,782 670,440 1,139,685 Royalties received..................................... 593,541 699,269 925,817 Net proceeds from insurance settlement................. -- 371,561 -- Income taxes paid...................................... -- -- (2,500) Income tax refund...................................... -- 60,000 4,422 ----------- ----------- ----------- Net cash used in operating activities.................. (3,587,508) (6,733,531) (8,981,704) Cash flows from investing activities: Proceeds from sales of marketable securities........... 4,433,874 11,305,551 8,993,685 Proceeds from notes and bonds maturing................. -- 7,500,000 5,000,000 Purchase of marketable securities...................... (1,744,075) (2,291,869) (7,426,189) Capital expenditures................................... (36,333) (280,891) (584,360) (Increase) decrease in other assets.................... (59,824) (57,565) (55,335) Cash sold in sale of Kalisto........................... -- (20,823) -- ----------- ----------- ----------- Net cash provided by investing activities.............. 2,593,642 16,154,403 5,927,801 Cash flows from financing activities: Proceeds from issuances of common stock, net........... 61,968 7,470 189,757 Purchase of treasury stock............................. -- (79,951) (156,349) ----------- ----------- ----------- Net cash (used in) provided by financing activities.... 61,968 (72,481) 33,408 ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents... (931,898) 9,348,391 (3,020,495) Cash and cash equivalents at beginning of year......... 17,052,636 7,704,245 10,724,740 ----------- ----------- ----------- Cash and cash equivalents at end of year............... $16,120,738 $17,052,636 $ 7,704,245 =========== =========== =========== Supplemental data: Non-cash operating activites: Marketable securities received in license and marketing agreement............................................ $13,546,875 $ -- $ --
The accompanying notes are an integral part of the financial statements. 32 ADVANCED MAGNETICS, INC. RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
FOR THE YEARS ENDED SEPTEMBER 30, ---------------------------------------- 2000 1999 1998 ------------ ----------- ----------- Net loss.............................................. $(11,263,485) $(4,442,418) $(6,309,341) ------------ ----------- ----------- Adjustments to reconcile net loss to net cash used in operating activities: Non-cash reduction in value of investment in subsidiary.......................................... -- 155,967 -- Non-cash reduction in value of minority interest in subsidiary.......................................... -- -- 194,178 Minority interest in subsidiary....................... -- -- (194,178) Non-cash license fee revenue.......................... (1,116,056) -- -- Cumulative effect of accounting change................ 7,457,717 -- -- Depreciation.......................................... 554,434 817,299 999,622 Accretion of U. S. Treasury Notes discount............ -- (15,358) (52,574) (Increase) decrease in accounts receivable............ 8,462 339,116 (448,203) (Increase) decrease in inventories.................... (10,976) 368,150 (335,452) (Increase) decrease in prepaid expenses............... 8,174 33,330 (4,117) Increase (decrease) in accounts payable and accrued expenses............................................ 698,724 (443,260) (359,736) Increase (decrease) in deferred revenues.............. 13,048 -- -- Increase (decrease) in income taxes payable........... -- 9,600 1,923 Net realized (gains) losses on sales of marketable securities.......................................... 62,450 (3,555,957) (2,473,826) ------------ ----------- ----------- Total adjustments..................................... 7,675,977 (2,291,113) (2,672,363) ------------ ----------- ----------- Net cash used in operating activities................. $ (3,587,508) $(6,733,531) $(8,981,704) ============ =========== ===========
The accompanying notes are an integral part of the financial statements. 33 NOTES TO FINANCIAL STATEMENTS A. SUMMARY OF ACCOUNTING POLICIES: BUSINESS Founded in November 1981, Advanced Magnetics, Inc., a Delaware Corporation (the "Company") is a biopharmaceutical company engaged in the development and manufacture of compounds utilizing the Company's core proprietary colloidal superparamagnetic particle technology and core polysaccharide technology for magnetic resonance imaging ("MRI"). The initial products developed by the Company are diagnostic imaging agents for use in conjunction with MRI to aid in the diagnosis of cancer and other diseases. The Company is subject to risks common to companies in the industry including, but not limited to, development by the Company or its competitors of new technological innovations, uncertainty of product development and commercialization, lack of marketing and sales history, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, and compliance with FDA government regulations. CONSOLIDATION POLICY The Company consolidated its majority-owned subsidiary until the date of divesture in July 1999. All intercompany transactions until that time have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand, money market funds and marketable securities having a maturity of less than three months at the date acquired. Substantially all of the cash and cash equivalents at September 30, 2000 and 1999 were held in a money market account. MARKETABLE SECURITIES The Company's current portfolio consists of securities classified as available-for-sale which are recorded at fair market value. The fair values of marketable securities are based on quoted market prices. Net unrealized gains and losses on marketable securities are recorded as a separate component of stockholders' equity entitled accumulated other comprehensive income. Interest income is accrued as earned. Dividend income is accrued on the ex-dividend date, and net realized gains and losses are computed on the basis of average cost and are recognized when realized. INVENTORIES Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. The cost of additions and improvements is charged to the property accounts while maintenance and repairs are expensed as incurred. Upon sale 34 or other disposition of property and equipment, the cost and related depreciation are removed from the accounts and any resulting gain or loss is reflected in income. DEPRECIATION Depreciation is recorded by the straight line method based on rates sufficient to provide for retirement over estimated useful lives as follows: buildings--40 years; laboratory equipment and furniture and fixtures--5 years; and leasehold improvements--over the life of the lease. REVENUE RECOGNITION Product revenue is recognized upon shipment to the customer and satisfaction of all obligations. Royalty revenue is recognized as the related product sales are recognized. The Company enters into product development agreements with collaborative partners. The terms of the agreements may include non-refundable license fees, payments based on the achievement of certain milestones and royalties on any product sales derived from collaborations. Non-refundable license fees, with respect to product development agreements and collaborations, are recognized over the term of the agreement as earned or, in cases where project costs are estimable, recognized on a percentage of completion basis as related costs are incurred. Milestone payments, which are not refundable, are recognized as revenue on a retrospective basis. Accordingly, upon achievement of the milestone, a portion of the milestone payment equal to the percentage of collaboration completed through that date would be recognized. The remainder would be recognized as services are performed over the remaining term of the collaboration. INCOME TAXES The provision (benefit) for income taxes includes federal and state income taxes currently payable and deferred income taxes arising from the recognition of certain income and expenses in different periods for financial and tax reporting purposes. INCOME (LOSS) PER SHARE The weighted average common and common equivalent shares used in the computation of basic and diluted earnings per share is presented below. Aggregate options of 479,506 (weighted average exercise price of $8.97), 473,833 options (weighted average exercise price of $9.47) and 408,649 options (weighted average exercise price of $11.30) for 2000, 1999 and 1998, respectively, have not been included in the calculation of weighted average shares since their effect would be anti-dilutive, given the net loss in these years.
FOR THE YEARS ENDED SEPTEMBER 30 ---------------------------------------- 2000 1999 1998 ------------ ----------- ----------- Numerator: Net income (loss)..................................... $(11,263,485) $(4,442,418) $(6,309,341) ============ =========== =========== Denominator: Weighted average number of common shares issued and outstanding......................................... 6,758,825 6,766,934 6,752,863 Assumed exercise of options reduced by the number of shares which could have been purchased with the proceeds of those options........................... -- -- -- ------------ ----------- ----------- Weighted average common and common equivalent shares.............................................. 6,758,825 6,766,934 6,752,863 Basic and diluted net income (loss) per share......... $ (1.67) $ (0.66) $ (0.93)
35 RECLASSIFICATIONS Certain amounts from the prior year have been reclassified to conform to the current year's presentation. B. CUMULATIVE EFFECT OF ACCOUNTING CHANGE: In fiscal 2000, the Company adopted SEC Staff Accounting Bulleting No. 101 ("SAB 101"). The effect of applying this change in accounting principle is a cumulative charge of $7,457,717, or $1.11 per share. This cumulative change in accounting principle reflects the reversal of license fees and milestone payments that had been recognized in prior years. Previously, the Company had recognized license fee revenue when the fees were non-refundable, a technology transfer occurred, no explicit commitment or obligation for scientific achievement existed, and the other portions of the agreement, principally supply and royalty, were priced at fair value. Under the new accounting method applied retroactively to October 1, 1999, these payments are recorded as deferred revenue to be recognized over the remaining term of the related agreement. For the year ended September 30, 2000, the Company recognized $727,582 in revenue that was included in the cumulative effect adjustment as of October 1, 1999. C. MARKETABLE SECURITIES: The cost and fair value of the marketable securities portfolio at September 30 are as follows:
2000 2000 1999 1999 COST FAIR VALUE COST FAIR VALUE ----------- ----------- ---------- ---------- Common stock................................ $15,970,531 $14,051,850 $5,175,906 $4,804,785 ----------- ----------- ---------- ---------- $15,970,531 $14,051,850 $5,175,906 $4,804,785 =========== =========== ========== ==========
At September 30, 2000, gross unrealized holding losses were $1,918,681. At September 30, 1999, gross unrealized holding losses were $371,121. For the fiscal years ended September 30, 2000 and 1999, the net unrealized holding losses have been recorded as a separate component of stockholders' equity, entitled accumulated other comprehensive income. During the year ended September 30, 2000, gross realized gains and gross realized losses on the sale of marketable securities were $101,325 and $163,775, respectively, resulting in a net realized loss of $62,450. During the year ended September 30, 1999, gross realized gains and gross realized losses on the sale of marketable securities were $4,796,165 and $1,240,208, respectively, resulting in a net realized gain of $3,555,957. During the year ended September 30, 1998, gross realized gains on the sale of marketable securities were $2,473,826. Proceeds from U.S. treasury notes maturing were $7,500,000, and $5,000,000 in 1999 and 1998 respectively. Interest, dividends and net gains (losses) on sales of securities consist of the following:
FOR THE YEARS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 1998 -------- ---------- ---------- Interest income............................................ $729,805 $ 534,733 $ 978,546 Dividend income............................................ 97,975 111,878 171,464 Net gains (losses) on sales of securities.................. (62,450) 3,555,957 2,473,826 -------- ---------- ---------- Totals..................................................... $765,330 $4,202,568 $3,623,836 ======== ========== ==========
In August 2000, in exchange for license and marketing rights, the Company received 1,500,000 shares of common stock of Cytogen Corporation of which 1,200,000 shares were restricted from resale. The restrictions lapse in 300,000 share increments on September 25, October 25, November 25 and December 25, 2000. As of September 30, 2000, the Company retained approximately 1,200,000 of these 36 shares, of which 900,000 shares were restricted from resale until the specified dates. The cost basis of these marketable securities is the quoted market price on the date of receipt. As of September 30, 2000, the fair market value of the Cytogen shares held, including the restricted shares, was $7,572,000. D. INVENTORIES: The Company's inventories consisted entirely of raw materials of $91,456 on September 30, 2000 and $80,480 on September 30, 1999. E. COMMITMENTS: The Company leases laboratory, office and warehouse space under various agreements. Rental expense for the years ended September 30, 2000, 1999 and 1998 amounted to $326,347, $411,245 and $572,729, respectively. Future minimum lease payments for fiscal 2001, 2002, 2003 and 2004 amount to $336,472, $301,823, $164,010 and $37,964, respectively. F. ACCRUED EXPENSES: Accrued expenses consist of the following at September 30:
2000 1999 -------- -------- Salaries and other compensation............................. $223,367 $208,149 License and royalty fees.................................... 33,952 20,000 Clinical trials............................................. 85,000 116,649 Professional fees........................................... 188,000 164,000 Other....................................................... 256,513 72,736 -------- -------- Totals...................................................... $786,832 $581,534 ======== ========
G. INCOME TAXES: Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. There was no income tax provision or benefit for the years ended September 30, 2000, 1999 and 1998. The provisions for income taxes were at different rates than the U.S. statutory rates for the following reasons:
FOR THE YEARS ENDED SEPTEMBER 30, ----------------------------------------- 2000 1999 1998 --------- --------- --------- Statutory U.S. federal income tax rate................. 34.0% 34.0% 34.0% State taxes, net of federal benefit.................... 6.3% 6.3% 6.3% Permanent items........................................ 0.2% (0.3)% 0.0% Other.................................................. (1.7)% (1.0)% 0.9% Valuation allowance.................................... (38.8)% (39.0)% (41.2)% ----- ----- ----- (0.0)% (0.0)% (0.0)% ----- ----- -----
37 The components of the deferred tax assets and liabilities at September 30, were as follows:
2000 1999 1998 ----------- ----------- ----------- Assets Net operating loss carryforwards..................... $ 4,649,480 $ 9,397,988 $ 7,645,130 Research and experimentation tax credit carryforward....................................... 3,041,904 3,004,518 2,511,022 Deductible intangibles............................... 90,116 102,016 111,370 Deferred revenue..................................... 8,014,368 -- -- Other................................................ 403,165 316,120 248,310 Liabilities Property, plant and equipment depreciation........... (135,586) (200,415) (246,347) Other................................................ (85,842) (70,142) (77,245) ----------- ----------- ----------- 15,977,605 12,550,085 10,192,240 Valuation allowance.................................... (15,977,605) (12,550,085) (10,192,240) ----------- ----------- ----------- Net deferred taxes..................................... $ -- $ -- $ -- =========== =========== ===========
Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has placed a valuation allowance against its otherwise recognizable net deferred tax assets. Realization of favorable tax attributes is, therefore, reflected as a tax benefit in the provision for income taxes. At September 30, 2000, the Company had unused net operating loss (NOL) carryforwards for federal income tax purposes of approximately $11,839,280 which expire in fiscal 2008. The Company also has unused state net operating loss carryforwards of approximately $9,959,146 which begin to expire in fiscal 2001. The Company also has federal research and experimentation credits of approximately $2,689,798 which expire in fiscal 2004. H. STOCK PLANS: The Company's 1993 Stock Plan (the "1993 Stock Plan") provides for the grant of options to the Company's directors, officers, employees and consultants to purchase up to an aggregate of 700,000 shares of common stock at a price equal to the fair market value of the stock at the date of the grant. The maximum term of the options under the 1993 Stock Plan is ten years. The number of shares available for future grants at September 30, 2000 was 249,425. On November 8, 2000, the Company adopted, subject to the approval of its stockholders, the 2000 Stock Plan which would, if approved, provide for the grant of options to the Company's directors, officers, employees and consultants to purchase up to an aggregate of 1,000,000 shares of common stock. The Company's 1983 Stock Option Plan (the "1983 Plan") does not allow for option grants after June 1993. The 1983 Plan provided for the grant of options to purchase up to 900,000 shares of common stock at a price equal to the fair market value of the stock at the date of grant to the Company's employees and mandatory grants to outside directors upon initial election to the Board of Directors. The maximum terms of incentive stock options and non-statutory options under the 1983 Plan are ten years and ten years plus thirty days, respectively. On November 5, 1991, the Company's Board of Directors adopted the 1992 Non-Employee Director Stock Option Plan (the "1992 Plan") which the shareholders approved. This plan provides for the grant to each non-employee director on November 5, 1991, and each fifth anniversary thereafter, of an option to purchase 5,000 shares of common stock up to an aggregate of 100,000 shares at a price equal to the fair market value of the stock at the date of the grant, vesting over a five year period. Under this plan, options to purchase 30,000 shares of common stock at a price of $21.00 per share and 38 30,000 shares of common stock at a price of $15.25 per share were granted on November 5, 1991 and 1996, respectively. The 1992 Plan also provided for the grant of options for 5,000 shares to new members of the Board of Directors. A total of 10,000 stock options were granted to new directors during fiscal year 1997 under the 1992 Plan. No grants may be made under this plan after November 4, 2001. On November 10, 1992, the Company's Board of Directors adopted the 1993 Non-Employee Director Stock Option Plan (the "1993 Plan") which the shareholders approved. This plan provides for the grant to each non-employee director on November 10, 1992, and each sixth anniversary thereafter an option to purchase 5,000 shares of common stock up to an aggregate of 100,000 shares at a price equal to the fair market value of the stock at the date of the grant, vesting over a five year period. Under this plan, options to purchase 30,000 shares of common stock at a price of $14.50 per share and 25,000 shares of common stock at a price of $9.625 per share were granted on November 10, 1992 and November 10, 1998, respectively. The 1993 Plan also provided for the grant of options for 5,000 shares to new members of the Board of Directors. A total of 10,000 stock options were granted to new directors during fiscal year 1997 under the 1993 Plan. No grants may be made under this plan after November 10, 2002. The Company uses the disclosure provision of SFAS 123, "Accounting for Stock-Based Compensation" ("SFAS 123") and has applied APB Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its Plans. Stock option activity for the years ended September 30, 2000, 1999 and 1998 is as follows:
2000 1999 1998 ------------------- ------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE -------- -------- -------- -------- -------- -------- Outstanding at beginning of year.............. 473,833 $9.47 408,649 $11.30 460,195 $10.73 Granted....................................... 47,500 $3.50 144,000 $ 5.04 13,500 $11.88 Exercised..................................... (5,250) $4.00 (1,329) $ 7.83 (39,846) $ 4.11 Canceled...................................... (36,577) $9.12 (77,487) $10.28 (25,200) $12.58 ------- ----- ------- ------ ------- ------ Outstanding at end of year.................... 479,506 $8.97 473,833 $ 9.57 408,649 $11.30 ======= ===== ======= ====== ======= ====== Options exercisable at year-end............... 288,411 $9.65 169,620 $11.33 135,392 $11.04 ======= ===== ======= ====== ======= ====== Weighted average fair value of options granted during the year............................. $ 1.90 $ 2.38 $ 6.16 ------- ------- -------
The fair value of each option granted during 2000, 1999 and 1998 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: (1) expected life of 5.0 years in 2000 and 1999, and 7.1 years in 1998 (2) expected volatility of 55.2% in 2000, 47.6% in 1999, and 37.5% in 1998 (3) risk-free interest rate of 6.12% in 2000, 5.38% and 4.74% in 1999, and 6.34% in 1998 and (4) no dividend yield. 39 The following table summarizes information about stock options outstanding and exercisable at September 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------- ---------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER REMAINING EXERCISE NUMBER EXERCISE RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE - ------------------------ ----------- ---------------- -------- ----------- --------------- $ 3.50-$5.25 152,000 8.0 $ 3.90 66,125 $ 3.73 $ 5.26-$7.88 1,356 0.1 $ 6.50 1,356 $ 6.50 $ 7.89-$11.81 262,047 6.7 $11.15 169,534 $11.25 $ 11.82-$12.24 64,103 3.1 $12.09 51,396 $12.09 ------- --- ------ ------- ------ $ 3.50-$12.24 479,506 6.6 $ 8.97 288,411 $ 9.65 ======= === ====== ======= ======
EMPLOYEE STOCK PURCHASE PLAN: The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") provides for the issuance of up to 150,000 shares of common stock to employees of the Company. Under the terms of the Purchase Plan, eligible employees may purchase shares in five annual offerings ending in 2002, through payroll deductions of up to a maximum of 10% of the employee's earnings, at a price equal to the lower of 85% of the fair market value of the stock on the applicable annual offering commencement date of June 1 or termination date of May 31. The first offering under the Purchase Plan ended on May 31, 1998 and 5,876 shares of common stock were purchased by eligible employees at a price of approximately $9.30 per share. The second offering under the Purchase Plan ended on May 31, 1999 and 2,267 shares of common stock were purchased by eligible employees at a price of approximately $3.29 per share. The third offering under the Purchase Plan ended on May 31, 2000 and 19,143 shares of common stock were purchased by eligible employees at a price of approximately $3.08 per share. As of September 30, 2000, 27,286 shares have been issued under this plan. Had the Company adopted SFAS 123, the weighted average fair value for each purchase right granted during fiscal 2000, 1999 and 1998 would have been $1.56, $1.57, and $3.45, respectively. PRO FORMA DISCLOSURES Had compensation cost for the Company's 2000, 1999 and 1998 grants for stock-based compensation plans been determined consistent with SFAS 123, the Company's net income (loss) and net income (loss) per share would approximate the pro forma amounts below:
2000 1999 1998 ------------ ------------ ----------- Net income (loss)....................... As reported $(11,263,485) $ (4,442,418) $(6,309,341) Pro forma $(11,840,095) $ (4,902,679) $(6,933,323) Net income (loss) per share............. As reported $ (1.67) $ (0.66) $ (0.93) Pro forma $ (1.75) $ (0.72) $ (1.03)
The effects of applying SFAS 123 in this pro-forma disclosure are not indicative of future amounts. Additional awards in future years are anticipated. 40 I. EMPLOYEE'S SAVING PLAN: The Company provides a 401(k) Plan to employees of the Company by which they may defer compensation for income tax purposes under Section 401(k) of the Internal Revenue Code. Each employee may elect to defer a percentage of his or her salary on a pre-tax basis up to a specified maximum percentage. The Company matches every dollar each employee contributes to the 401(k) Plan up to six percent of each employee's salary to a maximum of $2,000 annually per employee. Salary deferred by employees and contributions by the Company to the 401(k) Plan are not taxable to employees until withdrawn from the 401(k) Plan and contributions are deductible by the Company when made. The amount of the Company's matching contribution for the 401(k) Plan was $64,524, $95,753, and $99,710 for 2000, 1999, and 1998, respectively. J. COMMON STOCK TRANSACTIONS: In November 1997, the Board of Directors extended the authorization granted in May 1996 to purchase 250,000 shares of the Company's common stock in the aggregate on the open market. Through September 30, 2000, the Company purchased 122,200 shares for $1,574,244 and the shares have been retired. In November 2000, the Board of Directors authorized the purchase of up to 1,000,000 shares, including the number previously authorized, of the Company's common stock on the open market at prevailing market prices. K. PREFERRED STOCK: The preferred stock may be issued from time to time in one or more series. The rights, preferences, restrictions, qualifications and limitations of such stock shall be determined by the Board of Directors. L. BUSINESS CUSTOMERS: The Company's operations are located solely within the United States. The Company is focused principally on developing and manufacturing contrast agents. Since July 1999, the Company's revenues are attributable to one principal business segment. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Two customers accounted for 58.6% and 24.6% respectively, of the Company's product sales in fiscal 2000, 70.1% and 25.3% respectively, of the Company's product sales in fiscal 1999, and 56% and 19% respectively, of the Company's product sales in fiscal 1998. In fiscal 2000, 1999 and 1998, revenues from customers and licensees outside of the United States, principally in Europe and Japan, amounted to 35%, 19% and 26%, respectively, of the Company's total revenues. M. BUSINESS SEGMENTS: During fiscal 1999, the Company adopted FASB Statement No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information". Prior to the deconsolidation of Kalisto, the Company had two business segments under the "management approach" as defined in SFAS 131, the original business and the majority-owned subsidiary. 41 Information concerning the operations in these reportable segments is as follows:
FOR THE YEARS ENDED SEPTEMBER 30, ------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ REVENUES: Advanced Magnetics, Inc............................. $ 4,073,919 $ 6,511,654 $ 6,177,048 Kalisto Biologicals Inc............................. -- 918,402 227,098 ------------ ------------ ------------ Total............................................. $ 4,073,919 $ 7,430,056 $ 6,404,146 DEPRECIATION EXPENSE: Advanced Magnetics, Inc............................. $ 554,434 $ 764,861 $ 968,683 Kalisto Biologicals Inc............................. -- 52,438 30,939 ------------ ------------ ------------ Total............................................. $ 554,434 $ 817,299 $ 999,622 NET INCOME (LOSS): Advanced Magnetics, Inc............................. $(11,263,485) $ (3,476,742) $ (5,120,713) Kalisto Biologicals Inc............................. -- (965,676) (1,382,806) Eliminations and adjustments........................ -- -- 194,178 ------------ ------------ ------------ Total............................................. $(11,263,485) $ (4,442,418) $ (6,309,341) SEGMENT ASSETS: Advanced Magnetics, Inc............................. $ 35,667,591 $ 27,816,359 $ 35,230,857 Kalisto Biologicals Inc............................. -- -- 688,512 Eliminations and adjustments........................ -- -- (1,804,661) ------------ ------------ ------------ Total............................................. $ 35,667,591 $ 27,816,359 $ 34,114,708
N. LEGAL PROCEEDINGS: The Company and certain of its officers were sued in an action entitled DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Civil Action No. 92-12157-WGY, in the United States District Court for the District of Massachusetts on September 3, 1992. The plaintiff, a former consultant to the Company, claims that he was incorrectly omitted as an inventor or joint inventor on certain of the Company's patents and on pending applications, and seeks injunctive relief and unspecified damages. In addition, the complaint also alleges state law claims for breach of contract, breach of good faith and fair dealing, breach of implied contract, misappropriation of trade secrets, conversion, negligent misrepresentation, misrepresentation, unjust enrichment and unfair trade practices. The District Court has stayed this federal action pending resolution of an appeal in the State Court of summary judgment in the Company's favor as well as resolution of a jurisdictional issue. As noted below, the Massachusetts Appeals Court has decided the appeal, but the federal action remains stayed as of this date. While the outcome of the action cannot be determined, the Company believes the action is without merit and intends to defend the action vigorously. The Company may not be able to successfully defend this action and the failure by the Company to prevail for any reason could have an adverse effect on it's future business, financial condition and results of operations. The Company and certain of its officers were sued in DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Civil Action No. 93-02846-C, in the Superior Court Department of the Massachusetts Trial Court for Middlesex County. This case involves claims of breach of contract, breach of good faith and fair dealing, breach of implied contract, unjust enrichment and unfair trade practices that were originally dismissed by, but later remanded to, the Federal Court in the above-mentioned action, as well as a new count alleging tortious interference 42 with contractual or advantageous relations. The Superior Court granted partial summary judgment in the Company's favor and dismissed the unfair trade practices and tort counts. The plaintiff's contract claims have been dismissed with prejudice and final judgment was entered against the plaintiff. The plaintiff filed an appeal in DAVID D. STARK, M.D. V. ADVANCED MAGNETICS, INC., JEROME GOLDSTEIN, ERNEST V. GROMAN AND LEE JOSEPHSON, Appeal No. 98-P-1749, in the Massachusetts Appeals Court, on January 25, 1999. On October 13, 2000, the Massachusetts Appeals Court reversed the grant of partial summary judgment in the Company's favor and ordered that the unfair trade practice and tort claims be reinstated. The Superior Court has redocketed the claims as directed by the Appeals Court, and it is anticipated that the litigation in state court will now move forward. While the outcome of the action cannot be determined, the Company believes the action is without merit and intends to defend the action vigorously. The Company may not be able to successfully defend this action and the failure by the Company to prevail for any reason could have an adverse effect on its future business, financial condition and results of operations. The Company filed suit on October 7, 1997 against Sanofi Pharmaceuticals, Inc. (formerly known as Sanofi Winthrop, Inc.) and Sanofi SA (collectively, the "Defendants") in the Superior Court of the Commonwealth of Massachusetts. The action is entitled ADVANCED MAGNETICS, INC. V. SANOFI PHARMACEUTICALS, INC. AND SANOFI SA, Civil Action No. 97-5222B. The Company claims that the Defendants tortiously interfered with a license, supply and marketing agreement (the "Agreement"), and seeks unspecified monetary damages. In addition, the Company seeks a declaration that the Defendants do not have any rights under the Agreement and that the Company has not breached the Agreement. Sanofi Pharmaceuticals, Inc., filed counterclaims against the Company on February 4, 1998 seeking compensatory damages of $11,500,000 and multiple damages as a result of the Company's alleged breach of the Agreement. On November 13, 1998 the Company filed an amended complaint adding claims for unfair competition and breach of contract against the Defendants. On November 23, 1998, the Defendants answered the Company's amended complaint, and Sanofi Pharmaceuticals, Inc. served a new set of counterclaims seeking compensatory damages of $15,000,000 and multiple damages as a result of the Company's alleged conduct. On June 15, 1999, the court granted partial summary judgment in favor of the Company and against the Defendants, declared that the Company did not breach the Agreement, was not unjustly enriched, and did not violate Mass. Gen. Laws ch. 93A, and dismissed Sanofi Pharmaceuticals, Inc.'s counterclaims for breach of contract, unjust enrichment, conversion, account annexed and violation of Mass. Gen. Laws ch. 93A. On October 29, 1999, the Company served a second motion for partial summary judgment which, among other things, requests judgment in its favor on Sanofi Pharmaceuticals, Inc.'s remaining counterclaims against the Company and for judgment in its favor on the Company's breach of contract claim against Defendants. Also on October 29, 1999, Defendants served a motion for partial summary judgment which, among other things, requests judgment in its favor on the Company's remaining claims. On October 4, 2000, the Court granted the Company's motion and entered judgment on all remaining claims brought by Sanofi Pharmaceuticals, Inc. In addition, the Court granted in part and denied in part Defendants' motion for summary judgment. Only the Company's breach of contract claim against Sanofi SA remains in the case. On November 21, 2000, Sanofi SA and Sanofi Pharmaceuticals, Inc. served a Motion for Entry of Separate and Final Judgment, seeking to have the Court certify final judgment on all issues decided on summary judgment except for the Company's breach of contract claim against Sanofi SA. Sanofi SA and Sanofi Pharmaceuticals seek final judgment certification in order to obtain an immediate appeal on the summary judgment decisions. On December 1, 2000, the Company served a memorandum in opposition to the motion for final and separate judgment. On December 5, 2000, the Court set a trial date for March 19, 2001 on the Company's remaining claim. While the final outcome of this litigation cannot be determined, the Company intends to pursue its remaining claim. In the event that the judgments in the Company's favor are reversed on appeal, the Company intends to defend those claims vigorously. However, in such an event, the Company may not be able to successfully defend those 43 claims and the failure of the Company to prevail for any reason could impair the Company's financial resources and disrupt the Company's future operating plans. O. AGREEMENTS: To facilitate the marketing and distribution of its contrast agents, the Company has entered into strategic relationships with certain established pharmaceutical companies. These companies, both in the United States and abroad, include: (i) Guerbet S.A. ("Guerbet"), a leading European producer of contrast agents, in Western Europe and Brazil; (ii) Eiken Chemical Co., Ltd. ("Eiken"), one of Japan's leading medical diagnostics manufacturers, in Japan; (iii) Berlex Laboratories, Inc. ("Berlex"), the leading marketer of MRI contrast agents, in the United States; (iv) Cytogen Corporation ("Cytogen"), a U.S. marketer of oncology products, in the United States and (v) Mallinckrodt Inc. ("Mallinckrodt"), a unit of Tyco Inc. and a leading manufacturer of contrast agents, in the United States, Canada and Mexico. In August 2000, the Company entered into a license and marketing agreement and a supply agreement with Cytogen Corporation ("Cytogen"). The Company granted Cytogen the exclusive right to market and sell COMBIDEX and CODE 7228 for oncology applications in the United States and agreed to grant to Cytogen the exclusive right to market and sell FERIDEX I.V. in the United States if the Company's existing marketing agreement for FERIDEX I.V. terminates for any reason. Upon signing of the agreements, the Company received 1,500,000 shares of Cytogen common stock as a non-refundable license fee. An additional 500,000 shares of Cytogen common stock were placed in escrow and will be released to the Company upon satisfaction of certain milestones under the agreements. Cytogen has agreed to pay the Company for manufacturing and supplying the products and royalties on sales. These agreements have an initial ten-year term with automatic five year extensions, but can be terminated earlier upon the occurrence of certain specified events. On February 1, 1995, the Company entered into an agreement with Berlex granting Berlex a product license and exclusive marketing rights to Feridex I.V. in the United States and Canada. Under the terms of the agreement, Berlex paid a $5,000,000 non-refundable license fee in fiscal 1995. An additional $5,000,000 license fee was received in October 1996 as a result of the FDA's marketing approval and Berlex's market launch of Feridex I.V. in the United States. In addition, the company receives payments for manufacturing the product and royalties on sales. Under the terms of the agreement, Berlex pays for 60% of ongoing development expenses related to FERIDEX I.V. These agreements expire in 2010 with earlier termination upon certain events. Under an agreement with Squibb Diagnostics, a division of Bristol-Myers Squibb Co., the Company is obligated to pay up to a maximum of $2,750,000 in royalties in connection with product sales of COMBIDEX. In 1990, the Company entered into a manufacturing and distribution agreement with Mallinckrodt granting Mallinckrodt a product license and co-marketing rights to GastroMARK-Registered Trademark- in the United States, Canada and Mexico. Under the terms of the agreement, Mallinckrodt paid a $500,000 non-refundable license fee in fiscal 1997 as a result of the FDA's marketing approval of Feridex I.V. in the United States. In addition, the company receives payments for manufacturing the product and royalties on sales. The Company is the licensee of certain technologies under agreements with third parties which require the Company to make payments in accordance with these license agreements and upon the attainment of particular milestones. The Company is also required to pay royalties on a percentage of certain product sales, if any. There were no milestone payments in fiscal years 1998, 1999 or 2000. Future milestone payments are not to exceed $400,000. 44 P. RELATED PARTY TRANSACTIONS: During the fiscal years ended September 30, 2000, 1999, and 1998, the Company paid approximately $16,600, $33,329, and $58,410, respectively, to Fahnestock & Co. Inc. as commissions on transactions involving its investments in securities. Mr. Leslie Goldstein, a shareholder and the brother of Jerome Goldstein, Chairman of the Board and CEO of the Company, is employed by SRG Associates, a division of Fahnestock & Co. Inc., as an investment analyst and advisor. Q. CONSOLIDATED QUARTERLY FINANCIAL DATA--UNAUDITED: The following table provides quarterly data for the fiscal years ended September 30, 2000 and 1999.
FISCAL 2000 QUARTERS ENDED (AS PREVIOUSLY FILED IN FORM 10-Q) --------------------------------------------------------------- JUNE 30 MARCH 31 DEC. 31, 1999 ------------------- ------------------- ------------------- License fees............................ $ -- $ -- $ -- Royalties............................... 200,000 260,000 163,246 Product sales........................... 616,911 161,530 -- Research and development services....... -- 105,393 10,995 Interest, dividends and net gains and losses on sales of securities......... 197,122 168,588 235,845 ----------- ----------- ----------- Total revenues........................ 1,014,033 695,511 410,086 Cost of product sales................... 43,195 62,954 -- Cost of contract research............... -- -- 3,195 Operating expenses...................... 1,553,488 1,664,705 1,838,531 ----------- ----------- ----------- Net income (loss)....................... $ (582,650) $(1,032,148) $(1,431,640) =========== =========== =========== Net income (loss) per share........... $ (0.09) $ (0.15) $ (0.21)
FISCAL 2000 QUARTERS ENDED (AS AMENDED*) -------------------------------------------------------- SEPTEMBER 30 JUNE 30 MARCH 31 DEC. 31, 1999 ------------ ----------- ----------- ------------- License fees............................... $ 572,367 $ 183,894 $ 183,894 $ 183,894 Royalties.................................. 201,754 200,000 260,000 163,246 Product sales.............................. 475,096 616,911 161,530 -- Research and development services.......... -- -- 95,008 10,995 Interest, dividends and net gains and losses on sales of securities............ 163,775 197,122 168,588 235,845 ----------- ----------- ----------- ----------- Total revenues........................... 1,412,992 1,197,927 869,020 593,980 Cost of product sales...................... 133,079 43,195 62,954 -- Cost of contract research.................. -- -- -- 3,195 Operating expenses......................... 2,580,540 1,553,488 1,664,705 1,838,531 Cumulative effect of accounting change (loss)................................... -- -- -- (7,457,717) ----------- ----------- ----------- ----------- Net income (loss).......................... $(1,300,627) $ (398,756) $ (858,639) $(8,705,463) =========== =========== =========== =========== Net income (loss) per share................ $ (0.19) $ (0.06) $ (0.13) $ (1.29)
- ------------------------ * to reflect cumulative effect of accounting change (see Note B) 45
FISCAL 1999 QUARTERS ENDED -------------------------------------------------------- SEPTEMBER 30 JUNE 30 MARCH 31 DEC. 31, 1998 ------------ ----------- ----------- ------------- License fees............................... $ -- $ -- $ -- $ -- Royalties.................................. 220,000 100,000 200,000 160,000 Product sales.............................. 383,866 264,113 1,001,239 316,841 Research and development services.......... 106,241 85,430 144,856 244,902 Interest, dividends and net gains and losses on sales of securities............ 2,671,172 400,982 937,638 192,776 ---------- ----------- ----------- ----------- Total revenues........................... 3,381,279 850,525 2,283,733 914,519 Cost of product sales...................... 90,954 95,604 155,903 112,181 Cost of contract research.................. 17,138 4,103 15,815 -- Operating expenses......................... 1,817,524 3,088,904 3,327,433 3,412,508 Other (income) expenses.................... 155,968 -- (421,561) -- ---------- ----------- ----------- ----------- Net income (loss).......................... $1,299,695 $(2,338,086) $ (793,857) $(2,610,170) ========== =========== =========== =========== Net income (loss) per share................ $ 0.19 $ (0.35) $ (0.12) $ (0.39)
R. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In June 1998, the FASB issued Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities" which is effective for fiscal years beginning after June 15, 2000. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability, measured at its fair value. SFAS No. 133 also requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Adoption of this standard will increase or decrease the recorded value of options the Company may, in the future, acquire, and result in gains or losses being included in net income. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: Not applicable. 46 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: The information required by this item, other than with respect to the executive officers of the registrant, is incorporated by reference from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on February 6, 2001, filed with the Commission on or about December 21, 2000, under the caption "Election of Directors." The information required by this item, with respect to executive officers of the registrant, can be found in Part I hereof. ITEM 11. EXECUTIVE COMPENSATION: The information required by this item is incorporated by reference from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on February 6, 2001, filed with the Commission on or about December 21, 2000, under the captions "Compensation of Directors" and "Compensation and Other Information Concerning Directors and Officers." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: The information required by this item is incorporated by reference from the Company's definitive proxy statement in connection with its Annual Meeting of Stockholders to be held on February 6, 2001 filed with the Commission on or about December 21, 2000, in the table under the caption "Principal Stockholders". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: Not applicable. 47 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K: (a) The following documents are filed as part of this Annual Report on Form 10-K: 1. FINANCIAL STATEMENTS. The financial statements included in Item 8 of Part II of this Annual Report on Form 10-K. 2. Financial Statement Schedules. Financial statement schedules have been omitted because the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements or the notes thereto. 3. The exhibits listed in the Exhibit Index immediately preceding the Exhibits are filed as a part of this Annual Report on Form 10-K. (b) Reports on Form 8-K: The Company filed the following reports on Form 8-K during the fiscal quarter ended September 30, 2000: 1. Report on Form 8-K filed July 10, 2000 (Item 5: Other Event). 2. Report on Form 8-K filed August 24, 2000 (Item 5: Other Event). No financial statements were filed with these reports. 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADVANCED MAGNETICS, INC. By: /s/ JEROME GOLDSTEIN ----------------------------------------- Jerome Goldstein CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND TREASURER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE ---- ----- ---- Chairman of the Board of /s/ JEROME GOLDSTEIN Directors, Chief Executive -------------------------------------- Officer and Treasurer December 18, 2000 Jerome Goldstein (principal executive and financial officer) /s/ JAMES MATHESON -------------------------------------- Vice President-Finance December 18, 2000 James Matheson (principal accounting officer) /s/ LEONARD M. BAUM -------------------------------------- Director December 18, 2000 Leonard M. Baum /s/ JOSEPH B. LASSITER III -------------------------------------- Director December 18, 2000 Joseph B. Lassiter III, Ph.D. /s/ MICHAEL D. LOBERG -------------------------------------- Director December 18, 2000 Michael D. Loberg, Ph.D. /s/ EDWARD B. ROBERTS -------------------------------------- Director December 18, 2000 Edward B. Roberts, Ph.D. /s/ GEORGE M. WHITESIDES -------------------------------------- Director December 18, 2000 George M. Whitesides, Ph.D.
49 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - --------------------- ------------------------------------------------------------ ------------ 3.1 Certificate of Incorporation of the Company, as amended. 3.2 By-Laws of the Company, as amended. 10.1 (1) 1983 Stock Option Plan of the Company, as amended on November 13, 1990. 10.2 (1) 1992 Non-Employee Director Stock Option Plan. 10.3 (2) 1993 Stock Plan, as amended on February 2, 1999. 10.4 (2) 1993 Non-Employee Director Stock Option Plan. 10.5 (3) 1997 Employee Stock Purchase Plan 10.6 (4) Clinical Testing, Supply and Marketing Agreement between the Company and Guerbet S.A. dated May 22, 1987 (confidential treatment previously granted). 10.7 (5) Clinical Testing, Supply and Marketing Agreement between the Company and Eiken Chemical Co., Ltd. dated August 30, 1988 (confidential treatment previously granted). 10.8 (6) Contrast Agent Agreement between the Company and Guerbet S.A. dated September 29, 1989 (confidential treatment previously granted). 10.9 (7) Contrast Agent Agreement between the Company and Eiken Chemical Co., Ltd. dated March 27, 1990 (confidential treatment previously granted). 10.10 (7) Amendment to Clinical Testing, Supply and Marketing Agreement between the Company and Eiken Chemical Co., Ltd. dated September 29, 1990 (confidential treatment previously granted). 10.11 (7) License, Supply and Marketing Agreement between the Company and Mallinckrodt Medical, Inc. dated June 28, 1990 (confidential treatment previously granted). 10.12 (1) Technology License Agreement between the Company and Squibb Diagnostics, dated February 5, 1991 (confidential treatment previously granted). 10.13 (1) Agreement of Amendment to Clinical Testing, Supply and Marketing Agreement between the Company and Guerbet, S.A., dated August 13, 1990. 10.14 (8) Termination Agreement dated August 30, 1994 between the Company and Bristol-Myers Squibb Co. 10.15 (9) License and Marketing Agreement between the Company and Berlex Laboratories, Inc. dated as of February 1, 1995. 10.16 (9) Supply Agreement between the Company and Berlex Laboratories, Inc. dated as of February 1, 1995. 10.17 (10) Lease and Lease Agreement between the Company and Carnegie Center Associates dated September 6, 1994. 10.18 (11) Promissory Note dated February 10, 1998 issued to the Company by Leonard Baum. 10.19 + License and Marketing Agreement dated August 25, 2000 between the Company and Cytogen Corporation. 10.20 + Supply Agreement dated August 25, 2000 between the Company and Cytogen Corporation. 23.1 Consent of PricewaterhouseCoopers LLP, independent accountants. 27 Financial Data Schedule
+ Confidential treatment requested as to certain portions, which portions have been omitted and separately filed with the Securities and Exchange Commission pursuant to a Confidential Treatment Request. 50 (1) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1991. (2) Incorporated herein by reference to the exhibits to the Company's definitive proxy statement for the fiscal year ended September 30, 1992. (3) Incorporated herein by reference to the exhibits to the Company's definitive proxy statement for the fiscal year ended September 30, 1996. (4) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1987. (5) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1988. (6) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1989. (7) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1990. (8) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K, for the fiscal year ended September 30, 1994. (9) Incorporated herein by reference to the exhibits to the Company's Quarterly Report on Form 10-Q, as amended, for the fiscal quarter ended December 31, 1994. (10) Incorporated herein by reference to the exhibits to the Company's Annual Report on Form 10-K, for the fiscal year ended September 30, 1997. (11) Incorporated herein by reference to the exhibits to the Company's Quarterly Report on Form 10-Q, for the fiscal quarter ended March 31, 1998. 51 EX-3.1 2 a2033252zex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF BIOCLINICAL GROUP, INC. FIRST. The name of the Corporation is BioClinical Group, Inc. SECOND. The address of its registered office in the State of Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The nature of the business or purposes to be conducted or promoted is as follows: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. (A) This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is 7,000,000 shares, $.01 par value per share of which 5,000,000 shares shall be Common Stock and 2,000,000 shares shall be Preferred Stock. (B) The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation is hereby authorized, within the limitations and restrictions stated in this Certificate of Incorporation to determine or alter the rights, preferences, powers, privileges and the restrictions, qualifications and limitations granted to or imposed upon any wholly unissued series of Preferred Stock, and the number of shares constituting any such series and the designation thereof; and to increase or decrease the number of shares constituting any such series; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares then constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. -1- EXHIBIT 3.1 FIFTH. The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS Kenneth A. Hoxsie c/o Hale and Dorr 60 State Street Boston, Massachusetts 02105
SIXTH. The name and mailing address of each person who is to serve as a director until the first annual meeting of the stockholders or until a successor is elected and qualifies are as follows:
NAME MAILING ADDRESS Jerome Goldstein 282 Buckminster Road Brookline, Massachusetts 02146 Marlene Kaplan Goldstein 282 Buckminster Road Brookline, Massachusetts 02146
SEVENTH. In furtherance of and not in limitation of powers conferred by statute, it is further provided: 1. Election of directors need not be by written ballot. 2. The Board of Directors is expressly authorized to adopt, amend or repeal the By-Laws of the Corporation. EIGHTH. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. -2- EXHIBIT 3.1 NINTH. The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as that Section may be amended and supplemented from time to time, indemnify any director or officer which it shall have power to indemnify under that Section against any expenses, liabilities or other matters referred to in or covered by that Section. The indemnification provided for in this Article (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) shall continue as to a person who has ceased to be a director or officer and (iii) shall inure to the benefit of the heirs, executors and administrators of such a person. To assure indemnification under this Article of all such persons who are determined by the Corporation or otherwise to be or to have been "fiduciaries" of any employee benefit plan of the Corporation which may exist from time to time and which is governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974," as amended from time to time, such Section 145 shall, for the purposes of this Article, be interpreted as follows: an "other enterprise" shall be deemed to include such an employee benefit plan; the Corporation shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to the Corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed "fines;" and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Corporation. TENTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. EXECUTED at Boston, Massachusetts, on November 5, 1981. /s/ Ken A. Hoxsie ------------------------------------------ Incorporator -3- EXHIBIT 3.1 CERTIFICATE FOR RENEWAL AND REVIVAL OF CHARTER BioClinical Group, Inc. organized under the laws of Delaware, the certificate of incorporation of which was filed in the Secretary of State on the 9th day of November 1981 and the office of the Recorder of Deeds for New Castle County, the charter of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follows: 1. The name of this corporation is BIOCLINICAL GROUP, INC. 2. The registered office in the State of Delaware is located at 100 West Tenth Street, City of Wilmington ZIP CODE 19801 County of New Castle the name and address of its registered agent is The Corporation Trust Company, same address as above. 3. The date when the restoration, renewal, and revival of the charter of this company is to commence is the 28th day of February, same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual. 4. This corporation was duly organized and carried on the business authorized by its charter until the 1st day of March A. D. 1983, at which time the charter became inoperative and void for non-payment of taxes and this certificate for renewal and survival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charters, Jerome Goldstein the last and acting -1- EXHIBIT 3.1 President, and Marlene Kaplan Goldstein, the last and acting Secretary of BioClinical Group, Inc., have hereunto set their hands to this certificate this 6th day of December 1983. /s/ Jerome Goldstein --------------------------------------- LAST AND ACTING PRESIDENT ATTEST: /s/ Marlene Kaplan Goldstein --------------------------------------- LAST AND ACTING SECRETARY -2- EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF BIOCLINICAL GROUP, INC. Pursuant to Section 242 of the CORPORATION LAW OF THE STATE OF DELAWARE BIOCLINICAL GROUP, INC. (hereinafter called the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that (a) the Board of Directors duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware proposing an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable; (b) the stockholders of the Corporation duly approved said proposed amendment in accordance with Section 242 of the General Corporation Law of the State of Delaware; and (c) the capital of the Corporation will not be reduced under or by reason of this amendment. The resolution setting forth the amendment is as follows: RESOLVED: That Article FIRST of the Certificate of Incorporation of the Corporation be and hereby is deleted and the following Article FIRST is interested in lies thereof: "FIRST. The name of the corporation is Advanced Magnetics, Inc." IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereto affixed and this Certificate of Amendment to be signed by its President and -1- EXHIBIT 3.1 attested by its Secretary this 29th day of November, 1983. ATTEST /s/ Marlene Kaplan Goldstein ---------------------------- Secretary BIOCLINICAL GROUP, INC. By: /s/ Jerome Goldstein ------------------------------- President -2- EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ADVANCED MAGNETICS, INC. Pursuant to Section 242 of the CORPORATION LAW OF THE STATE OF DELAWARE ADVANCED MAGNETICS, INC. (the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that (a) the Board of Directors duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware proposing an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable; and (b) the stockholders of the Corporation duly approved said proposed amendment by written action of stockholders in lieu of a meeting in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware and prompt written notice was given to those shareholders who did not consent in writing to such amendment. The resolution setting forth the amendment is as follows: RESOLVED: That paragraph (A) of Article FOURTH of the Certificate of Incorporation of the Corporation be and hereby is deleted and the following paragraph (A) of Article FOURTH is inserted in lieu thereof: "FOURTH. (A) This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is 12,000,000, $.01 par value per share, of which 10,000,000 shares shall be Common Stock and 2,000,000 shares shall be Preferred Stock." IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereto affixed and this Certificate of Amendment to be signed by its President and attested by its Assistant Secretary this 23rd day of April, 1986. ADVANCED MAGNETICS, INC. ATTEST: /s/ Ellen B. Corenswet By: /s/ Jerome Goldstein ----------------------------- ------------------------------- Ellen B. Corenswet, Jerome Goldstein, Assistant Secretary President CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ADVANCED MAGNETICS, INC. Pursuant to Section 242 of the General CORPORATION LAW OF THE STATE OF DELAWARE ADVANCED MAGNETICS, INC. (the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that (a) the Board of Directors duly adopted a resolution pursuant to Section 242 of the General Corporation Law of the State of Delaware proposing an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable; and (b) at the Annual Meeting of Stockholders on February 3, 1987, the stockholders of the Corporation duly adopted said proposed amendment in accordance with Sections 211 and 242 of the General Corporation Law of the State of Delaware. The Certificate of Incorporation is hereby amended to add the following Articles ELEVENTH and TWELFTH: ELEVENTH: (A) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether initiated by or in the right of the Corporation or by a third party (hereinafter a "proceeding"), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or n any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter by amended (in the case of any such amendment, only to the extent that such amendment either (I) permits the Corporation to provide broader indemnification rights than said law permitted prior to such amendment or (ii) prohibits or limits any of the indemnification rights previously set forth in said law, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; PROVIDED, HOWEVER, that, except with respect to a -1- Certificate of Amendment of Certificate of Incorporation of Advanced Magnetics, Inc. proceeding under paragraph (C) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; PROVIDED, HOWEVER, that the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (B) Indemnification or advancement of expenses pursuant to paragraph (A) of this Article shall be made no later than 45 days after receipt by the Corporation of the written request of the claimant, unless a determination is made that the claimant has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Any such determination shall be made (1) by the Board of Directors of the Corporation by a majority vote of a quorum consisting of directors who are not parties to such proceeding, or (2) if such a quorum is not obtainable or, even if obtainable a majority of disinterested directors so directs, by independent legal counsel in a written opinion. (C) If a claim under paragraph (A) of this Article is not paid in full by the Corporation within the 45-day period specified in paragraph (B), the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. -2- Certificate of Amendment of Certificate of Incorporation of Advanced Magnetics, Inc. (D) If a claimant is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses, judgments, fines or penalties actually and reasonably incurred by him in the investigation, defense, appeal or settlement of any proceeding but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the claimant for the portion of such expenses, judgments, fines or penalties to which such claimant is entitled. (E) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Without limiting the generality of the foregoing, the Corporation, acting through its Board of Directors, may enter into agreements with any director, officer, employee or agent of the Corporation providing for indemnification rights equivalent to or greater than the indemnification rights set forth in this Article. (F) The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by him in any such Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (G) Without the consent of a person entitled to the indemnification and other rights provided in this Article (unless otherwise required by the Delaware General Corporation Law), no amendment modifying or terminating such rights shall adversely affect such person's rights with respect to the period prior to such amendment. (H) If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, or if substantially all of the assets or stock of the Corporation is acquired by any other corporation, or in the event of any other similar reorganization involving the Corporation, the Board of Directors of the Corporation or the board of directors of any corporation assuming the obligations of the Corporation shall assume the obligations of the Corporation under this Article, through the date of such merger, consolidation or reorganization, with respect to each person who was entitled to indemnification rights under this Article as of such date. TWELFTH: To the fullest extent permitted by Delaware law, as it may be amended from time to time, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. -3- Certificate of Amendment of Certificate of Incorporation of Advanced Magnetics, Inc. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereto affixed and this Certificate of Amendment to be signed by its President and attested by its Secretary this 3rd day of February, 1987. ADVANCED MAGNETICS, INC. ATTEST: /s/ Marlene Kaplan Goldstein By: /s/ Jerome Goldstein ----------------------------- -------------------------- Marlene Kaplan Goldstein, Jerome Goldstein, Secretary President -4- CERTIFICATE OF CHANGE OF ADDRESS OF REGISTERED OFFICE AND OF REGISTERED AGENT PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE To: DEPARTMENT OF STATE Division of Corporations Townsend Building Federal Street Dover, Delaware 19903 Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code, the undersigned Agent for service of process, in order to change the address of the registered office of the corporations for which it is registered agent, hereby certifies that: 1. The name of the agent is: The Corporation Trust Company 2. The address of the old registered office was: 100 West Tenth Street Wilmington, Delaware 19801 3. The address to which the registered office is to be changed is: Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 The new address will be effective on July 30, 1984. 4. The names of the corporations represented by said agent are set forth on the list annexed to this certificate and made a part hereof by reference. IN WITNESS WHEREOF, said agent has caused this certificate to be signed on its behalf by its Vice-President and Assistant Secretary this 25th day of July, 1984. THE CORPORATION TRUST COMPANY ------------------------------------- (Name of Registered Agent) By /s/ Virginia Colvell --------------------- (Vice-President) -1- Certificate of Amendment of Certificate of Incorporation of Advanced Magnetics, Inc. ATTEST: /s/ Derek North -------------------------- (Assistant Secretary) -2- Certificate of Amendment of Certificate of Incorporation of Advanced Magnetics, Inc. CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF ADVANCED MAGNETICS, INC. ADVANCED MAGNETICS, INC., a Delaware corporation, hereby certifies as follows: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the Certificate of Incorporation of said corporation to increase the total number of shares which the corporation shall have authority to issue from 10,000,000 shares of Common Stock of the par value of $.01 per share to 15,000,000 shares of Common Stock of the par value of $.01 per share so that, as amended, said Article shall read as follows: FOURTH. (A) This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is 17,000,000, $.01 par value per share, of which 15,000,000 shares shall be Common stock and 2,000,000 shares shall be Preferred Stock. SECOND. The foregoing amendment has been duly adopted by the favorable vote of the holders of a majority of the outstanding stock entitled to vote thereon in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereto affixed and this Certificate of Amendment to be signed by its President and attested by its Secretary this 6th day of March, 1992. ADVANCED MAGNETICS, INC. ATTEST: /s/ Marlene Kaplan Goldstein By: /s/ Jerome Goldstein ----------------------------- ----------------------- Marlene Kaplan Goldstein, Jerome Goldstein, Secretary President EX-3.2 3 a2033252zex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF ADVANCED MAGNETICS, INC. ARTICLE 1 - STOCKHOLDERS 1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Board of Directors or the President or, if not so designated, at the registered office of the corporation. 1.2 ANNUAL MEETING. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on the first Tuesday in February in each year, at a time fixed by the Board of Directors or the President. If this date shall fall upon a legal holiday at the place of the meeting, then such meeting shall be held on the next succeeding business day at the same hour. If no annual meeting is held in accordance with the foregoing provisions, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. 1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by the President or by the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. 1.5 VOTING LIST. The officer who has charge of the stock ledger of the corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present. 1.6 QUORUM. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. 1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-Laws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 1.8 VOTING AND PROXIES. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided in the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for him by written proxy executed by the stockholder or his authorized agent and delivered to the Secretary of the corporation. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. 1.9 ACTION AT MEETING. When a quorum is present at any meeting, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) shall decide any matter to be voted upon by the stockholders at such meeting, except when a different vote is required by express provision of law, the Certificate of Incorporation or these By-Laws. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. 1.10 ACTION WITHOUT MEETING. Any action required or permitted to be taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled 2 to vote on such action were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE 2 - DIRECTORS 2.1 GENERAL POWERS. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law, the Certificate of Incorporation or these By-Laws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2.2 NUMBER; ELECTION; TENURE AND QUALIFICATION. The number of directors which shall constitute the whole Board shall be fixed by resolution of the Board of Directors, but in no event shall be less than one. Each director shall be elected by the stockholders at the annual meeting and shall hold office until the next annual meeting and until his successor is elected and qualified, or until his earlier death, resignation or removal. Directors need not be stockholders of the corporation. 2.3 ENLARGEMENT OF THE BOARD. The number of the Board of Directors may be increased at anytime by vote of a majority of the directors then in office. 2.4 VACANCIES. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next annual meeting of stockholders and until his successor is elected and qualified, or until his earlier death, resignation or removal. 2.5 RESIGNATION. Any director may resign by delivering his written resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 2.6 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. Notice to any such director not attending the meeting shall be given in person, by telephone, by telegram sent to his business or home address or by other electronic transmission directed as instructed by such director at least 48 hours in advance of the meeting, or by written notice mailed to his business or home address at least 72 hours in advance of the scheduled meeting. 3 2.7 SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board, President, two or more directors, or by one director in the event that there is only a single director in office. 2.8 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be given to each director in person, by telephone, by telegram sent to his business or home address or by other electronic transmission directed as instructed by such director at least 48 hours in advance of the meeting, or by written notice mailed to his business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 2.9 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 2.10 QUORUM. A majority of the number of directors fixed pursuant to Section 2.2 shall constitute a quorum at all meetings of the Bard of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 2.11 ACTION AT MEETING. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these By-Laws. 2.12 ACTION BY CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents or electronic transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. 2.13 REMOVAL. Any one or more or all of the directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 2.14 COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of 4 the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-Laws for the Board of Directors. 2.15 COMPENSATION OF DIRECTORS. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service. ARTICLE 3 - OFFICERS 3.1 ENUMERATION. The officers of the corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate. 3.2 ELECTION. The President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting. 3.3 QUALIFICATION. The President shall be a director. No officer need be a stockholders. Any two or more offices may be held by the same person. 3.4 TENURE. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, each officer shall hold office until his successor is elected and qualified, unless a different term is specified in the vote choosing or appointing him, or until his earlier death, resignation or removal. 3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 5 The Board of Directors, or a committee duly authorized to do so, may remove any officer with or without cause. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation. 3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is elected and qualified, or until his earlier death, resignation or removal. 3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. If the Board of Directors appoints a Chairman of the Board, he shall perform such duties and possess such powers as are assigned to him by the Board of Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be vested in him by the Board of Directors. 3.8 PRESIDENT. The President shall be the chief operating officer of the corporation. He shall also be the chief executive officer of the corporation unless such title is assigned to a Chairman of the Board. The President shall, subject to the direction of the Board of Directors, have general charge and supervision of the business of the corporation. Unless otherwise provided by the Board of Directors, he shall preside at all meetings of the stockholders and of the Board of Directors (except as provided in Section 3.7 above). The President shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe. 3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and when so performing shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to 6 maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary, (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting. 3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-Laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurer shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 3.12 BONDED OFFICERS. The Board of Directors may require any officer to give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors upon such terms and conditions as the Board of Directors may specify, including without limitation a bond for the faithful performance of his duties and for the restoration to the corporation of all property in his possession or under his control belonging to the corporation. 3.13 SALARIES. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE 4 - CAPITAL STOCK 4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or in part of any unissued balance of the 7 authorized capital stock of the corporation or the whole or any part of any unissued balance of the authorized capital stock of the corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine. 4.2 CERTIFICATES OF STOCK. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by him in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the By-Laws, applicable securities laws or any agreement among any number of shareholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. 4.3 TRANSFERS. Subject to the restrictions, if any, stated or noted on the stock certificates, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-Laws. 4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar. 4.5 RECORD DATE. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or to express consent (or dissent) to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates. 8 If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE 5 (Intentionally Omitted) ARTICLE 6 - GENERAL PROVISIONS 6.1 FISCAL YEAR. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of October in each year and end on the last day of September in each year. 6.2 CORPORATE SEAL. The corporate seal shall be in such form as shall be approved by the Board of Directors. 6.3 EXECUTION OF INSTRUMENTS. The President or the Treasurer shall have power to execute and deliver on behalf and in the name of the corporation any instrument requiring the signature of an officer of the corporation, except as otherwise provided in these By-Laws, or where the execution and delivery of such an instrument shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. 6.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a waiver of such notice either in writing signed by the person entitled to such notice or such person's duly authorized attorney, or by telegraph, cable, or electronic transmission or any other available method, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice; provided that a shareholder shall not be deemed to have received notice if that shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 9 6.5 VOTING OF SECURITIES. Except as the directors may otherwise designate, the President or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or shareholders or any other corporation or organization, the securities of which may be held by this corporation. 6.6 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action. 6.7 CERTIFICATE OF INCORPORATION. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time. 6.8 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officers is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (2) The material facts as to his relationship or interest, and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 6.9 SEVERABILITY. Any determination that any provision of these By-Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-Laws. 10 6.10 PRONOUNS. All pronouns used in these By-Laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 6.11 ELECTRONIC TRANSMISSION. Any vote, notification or other action to be made by the Corporation or its officers, directors, agents or stockholders may be taken via an electronic transmission or other similar method of communication to the fullest extent permitted by the Delaware General Corporation Law, as amended. ARTICLE 7 - AMENDMENTS 7.1 BY THE BOARD OF DIRECTORS. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the directors present at any regular or specific meeting of the Board of Directors at which a quorum is present. 7.2 BY THE STOCKHOLDERS. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting. 11 EX-10.19 4 a2033252zex-10_19.txt EX-10.19 EXHIBIT 10.19 LICENSE AND MARKETING AGREEMENT BY AND BETWEEN CYTOGEN CORPORATION AND ADVANCED MAGNETICS, INC. TABLE OF CONTENTS 1. Definitions...................................................................................................1 2. The Projects..................................................................................................6 3. Cooperation...................................................................................................7 3.1 Cytogen Assistance with AM Projects.....................................................................7 3.2 Cooperation Regarding FDA Matters.......................................................................7 3.3 Post-Marketing Regulatory Communications................................................................8 3.4 Adverse Event and Other Reporting.......................................................................8 3.5 Advertising and Promotional Materials...................................................................9 4. Grants of Rights and Licenses................................................................................10 4.l Rights and Licenses....................................................................................10 4.2 Rights to Feridex I.V..................................................................................11 4.3 License of Trademarks..................................................................................11 4.4 Sublicensees...........................................................................................13 5. License Fees.................................................................................................13 5.1 Payments...............................................................................................13 6. Disclosure of Project and Other Information..................................................................13 7. Confidentiality..............................................................................................14 7.1 Confidentiality........................................................................................14 7.2. Exceptions.............................................................................................14 7.3 Project Information Disclosed to AM....................................................................15 9. Infringement Actions.........................................................................................15 8.1 Infringement of Agent Technology or Manufacturing Technology...........................................15 8.2 Infringement of Patents of Third Parties...............................................................17 8.3 Limitation of Remedies.................................................................................20 9. Ownership...................................................................................................21 10. Supply; Royalties...........................................................................................21 10.1 Payment................................................................................................22 10.2 Minimum Sales..........................................................................................22 11. Obligation of Cytogen to Market Agent.......................................................................23 12. Reports and Accounting for Agent............................................................................24 12.1 Payments and Monthly Reports for Agent Net Sales.......................................................24 12.2 Annual Reports.........................................................................................24 12.3 Records................................................................................................25 12.4 Currency...............................................................................................25 13. Compliance with Regulations.................................................................................25 14. Representations and Warranties..............................................................................25 14.1 By AM...................................................................................................25 14.2 By Cytogen..............................................................................................26 14.3 Limitations.............................................................................................28 15. Term and Termination........................................................................................28 15.1 Term....................................................................................................28 15.2 Termination Events......................................................................................28 15.3 Partial Termination for Certain Agents..................................................................29 15.4 Effect of Expiration or Termination.....................................................................29 16. General Provisions..........................................................................................30 -i- 16.1 Force Majeure...........................................................................................30 16.2 Waiver..................................................................................................30 16.3 Publicity...............................................................................................31 16.4 Notices.................................................................................................31 16.5 Entire Agreement........................................................................................32 16.6 Headings................................................................................................33 16.7 Assignment..............................................................................................33 16.8 Independent Contractors.................................................................................33 16.9 Governing Law...........................................................................................33 16.10 Severability...........................................................................................34
-ii- LICENSE AND MARKETING AGREEMENT AGREEMENT made as of this 25th day of August 2000 (the "Effective Date), by and between Advanced Magnetics, Inc., a Delaware corporation having an address of 61 Mooney Street, Cambridge, Massachusetts 02138 ("AM"), and Cytogen Corporation, a Delaware corporation, having an address of 600 College Road East, Princeton, New Jersey 08540 ("Cytogen"). RECITALS: WHEREAS, AM is developing certain contrast agents for use in magnetic resonance imaging ("MRI"); and WHEREAS, subject to the terms and conditions hereinafter set forth, AM is willing to grant Cytogen the right to market and sell Feridex I.V., Combidex and Code 7228 in the Territory; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. 1.1 "AFFILIATE" shall mean a Person that directly, or indirectly through one or more intermediaries, controls, is Controlled by, or is under common Control with, the Person specified. 1.2 "AGENT" shall mean Feridex I.V., Combidex and Code 7228, individually or in the aggregate, as the context provides. 1.3 "AGENT NET SALES" shall mean, with respect to any Agent, during the term of this Agreement and calculated for each period indicated herein, the gross amount invoiced for such Agent by Cytogen, its Affiliates, and its Approved Sublicensees to Third Parties, less deductions for: (i) quantity and/or cash discounts, allowances, rebates, and chargebacks actually allowed or given; (ii) freight, postage and shipping, and insurance expenses (if separately identified in such invoice); (iii) credits or refunds actually allowed for rejected, outdated or returned Agent; and (iv) sales and other taxes and duties directly related to the sale, to the extent that such items are included in the gross invoice price (but not including taxes assessed against the income derived from such sale); PROVIDED, HOWEVER, that Agent Net Sales shall not include sales to Affiliates of a reasonable amount of samples and supplies for clinical studies permitted pursuant to this Agreement. In the event of any sale of Agent to any Affiliate or Approved Sublicense for resale to its customers, "AGENT NET SALES" shall be based on the greater of the amount actually received by Cytogen from its Affiliate or Approved Sublicensees or the amount actually received by such Affiliate or Approved Sublicensee from its customers for the sale of Agent. 1.4 "AGENT TECHNOLOGY" shall mean all proprietary information with respect to any Agent and improvements (as defined below) thereto, including, without limitation, all information provided by AM pursuant to Article 6 of this Agreement, Project Information, trade secrets, technical information, data, techniques, discoveries, inventions, processes, know-how, patents (including any extension, reissue or renewal thereof) and patent applications (including such patents and patent applications set forth in EXHIBIT A to this Agreement and incorporated herein), that AM now has or may hereafter conceive, develop, own or Control during the term of this Agreement (but excluding any information owned or Controlled by any Person who becomes a successor or assignee of AM hereunder immediately prior to becoming a successor or assign), which is necessary or useful in connection with: the performance of the Cytogen Project, the marketing and sale by Cytogen of Agent pursuant to Section 4.1 or 4.2 or the performance by Cytogen of its obligations hereunder. No Manufacturing Technology shall be deemed to be included in Agent Technology. For purposes of this Section 1.4, a substance shall only be deemed an "improvement" to the extent that it is an MRI contrast agent composed of the same active ingredient contained in the Agent to which it would be an improvement and falls within the claims of any Patent covering such Agent. 1.5 "AM PROJECTS" shall mean the Combidex Project and the Code 7228 Project. 1.6 "APPROVED SUBLICENSEE" shall mean any Person to whom Cytogen has sublicensed all or a part of its rights arising under this Agreement with AM's written consent, subject to Section 4.4. 1.7 "FERIDEX AGREEMENT" shall mean the agreement by and between AM and a Third Party under which AM has granted exclusive marketing rights in the Territory to such Third Party. 1.8 "CODE 7228" shall mean the contrast agent currently known as Code 7228 which is composed of the substance AMI-7228 and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 1.9 "CODE 7228 APPROVAL DATE" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Code 7228 in the United States (said date being referred to as the "Code 7228 Approval Letter Date") and (b) the date on which AM is first able to produce and provide a supply of Code 7228 to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that 2 must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no later than fifteen (15) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to timely provide such notice of supply requirements, the Code 7228 Approval Date shall be the Code 7228 Approval Letter Date. 1.10 "CODE 7228 NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Code 7228. 1.11 "CODE 7228 PROJECT" shall mean any work undertaken in obtaining FDA approval for commercial marketing of Code 7228 in the United States including all work upon which such approval is contingent, including, without limitation, the conduct of human clinical trials and United States regulatory applications (including the preparation and filing of the Code 7228 NDA). The Code 7228 Project shall also include all studies which are required to be conducted as a condition of the FDA approval of the Code 7228 NDA. 1.12 "CODE 7228 PROJECT TEAM" shall mean a standing committee composed of designated representatives of AM and Cytogen, with majority representation from AM, established for the purpose of overseeing the Code 7228 Project and relating to the Field of Use. AM shall have the primary responsibility for and the final decision with respect to any actions or recommendations made by the Code 7228 Project Team. Notwithstanding the foregoing, the Parties shall jointly agree to labeling content and requirements for Code 7228 in the Field of Use. 1.13 "COLLECTIVE OPINION OF PATENT COUNSEL" shall mean the final joint opinion of patent counsel selected by AM and patent counsel selected by Cytogen after review of all data and information reasonably available at the time such opinion is rendered. If patent counsel for AM and Cytogen cannot agree on a final joint opinion, such counsel shall agree on the selection of a third patent counsel who shall offer an independent opinion on the subject matter. The final opinion of such third patent counsel shall be the Collective opinion of Patent Counsel. 1.14 "COMBIDEX" shall mean the contrast agent currently known as Combidex which is composed of the substance with the United States Adopted Name Ferumoxtran-10 and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 3 1.15 "COMBIDEX APPROVAL DATE" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Combidex in the United States (said date being referred to as the "Combidex Approval Letter Date") and (b) the date on which AM is first able to produce and provide a supply of Combidex to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no less than six months after the execution date of this Agreement but no later than fifteen (15) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to timely provide such notice of supply requirements, the Combidex Approval Date shall be the Combidex Approval Letter Date. 1.16 "COMBIDEX NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Combidex and accepted for filing by the FDA on December 21, 1999. 1.17 "COMBIDEX PROJECT" shall mean any work undertaken in obtaining FDA approval for commercial marketing of Combidex in the United States, including all work upon which such approval is contingent, including, without limitation, the conduct of human clinical trials. The Combidex Project shall include all studies which are required to be conducted as a condition of the FDA approval of the NDA. 1.18 "COMBIDEX PROJECT TEAM" shall mean a standing committee composed of designated representatives of AM and Cytogen, with majority representation from AM, established for the purpose of overseeing the Combidex Project. AM shall have the primary responsibility for and the final decision with respect to any actions or recommendations made by the Combidex Project Team. Notwithstanding the foregoing, the Parties shall jointly agree to labeling content and requirements for Combidex. 1.19 "COMPETING PRODUCTS" shall mean, with respect to any Agent, a product approved by the FDA for marketing in the Territory with substantially similar indications. 1.20 "CONTROLS" OR "CONTROL" shall mean, in the case of any Person, the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of at least fifty percent (50%) of the voting securities thereof or otherwise, and when used in the context of "Control" of technology or information, shall mean possession by a Person of the right to grant licenses or sublicenses of such technology, or disclose such information, without 4 violating the terms of any agreement or other arrangement with, or the rights of, any other Person or any legally binding laws or regulations. 1.21 "CYTOGEN AGREEMENTS" shall mean this Agreement, the Supply Agreement and the Escrow Agreement. 1.22 "CYTOGEN PROJECT" shall mean the conduct of such Phase III(b) Studies and Phase IV Studies and any other studies undertaken to enhance the marketing of any Agent that Cytogen elects to conduct. 1.23 "ESCROW AGREEMENT" shall mean the Escrow Agreement entered into as of the date hereof by and between Cytogen, AM and Chase Mellon Shareholder Services, Inc. 1.24 "FERIDEX I.V." shall mean the contrast agent currently known and marketed as Feridex I.V., which is composed of the substance with the United States Adopted Name Ferumoxide and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 1.25 "FERIDEX I.V. NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Feridex I.V. and accepted for filing by the FDA on or about April 8, 1994 and approved by the FDA on August 30, 1996. 1.26 "FERIDEX START DATE" shall mean the date on which AM notifies Cytogen of the termination of the Feridex Agreement. 1.27 "FIELD OF USE" shall mean diagnostic imaging for the detection or staging of cancer, and similar diagnostic applications in the field of oncology. 1.28 "MANUFACTURING TECHNOLOGY" shall have the meaning defined in Section 1.26 of the Supply Agreement. l.29 "PARTY" shall mean Cytogen and/or AM. 1.30 "PATENTS" shall mean the patents listed on EXHIBIT A and any reissues, extensions or renewals thereof. 1.31 "PHASE III STUDIES" shall mean clinical or other studies of any Agent which are necessary for approval of the applicable NDA. 1.32 "PERSON" shall mean an individual, partnership, corporation, joint venture, unincorporated association, or other entity, or a government or department or agency thereof. 5 1.33 "PHASE III(b) STUDIES" shall mean clinical or other studies of any Agent which are not necessary for approval of the applicable NDA, but which are begun prior to FDA approval of the applicable NDA. 1.34 "PHASE IV STUDIES" shall mean clinical or other studies of any Agent which are undertaken following approval of the applicable NDA, and which are not required to be conducted as a condition of the FDA approval of the applicable NDA. 1.35 "PROJECT" or "PROJECTS" shall mean the AM Projects and/or the Cytogen Project. 1.36 "PROJECT INFORMATION" shall mean all information developed as a result of the Projects, including, without limitation, techniques, discoveries, processes, know-how, toxicological and pharmacological data, clinical trial results, regulatory applications and documents evidencing approval thereof, and test results, and all information and data provided to a Party pursuant to Article 6 hereof. 1.37 "QUALIFIED PERSON" shall mean any employee or agent of Cytogen engaged in the Cytogen Project pursuant to Article 2, the marketing of the Agent pursuant to Section 11 or the performance of Cytogen's other obligations hereunder, or any employee or agent of AM engaged in the AM Project or the performance of AM's obligations hereunder, designated by Cytogen or AM respectively, to receive Agent Technology, Project Information or other information provided pursuant to Article 6 of this Agreement or any other information proprietary to AM or Cytogen, respectively, who has a need to know the information included therein and disclosed to them. 1.38 "SUPPLY AGREEMENT" shall mean the Supply Agreement entered into as of the Effective Date by and between Cytogen and AM. 1.398 "TERRITORY" shall mean the United States (including its territories and possessions and Puerto Rico). 1.40 "THIRD PARTY" shall mean any party other than a Party, to this Agreement. 1.41 "TRADEMARKS" shall mean the following trademarks registered in the United States of America: Feridex I.V. and Combidex. Any other mark registered by AM in the United States relating to Feridex I.V., Combidex and Code 7228 (only in the Field of Use) after the Effective Date shall be deemed a Trademark hereunder. 2. THE PROJECTS. AM shall be responsible for the conduct of, and shall bear all out-of-pocket expenses in connection with, the AM Projects. AM shall consult with the Combidex Project Team and the Code 7228 Project Team in developing plans for clinical trials. Cytogen shall be responsible for the conduct of, and shall bear all out-of-pocket expenses in connection with, the Cytogen Project. AM may 6 conduct Phase III(b) Studies or Phase IV Studies at its own expense, and Cytogen shall have no rights to the benefits thereof. AM will be responsible for all fees paid for FDA approval, including fees paid to the FDA in connection with Combidex, prior to the Combidex Approval Letter Date. AM will be responsible for all fees for FDA approval, including fees payable to the FDA in connection with Code 7228 on filing of the Code 7228 NDA and up to the Code 7228 Approval Letter Date. AM will be responsible for all fees payable to the FDA in connection with the certification of its facilities for commercial production of Agent. Cytogen will be responsible for any other fees payable to the FDA in connection with (i) Code 7228 (in the Field of Use) and Combidex as such Agents incur FDA charges after their respective Approval Letter Dates and (ii) Feridex I.V. if a license is granted under Section 4.2 hereof. Cytogen shall reimburse AM for the Annual Product Registration Fee payable with respect to any NDA for an Agent while Cytogen has exclusive rights under this Agreement to such Agent. AM shall be responsible for the annual Establishment Registration Fee. If Cytogen desires to conduct any clinical study solely to enhance the marketing of any Agent and such study necessitates no material labeling change, then Cytogen shall be responsible for conducting any such study and shall be responsible for all costs incurred in connection therewith. AM and Cytogen shall agree to a protocol for such study, PROVIDED, HOWEVER, that Cytogen shall have final approval of any such protocol. If AM or Cytogen desires to conduct any clinical study to enhance the marketing of any Agent, which study supports any material changes to the labeling of such Agent, Cytogen and AM shall be responsible for sixty percent (60%) and forty percent (40%), respectively, of the costs incurred in connection therewith. AM and Cytogen shall agree to a protocol for such study, PROVIDED, HOWEVER, that Cytogen shall have final approval of any such protocol. 3. COOPERATION. 3.1. CYTOGEN ASSISTANCE WITH AM PROJECTS. Cytogen and AM shall mutually agree upon the reasonable assistance that Cytogen shall provide AM with the AM Projects, which will include assistance in reviewing and commenting on information provided by AM, evaluating clinical data and, when deemed appropriate, providing alternative language or other advice believed to be constructive to FDA approval of the NDAs and communication with the FDA. Cytogen shall provide such services to AM at cost. AM shall not contract for services in connection with the AM Projects without first offering to Cytogen the opportunity to submit a proposal to provide such services, such proposal to be submitted by Cytogen within thirty days of AM's request. Cytogen shall not be obligated to submit a proposal and 7 AM shall not be obligated to accept any such proposal. AM may contract for services from Cytogen or others in its sole discretion. If Cytogen provides such services, AM shall not be responsible to Cytogen for amounts greater than the quoted amount for such services. 3.2 COOPERATION REGARDING FDA MATTERS. Prior to the respective Combidex and Code 7228 Approval Dates, AM shall provide the Combidex Project Team and the Code 7228 Project Team with (i) an opportunity to consult in advance with AM regarding clinical trials, research and regulatory applications to be conducted by, or for, AM or to be submitted and filed pursuant to the AM Projects after the date hereof; (ii) a reasonable opportunity to review and comment on material communications with or submissions to the FDA after the date hereof prior to their submission and filing; and (iii) an opportunity to be present at meetings between the FDA and AM concerning Combidex or Code 7228, and shall advise Cytogen from time to time, but no less than on a monthly basis, of the status of the Combidex and Code 7228 NDAs. AM shall be under no obligation to accept any comments or other advice provided by Cytogen, and Cytogen shall have no liability to AM for the consequences to AM of accepting or rejecting any such comments or advice, absent bad faith or willful misconduct by Cytogen. Subject to Section 3.3, AM shall promptly advise Cytogen of any material communication which it may receive from the FDA regarding any Agent and Cytogen shall promptly advise AM of any communication which it may receive from the FDA regarding any Agent. Except as expressly provided in Section 3.5, or prior to the respective Combidex and Code 7228 Approval Dates, Cytogen shall not make any communications to the FDA concerning Combidex or Code 7228 other than through, or with the prior consent of, AM, and AM shall advise Cytogen before it shall make any material communication with the FDA. 3.3 POST-MARKETING REGULATORY COMMUNICATIONS. It is the intent of the parties that AM shall, as the sponsor of the Feridex I.V. NDA, the Combidex NDA and the Code 7228 NDA, be primarily responsible for conducting communications with the FDA regarding the Agents. Unless otherwise agreed by the Parties, except as expressly provided in Section 3.5, following the Approval Date with respect to any Agent, neither AM nor Cytogen shall make any material communications to the FDA concerning such Agent without the prior consent of the other unless such communication is required by law or regulation or is of such an urgent and material nature that such Party is not reasonably able to consult with the other Party in advance of the time communication is to be made to the FDA; in which case such Party shall inform the other Party of such communication as soon as practicable thereafter. AM shall use its commercially reasonable efforts to obtain such status of the current circumstances 8 concerning any Agent or NDA for Cytogen as will enable Cytogen to communicate with the FDA concerning the Agent in the emergency circumstance described in this section. 3.4. ADVERSE EVENT AND OTHER REPORTING. (a) If Cytogen learns of any information that might give rise to a recall or market withdrawal of any Agent or which might result in a field alert report pursuant to the NDA, or which involves a complaint about the quality or purity of any Agent, then Cytogen shall promptly provide notice thereof to AM. With respect to any Agent, and as between Cytogen and AM, initiation of any recall or market withdrawal, any investigation of any product complaint, or the filing of any field alert report with the FDA, shall be the responsibility of AM, and AM shall be responsible for and handling of all interaction with the FDA and other governmental authorities. To the extent possible under the circumstances, AM will inform Cytogen prior to communicating with the FDA concerning any recall, market withdrawal or field alert report involving any Agent distributed by Cytogen. (b) If in any case where Cytogen's name is on the label of an Agent and Cytogen is of the opinion that a report to a regulatory agency must be made, or a recall or market withdrawal initiated, and such action has not been taken diligently by AM, then Cytogen shall have the right to take such action, if required by law, except that Cytogen will not initiate a recall or market withdrawal without first discussing the matter with the FDA. (c) Any U.S. adverse event report or medical complaint received by Cytogen or AM relating to an Agent shall be promptly investigated by Cytogen. AM will notify Cytogen within one working day of becoming aware of an adverse event or medical complaint, providing appropriate contact information to allow for Cytogen follow-up. Adverse events from outside the U.S. will be followed up by AM. Copies of serious (FDA defined) non-U.S. cases will be transmitted to Cytogen within five (5) working days of AM becoming aware of the case. Any such report that involves an event that is both serious and unexpected (as those terms are defined by then applicable FDA regulations) will be promptly reported to the FDA by Cytogen within fifteen (15) working days of receipt (term definition and reporting requirements to be modified to meet then applicable regulations). Cytogen will provide AM with copies of completed serious (FDA defined) U.S. cases within five (5) working days of Cytogen becoming aware of the case. Cytogen will prepare adverse event periodic reports in accordance with FDA regulations. Periodic reports will be forwarded to AM within twenty-five (25) days of close of the reporting interval, AM will be responsible for submission of periodic and other non-fifteen (15) day reports to the FDA. Each Party will provide the other with monthly updates of adverse event and product complaint activity. 9 3.5 ADVERTISING AND PROMOTIONAL MATERIALS. (a) Prior to the approval of the Combidex NDA, Cytogen will have the exclusive right to submit to the FDA for approval, and negotiate with the FDA with respect to the approval of, the advertising and promotional materials to be used by Cytogen relating to Combidex. If such direct contact with the FDA is not permitted by the FDA, then AM, at no cost to Cytogen, will act as Cytogen's agent in obtaining approval of such advertising and promotional materials. If AM acts as Cytogen's agent, AM may make changes requested by the FDA, only after consultation with and approval of Cytogen. (b) After the approval of the Combidex NDA, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Combidex. (c) After the approval of the Code 7228 NDA, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Code 7228 in the Field of Use. (d) After the Feridex Start Date, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Feridex I.V. (e) The rights granted Cytogen under this Section 3.5 with respect to any Agent shall terminate in the event of the termination of the exclusivity of the license grant with respect to such Agent pursuant to Sections 8.2, 11, 10.2 or 15.3. (f) Notwithstanding anything to the contrary in this Section 3.5, AM shall, solely relating to the use of the Trademarks, have final approval regarding advertising and promotional materials to be submitted to the FDA and any advertising and promotional materials approved by the FDA to confirm that such materials comply with AM's policy for the use of its trademarks; PROVIDED, HOWEVER, that if AM does not object to any advertising and promotional materials proposed by Cytogen within five (5) days of communication thereof to AM by Cytogen in writing, AM shall be deemed to have consented to such materials. 4. GRANTS OF RIGHTS AND LICENSES. 4.l RIGHTS AND LICENSES. Subject to the terms and conditions contained in this Agreement, AM hereby grants to Cytogen and its Affiliates (a) the non-exclusive right to use the Agent Technology for purposes of performing the Cytogen Project; (b) the exclusive right and license to distribute, market, offer to sell and sell Combidex in the Territory; and (c) the exclusive right and license 10 to distribute, market, offer to sell and sell Code 7228 in the Territory for the Field of Use. AM may request a proposal from Cytogen for the marketing of Code 7228 in the Territory for one or more indications outside the Field of Use. If Cytogen notifies AM in writing within five (5) business days after receipt of such notice of its interest in obtaining such rights, there shall be a period of ***** (***** ) days after such notice from Cytogen to AM in which the Parties may negotiate and execute a final agreement relating thereto or Cytogen may deliver a proposal, binding on itself, covering all the matters set forth in AM's notice to Cytogen. If the Parties do not execute an agreement or if AM declines to accept any binding proposal offered by Cytogen within such ***** (***** ) day period, AM may in its sole discretion enter into a definitive agreement with a Third Party covering the subject matter of the notice from AM to Cytogen requesting a proposal; PROVIDED, HOWEVER, that AM shall not enter into a definitive agreement with a Third Party, other than an Affiliate of AM, granting the rights to market and distribute Code 7228 in the Territory for an indication outside the Field of Use on terms less advantageous to AM than those contained in any proposal made by, and binding upon, Cytogen to obtain such rights. The foregoing shall not restrict AM from granting rights to market Code 7228 to an Affiliate of AM or outside of the Territory; nor shall there be any restriction on AM developing or marketing Code 7228 for any indication outside the Field of Use for its own account. If Cytogen does not make a binding proposal, AM shall have no restrictions as to the matters set forth in its notice requesting a proposal. 4.2 RIGHTS TO FERIDEX I.V. Subject to the terms and conditions contained in this Agreement, AM shall grant to Cytogen the exclusive right and license to distribute, market, offer to sell and sell Feridex I.V. in the Territory if the Feridex Agreement terminates for any reason; PROVIDED, HOWEVER, such grant shall not be exclusive to the extent that AM has granted rights to a Third Party which will survive the termination of the Feridex Agreement and solely for the purpose of meeting AM's obligations under the survival provisions of such Feridex Agreement. Such license shall be granted automatically as of the Feridex Start Date. - ----------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 11 4.3 LICENSE OF TRADEMARKS. (a) Subject to the terms and conditions of this Agreement and for as long as the license granted under Section 4.1 or 4.2 remains exclusive with respect to Combidex or Feridex I.V., AM hereby grants to Cytogen an exclusive right and license to use the Trademarks in the Territory solely in connection with Cytogen's use, marketing, distribution, offer for sale and sale of the Agent in the Territory to which the Trademark relates; PROVIDED, HOWEVER, the right to use the Feridex I.V. Trademark shall not commence until the Feridex Start Date; PROVIDED, FURTHER, HOWEVER, that Cytogen may not use the trademark "Feridex" in the United States for any activities; in the United States, the word Feridex is to be used as "Feridex I.V." (b) Cytogen shall not use any other marks in connection with the marketing or sale of Agent or market or sell Agent under any other trademark, whether registered or unregistered without AM's prior written consent, which consent may be granted or withheld in AM's sole discretion. (c) Cytogen undertakes that the nature and quality of Agent made by it, if any, or for it by any Person (other than AM) and identified by the Trademarks shall at all times conform to the standards set by and maintained by AM. (d) Cytogen acknowledges that AM is the owner of the Trademarks. Cytogen shall not at any time do, cause to be done, or permit any act or thing inconsistent with, contesting or in any way impairing or tending to impair, such ownership. Cytogen acknowledges that nothing in this Agreement shall give Cytogen any right, title or interest in the Trademarks other than the right to use the Trademarks in accordance with this Agreement. Cytogen agrees that it will not challenge the title or ownership of AM to the Trademarks or attack or contest the validity of the Trademarks and that any such challenge, attack or contest will be deemed a material breach of this Agreement. (e) AM shall register and maintain the Trademarks as necessary to protect the Trademarks in the Territory during the term of this Agreement. If either Party learns of any unauthorized use of the Trademarks by others in the Territory, such Party agrees to promptly notify the other Party of such unauthorized use. (f) Cytogen shall not alter, cover, obfuscate or remove any Trademark placed by AM on any vials of Agent. Cytogen shall at all times display the Trademarks with the trademark symbol "R" and any proprietary legend that AM shall determine to be reasonably necessary to protect its rights therein. Cytogen shall not, during the term of this Agreement or thereafter, use, adopt or seek to register the Trademarks or any trademark or trade name similar to or confusing with the Trademarks, or any translation thereof, in any jurisdiction. Cytogen further agrees that, if it shall have obtained or shall 12 obtain in the future, in any jurisdiction, any right, title or interest in any mark, symbol or phrase which shall be identical to, similar to or likely to be confused with any Trademark, or any translation thereof, then Cytogen shall have acted or shall act as an agent and for the benefit of AM for the limited purpose of obtaining such registrations and assigning such registration (and all right, title and interest in such mark, symbol or phrase) to AM. Cytogen further agrees to execute any and all instruments deemed by AM to be necessary to transfer such registrations or such right, title or interest to AM. Cytogen shall not challenge, or assist others in challenging, the validity or ownership of any Trademarks. 4.4 SUBLICENSEES. So long as the rights and licenses remain exclusive, Cytogen may sublicense any of the rights or licenses granted to Cytogen in this Article 4 to any Person, but not without the prior written consent of AM, such consent not to be unreasonable withheld, it being agreed that consent shall not be deemed to be unreasonably withheld if, in AM's judgment, that consent would not be in the commercial best interests of AM; PROVIDED, HOWEVER, that Cytogen shall have the right, without the consent of AM, to transfer Agent to any Affiliate for marketing and resale in the Territory. Cytogen shall be responsible for the payment of all payments and royalties due and the making of reports under this Agreement by reason of sales of any Agent by its Affiliates and Approved Sublicensees and their compliance with all applicable terms of this Agreement. 5. LICENSE FEES. 5.1 PAYMENTS. In consideration of the rights and licenses granted pursuant to Article 4, Cytogen shall issue, on the Effective Date, two million (2,000,000) shares of its common stock, par value $.01 per share, to AM. A certificate or certificates representing one million five hundred thousand (1,500,000) shares shall be delivered to AM on the date hereof. Two certificates representing two hundred fifty thousand (250,000) shares each shall be delivered to an escrow agent and placed in an escrow account to be distributed pursuant to the terms set forth in the Escrow Agreement. Of the 1,500,000 shares not subject to escrow, AM shall not transfer, sell or otherwise dispose of 1,200,000 shares; PROVIDED, HOWEVER, that this restriction on transfer shall terminate with respect to 300,000 shares one month after the Effective Date and an additional 300,000 shares on each monthly anniversary of the Effective Date thereafter. Such shares shall have been issued pursuant to a registration statement filed with and declared effective by the U.S. Securities and Exchange Commission and shall be freely tradable without restriction under the Securities Act of 1933, as amended. Certificates representing such shares shall be issued in the 13 name of AM and delivered to AM upon the Effective Date and shall not be inscribed with any restrictive legends relating to registration under the Securities Act. 6. DISCLOSURE OF PROJECT AND OTHER INFORMATION. Each Party (the "Delivering Party") shall, at the reasonable request of the other Party (the "Receiving Party"), disclose and deliver to such Qualified Persons as shall be designated by the Receiving Party to the Delivering Party, as it becomes available, all Agent Technology and such additional information and data which it may develop or acquire relating to any Agent and the Agent Technology necessary to enable the other Party to exercise its then existing rights and perform its then existing obligations hereunder, including all information concerning product formulation and information provided to AM by Third Party licensees of any Agent with respect to that Agent (including regulatory filings made by such licensees with applicable regulatory authorities) to the extent such disclosure is permitted under the terms of AM's agreements with such Third Parties. AM agrees that to the extent that disclosure to Cytogen of such information provided to AM by Third Party licensees is not so permitted, AM shall use commercially reasonable efforts to obtain such licensee's consent to such disclosure, or to otherwise enable Cytogen to obtain access to such information (consistent with AM's agreements with such Third Party). Each Party shall also provide the other with all information currently known (or which subsequently becomes known) to it regarding handling precautions, toxicity, and hazards associated with the Agent. Said information shall be provided in written form. If requested by Cytogen, AM shall provide Cytogen with the appropriate Material Safety Data Sheet for the Agent. 7. CONFIDENTIALITY. 7.1 CONFIDENTIALITY. Except as expressly permitted in this Section 7.1, Cytogen shall maintain the confidentiality of all written or orally disclosed Agent Technology, Project Information, information provided pursuant to Article 6 and other information proprietary to AM (collectively "AM Confidential Material"), and not disclose any such AM Confidential Material to any Person (including its own employees and agents), other than Qualified Persons who have signed Cytogen's standard agreement protecting the confidentiality of Third Party information prior to such disclosure, and shall hold the same in confidence and shall use the same only for the purposes specified herein. Notwithstanding anything in this Agreement to the contrary, Cytogen may disclose such AM Confidential Information: (i) to Affiliates or Approved Sublicensees on a confidential basis to the extent necessary to enable them to perform the Cytogen Project (to the extent permitted pursuant to Article 2) and (ii) to Affiliates or Approved Sublicensees on a confidential basis to the extent necessary to enable them to market (to the 14 extent permitted under Section 4.4 and 4.5) Agent in the Territory; PROVIDED, HOWEVER, that Cytogen shall be responsible for any failure by any such Affiliate or Approved Sublicensee to (a) maintain the confidentiality of such information (except as provided in Section 7.2), (b) use it only for such purposes and/or (c) disclose it only to employees who need to know such information for such purposes and who have previously signed Cytogen's standard agreement, referred to above, or are otherwise bound by obligations substantially similar to those in such standard agreement, prior to such disclosure. 7.2. EXCEPTIONS. (a) The obligations of confidentiality and restrictions on use imposed upon Cytogen by Section 7.1 shall not apply to any AM Confidential Information that was: (i) in the public domain before the Effective Date or subsequently came into the public domain other than through any act or omission of Cytogen; or (ii) lawfully received by Cytogen without an obligation of confidentiality from a source other than AM; or (iii) disclosed with the prior written approval of AM. (b) Notwithstanding anything to the contrary contained in this Agreement, Cytogen and its Affiliates and Approved Sublicensees may disclose or deliver any such AM Confidential Information (i) to any government agency or official to the extent that such disclosure or delivery is necessary for compliance with any law or regulation or (ii) to any Third Party if required to be disclosed by governmental or judicial order, in which case Cytogen shall promptly notify AM and take reasonable steps to assist in contesting such order or in protecting AM's rights prior to disclosure. 7.3 PROJECT INFORMATION DISCLOSED TO AM. AM shall be obligated to maintain the confidentiality of any Project Information, marketing and business plans and strategies developed by Cytogen and disclosed or delivered to AM by Cytogen to the same extent that Cytogen is obligated to maintain the confidentiality of Project Information pursuant to Section 7.1, except that AM may share information on adverse events and Project Information with the FDA and may share such information, on a confidential basis, with Third Party licensees of Agent if (a) such Third Party licensee, or AM, has provided comparable information developed by or on behalf of, or owned or Controlled by, such Third Party licensee, to Cytogen, or (b) such Third Party licensee has agreed to the disclosure of such comparable information to Cytogen when it is developed. Such obligation on the part of AM shall be subject to the same exceptions and conditions that are applicable to Cytogen's maintenance of the confidentiality of Project Information pursuant to Section 7.2. 15 7.4 This Article 7 shall survive termination of this Agreement for any reason for a period of five (5) years. 8. INFRINGEMENT ACTIONS. 8.1 INFRINGEMENT OF AGENT TECHNOLOGY OR MANUFACTURING TECHNOLOGY. Cytogen and AM shall promptly notify each other of any infringement or misappropriation of any patent or proprietary right that forms part of the Agent Technology or Manufacturing Technology and shall provide each other with any available evidence of such infringement or misappropriation. AM shall promptly investigate all such alleged infringement or misappropriation and advise Cytogen about any action it intends to take within two (2) months of notice from Cytogen or discovery by AM. Cytogen shall not institute any action during this period or during the pendency of any action instituted by AM. AM shall have the right, but not the obligation, at its sole cost and expense, to take all reasonable steps necessary to enjoin and prevent such infringement or misappropriation and/or to seek damages as a consequence thereof, including the institution and maintenance of legal or equitable proceedings. If AM determines that it is necessary for Cytogen to join in any such suit, action or proceeding, Cytogen shall, at AM's expense, execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice; PROVIDED that AM shall control the decisions related to the litigation. If AM shall cause Cytogen to join in any such suit, action, or proceeding, then AM shall reimburse Cytogen for all reasonable expenses (including reasonable attorneys' fees) incurred in connection with any such suit, action or proceeding, as such expenses are incurred. If AM lacks standing to bring any such suit, action or proceeding, then Cytogen shall, at the request of AM, do so upon AM's undertaking to indemnify and hold it harmless (to the extent permissible by law) from all consequent liability and to reimburse it for all reasonable expenses (including reasonable attorneys' fees) incurred in connection therewith, as such expenses are incurred; PROVIDED that AM shall control the decisions related to the litigation. Any amount received by AM in or as a result of any proceeding referred to in the fourth sentence of this paragraph shall be paid, first, to reimburse AM for any out-of-pocket expenses incurred in connection with such proceeding, and next to reimburse AM and Cytogen for any damages actually suffered by either party as a result of such infringement or misappropriation (other than consequential or incidental damages, such as loss of profits), and any additional amounts remaining after such application shall be shared equally by AM and Cytogen. Notwithstanding the foregoing, AM shall not be required to directly or indirectly contest, or intentionally assist in any contest of, any patent or other proprietary right 16 licensed to AM if AM would thereby breach the terms of its license to such patent or other proprietary interest. After evaluating such claims, if AM does not, at its option, within such period of two (2) months, either bring suit or cause such alleged infringement or misappropriation to cease, then Cytogen shall have the right, but not the obligation, to prosecute all substantial claims of infringement or misappropriation of any of said patents or proprietary rights, at its own expense and for its own benefit, in the name of AM, if necessary, and AM agrees to execute any necessary papers for such suits (at Cytogen's expense). If Cytogen determines that it is necessary for AM to join in any such suit, action or proceeding, AM shall, at Cytogen's expense, execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice; PROVIDED that Cytogen shall control the decisions related to the litigation. If Cytogen shall cause AM to join in any such suit, action, or proceeding, then Cytogen shall reimburse AM for all reasonable expenses (including reasonable attorneys' fees) incurred in connection with any such suit, action or proceeding, as such expenses are incurred. Any amount received by Cytogen in or as a result of any such proceeding shall be paid, first, to reimburse Cytogen for any out-of-pocket expenses incurred in connection with such proceeding, and next to reimburse Cytogen and AM for any damages actually suffered by each Party as a result of such infringement or misappropriation (other than consequential or incidental damages, such as loss of profits), and any additional amounts remaining after such application shall be shared equally by Cytogen and AM. 8.2 INFRINGEMENT OF PATENTS OF THIRD PARTIES. (a) If, in the Collective Opinion of Patent Counsel, a patent or patents covering the manufacture, use or sale of any Agent should issue or have issued in the United States in the Field of Use, if applicable, to a Third Party, AM shall attempt to negotiate a license from such Third Party to permit the manufacture, use and sale by AM and its licensees of such Agent. If AM shall obtain a license to any such patent or patents covering any Agent directly from such Third Party, Cytogen shall receive a sublicense under such license, and Cytogen shall, on a quarterly basis, reimburse AM in an amount equal to ***** percent (*****%) of AM's cost of obtaining such license, including any license fees and royalty payments (excluding such portion, if any, of such cost that is attributable to sales by AM and/or its licensees of products other than any Agent or outside the Field of Use, if applicable, to sales of any Agent by AM and/or its licensees outside the Territory or to considerations other than the sale of Agent in the - ------------------------------ ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 17 Territory). To the extent that the total payment to AM in any fiscal quarter under the preceding sentence would exceed ***** percent (*****%) of the total Royalty payments from Cytogen that are due to AM for such quarter pursuant to Section 10.1, such excess amount shall not be payable in that quarter, and shall instead be carried forward and paid quarterly as soon thereafter as is possible without causing the payments by Cytogen under this paragraph in any quarter to exceed ***** percent (*****%) of the total Royalty payments from Cytogen that are due to AM for such quarter pursuant to Section 10.1. If AM is not successful in obtaining such a license within three months of the Collective Opinion of Patent Counsel, and if Cytogen thereafter obtains such a license, the Parties agree that ***** percent (*****%) of any consideration paid by Cytogen therefor, including royalties paid by Cytogen pursuant to such license and license fees paid to obtain such license, shall be creditable against the Royalty payments due from it to AM pursuant to Section 10.1 with respect to the Agent or Agents to which the Collective Opinion of patent Counsel relates; PROVIDED, however, that Cytogen shall use commercially reasonable efforts to enter into any such licensing arrangements on the most favorable terms then available. In no event, however, shall the total credit available to Cytogen in any fiscal quarter under this paragraph exceed ***** percent (*****%) of the total Royalty payments from Cytogen that would have been due to AM for such quarter (prior to giving effect to such credit) pursuant to Section 10.1 of this Agreement. To the extent any credit available to Cytogen under this Agreement cannot be totally exhausted in any period, the balance of such credit shall be carried forward and used in future periods until it is so exhausted. If (i) AM and/or Cytogen are unable to obtain the license referred to above within ninety (90) days after the date of the Collective Opinion of Patent Counsel, or (ii) the consideration to be paid to a Third Party for such license would (x) exceed ***** percent (*****%) of Agent Net Sales relating to such Agent that allegedly infringes the patents or proprietary rights for the six-month period ending prior to the date of the Collective Opinion of Patent Counsel or (y) make such Agent commercially unviable for either Party, then either Party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate the licenses granted hereunder with respect to such Agent and the obligation to market and supply such Agent. In the event that the foregoing applies to two or more Agents, either party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate this Agreement by written notice to the other Party hereto. During the period from the - ---------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 18 issuance of the Collective Opinion of Patent Counsel until such time as a license is secured pursuant to this Section 8.2(a) or a termination as described above is effected, Cytogen shall not be obligated to meet its minimum revenue obligations under Section 10.2, AM shall not be required to supply the applicable Agent pursuant to the Supply Agreement and AM shall have no indemnity obligations under Section 8.2(b) or (c) hereof for sales by Cytogen of such Agent during such period. Any failure to deliver Agent as a consequence of this Section 8.2(a) shall not be deemed a breach of the Supply Agreement, shall not give rise to any right of Cytogen to manufacture any Agent and any cure periods shall be extended during this period. (b) Should a Third Party institute a patent infringement suit against Cytogen or an Affiliate thereof in the United States during the term of this Agreement charging that their sale or manufacture, if permitted under the Supply Agreement, of any Agent in the United States infringes one or more United States patents owned by or licensed to such Third Party, Cytogen shall so notify AM. AM shall have the option at its expense to control the defense of such suit, in which case Cytogen shall execute all papers and perform other acts as AM may reasonable request. AM shall reimburse Cytogen for any out-of-pocket expenses in connection with the suit. If AM elects not to control the defense, then, except as set forth in paragraph (c) below, Cytogen shall have the right to reduce the Royalty amount payable to AM pursuant to Section 10.1 of this Agreement with respect to such Agent up to ***** percent (*****%) of the amount of reasonable out-of-pocket costs, including legal fees incurred by Cytogen, in defending or settling such suit. In no event, however, shall the total credit available to Cytogen in any fiscal quarter under this paragraph exceed ***** percent (*****%) of the total Royalty payments from Cytogen that would have been due to AM for such quarter (prior to giving effect to such credit) pursuant to Section 10.1 of this Agreement. To the extent any credit available to Cytogen under this Agreement cannot be totally exhausted in any period, the balance of such credit shall be carried forward and used in future periods until it is so exhausted. Such reimbursement or credit shall not include the cost of Cytogen's in-house attorneys' or other Cytogen employees' time. If such Third Party suit is not successfully defended by Cytogen or AM, AM shall indemnify Cytogen for ***** percent (*****%) of all damages which may be finally awarded against Cytogen based upon such patent infringement. If a license is negotiated, the payments for such license shall be controlled by the provisions of paragraph (a) above. - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 19 (c) Should a Third Party institute a patent infringement suit against AM, or against AM and Cytogen jointly, in the United States based on: (i) any modification or enhancement of Agent or of the Agent Technology or Manufacturing Technology, or (ii) the method of the manufacture, finish or use of the Agent; which in either case (i) or (ii) is not the result of AM's acts but that of Cytogen or its Affiliates or Approved Sublicensees, Cytogen shall reimburse AM for ***** percent (*****%) of the amount of reasonable out-of-pocket costs, including legal fees incurred by AM, in defending such suit and AM shall be entitled to control such defense; PROVIDED, HOWEVER, that Cytogen shall be able to participate fully in the preparation of such defense and that AM shall make no settlement agreement affecting material rights held by Cytogen without the consent of Cytogen. Such credit shall not include the cost of AM's in-house attorneys' or other AM employees' time. If such Third Party suit is not successfully defended by Cytogen or AM, Cytogen shall indemnify AM for ***** percent (*****%) of all damages which may be finally awarded against it based upon patent infringement. If a license is negotiated, the payments for such license shall be controlled by the provisions of paragraph (a) above. (d) Nothing in this Article shall prevent either Party, at its own expense, from obtaining any license or other rights from Third Parties it deems appropriate in order to permit the full and unhindered exercise of its rights under this Agreement. (e) If (i) as a result of any claim made against either Party during the term of this Agreement or the Supply Agreement alleging that the manufacture and sale to Cytogen of any Agent by AM or the manufacture, use or sale of any Agent by Cytogen (in the case of a claim against Cytogen) infringes or misappropriates any patent or any other proprietary right of a Third Party, a judgment is entered against such Party by a court of competent jurisdiction from which no appeal can be or is taken within the time permitted for appeal, such that AM cannot manufacture an Agent or sell the Agent to Cytogen in the United States (in the case of a claim against AM), or that Cytogen cannot sell an Agent in the United States (in the case of a claim against Cytogen), without infringing the patent or other proprietary rights of such Third Party and (ii) (A) AM and/or Cytogen are unable to obtain the license referred to in subsection (a) above within ninety (90) days after such entry of judgment, or (B) such consideration to be paid to a Third Party for such license would (x) exceed **** *percent (*****%) of Agent Net Sales relating to such Agent that infringes the patents or proprietary rights for the six-month period ending prior to the time such infringement or misappropriation complaint is filed in a court of competent jurisdiction or (y) make such Agent commercially unviable to either Party, then either Party - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 20 shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate the licenses granted hereunder with respect to such Agent and the obligation to market such Agent. In the event that the foregoing applies to two or more Agents, either party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate this Agreement by written notice to the other Party hereto. 8.3 LIMITATION OF REMEDIES. The provisions of Section 8.2 set forth the Parties' only remedies against each other in respect of the subject matter thereof, absent bad faith or willful misconduct. In no event shall either Party be liable to the other under this Article 8 for incidental or consequential damages (including, but not limited to, loss of profits or loss of use damages). 9. OWNERSHIP. (a) AM shall be the sole and exclusive owner of (i) the Agent Technology, subject to Cytogen's rights pursuant to Article 4 hereof, (ii) the Manufacturing Technology, subject to Cytogen's rights pursuant to Article 4 hereof, and (iii) the Project Information obtained and/or developed exclusively by AM, subject to Cytogen's rights pursuant to Article 4 hereof. Cytogen shall be the sole and exclusive owner of Project Information developed exclusively by Cytogen, and such information may not be used by AM or licensed by AM to any person without Cytogen's consent except as otherwise provided in Article 7. Project Information, other than patents and patent applications, obtained and/or developed jointly by AM and Cytogen shall be deemed owned jointly and severally by them, without an obligation of accounting. Any inventions conceived and reduced to practice for which a patent is filed having named investors on the patent including both one or more AM employees and one or more Cytogen employees ("Joint Invention(s)"), shall belong jointly to AM and Cytogen. AM shall have the first right, at its own expense, to prepare, file, prosecute and maintain patent application(s) and patent(s) for Joint Invention(s) in the United States and foreign countries. AM shall provide Cytogen with a copy of such application at least fifteen (15) days prior to filing and a filed copy within thirty (30) days of filing. In the event AM elects not to prepare, file, prosecute and/or maintain any such patent application(s) and/or patent(s) in any jurisdiction, AM shall notify Cytogen at least thirty (30) days prior to taking, or not taking any action which would result in abandonment, withdrawal or lapse of such patent application(s) or patent(s). In any event, Cytogen shall have the right to prepare, file, prosecute and maintain, at its own expense, patent application(s) and patent(s) on any Joint Invention(s) for which AM elects not to seek or maintain patent protection in the United States. Title to all patents issued thereon, regardless of which party filed the corresponding application(s), shall be jointly held by AM and Cytogen. AM's rights to a Joint Invention are subject to Cytogen's rights as a joint owner and the rights 21 and licenses granted to Cytogen in this Agreement. Neither party shall grant any rights to a Joint Invention to a Third Party which would limit the other party's rights as a joint owner of the Joint Inventions. (b) AM shall pay any fees necessary to maintain the Patents in effect. If AM determines, in its sole judgment, not to maintain any of the Patents, it shall timely notify Cytogen so that Cytogen may pay the necessary maintenance fees on AM's behalf. If Cytogen elects to pay the maintenance fees, AM shall execute any documents necessary to assign such Patent to Cytogen for such period as Cytogen continues to pay such maintenance fees. Cytogen's right set forth in this Section 9(b) shall be the sole and exclusive remedy for AM's failure to maintain any Patent. 10. SUPPLY; ROYALTIES. 10.1 PAYMENT. In consideration of the rights granted hereunder, Cytogen shall pay to AM a royalty (the "Royalty") in an amount equal to ***** percent (*****%) of Agent Net Sales, on the payment terms set forth in subsection 12.1; PROVIDED that such Royalty shall be reduced to ***** percent (*****%) for any Agent if Cytogen's license under this Agreement is converted to a non-exclusive license with respect to such Agent and shall be reduced to *****% for any Agent upon the expiration of the last to expire Patent covering such Agent. Such Royalty shall be payable as long as AM continues to provide Agent to Cytogen pursuant to the Supply Agreement. Furthermore, such Royalty shall also be payable, if applicable, as long as Cytogen manufactures Agent pursuant to the Supply Agreement. 10.2 MINIMUM REVENUES. (a) With respect to Combidex, for each full twelve-month period beginning on the first day of the fiscal quarter commencing after the Combidex Approval Date, the total amount of revenue to AM resulting from royalties on Agent Net Sales of Combidex under this Agreement and payments for Combidex under the Supply Agreement shall not be less than: First Year $***** Second Year $***** Third Year $***** Fourth Year $***** Fifth Year $***** Thereafter ***** - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 22 If such revenues are less than such amount in any period, AM shall have the right to elect that the licenses and rights granted under this Agreement with respect to Combidex be converted to non-exclusive licenses and rights. (b) With respect to Code 7228, for each full twelve-month period beginning on the first day of the third fiscal quarter commencing after the Code 7228 Approval Date, the total amount of revenue to AM resulting from royalties on Agent Net Sales of Code 7228 and Combidex combined under this Agreement and payments for Combidex and Code 7228 combined under the Supply Agreement by Cytogen shall not be less than: First Year $***** Second Year $***** Third Year $***** Fourth Year $***** Fifth Year $***** Thereafter ***** If such revenues for Code 7228 and Combidex combined are less than such amount in any period, AM shall have the right to elect that the licenses and rights granted under this Agreement with respect to Code 7228 be converted to non-exclusive licenses and rights. (c) If Combidex may not be marketed and sold due to FDA action or any reason unrelated to an action or inaction of Cytogen and outside its control, the Parties shall negotiate in good faith to revise the minimum revenue targets set forth in Section 10.2(b). (d) The requirement to achieve the minimum revenue targets set forth above shall be suspended during any period when (i) a Third Party is marketing a Competing Product in the Territory that competes with Combidex or (for purposes of Section 10.2(b) only) Code 7228, such Competing Product has attained a market share of twenty-five percent (25%) or greater in any calendar quarter (measured as sales of such Competing Product divided by sales of all products which are Competing Products and the relevant Agent), Cytogen has notified AM pursuant to Section 8.1(a) that - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 23 such Competing Product infringes some portion of the Agent Technology, and AM has elected not to institute any action to prohibit the marketing of such Competing Product, (ii) AM fails to supply a sufficient amount of Agent to meet the minimum revenue targets or (iii) as provided in Section 8.2(a). (e) If AM converts any license to a non-exclusive license pursuant to this Section 10.2, the minimum revenue requirement for any such Agent shall terminate and Cytogen shall not be required to use its commercially reasonable efforts to market or sell such Agent. 11. OBLIGATION OF CYTOGEN TO MARKET AGENT. From and after the respective Combidex or Code 7228 Approval Date, Cytogen shall use ***** efforts to market and sell Combidex and/or Code 7228, as the case may be, in the Territory. From and after the date which is two months after the Feridex Start Date, Cytogen shall use ***** efforts to market Feridex I.V. in the Territory. As part of said obligation, Cytogen agrees that, it will commence the marketing of each Agent as soon as practicable, but in any event not more than sixty (60) business days following any Approval Date or the Feridex Start Date (each, a "Market Launch Date"). If Cytogen fails to commence marketing of any Agent within such period, in addition to any other remedy it may have, AM will have the option to terminate the licenses and rights granted under Article 4 with respect to that Agent. If AM chooses to terminate such rights and licenses, AM shall so notify Cytogen. Cytogen's obligations to market and AM's obligation to supply such Agent shall cease and each party shall follow the procedures of Section 15.4(b) with regard to the return or destruction of any Agent Technology or other information. Subsequent to the Effective Date, the parties agree to cooperate and coordinate their activities in connection with any such Market Launch Date. 12. REPORTS AND ACCOUNTING FOR AGENT. 12.1 PAYMENTS AND MONTHLY REPORTS FOR AGENT NET SALES. Within thirty (30) days after the close of each calendar quarter after Cytogen commences sales of any Agent, Cytogen shall deliver to AM a report containing an accounting to AM with respect to all Agent Net Sales for such quarter. Such report shall indicate the amount and calculations of any payments of Royalties due to AM pursuant hereto, and the amount of Agent Net Sales separately for each Agent, and shall be accompanied by payment thereof in full of such Royalties. If no payment is due for any calendar quarter, Cytogen shall so report. Interest on all payments due to AM and not paid by Cytogen when due shall accrue at a rate of 12% per annum from the due date, or such maximum rate - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 24 allowed by law if less. No sales of Agent to any Person shall be counted more than once in the calculation of Agent Net Sales, and no payments under Article 10 shall be payable more than once with respect to any sale of Agent, i.e., payments due AM with respect to any sale of Agent shall not be cumulative. 12.2 ANNUAL REPORTS. Cytogen shall cause to be delivered to AM, within ninety (90) days after the end of each fiscal year of Cytogen, a report certified by an authorized financial officer of Cytogen setting forth the basis upon which payments were calculated hereunder during the preceding fiscal year and the amount of payments payable hereunder during and with respect to such fiscal year. 12.3 RECORDS. Cytogen shall keep and maintain in accordance with U.S. generally accepted accounting principles, consistently applied, proper and complete records and books of account with respect to the payments made or due pursuant to Article 10 but no longer than three (3) years after the year in which such Agent Net Sales occurred. AM shall have the right, upon reasonable prior written notice to Cytogen but in no event less than ten (10) days notice, during normal business hours, and at its own expense to examine or to have examined by a certified public accountant, or other person reasonably acceptable to Cytogen, pertinent books and records of Cytogen, solely for the purpose of determining the correctness of payments made hereunder. 12.4 CURRENCY. All payments and royalties payable under this Agreement shall be paid in U.S. dollars in immediately available funds to an account designated by AM. 13. COMPLIANCE WITH REGULATIONS. Each Party will comply with, and cause any of their Affiliates performing any of their respective rights or obligations hereunder (and in the case of Cytogen, will use its reasonable best efforts to cause its Approved Sublicensees) to comply with, all laws and regulations applicable to such rights and obligations. 14. REPRESENTATIONS AND WARRANTIES; LIMITATION OF LIABILITY. The following provisions relate to representations and warranties by the Parties made in connection with this Agreement and the Supply Agreement: 14.1 BY AM. AM represents and warrants to Cytogen as follows: (a) AM is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware. 25 (b) AM has all necessary corporate power to enter into and perform its obligations under each of the Cytogen Agreements and has taken all necessary corporate action under the laws of the state of Delaware and its certificate of incorporation and by-laws to authorize the execution and consummation of the Cytogen Agreements. (c) AM's performance under and in accordance with each of the Cytogen Agreements will not result in a breach of or constitute a default under any contract between AM and a Third Party, and will not violate any United States statute, rule or governmental regulation applicable to AM. (d) AM is the sole and absolute owner of all of the Patents and the Trademarks, and has the right to grant the exclusive rights and licenses granted under Article IV, subject to the Feridex Agreements. (e) To the best of AM's knowledge, all the Patents and Trademarks are in full force and effect and have been maintained to date. (f) Other than litigation disclosed in its filings with the Securities and Exchange Commission, AM is not aware of any asserted claim or demand, or unasserted claim or demand which is likely to be asserted against the Patents or Trademarks; (g) AM has not entered into any agreement with any Third Party which is in conflict with the rights granted to Cytogen or the obligations assumed by AM pursuant to the Cytogen Agreements. (h) Other than litigation disclosed in its filings with the Securities and Exchange Commission, AM is not aware of any asserted claim or demand, or Third Party unasserted claim or demand, which is likely to be asserted, which AM considers valid, which would materially affect AM's ability to perform its obligations under the Cytogen Agreements. 14.2 BY CYTOGEN. Cytogen represents and warrants to AM, as follows: (a) Cytogen is a corporation duly organized, validly existing, and in good standing under the laws of Delaware. (b) Cytogen has all necessary corporate power to enter into and perform its obligations under the Cytogen Agreements and has taken all necessary corporate action under the laws of Delaware and its charter and by-laws to authorize the execution and consummation of each of the Cytogen Agreements. 26 (c) Cytogen's performance under and in accordance with each of the Cytogen Agreements will not result in a breach of or constitute a default under any contract between Cytogen and a Third Party, and will not violate any United States statute, rule or governmental regulation applicable to Cytogen. (d) Cytogen has not entered into any agreement with any Third Party which is in conflict with the rights granted to AM or the obligations assumed by Cytogen pursuant to the Cytogen Agreements. (e) Cytogen is not aware of any asserted claim or demand or Third Party unasserted claim or demand which is likely to be asserted, which Cytogen considers valid, and which would materially affect Cytogen's ability to perform its obligations under this Agreement or the Supply Agreement. (f) The authorized capital stock of Cytogen consists of 250,000,000 shares of common stock, par value $.01 per share ("Cytogen Common Stock"), and 5,400,000 shares of preferred stock, par value $.01 per share ("Cytogen Preferred Stock"), of which Cytogen Preferred Stock, 200,000 shares have been designated Series C Junior Participating Preferred Stock, $.01 par value. At the close of business on August 23, 2000, (i) 73,166,056 shares of Cytogen Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable, and free of preemptive rights, (ii) no shares of Cytogen Common Stock were held in the treasury of Cytogen, (iii) 5,682,837 shares of Cytogen Common Stock were reserved for future issuance pursuant to stock option arrangements of Cytogen (collectively, the "Cytogen Stock Option Plans"). No shares of Cytogen Preferred Stock are issued and outstanding. As of the date of this Agreement, except as set forth above, no shares of capital stock or other voting securities of Cytogen were issued, reserved for issuance or outstanding. As of the date of this Agreement, except for stock options covering not in excess of 3,974,336 shares of Cytogen Common Stock issued under the Cytogen Stock Option Plans (collectively, the "Cytogen Stock Options"), rights to purchase covering approximately 371,950 shares of Cytogen Common Stock under the Cytogen Employee Stock Purchase Plan, warrants to purchase 328,012 shares of Cytogen Common Stock, approximately 923,534 shares of Cytogen Common Stock underlying a certain convertible promissory note and 950,000 shares of Cytogen Common Stock issuable, in certain circumstances, pursuant to an acquisition agreement, there are no options, warrants, calls, rights or agreements to which Cytogen or any of its subsidiaries is a party or by which any of them is bound obligating Cytogen or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or 27 sold, additional shares of capital stock of Cytogen or obligating Cytogen or any of its subsidiaries to grant, extend or enter into any such option, warrant, call, right or agreement. Cytogen does not have any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Cytogen on any matter. (g) The shares of Cytogen Common Stock to be issued in accordance with this Agreement will be, upon issuance, duly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof. Such issuance of shares of Cytogen Common Stock will be free of any restrictions on transfer imposed by Cytogen, other than those contemplated by this Agreement. There are no preemptive rights or other anti-dilution rights which would become effective upon or prohibit such issuance of shares of Cytogen Common Stock. (h) No stop order suspending the effectiveness of the registration statement covering the issuance of the shares of Cytogen Common Stock to AM under the terms of this Agreement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of Cytogen, are contemplated by the Securities and Exchange Commission. 14.3 LIMITATIONS. Notwithstanding the foregoing, Cytogen's sole remedies if it is alleged or determined that Cytogen's exercise of any of its rights hereunder would infringe upon, or conflict with, any patent or other proprietary right of any Third Party shall be as set forth in Section 8.2, and AM's sole remedies if it is alleged or determined that AM's exercise of any of its rights hereunder would infringe upon, or conflict with, any patent or proprietary right of any Third Party shall be as set forth in Section 8.2. Except in connection with a breach of the confidentiality obligations of Article VII hereof or in connection with an infringement or misappropriation by one Party of the intellectual property of the other, neither Party shall be liable to the other for any indirect, incidental, special, or consequential damages in connection with this Agreement, however caused, whether based on contract, tort, warranty, or other legal theory, and even if such Party has been informed in advance of the possibility of such damages or such damages could have been reasonably foreseen by such Party. 15. TERM AND TERMINATION. 15.1 TERM. This Agreement shall continue in force until August __, 2010, with rolling automatic successive renewal periods of an additional five (5) years, unless notice of non-renewal 28 or termination is given by Cytogen or AM ninety (90) days prior to the commencement of any renewal period, and unless and until terminated pursuant to the provisions of Section 15.2. 15.2 TERMINATION EVENTS. This Agreement may be terminated: (a) at any time, by Cytogen or AM, in accordance with and to the extent permitted by the provisions of Section 8.2 hereof; (b) at any time, by Cytogen or AM if the other Party shall materially breach any of the terms, conditions and agreements contained herein to be kept, observed, and performed by it, in which case the non-breaching Party may terminate this Agreement at its option and without prejudice to any of its other legal and equitable rights or remedies except as specifically provided in this Agreement, by giving the Party which committed the breach sixty (60) days written notice, particularly specifying the breach, unless the notified Party within such sixty (60) days shall have cured the breach; (c) at any time, if any assignment shall be made by either Party for the benefit of creditors, or if a receiver, trustee in bankruptcy or similar officer shall be appointed to take charge of all of the property of either Party, or if either Party files a voluntary petition under applicable bankruptcy laws or such a petition is filed against either Party and is not dismissed within sixty (60) days, the other Party may immediately terminate this Agreement by giving written notice of termination; or (d) by AM or Cytogen, upon thirty (30) days written notice, if the Supply Agreement has terminated; provided, however, that the notice of termination of this Agreement pursuant to this subsection must be served on the other party within ninety (90) days of the termination of the Supply Agreement, as applicable. 15.3 PARTIAL TERMINATION FOR CERTAIN AGENTS. The obligations of Cytogen to market any Agent and the grant of the rights and licenses by AM with respect to such Agent may be terminated (a) at any time, by AM or Cytogen, upon thirty (30) days written notice, in the event of significant BONA FIDE concerns about the safety or efficacy of such Agent on the part of the chief medical officer of the party asserting such concern, such concerns to be set forth in writing and delivered to the other Party with the termination notice. Concerns about safety shall be considered an appropriate basis for termination of the obligations or license with respect to such Agent under this subsection if the safety profile of the Agent is such that it fails a risk/benefit analysis conducted by physicians experienced in the use of MRI contrast media. Concerns about efficacy shall be considered an appropriate basis for termination of the obligations or license with respect to such Agent under this subsection if physicians experienced in the use of MRI contrast media conclude that the Agent is of little diagnostic value; or 29 (b) at any time by AM or Cytogen in accordance with the terms and provisions of Section 8.2. 15.4 EFFECT OF EXPIRATION OR TERMINATION. (a) Except as otherwise provided in Article 7, Article 13, or subsections (c) and (d) of this Section 15.4, expiration or termination of this Agreement shall result in the termination of all provisions hereof; PROVIDED, that Cytogen shall continue to be liable for all license fees and Royalty (with respect to all Agent that has then been sold by Cytogen or its Affiliates or Approved Sublicensees) payments that shall then have accrued and each Party shall be responsible for any amounts due under Section 8.2 and remaining unpaid. (b) Upon expiration or termination of this Agreement, Cytogen shall return to AM (i) the Agent Technology, (ii) the Manufacturing Technology, if any, in its possession, and (iii) Project Information not developed by Cytogen, or otherwise dispose of such Agent Technology, Manufacturing Technology or Project Information as instructed by AM. (c) Upon termination of this Agreement by AM, Cytogen shall have the right to complete the sale of its inventory of the Agent in the Territory; PROVIDED, that Cytogen's obligations hereunder to comply with this Agreement and the Supply Agreement in connection with such completion of sale shall remain in effect; and FURTHER PROVIDED, that if requested by AM, Cytogen shall negotiate with AM for the sale of Cytogen's entire inventory of the Agent to AM on terms to be negotiated by the Parties at such time. (d) Upon expiration or termination of this Agreement, neither Party shall have liability to the other Party for damages of any kind solely as a result of the fact of such expiration or termination, whether on account of the loss by Cytogen of present or prospective sales, investments or goodwill arising solely from statutes that relate to termination of distributors or licensees, and each Party hereby waives any rights which may be granted to it by such statutes. 16. GENERAL PROVISIONS. 16.1 FORCE MAJEURE. If either Party is prevented from performing, or is unable to perform, any of its obligations under this Agreement, due to any act of God, fire, casualty, flood, war, strike, lock out, failure of public utilities, injunction or any act, exercise, assertion or requirement of governmental authority, compliance with any law or government regulation or order, epidemic, destruction of production facilities, insurrection, inability to procure materials, labor, equipment, transportation or energy sufficient to meet its production or performance needs, or any other cause 30 beyond the reasonable control of the Party invoking this provision, and if such Party shall have used its commercially reasonable efforts to avoid such occurrence and minimize its duration and has given prompt written notice to the other Party, then the affected Party's performance shall be excused and the time for performance shall be extended for the period of delay or ability to perform due to such occurrence. 16.2 WAIVER. The waiver by either Party of a breach or a default of any provision of this Agreement by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provisions, nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege that it has, or may have hereunder, operate as a waiver of any right, power or privilege by such Party. No waiver, consent, modification or change of terms of this Agreement shall bind either Party unless in a writing signed by both parties, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. 16.3 PUBLICITY. Except as required by or advisable under law, governmental regulation, judicial order, generally accepted accounting principles or any obligations pursuant to any listing agreement with, or regulation of, any national securities exchange or quotation system, neither Party shall directly or indirectly make any public announcement or publicity concerning this Agreement or the subject matter hereof without the prior written consent of the other Party and agreement upon the nature, text and timing of such announcement, which approval and agreement shall not be unreasonably withheld. Such approval and agreement shall be deemed to be given if no response is given to the other Party within two working days of receipt of the proposed text from the Party intending to make such announcement. In the event of a public announcement or publicity not required by law, the Party making such announcement shall use commercially reasonable efforts to provide the other with a copy of the proposed text prior to such announcement, for the purpose of notice and opportunity to comment. Upon execution hereof, each Party expects to issue a press release concerning the subject matter hereof. 31 16.4 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopier, as follows: If to AM: Advanced Magnetics, Inc. 61 Mooney Street Cambridge, Massachusetts 02138 Attention: Chief Executive Officer Telecopier: (617) 547-2445 with a copy to: Testa, Hurwitz & Thibeault 125 High Street Boston, Massachusetts 02110 Attention: Leslie E. Davis, Esq. Telecopier: (617) 248-7100 If to Cytogen: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540 Attention: Dr. Joseph Reiser Telecopier: ( ) ___-____ with a copy to: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540 Attention: General Counsel Telecopier: ( ) ___-____ or to such other address as any Party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. All notices and other communications given to any Party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telex, graphic scanning or other telegraphic communications equipment of the sender, or on the date five business days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such Party as provided in this Section 16.4. 16.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof The subject matter of this Agreement is limited to the rights expressly granted herein. The terms of this Agreement shall have no force or effect with respect to any claim based on the use of any intellectual property rights of AM or its licensors outside the scope of 32 the licenses expressly granted herein. No waiver, consent, modification or change of terms of this Agreement shall bind either Party unless in a writing signed by both parties, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. There are no understandings, agreements, representations or warranties, expressed or implied, not specified herein regarding this Agreement or the subject matter thereof. 16.6 HEADINGS. Captions and headings contained in this Agreement have been included for ease of reference and convenience and shall not be considered in interpreting or construing this Agreement. 16.7 ASSIGNMENT. Neither this Agreement nor any rights granted hereby may be assigned by Cytogen voluntarily or by operation of law, without AM's prior written consent which consent may be granted or withheld in AM's sole discretion. Assignment shall be deemed to include the transfer of substantially all of the assets of, or a majority interest in the voting stock of, Cytogen, or the merger of Cytogen with one or more other Persons (except a merger in which the stockholders of Cytogen prior to the merger constitute the holders of a majority of the capital stock of the surviving entity following the merger). This Agreement shall be freely assignable by AM. This Agreement shall be binding upon, and shall inure to the benefit of, the successors and assigns of AM and the permitted successors and assigns of Cytogen. 16.8 INDEPENDENT CONTRACTORS. No agency, partnership or joint venture is hereby established. Neither Party shall be responsible for the acts or omissions of the other Party. Neither Cytogen nor AM shall enter into, or incur, or hold itself out to Third Parties as having authority to enter into or incur on behalf of the other Party any contractual obligations, expenses or liabilities whatsoever. 16.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts-of-law principles thereof. Each party irrevocably submits to the exclusive jurisdiction of any state or federal district court of competent jurisdiction in the Commonwealth of Massachusetts for the purpose of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated by this Agreement (and agrees not to commence any action, suit or proceeding relating to this agreement or any such transaction, except in those courts). Each party further agrees that service of any process, summons, notice or document in accordance with Section 16.4 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each party irrevocably and unconditionally waives any objection to the 33 laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated by this agreement in any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such action, suit or proceeding sought in any such court that such action, suit or proceeding has been brought in an inconvenient forum. 16.10 SEVERABILITY. The provisions of this Agreement are severable, and in the event that any provisions of this Agreement shall be determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 34 IN WITNESS WHEREOF, this Agreement has been duly executed as a sealed instrument as of the date specified above. ADVANCED MAGNETICS, INC. CYTOGEN CORPORATION By: /s/ Jerome Goldstein By: /s/ H. Joseph Reiser --------------------------- -------------------------- Title: Chief Executive Officer Title: President and Chief Executive Officer ------------------------ -------------------------------------- 35
EXHIBIT A ISSUED PATENTS COUNTRY PATENT NO. ISSUANCE DATE U.S. 4,770,183 9/13/88 U.S. 4,827,945 5/9/89 U.S. 4,951,675 8/28/90 U.S. 5,055,288 10/8/91 U.S. 5,102,652 4/7/92 U.S. 5,219,554 6/15/93 U.S. 5,248,492 9/28/93 U.S. 5,160,726 11/3/92 U.S. 5,262,176 11/16/93 U.S. 5,314,679 5/24/94
PATENT APPLICATIONS
COUNTRY APPLICATION SERIAL NO. FILE DATE U.S. ***** 3/8/00
- --------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. EX-10.20 5 a2033252zex-10_20.txt EX-10.20 EXHIBIT 10.20 SUPPLY AGREEMENT THIS SUPPLY AGREEMENT, made as of the 25th day of August 2000 (the "Effective Date"), by and between Advanced Magnetics, Inc., a Delaware corporation having its principal place of business at 61 Mooney Street, Cambridge, Massachusetts 02138 ("AM"), and Cytogen Corporation, a Delaware corporation having its principal place of business at 600 College Road East, Princeton, New Jersey 08540-5380 ("Cytogen"). RECITALS: WHEREAS, AM has granted to Cytogen a license to market and sell certain products on the terms set forth in the License and Marketing Agreement by and between Cytogen and AM of even date herewith (hereinafter the "Marketing Agreement"); NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and obligations hereinafter set forth, the sufficiency of which is hereby acknowledged, Cytogen and AM agree as follows: 1. DEFINITIONS. When capitalized, the following terms shall for all purposes of this Agreement have the meanings specified in this Section. 1.1 "AFFILIATE" shall mean a Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified. 1.2 "AGENT" shall mean Feridex I.V., Combidex and Code 7228, individually or in the aggregate, as the context provides. 1.3 "AGENT NET SALES" shall have the meaning set forth in the Marketing Agreement. 1.4 "AGENT TECHNOLOGY" shall have the meaning set forth in the Marketing Agreement. 1.5 "AGREEMENT" shall mean this document together with all attachments and exhibits. 1.6 "AM PROJECTS" shall mean the Combidex Project and the Code 7228 Project, each as defined in the Marketing Agreement. 1.7 "APPROVED SUBLICENSEE" shall mean any Person sublicensed by Cytogen with AM's written consent under the terms of this Agreement. 1.8 "BATCH" shall mean a Lot of approximately 9,000 bottles of Feridex I.V., Combidex or Code 7228, as the case may be. 1.9 "CODE 7228" shall mean the contrast agent currently known as Code 7228, which is composed of the substance AMI-7228. 1.10 "CODE 7228 APPROVAL DATE" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Code 7228 in the United States (said date being referred to as the "Code 7228 Approval Letter Date") and (b) the date on which AM is first able to produce and provide a supply of Code 7228 to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no less than six months after the execution date of this Agreement but no later than ten (10) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to so provide such notice of supply requirements, the Code 7228 Approval Date shall be the Code 7228 Approval Letter Date. 1.11 "COMBIDEX" shall mean the contrast agent currently known as Combidex, which is composed of the substance with the United States Adopted Name Ferumoxtran-10. 1.12 "COMBIDEX APPROVAL DATE" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Combidex in the United States (said date being referred to as the "Combidex Approval Letter Date") and (b) the date on which AM is first able to produce and provide a supply of Combidex to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no less than six months after the execution date of this Agreement but no later than ten (10) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to so provide such notice of supply requirements, the Combidex Approval Date shall be the Combidex Approval Letter Date. 1.13 "COMBIDEX NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Combidex and accepted for filing by the FDA on or about December 21, 1999. 1.14 "COMMERCIALIZATION" shall mean the distribution by Cytogen of any Agent for sale in interstate commerce in the U.S. -2- 1.15 "CONTRACT QUARTER" shall mean any period of three consecutive calendar months commencing with the first day of any January, April, July or October. 1.16 "CONTRACT YEAR" with respect to any Agent shall mean the twelve consecutive month period commencing with the first day of the next Contract Quarter following Commercialization of such Agent, and each consecutive twelve month period thereafter. 1.17 "CONTROLS" OR "CONTROL" shall mean, in the case of any Person, the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of at least fifty percent (50%) of the voting securities thereof or otherwise, and when used in the context of "Control" of technology or information, shall mean possession by a Person of the right to grant licenses or sublicenses of such technology, or disclose such information., without violating the terms of any agreement or other arrangement with, or the rights of, any other Person or any legally binding laws or regulations. 1.18 "CYTOGEN AGREEMENTS" shall mean this Agreement, the Marketing Agreement and the Escrow Agreement. 1.19 "CYTOGEN PROJECT" shall mean the Phase III(b) Studies and Phase IV Studies and any other studies undertaken to enhance the marketing of any Agent that Cytogen elects to conduct. 1.20 "DMF" shall mean a Drug Master File as described in 21 CFR 314.420. "Type I DMF" shall mean a DMF which refers to facilities and operating procedures used to manufacture a drug substance or drug product; "Type II DMF" shall mean a DMF which refers to drug substances or components used in the manufacture of a drug substance or drug product. 1.21 "FDA" shall mean the U.S. Food and Drug Administration of the Department of Health and Human Services, or any successor agency. 1.22 "FDCA" shall mean the Federal Food, Drug and Cosmetic Act. 1.23 "FERIDEX I.V." shall mean the contrast agent commonly known and marketed as Feridex I.V., which is composed of the substance with the United States Adopted Name Ferumoxide. 1.24 "GMPS" shall mean the Current Good Manufacturing Practices regulations promulgated by the FDA and codified at 21 CFR Parts 210 and 211, as amended. 1.25 "LOT" shall mean a batch production run of Agent, or a specific and identified portion of a batch, having uniform character and quality within specified limits; or, in the case of a drug product -3- produced by continuous process, it is a specific and identified amount produced in a unit of time or quantity in a manner that assures its having uniform character and quality within specified limits. 1.26 "MANUFACTURING TECHNOLOGY" shall mean all proprietary information, with respect to the manufacture and production of any Agent, including, without limitation, all trade secrets, technical information, data, techniques, discoveries, inventions, processes, know-how, improvements, patents (including any extension, reissue or renewal thereof) and patent applications, that AM now has or may hereafter conceive, develop, own or Control, which is necessary in connection with the manufacture of any Agent. l.27 "PARTY OR PARTIES" shall mean Cytogen and/or AM, as the context provides. 1.28 "PERSON" shall mean an individual, partnership, corporation, joint venture, unincorporated association, or other entity, or a government or department or agency thereof. 1.29 "PHASE III(b) STUDIES" shall mean clinical or other studies of any Agent which are not necessary for approval of any NDA, but which are begun prior to approval of an NDA. 1.30 "PHASE IV STUDIES" shall mean clinical or other studies of Agent which are undertaken following approval of an NDA, and which are not required to be conducted as a condition of the FDA approval of an NDA. 1.31 "PROJECT OR PROJECTS" shall mean the AM Projects and the Cytogen Project individually or together, as the context provides. 1.32 "PROJECT INFORMATION" shall mean all information developed as a result of the Projects, including, without limitation, techniques, discoveries, processes, copyrights, patents (including any extension, reissue or renewal thereof) and patent applications, know-how, toxicological and pharmacological data, clinical trial results, regulatory applications and documents evidencing approval thereof, and test results, and all information and data provided to a Party pursuant to Article 6 of the Marketing Agreement. 1.33 "PURCHASE PRICE" shall mean the purchase price of Feridex I.V., Combidex and Code 7228 as set out in Section 2.3, individually or collectively, as the context provides as the same may be adjusted pursuant to the terms hereof. 1.34 "QUALIFIED PERSON" shall mean any employee or agent of Cytogen engaged in the manufacture of any Agent pursuant to Section 4.1 of this Agreement, or any employee or agent of AM engaged in the AM Project or the performance of AM's obligations hereunder, designated by Cytogen or -4- AM respectively, to receive Agent Technology or Manufacturing Technology pursuant to Section 4.3 of this Agreement, who has a need to know the information included therein and disclosed to them. 1.35 "QUALIFY" shall mean providing the technological ability to carry on, and achieving approval from FDA for, the manufacture and packaging of any Agent. 1.36 "SPECIFICATIONS" shall mean the written standards established for the characteristics, quality, and quality control testing of each Agent and its constituents, components and packaging, which are set forth on EXHIBIT A. 1.37 "TERM" shall refer to the term of this Agreement, as set forth in Section 5.1. 1.38 "TERRITORY" shall mean the United States (including its territories and possessions and Puerto Rico). 1.39 "THIRD PARTY" shall mean any party other than a Party, or an Affiliate of a Party, to this Agreement. 1.40 "UNIT" shall mean single dose shipping units of any Agent. 2. SUPPLY; PRICE. 2.1 SUPPLY FOR CYTOGEN PROJECT; PROMOTIONAL SAMPLES. During the term of the Marketing Agreement, AM shall supply to Cytogen such completely finished, vialed, labeled, and finally packaged quantities of Agent as may be reasonably required by Cytogen and are reasonably acceptable to AM in order to perform the Cytogen Project or for reasonable distribution of samples to promote sales of Agent. In addition to sample and commercial presentations of Agent, AM will provide Agent to Cytogen in such other presentation as Cytogen shall reasonably request, provided that such other presentations are in compliance with the FDCA and FDA regulations and that Cytogen pays AM's costs occasioned by developing the new presentations. Cytogen agrees not to use Agents supplied to it pursuant to this Section 2.1 for any purpose other than to perform the Cytogen Project or as promotional samples for which Cytogen receives no consideration. In consideration of its purchase of any Agent under this Section 2.1, Cytogen shall pay to AM an amount equal to AM's Cost of Manufacturing such Agent, as AM shall determine once per year and provide notice thereof to Cytogen. AM's "Cost of Manufacturing" for purposes of this Section 2.1 shall mean the costs directly attributable (excluding all overhead) to manufacturing, finishing, packaging and labeling such Agent (i.e., those costs which vary with production), including, but not limited to, direct labor and benefit expenses, consumable bulk and other production materials, determined in accordance with generally accepted cost accounting practices and -5- costs related to outsourcing processes. AM shall invoice Cytogen at the time of shipment. Payment of such amounts shall be made in accordance with the terms of subsection 3.7(a). Cytogen shall have the right, upon reasonable prior notice to AM, at reasonable times and at its own expense to examine or to have examined by a certified public accountant or other person reasonably acceptable to AM, pertinent books and records of AM, for the purpose of determining the correctness of payments made hereunder. 2.2 SUPPLY. During the term of the Marketing Agreement and for any extension agreed upon by the Parties, AM agrees to manufacture for and sell to Cytogen such finished and packaged quantities of Agent as may be reasonably required by Cytogen for sale in the Territory (except to the extent that if for any three month period such requirements exceed ***** percent (*****%) of the quantity forecasted for such period by Cytogen, AM shall only be required to use its commercially reasonable efforts to supply Cytogen its reasonable requirements of Agent for such sale, but not less than ***** percent (*****%) of the forecast). AM agrees that as part of its obligation to manufacture and supply Cytogen with Agent under this Agreement that such Agent shall be supplied in completely finished, labeled, and final packaged quantities, containing all necessary and appropriate packaging and labeling (including, but not limited to, vials, filters, boxes, inserts, labels, freeze/temperature indicators, as required by law and agreed to by the Parties), suitable for sale by Cytogen, its Affiliates or distributors to their respective customers in the Territory and in accordance with Section 3.9 of this Agreement. 2.3 PRICE. In consideration of its purchase of Agent (other than pursuant to Section 2.1), and the rights granted hereunder, Cytogen shall pay to AM the following Purchase Prices: a) $***** per Unit of Feridex I.V.; b) $***** per Unit of Combidex; and c) $***** per Unit of Code 7228. Each Purchase Price shall be payable for so long as AM continues to provide Agent to Cytogen under this Article and pursuant to Cytogen's orders, as set forth in Article 3 of this Agreement. Payment of such amounts shall be made in accordance with subsection 3.7(b). Each Purchase Price is subject to adjustment at the option of AM beginning on ***** and on each ***** thereafter based upon the ***** from the ***** of such ***** to the ***** of such ***** of the PPI-06-35 (for Pharmaceutical Preps, ethical) as published by - ---------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. -6- the Bureau of Labor Statistics, US Department of Labor. In the event that Cytogen's gross margins on the sales of any Agent in any Contract Year (determined as the quotient of (i) Agent Net Sales for such Agent less the sum of (x) the aggregate Purchase Price for such Agent invoiced to Cytogen and (y) royalties owed by Cytogen under the Marketing Agreement for a Contract Year divided by (ii) Agent Net Sales for such Agent in that Contract Year) are less than *****%, then at the request of Cytogen, the Parties shall negotiate in good faith a new Purchase Price with respect to such Agent. 2.4 ALTERNATE MANUFACTURER. AM shall have the right to contract with Third Parties to manufacture Agent for supply to Cytogen, provided that AM shall remain liable to Cytogen for its obligations hereunder and the action or inaction of any such Third Party. 3. FORECASTS; ORDERS; MANUFACTURING; DELIVERY; PAYMENT; PACKAGING; REPORTS; TAXES. 3.1 FORECASTS. As soon as practicable following the Effective Date of this Agreement but no later than the submission of Cytogen's initial purchase order for any Agent, Cytogen shall send to AM, Cytogen's initial non-binding forecasts by Contract Quarter of the quantity of each of Combidex, Code 7228 and Feridex I.V., which Cytogen expects to purchase from AM during the first Contract Year for each such Agent. At each time purchase orders are submitted by Cytogen, a revised non-binding forecast by Contract Quarter for each Agent shall be transmitted by Cytogen to AM for the twelve (12) month period beginning with the Contract Quarter following the Contract Quarter in which the purchase order(s) is submitted. 3.2 ORDERS. Having regard for the forecasts hereinabove referred to, Cytogen shall furnish AM with purchase order(s) (each, an "Order") at least three (3) months prior to the beginning of each Contract Quarter commencing with the second Contract Quarter, consistent with AM's Batch sizes, for the quantities of each of the Agents which Cytogen shall purchase, and which AM shall deliver during the upcoming Contract Quarter. Orders for any Agent in a Contract Quarter in excess of *****% of any of the volume forecasts by Cytogen for such quarter which AM is not able to fill shall not trigger Cytogen's alternate supply right under this Agreement or be deemed a breach of this Agreement. AM agrees to use commercially reasonable efforts to accommodate purchase order revisions submitted in writing by -7- - ---------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. Cytogen. Each Order must specify a delivery date not less than sixty (60) days after the date of the Order in the case of Combidex and Code 7228 (which period shall be reduced to thirty (30) days on and after the first anniversary of the Combidex Approval Date and Code 7228 Approval Date, as the case may be) and in the case of Feridex, not less than thirty (30) days after the date of the Order. Unless AM is not able to fill an Order, AM shall acknowledge and accept in writing each such Order within ten (10) days after receipt of such Order, and shall confirm the shipment instructions and delivery times for such Order either to Cytogen or as otherwise directed by Cytogen. If AM is not able to fill an Order, it shall so notify Cytogen within five (5) days. The purchase order which will be utilized for such order shall be in such form as may be agreed to by AM and Cytogen. If there is any conflict between the terms of a purchase order and the terms of this Agreement, the terms of this Agreement shall govern, unless the Parties have otherwise expressly agreed in writing. Cytogen's initial Order for each Agent shall be submitted to AM at least sixty (60) days prior to the first delivery date specified therein. 3.3 MANUFACTURING. AM shall manufacture each Agent in accordance with applicable GMPs, and as described in the applicable NDA (and if applicable DMF) for each Agent. AM shall manufacture Agent in accordance with the Specifications. AM shall release any Batch of Agent for delivery to Cytogen after determining that such Agent meets the Specifications. AM's testing certificate of analysis ("COA") and a copy of the Batch records shall be shipped to Cytogen either in advance of or with the Batch of Agent to which each refers. 3.4 DELIVERY; SHIPMENT. Actual quantities of Agent to be produced and delivered, and delivery dates, shall be specified in the Orders submitted by Cytogen; provided each Order quantity shall be in whole Batch Multiples. AM agrees to ship the quantities of Agent ordered by Cytogen by the common carrier and method of shipment designated by Cytogen, F.O.B. AM's manufacturing facility, according to any reasonable shipping schedule specified by Cytogen, to the locations specified in Cytogen's Orders. Each shipment of Agent shall be accompanied by an invoice setting forth the amount payable by Cytogen to AM with respect to such shipment. Cytogen shall pay all costs of shipping. 3.5 TITLE; LOSS. Legal title and risk of loss with respect to Agent furnished hereunder by AM shall pass to Cytogen upon delivery to the common carrier designated by Cytogen at the shipping point at AM's manufacturing facility. 3.6 ACCEPTANCE; REJECTION. (a) AM shall deliver Batches of Agent pursuant to Cytogen's Orders along with a COA. Within twenty (20) days of receipt of any shipment, Cytogen shall inspect the -8- shipment and notify AM of its rejection of any Agent within the Shipment. Agent may be rejected only if the quantity shipped is inaccurate as compared to the Order, the shipment does not include the COA or if vials of Agent are damaged or mislabeled. If Cytogen does not notify AM of rejection within twenty (20) days, it shall be deemed to have accepted the shipment or any Agent not so rejected. (b) Rejected Agent shall be returned to AM or disposed of at the direction of AM, in either case at the expense of AM. (c) No rejected Agent shall be reworked by AM unless the same is expressly permitted in the NDA (or if applicable, DMF). (d) AM shall have seventy-five (75) days after receipt of a notice from Cytogen rejecting any Batch of Agent to replace the defective Batch. 3.7 PAYMENTS AND REPORTS FOR AGENTS. (a) Cytogen shall pay for all Agent supplied by AM within thirty (30) days after receipt of an invoice from AM. (b) Interest on all payments due to AM and not paid by Cytogen shall accrue at a rate of 12% per annum or the maximum rate allowed by law, if less. (c) Within thirty (30) days after the close of each Contract Quarter after Cytogen commences sales of an Agent, Cytogen shall deliver to AM a report containing an accounting to AM with respect to all Agent Net Sales for such Contract Quarter and a calculation of gross margin pursuant to Section 2.3. 3.8 CURRENCY. All payments payable under this Agreement shall be paid in U.S. dollars in immediately available funds to an account designated by AM. 3.9 PACKAGING. Agent shall be packaged under Cytogen's label by AM, with such labeling and packaging inserts as mutually agreed to by the Parties. Any packaging and labeling changes for any Agent which are required by the FDA or other regulatory agencies, or changes which result in improved safety or administration of any Agent, such as those which limit breakage, shall be made by AM at no additional cost to Cytogen. Any "esthetic" or non-required packaging and labeling changes requested by Cytogen will be paid for by Cytogen following agreement by the Parties as to the amounts to be charged to Cytogen by AM. Notwithstanding any other provision in this Agreement, but subject to Section 3.5 of the Marketing Agreement, Cytogen will submit all proposed advertising for any Agent directly to the FDA with copies to AM, it being understood that AM does not expect to comment on advertising by Cytogen or on trivial or aesthetic changes in packaging, such as type size. Subject to Section 3.5 of the -9- Marketing Agreement, if AM does not object to any labeling, packaging or advertising proposed by Cytogen within five (5) days of communication thereof to AM by Cytogen in writing, AM shall be deemed to have consented to such labeling, packaging or advertising. 3.10 STABILITY, RECORD KEEPING, INSPECTION, ETC. AM will: (i) select and retain samples of each Batch of Agent as required by the GMPs, and conduct an ongoing stability program in accordance with the provisions of the GMPs for finished pharmaceuticals and the NDA (or if applicable, DMF) (or any stability protocol mutually agreed to by the Parties), and initiate and maintain all legally required documents and records including, without limitation, Batch and Lot production, quality control and stability records, for such periods as are required by the FDA; (ii) promptly notify Cytogen if any out-of-specification value is found in the stability testing program, and reach agreement with Cytogen concerning a course of action; (iii) furnish Cytogen with copies of all such records at Cytogen's request; (iv) if requested by Cytogen, conduct additional testing of retained samples of any Agent returned by customers to determine conformity with the Specifications and other requirements of the NDA (and if applicable DMF); (v) at Cytogen's option and upon reasonable notice to AM, allow one or more Cytogen quality assurance employees or agents, under conditions of confidentiality and AM's standard security procedures, to observe the entire process of manufacture and packaging of each Batch or Lot, or selected Batches or Lots of Agents; (vi) promptly inform Cytogen of any actual or threatened legal or regulatory action by the FDA or any other governmental agency with respect to, or any inspection by the FDA or any other governmental agency of, the AM facilities or operations relating to the Agents, and provide Cytogen with any documentation relating thereto or resulting therefrom; (vii) provide reasonable advance written notice to Cytogen prior to amending the NDA, or any DMF that is referenced in the NDA; and (viii) store, ship and dispose of all wastes generated as a result of its manufacture of Agent in accordance with all applicable laws and regulations. 3.11 RECALL PROCEDURE, COMPLAINTS, ADVERSE EVENT REPORTING, ETC. (a) If Cytogen learns of any information that might give rise to a recall or market withdrawal of any Agent or which might result in a field alert report pursuant to the NDA, or which involves a complaint about the quality or purity of any Agent, then Cytogen shall promptly provide notice thereof to AM. With respect to any Agent, and as between Cytogen and AM, initiation of any recall or market withdrawal, any investigation of any product complaint, or the filing of any field alert report with the FDA, shall be the responsibility of AM, and AM shall be responsible for and handling of all -10- interaction with the FDA and other governmental authorities. To the extent possible under the circumstances, AM will inform Cytogen prior to communicating with the FDA concerning any recall, market withdrawal or field alert report involving any Agent distributed by Cytogen. (b) If in any case where Cytogen's name is on the label of an Agent and Cytogen is of the opinion that a report to a regulatory agency must be made, or a recall or market withdrawal initiated, and such action has not been taken diligently by AM, then Cytogen shall have the right to take such action, if required by law, except that Cytogen will not initiate a recall or market withdrawal without first discussing the matter with the FDA. (c) Any U.S. adverse event report or medical complaint received by Cytogen or AM relating to an Agent shall be promptly investigated by Cytogen. Cytogen will notify AM within one working day of becoming aware of an adverse event or medical complaint. AM will notify Cytogen within one working day of becoming aware of an adverse event or medical complaint, providing appropriate contact information to allow for Cytogen follow-up. Adverse events from outside the U.S. will be followed up by AM. Copies of serious (FDA defined) non-U.S. cases will be transmitted to Cytogen within five (5) working days of AM becoming aware of the case. Any such report that involves an event that is both serious and unexpected (as those terms are defined by then applicable FDA regulations) will be promptly reported to the FDA by Cytogen within fifteen (15) working days of receipt (term definition and reporting requirements to be modified to meet then applicable regulations). Cytogen will provide AM with copies of completed serious (FDA defined) U.S. cases within five (5) working days of Cytogen becoming aware of the case. Cytogen will prepare adverse event periodic reports in accordance with FDA regulations. Periodic reports will be forwarded to AM within twenty-five (25) days of close of the reporting interval, AM will be responsible for submission of periodic and other non-fifteen (15) day reports to the FDA. Each respective Party will provide the other Party with monthly updates of adverse event and product complaint activity within ten (10) days of the end of each month. 3.12 CONTINUING GUARANTEE. For the purpose of Section 333(c)(2) of the FDCA, AM and Cytogen each hereby guarantee to the other that, as of the date of each shipment by AM to Cytogen (in the case of AM's guarantee) and by Cytogen to purchasers from it (in the case of Cytogen's guarantee) of any Agent subject to the provisions of the FDCA, such Agent is not, when shipped by it, adulterated or misbranded within the meaning of the FDCA or of any applicable state law in which the definitions of adulteration and misbranding are substantially the same as those contained in the FDCA. AM and -11- Cytogen each hereby guarantee to the other that, as of the date of each such shipment by it, such Agent will not be an article which may not, under the provisions of Sections 344 or 355 of the FDCA, be introduced into interstate commerce. 3.13 TAXES. Cytogen shall pay all taxes on the use or sale of Agent supplied to Cytogen other than AM's income taxes which may result in connection with this Agreement. 4. LICENSE TO MANUFACTURE AGENT. 4.1 LICENSE TO MANUFACTURE AGENT. If (i) at any time during the term of this Agreement, AM (A) notifies Cytogen that it will be unable to provide at least *****% of the quantity of Agent projected to be needed in any of Cytogen's forecasts; or (B) fails for any reason, including by reason of an event specified in Section 9.1 hereof, to supply Cytogen with any Agent in accordance with Orders submitted by Cytogen and such failure continues for ninety (90) days in the case of Code 7228 and Combidex (which period shall be increased to one hundred and twenty (120) days on and after the first anniversary of the Code 7228 Approval Date or Combidex Approval Date, as the case may be), or one hundred and twenty (120) days in the case of Feridex I.V., or (ii) AM fails to supply Cytogen with Combidex after the Combidex Approval Letter Date or Code 7228 after the Code 7228 Approval Letter Date, in accordance with the initial Order submitted by Cytogen hereunder to purchase such Agent from AM for commercial resale in the United States, and such failure continues for ninety (90) days after the respective Approval Letter Date, AM shall grant Cytogen a temporary non-exclusive right and license, to manufacture the particular Agent to which such failure relates, and AM shall, subject to the provisions of Section 4.3 hereof, provide to Cytogen all Manufacturing Technology necessary to enable Cytogen to manufacture such Agent. The temporary right and license which may be granted pursuant to this Section 4.1 shall include a right to sublicense to an Affiliate or a Third Party contract manufacturer reasonably satisfactory to AM, subject to the confidentiality provisions of Article 7; PROVIDED, that Cytogen shall be liable for the compliance by such Affiliate or Third Party contract manufacturer reasonably satisfactory to AM with all applicable terms of this Agreement. If Cytogen is granted such license to manufacture, it shall have the right, but not the obligation, to manufacture such Agent; and the failure of Cytogen to manufacture, or have manufactured, such Agent shall not cause Cytogen to be in breach of any obligation it may have under this Agreement absent bad faith or willful misconduct. -12- - ---------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. If a condition specified in clause (i) of this Section occurs and is continuing for a period of six months (including the 90-day or 120-day period, as applicable, referred to in clause (i)) or the condition specified in clause (ii) of this Section occurs and is continuing for a period of ninety (90) days, then AM and Cytogen shall negotiate in good faith with a view to (x) modifying the percentage amount of the royalty under Section 10.1 of the Marketing Agreement in light of the costs to Cytogen of AM's failure to supply (or cause a Third Party or Affiliate to supply) Cytogen with such Agent, (y) establishing a date by which AM shall resume manufacturing such Agent, and (z) affording Cytogen the right to terminate this Agreement if AM shall not resume manufacturing by such date, and, if AM and Cytogen are not able to agree on a modified royalty percentage and date for resumption by AM of manufacturing such Agent, then Cytogen shall be entitled to terminate this Agreement pursuant to Section 5.1(c). The temporary license and right of termination set forth in this Section shall be Cytogen's only remedy for AM's failure to manufacture or deliver any Agent, absent bad faith or willful misconduct by AM. 4.2 LICENSE DURATION. The temporary right and license which may be granted pursuant to this Section shall continue until AM notifies Cytogen that it is capable and willing to resume the supply and delivery to Cytogen of its requirements of such Agent (the "Notification"). Upon the expiration of any temporary right and license which may be granted pursuant to this Article 4, Cytogen and the manufacturer used by Cytogen shall return the Manufacturing Technology to AM or otherwise dispose of such Manufacturing Technology as instructed by AM and AM shall resume supplying such Agent pursuant to Article 3. The obligation of Cytogen to make the royalty payments pursuant to Section 10.1 of the Marketing Agreement shall continue notwithstanding any grant to Cytogen of the right and license to manufacture any Agent set forth in this Article 4. 4.3 DISCLOSURE OF MANUFACTURING TECHNOLOGY TO CYTOGEN. If AM grants a license to Cytogen to manufacture an Agent pursuant to this Article, AM shall, at Cytogen's reasonable request, disclose and deliver to such Qualified Persons as shall be designated by Cytogen to AM any or all of the Manufacturing Technology and Agent Technology, including documents, drawings, specifications, processes, formulations, protocols, devices and other tangible manifestations thereof, necessary to enable Cytogen to Qualify itself, its Affiliates or a Third Party, as the case may be, and to exercise its rights under said license with respect to the particular Agent for which the license is being granted. Cytogen shall not disclose any Agent Technology or Manufacturing Technology disclosed to it pursuant to this Section to any other Person, whether or not such Person is an Affiliate of Cytogen, without the express -13- permission of AM, except as expressly permitted in Article 6 of the Marketing Agreement regarding Agent Technology, nor may Cytogen use any of such Agent Technology or Manufacturing Technology except as expressly permitted by this Agreement or the Marketing Agreement. 4.4 INSPECTION RIGHT. If Cytogen shall manufacture, or have manufactured, any Agent pursuant to Section 4.1, AM shall have the right with prior written notice of no less than ten (10) days, during normal business hours, to inspect the finished Agent upon and in connection with which any Trademark is to be used, as well as the methods of manufacture used by Cytogen (or any Affiliate or Third Party engaged in manufacture of such Agent pursuant to Section 4.1) in order that AM may satisfy itself that the finished Agent meets its formulae, standards, specifications and instructions. If any finished Agent is unsatisfactory in the reasonable opinion of AM, Cytogen and AM shall meet to discuss AM's opinion of why such Agent is unsatisfactory. 5. TERM; TERMINATION; SURVIVAL. 5.1 TERM. This Agreement shall continue in force until August ___, 2010, with rolling automatic successive renewal periods of additional five (5) years, unless notice of non-renewal or termination is given by Cytogen or AM ninety (90) days prior to the commencement of any renewal period, and unless and until terminated pursuant to the provisions of this Section. This Agreement shall be automatically terminated upon termination of the Marketing Agreement. In addition, this Agreement may be terminated: (a) at any time, by Cytogen or AM if the other Party shall materially breach any of the terms, conditions and agreements contained herein to be kept, observed, and performed by it, in which case the non-breaching Party may terminate this Agreement at its option and without prejudice to any of its other legal and equitable rights or remedies except as specifically provided in this Agreement, by giving the Party which committed the breach sixty (60) days written notice, particularly specifying the breach, unless the notified Party within such sixty (60) days shall have cured the breach; (b) at any time, if any assignment shall be made by either Party for the benefit of creditors, or if a receiver, trustee in bankruptcy or similar officer shall be appointed to take charge of all of the property of either Party, or if either Party files a voluntary petition under applicable bankruptcy laws or such a petition is filed against either Party and is not dismissed within sixty (60) days, the other Party may immediately terminate this Agreement by giving written notice of termination; -14- (c) by Cytogen, upon thirty (30) days notice, upon the occurrence of any condition specified in clause (i) of Section 4.1, which condition continues for a period of six (6) months, or (ii) upon the occurrence of a condition specified in clause (ii) of Section 4.1, which condition continues for a period of ninety (90) days, during which AM is not able to cause any other Third Party reasonably acceptable to Cytogen to commence performing AM's manufacturing obligations pursuant to this Agreement, and AM and Cytogen are not able to agree upon a revised royalty percentage and date by which AM shall resume manufacturing that particular Agent. 5.2 EFFECT OF TERMINATION. (a) Expiration or termination of this Agreement shall result in the termination of all provisions hereof unless otherwise specified, including, without limitation, the payment and the supply obligation herein contained; PROVIDED that Cytogen shall continue to be liable for payments (with respect to all Agent that have then been delivered to or at the direction of Cytogen) that shall then have accrued and provided that sections 1, 5.2, 6, 7 and 9 shall survive any expiration or termination. (b) Upon expiration or termination of this Agreement: (i) Cytogen shall immediately return to AM the Manufacturing Technology and Agent Technology, if any, in its possession, or otherwise dispose of such Manufacturing Technology and Agent Technology as instructed by AM and cause any Affiliates or Approved Sublicenses to do the same; and (ii) each Party shall immediately return any confidential information of the other. (c) Upon termination of this Agreement by AM, Cytogen shall have the right to complete the sale of its inventory of Agent in the Territory; PROVIDED, that Cytogen's obligations hereunder to comply with the provisions of Articles 2 and 3 in connection with such completion of sale shall remain in effect; and PROVIDED FURTHER, that if requested by AM, Cytogen shall negotiate with AM for the sale of Cytogen's entire inventory of Agent to AM on terms to be negotiated by the parties at such time. (d) Upon expiration or termination of this Agreement, neither Party shall have liability to the other Party for damages of any kind solely as a result of the fact of such expiration or termination, whether on account of the loss by Cytogen of present or prospective sales, investments or goodwill arising solely from statutes that relate to termination of distributors or licensees, and each Party hereby waives any rights which may be granted to it by such statutes. The termination of this Agreement by either party pursuant to this Section shall not bar the party terminating the Agreement from pursuing -15- other legal remedies against the other party including, without limitation, monetary damages for breach of contract. 6. DISCLAIMERS; INDEMNITY. 6.1 (a) AM makes the following warranties with respect to Agent manufactured by AM and delivered to Cytogen by AM under this Agreement: (i) the Agent shall be manufactured in accordance with the approved NDA covering such Agent and the requirements of the FDA and shall conform to the specifications set forth in the approved NDA at the time of delivery, (ii) AM shall comply with all other statutes and regulations applicable to the manufacturing of such Agent at the time of production (including without limitation, those relating to the generation, storage, shipment and disposal of waste); and (iii) AM has not used in any capacity under this Agreement or the Marketing Agreement any person who has been debarred pursuant to the FDCA. (b) EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT AND PARAGRAPHS (c) AND (d) BELOW, AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, AM DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY (I) THAT THE AGENT TECHNOLOGY OR THE MANUFACTURING TECHNOLOGY, OR THE USE THEREOF, OR ANY PRODUCTS INCORPORATED OR MANUFACTURED BY THE USE THEREOF, WILL BE FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (II) OF THE ACCURACY, RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS, OR MERCHANTABILITY OF THE AGENT TECHNOLOGY OR THE MANUFACTURING TECHNOLOGY, OR ANY AGENT OR ANY OTHER PRODUCTS INCORPORATED OR MANUFACTURED BY THE USE THEREOF, OR THEIR SUITABILITY OR FITNESS FOR ANY PURPOSE WHATSOEVER INCLUDING, WITHOUT LIMITATION, THE DESIGN, DEVELOPMENT, MANUFACTURE, USE OR SALE OF ANY AGENT. AM DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER NATURE, EXPRESS OR IMPLIED. EXCEPT AS PROVIDED IN PARAGRAPH (c) BELOW, AM'S LIABILITY ARISING OUT OF THE FAILURE OF ANY AGENT MANUFACTURED BY OR FOR IT TO CONFORM TO THE WARRANTY SET FORTH IN SECTION 6.1(a) WHETHER BASED UPON WARRANTY, CONTRACT, TORT (INCLUDING WITHOUT LIMITATION, NEGLIGENCE) OR OTHERWISE, SHALL BE LIMITED TO REPLACEMENT OF THE DEFECTIVE AGENT IN THE ABSENCE OF AM'S BAD FAITH OR -16- WILLFUL MISCONDUCT. AM'S LIABILITY FOR FAILURE TO MANUFACTURE OR SUPPLY ANY AGENT PURSUANT TO CYTOGEN'S ORDERS SHALL BE LIMITED TO THE RIGHTS SPECIFIED IN ARTICLE 4 OF THIS AGREEMENT IN THE ABSENCE OF AM'S BAD FAITH OR WILLFUL MISCONDUCT. AM'S LIABILITY IF IT IS ALLEGED OR DETERMINED THAT CYTOGEN'S EXERCISE OF ANY OF ITS RIGHTS HEREUNDER WOULD INFRINGE UPON, OR CONFLICT WITH, ANY PATENT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY SHALL BE LIMITED TO THE RIGHTS SET FORTH IN SECTION 8.2 OF THE MARKETING AGREEMENT. (c) AM will indemnify and hold harmless Cytogen, each Affiliate of Cytogen and their respective officers, directors, and employees against any out-of-pocket costs resulting from any claim of product liability, including due to any bodily injury or death, or product recall or FDA investigation costs (for purposes of this Section, any out-of-pocket cost resulting from a claim of product liability, or product recall or FDA investigation cost hereinafter referred to as a "Claim") that may be incurred by Cytogen or any such Affiliate, officer, director or employee to the extent such Claim arises or is alleged to arise out of a material breach by AM of the AM warranty set forth in the Section 6.1(a) above. (d) Cytogen will indemnify and hold harmless AM, each Affiliate of AM, and their respective officers, directors and employees against any out-of-pocket Claim that may be incurred by AM or any such Affiliate, officer, director, or employee to the extent such out-of-pocket Claim arises or is alleged to arise out of the use or sale by Cytogen, its Affiliates or Approved Sublicensees of any Agent manufactured by AM, Cytogen, any Affiliate of Cytogen, or Cytogen designee, provided, however that Cytogen does not indemnify and hold harmless AM, each Affiliate of AM and their respective officers, directors and employees from any out-of-pocket Claim to the extent such out-of-pocket Claim arises out of a breach by AM of the warranty set forth in Section 6.1(a) above. (e) (i) Each indemnified party agrees to give the indemnifying party prompt written notice of any Claim or discovery of fact upon which such indemnified party intends to base a request for indemnification hereunder. (ii) Each party shall furnish promptly to the other copies of all papers and official documents received in respect of any claim for indemnification. The indemnified party will cooperate with the indemnifying party in providing witnesses and records necessary in the defense against any such claim. -17- (iii) With respect to any Claim relating solely to the payment of money damages and which will not result in the indemnified party's becoming subject to injunctive or other relief or otherwise adversely affect the business of the indemnified party in any manner as to which the indemnifying party shall have acknowledged in writing the obligation to indemnify the indemnified party hereunder, the indemnifying party shall have the sole right to defend, settle or otherwise dispose of such claim, on such terms as the indemnifying party, in its sole discretion shall deem appropriate. (iv) The indemnifying party shall obtain the written consent of the indemnified party, which shall not be unreasonably withheld, prior to ceasing to defend, settling or otherwise disposing of any claim if as a result thereof the indemnified party would become subject to injunctive or other equitable relief or the business of the indemnified party would be adversely materially affected. The indemnifying party shall not be liable for any settlement or other disposition of a Claim by the indemnified party which is reached without the written consent of the indemnifying party. (v) Except as provided above, the costs and expenses including fees and disbursements of counsel, incurred by any indemnified party in connection with any claim shall be reimbursed on a quarterly basis by the indemnifying party, without prejudice to the indemnifying party's right to contest the indemnified party's right to indemnification and subject to a refund in the event that the indemnifying party is ultimately held not to be obligated to indemnify the indemnified party. (f) EXCEPT IN CONNECTION WITH BREACHES OF THE CONFIDENTIALITY OBLIGATIONS OF ARTICLE 7 HEREOF OR IN CONNECTION WITH AN INFRINGEMENT OR MISAPPROPRIATION BY ONE PARTY OF THE INTELLECTUAL PROPERTY OF THE OTHER, IN NO EVENT SHALL AM OR CYTOGEN BE RESPONSIBLE TO THE OTHER FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST PROFITS) OF THE OTHER PARTY. (g) Each Party agrees to obtain and maintain in effect a policy or policies of insurance covering its indemnity obligations hereunder. Such policies shall be issued by one or more reputable insurers reasonably acceptable to the other Party, and shall contain terms of coverage reasonably acceptable to the other Party. The policy limits of the policy or policies obtained by Cytogen shall be at least ten million dollars ($10,000,000). The policy limits of the policy or policies initially obtained by AM shall be at least five million ($5,000,000), but AM shall use commercially reasonable -18- efforts to increase such coverage to total policy limits of at least ten million dollars ($10,000,000) by the later of the Combidex Approval Letter Date or the Code 7228 Approval Letter Date. Upon the request of the other Party to this Agreement, each Party shall provide evidence of insurance coverage in compliance with this Section to the other party. In lieu of the insurance coverage described above, either party shall have the right to undertake a program of self-insurance to cover its indemnity obligations hereunder; PROVIDED, HOWEVER, that such program of self-insurance shall be proposed in writing to and approved by the other party to this Agreement (such approval not to be unreasonably withheld). The obligations described in this Section shall survive the termination of this Agreement and continue to bind the parties for five (5) years after the expiration date of the last unit of Agent distributed by Cytogen pursuant to this Agreement. (h) Except in connection with a breach of Article 7, infringement or misappropriation of any intellectual property of the other Party or liability under Sections 6.1(c) or (d), the maximum liability under this Agreement shall equal the amount paid by Cytogen under the Cytogen Agreements over the twelve month period immediately preceding the event giving rise to such liability. 7. CONFIDENTIALITY. 7.1 CONFIDENTIALITY. Except as expressly permitted in this Section 7.1, Cytogen shall maintain the confidentiality of all Agent Technology and Manufacturing Technology (collectively "AM Confidential Material"), and not disclose any such AM Confidential Material to any Person (including its own employees and agents), other than Qualified Persons who have signed Cytogen's standard agreement protecting the confidentiality of third party information prior to such disclosure, and shall hold the same in confidence and shall use the same only for the purposes specified herein. Notwithstanding anything in this Agreement to the contrary, Cytogen may disclose such AM Confidential Information to Affiliates or Approved Sublicensees on a confidential basis to the extent necessary to enable them to manufacture (to the extent permitted under Article 4 of this Agreement) Agent; PROVIDED, HOWEVER, that Cytogen shall be responsible for any failure by any such Affiliate or Approved Sublicensee to (i) maintain the confidentiality of such information (except as provided in Section 7.2), (ii) use it only for such purposes and (iii) disclose it only to employees who need to know such information for such purposes and who have previously signed Cytogen's standard agreement, referred to above, or are otherwise bound by obligations substantially similar to those in such standard agreement, prior to such disclosure. -19- 7.2. EXCEPTIONS. (a) The obligations of confidentiality and restrictions on use imposed upon Cytogen by Section 7.1 shall not apply to any AM Confidential Information that was: (i) in the public domain before the date of this Agreement or subsequently came into the public domain other than through any disclosure or delivery thereof by Cytogen; or (ii) lawfully received by Cytogen without an obligation of confidentiality from a source other than AM; or (iii) disclosed with the prior written approval of AM. (b) Notwithstanding anything to the contrary contained in this Agreement, Cytogen and its Affiliates and any such Third Party manufacturer may disclose or deliver any such AM Confidential Information to (i) any government agency or official to the extent that such disclosure or delivery is necessary for compliance with any law or regulation or (ii) to any Third Party if required to be disclosed by governmental or judicial order, in which case Cytogen shall promptly notify AM and take reasonable steps to assist in contesting such order or in protecting AM's rights prior to disclosure. 7.3 SURVIVAL. This Article 7 shall survive termination of this Agreement for any reason for a period of five (5) years. 8. COMPLIANCE WITH REGULATIONS. Each Party will comply with, and cause any of their Affiliates performing any of their respective rights or obligations hereunder to comply with, all laws and regulations applicable to such rights and obligations. 9. MISCELLANEOUS. 9.1 FORCE MAJEURE. If either Party is prevented from performing, or is unable to perform, any of its obligations under this Agreement, due to any act of God, fire, casualty, flood, war, strike, lock out, failure of public utilities, injunction or any act, exercise, assertion or requirement of governmental authority, compliance with any law or government regulation or order, epidemic, destruction of production facilities, insurrection, inability to procure materials, labor, equipment, transportation or energy sufficient to meet its production or performance needs, or any other cause beyond the reasonable control of the Party invoking this provision, and if such Party shall have used its commercially reasonable efforts to avoid such occurrence and minimize its duration and has given prompt written notice to the other Party, then the affected Party's performance shall be excused and the time for performance shall be extended for the period of delay or ability to perform due to such occurrence. 9.2 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopier, as follows: -20- All notices to AM other than routine correspondence relating to purchase orders, forecasts, and revisions shall be addressed to: Attention: Jerome Goldstein Advanced Magnetics, Inc. 61 Mooney Street Cambridge, MA 02138 Telecopier: (617) 547-2445 With a copy addressed to: Attention: Leslie E. Davis, Esq. Testa, Hurwitz & Thibeault, LLP 125 High Street Boston, MA 02110 Telecopier: (617) 248-7100 Purchase orders, forecasts, revisions, and routine correspondence relating thereto shall be addressed to: Attention: Vice President, Operations Advanced Magnetics, Inc. 61 Mooney Street Cambridge, MA 02138 Telecopier: (617) 547-2445 All notices to Cytogen other than routine correspondence relating to purchase orders, forecasts, and revisions shall be addressed to: Attention: Dr. Joseph Reiser Cytogen Corporation 600 College Road East Princeton, NJ 08540-5308 With a copy addressed to: Attention: General Counsel Cytogen Corporation 600 College Road East, CN5308 Princeton, NJ 08540-5308 -21- Routine correspondence relating to purchase orders, forecasts, and revisions shall be addressed to: Attention: Vice President, Sales & Marketing Cytogen Corporation 600 College Road East, CN5308 Princeton, NJ 08540-5308 or to such other address as any Party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. All notices and other communications given to any Party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopier, or on the date five business days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such Party as provided in this Section 9.2. 9.3 ASSIGNMENT. Neither this Agreement nor any rights granted hereby may be assigned by Cytogen voluntarily or by operation of law, without AM's prior written consent, which may be granted or withheld in AM's sole discretion. Assignment shall be deemed to include the transfer of substantially all of the assets of, or a majority interest in the voting stock of Cytogen, or the merger of Cytogen with one or more other Persons (except a merger in which the stockholders of Cytogen prior to the merger constitute the holders of a majority of the capital stock of the surviving entity following the merger). This Agreement shall be freely assignable by AM. This Agreement shall be binding upon, and inure to the benefit of the successors and assigns of AM and the permitted successors and assigns of Cytogen. 9.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of law principles thereof. Each Party irrevocably submits to the exclusive jurisdiction of any state or federal district court of competent jurisdiction in the Commonwealth of Massachusetts for the purpose of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated by this Agreement (and agrees not to commence any action, suit or proceeding relating to this Agreement or any such transaction, except -22- in those courts). Each party further agrees that service of any process, summons, notice or document in accordance with Section 9.3 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated by this Agreement in any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such action, suit or proceeding sought in any such court that such action, suit or proceeding has been brought in an inconvenient forum. 9.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof. There are no understandings, agreements, representations or warranties, express or implied, not specified herein regarding this Agreement or the subject matter hereof. 9.6 INDEPENDENT CONTRACTORS. No agency, partnership or joint venture is hereby established. Neither Party shall be responsible for the acts or omissions of the other Party. Neither Cytogen nor AM shall enter into, or incur, or hold itself out to Third Parties as having authority to enter into or incur on behalf of the other Party any contractual obligations, expenses or liabilities whatsoever. 9.7 COUNTERPARTS. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 SEVERABILITY. The provisions of this Agreement are severable, and in the event that any provisions of this Agreement shall be determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof. 9.9 HEADINGS. Section and paragraph headings contained in this Agreement are included for convenience only and form no part of the agreement between the parties. 9.10 PUBLICITY. Except as required by or advisable under law, governmental regulation, judicial order, generally accepted accounting principals or any obligations pursuant to any listing agreement with, or regulation of, any national securities exchange or quotation system, neither Party shall directly or indirectly make any public announcement or publicity concerning this Agreement or the subject matter hereof without the prior written consent of the other Party and agreement upon the nature, -23- text and timing of such announcement, which approval and agreement shall not be unreasonably withheld. Such approval and agreement shall be deemed to be given if no response is given to the other Party within two working days of receipt of the proposed text from the Party intending to make such announcement. In the event of a public announcement or publicity not required by law, the Party making such announcement shall use its commercially reasonable efforts to provide the other with a copy of the proposed text prior to such announcement, for the purpose of notice and opportunity to comment. 9.11 WAIVER. The waiver by either Party of a breach or a default of any provision of this Agreement by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provisions, nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege that it has, or may have hereunder, operate as a waiver of any right, power or privilege by such Party. No waiver, consent, modification or change of terms of this Agreement shall bind either Party unless in a writing signed by both Parties, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. 9.12 SUPERIORITY OF AGREEMENT. The parties agree that the provisions of this Agreement, together with any amendments hereto and thereto shall prevail over any inconsistent statements or provisions contained in any documents passing between the parties, including, but not limited to, any purchase order, acknowledgment, confirmation, or notice. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK] -24- IN WITNESS WHEREOF, this Agreement has been duly executed as a sealed instrument as of the date specified above. CYTOGEN CORPORATION ADVANCED MAGNETICS, INC. By: /s/ H. Joseph Reiser By: /s/ Jerome Goldstein ------------------------------------- ------------------------ President and Chief Executive Officer Jerome Goldstein Chief Executive Officer -25- EXHIBIT A SPECIFICATIONS REGULATORY SPECIFICATIONS FOR FERIDEX I.V. - ---------------------------------------------------------------------------------------------------------------------- TEST Proposed Regulatory Specifications - ---------------------------------------------------------------------------------------------------------------------- APPEARANCE Black to reddish brown liquid - ---------------------------------------------------------------------------------------------------------------------- PHYSICAL TEST - ---------------------------------------------------------------------------------------------------------------------- pH 5.0-9.0 - ---------------------------------------------------------------------------------------------------------------------- Relaxivity 0.55-1.25 x 10(5) M(-1) sec(-1) - ---------------------------------------------------------------------------------------------------------------------- Magnetic Susceptibility Not less than 17,000 x 10(-6) c.g.s units/g of iron - ---------------------------------------------------------------------------------------------------------------------- Colloidal Particle Size 100-250 nm Effective Diameter - ---------------------------------------------------------------------------------------------------------------------- Osmolality 325-365 mOsm/kg - ---------------------------------------------------------------------------------------------------------------------- Specific Gravity 1.031-1.041 - ---------------------------------------------------------------------------------------------------------------------- Identification No precipitate with ammonium hydroxide; brown precipitate with hydrochloric acid followed by ammonium hydroxide - ---------------------------------------------------------------------------------------------------------------------- MICROBIOLOGICAL TEST - ----------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- Sterility Pass - ---------------------------------------------------------------------------------------------------------------------- Bacterial Exdotoxin Less than 12.5 EU/ml - ---------------------------------------------------------------------------------------------------------------------- CONTENT TESTS - ---------------------------------------------------------------------------------------------------------------------- Iron Content 10.7-11.7 mg/ml - ---------------------------------------------------------------------------------------------------------------------- Dextran Content 5.6-9.1 mg/ml - ---------------------------------------------------------------------------------------------------------------------- Mannitol Content 55.2-67.4 mg/ml - ---------------------------------------------------------------------------------------------------------------------- Citrate Content 0.25-0.53 mg/ml - ---------------------------------------------------------------------------------------------------------------------- Volume per Vial 5.0-5.6 ml - ---------------------------------------------------------------------------------------------------------------------- Free Iron Less than 0.10 mg/ml - ----------------------------------------------------------------------------------------------------------------------
REGULATORY SPECIFICATIONS FOR COMBIDEX
- ------------------------------------------------------------------------------------------------------------------------------ CODE 7227 TESTING ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ PHYSICAL TEST - ------------------------------------------------------------------------------------------------------------------------------ Appearance ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Identification ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ pH ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Susceptibility ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Size ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ MICROBIOLOGICAL TESTS - ------------------------------------------------------------------------------------------------------------------------------ Bacterial endotoxin ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Sterility* ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Content Tests - ------------------------------------------------------------------------------------------------------------------------------ Iron content ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Dextran content ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Sodium citrate content ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Moisture content ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Colloidal iron ***** ***** - ------------------------------------------------------------------------------------------------------------------------------ Ionic iron ***** ***** - ------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. REGULATORY SPECIFICATIONS FOR CODE 7228
- ------------------------------------------------------------------------------------------------------------------------------ TEST ***** - ------------------------------------------------------------------------------------------------------------------------------ PHYSICAL TESTS - ------------------------------------------------------------------------------------------------------------------------------ Appearance ***** - ------------------------------------------------------------------------------------------------------------------------------ Identification (FTIR) ***** - ------------------------------------------------------------------------------------------------------------------------------ pH ***** - ------------------------------------------------------------------------------------------------------------------------------ Magnetic Susceptibility ***** - ------------------------------------------------------------------------------------------------------------------------------ Particle Size ***** - ------------------------------------------------------------------------------------------------------------------------------ Vol./Vial ml ***** - ------------------------------------------------------------------------------------------------------------------------------ Osmolality ***** - ------------------------------------------------------------------------------------------------------------------------------ Biological Test - ------------------------------------------------------------------------------------------------------------------------------ Sterility ***** - ------------------------------------------------------------------------------------------------------------------------------ Bacterial Endotoxin ***** - ------------------------------------------------------------------------------------------------------------------------------ Content Tests - ------------------------------------------------------------------------------------------------------------------------------ Total Organic Carbon (TOC) (mg/g) ***** - ------------------------------------------------------------------------------------------------------------------------------ Iron Content ***** - ------------------------------------------------------------------------------------------------------------------------------ Ionic Iron ***** - ------------------------------------------------------------------------------------------------------------------------------ Colloidal Iron ***** - ------------------------------------------------------------------------------------------------------------------------------ Mannitol Content ***** - ------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. EX-23.1 6 a2033252zex-23_1.txt EX-23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 33-8697, 33-13953, 33-40744, 33-46963, and 333-28417) of Advanced Magnetics, Inc. of our report dated November 8, 2000 relating to the financial statements, which appears in this Form 10-K. PricewaterhouseCoopers LLP Boston, Massachusetts December 18, 2000 EX-27.1 7 a2033252zex-27_1.txt EXHIBIT 27.1
5 YEAR SEP-30-2000 OCT-01-1999 SEP-30-2000 16,120,738 14,051,850 639,740 0 91,456 31,091,265 13,774,794 (9,620,094) 35,667,591 5,384,360 0 0 0 67,739 0 35,667,591 1,253,537 4,073,919 239,228 7,879,687 0 0 0 (3,805,768) 0 (3,805,768) 0 0 (7,457,717) (11,263,485) (1.67) (1.67)
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