-----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, Birr75Wt8oQXrhacN21iYW9cXt1eqaHVDQxTfGpd/fSoOr/U3TcQIDd8rHXfiLVi sYVx5QZwB9Q37iiy/Y8OTQ== 0000950005-98-000675.txt : 19980813 0000950005-98-000675.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950005-98-000675 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYNX THERAPEUTICS INC CENTRAL INDEX KEY: 0000913275 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 943161073 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22570 FILM NUMBER: 98683514 BUSINESS ADDRESS: STREET 1: 3832 BAY CENTER PL CITY: HAYWARD STATE: CA ZIP: 94545 BUSINESS PHONE: 5106709300 MAIL ADDRESS: STREET 1: 3832 BAY CENTER PLACE CITY: HAYWARD STATE: CA ZIP: 74545 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998. 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 0-22570 Lynx Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 94-3161073 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3832 Bay Center Place Hayward, CA 94545 (Address of principal executive offices) (Zip Code) (510) 670-9300 (Registrant's telephone number, including area code) 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 ------- ------ The number of shares of Common Stock outstanding as of July 31, 1998 was 11,121,963. The aggregate market value of the common stock of the Registrant held by non-affiliates as of July 31, 1998 was $106,908,592. Page 1 of 11 Lynx Therapeutics, Inc. INDEX
PART I FINANCIAL INFORMATION (unaudited) Page Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997............................................................... 3 Condensed Consolidated Statements of Operations - three and six months ended June 30, 1998 and 1997....................................................... 4 Condensed Consolidated Statements of Cash Flows - six months ended June 30, 1998 and 1997........................................................ 5 Notes to Condensed Consolidated Financial Statements.................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 8 PART II OTHER INFORMATION Item 1. Legal Proceedings....................................................................... 10 Item 2. Changes in Securities................................................................... 10 Item 3. Defaults Upon Senior Securities......................................................... 10 Item 4. Submission of Matters to a Vote of Security Holders..................................... 10 Item 5. Other Information...................................................................... 10 Item 6. Exhibits and Reports on Form 8-K....................................................... 10 Signatures ........................................................................................ 11
Page 2 of 11 PART I FINANCIAL INFORMATION Item 1. Financial Statements Lynx Therapeutics, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, December 31, 1998 1997* -------------------------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 5,669 $ 8,798 Short-term investments 15,824 16,132 Accounts receivable 108 244 Other current assets 318 199 -------------------------------------------- Total current assets 21,919 25,373 Property and equipment: Leasehold improvements 4,181 3,795 Laboratory and other equipment 3,023 3,562 -------------------------------------------- 7,204 7,357 Less accumulated depreciation and amortization (3,007) (3,588) -------------------------------------------- Net property and equipment 4,197 3,769 Notes receivable from employees 34 125 Long-term investments 883 --- -------------------------------------------- $ 27,033 $ 29,267 ============================================ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 583 $ 210 Accrued compensation 297 289 Accrued professional fees 138 179 Deferred revenue from related parties 917 2,292 Other accrued liabilities 419 528 -------------------------------------------- Total current liabilities 2,354 3,498 Other noncurrent liabilities 194 179 Stockholders' equity: Preferred stock --- 27,189 Common stock 74,587 46,640 Notes receivable from stockholders (423) (460) Deferred compensation (4,768) (5,394) Accumulated other comprehensive income (loss) 2 (45) Accumulated deficit (44,913) (42,340) -------------------------------------------- Total stockholders' equity 24,485 25,590 -------------------------------------------- $ 27,033 $ 29,267 ============================================ *The Balance Sheet amounts at December 31, 1997 have been derived from audited financial statements at that date but do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes.
Page 3 of 11 Lynx Therapeutics, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net revenues: Revenues from collaborative arrangements with related parties $ 687 $ 1,224 $ 1,375 $ 2,287 Other revenues 4 98 130 170 ------------------------------------------------------------------- Total revenues 691 1,322 1,505 2,457 Operating expenses: Research and development 3,071 3,377 6,913 6,452 General and administrative 509 591 1,001 1,017 ------------------------------------------------------------------- Total operating expenses 3,580 3,968 7,914 7,469 ------------------------------------------------------------------- Loss from operations (2,889) (2,646) (6,409) (5,012) Interest income 324 133 660 304 Gain on sale of Antisense Business --- --- 3,176 --- ------------------------------------------------------------------- Net loss $ (2,565) $ (2,513) $ (2,573) $ (4,708) =================================================================== Basic and diluted net loss per share $ (0.24) $ (0.89) $ (0.31) $ (1.69) =================================================================== Shares used in per share computation 10,884 2,815 8,306 2,787 =================================================================== See accompanying notes.
Page 4 of 11 Lynx Therapeutics, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, ------------------------------------ 1998 1997 ---- ---- Cash flows from operating activities Net loss $ (2,573) $ (4,708) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 653 631 Amortization of deferred compensation 626 293 Non-cash consideration received and costs incurred on the sale of the Antisense Business, net (418) -- Changes in operating assets and liabilities: Accounts receivable 136 (73) Other current assets (119) 91 Accounts payable 373 (80) Accrued liabilities (142) (153) Deferred revenue from related party (1,375) (2,126) Other noncurrent liabilities 15 16 ------------------------------------ Net cash provided by (used in) operating activities (2,824) (6,109) Cash flows from investing activities Purchases of short-term investments (18,260) -- Maturities of short-term investments 18,615 1,968 Purchases of property and equipment (1,290) (1,243) Other assets 5 (264) ------------------------------------ Net cash provided by (used in) investing activities (930) 461 Cash flows from financing activities Issuance of common stock 625 257 ------------------------------------ Net cash provided by (used in) financing activities 625 257 ------------------------------------ Net increase (decrease) in cash and cash equivalents (3,129) (5,391) Cash and cash equivalents at beginning of period 8,798 12,109 ------------------------------------ Cash and cash equivalents at end of period $ 5,669 $ 6,718 Supplemental schedule of non-cash investing activities Following are the effects of the non-cash transactions relating to the sale of the Antisense Business Assets sold, net of depreciation $ 210 -- ==================================== Inex stock received $ 882 -- ==================================== See accompanying notes.
Page 5 of 11 Lynx Therapeutics, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1998 (Unaudited) 1. Ownership and Nature of Business Lynx Therapeutics, Inc. ("Lynx" or the "Company"), was incorporated in February 1992 under the laws of the State of Delaware. Lynx is currently focused on developing its proprietary, highly parallel technologies for the handling and characterization of DNA molecules and fragments. The Company expects these technologies will contribute to a number of applications including gene discovery, characterization of gene function, identification of disease-associated genomic sequences such as polymorphisms, and the study of non-human genomes such as commercially important plants and animals. 2. Basis of Presentation The accompanying condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "Commission"). Certain prior year amounts have been reclassified to conform with current year presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to Commission rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for the quarter and six months ended June 30, 1998, are not necessarily indicative of the results for the full year. The unaudited condensed consolidated financial statements include all accounts of the Company and its wholly owned subsidiary, Lynx GmbH, formed under the laws of the Federal Republic of Germany. All significant intercompany balances have been eliminated. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the Company's year ended December 31, 1997, included in its annual report on Form 10-K filed with the Commission. 3. Summary of Significant Accounting Policies Net Loss Per Share Basic loss per share is calculated by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding, net of certain common shares outstanding which are subject to continued vesting and the Company's right of repurchase, while diluted EPS reflects the potential dilution of securities that could share in the earnings of the Company, to the extent such securities are dilutive. Basic and diluted loss per share are equivalent for all periods presented herein due to the Company's net losses for such periods. The Company has adopted SFAS 128 for annual and interim financial statements issued after December 15, 1997, and has calculated and restated EPS in accordance with SFAS 128 for each period in which an income statement is reported. The following have been excluded from the calculation of loss per share because the effect of inclusion would be antidilutive: approximately 212,000 common shares which are outstanding but are subject to the Company's right of repurchase which expires ratably over 5 years, and options to purchase approximately 1,378,000 shares of common stock at a weighted average price of $5.11 per share. Additionally, all periods prior to March 31, 1998 exclude approximately 500,000 shares of Series B, C, and D convertible preferred stock. On March 31, 1998, the preferred stock converted to common stock on a ten-for-one basis. The converted shares are included in the calculations of basic EPS in all periods including, and subsequent to, March 31, 1998. Page 6 of 11 Comprehensive Income As of January 1, 1998, the Company adopted Statement of Financial Accounting Standards, No. 130 ("SFAS 130"), "Comprehensive Income." SFAS 130 establishes new rules for the reporting and display of comprehensive income and its components. SFAS 130 requires unrealized gains or losses on the Company's available-for-sale securities, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. Total comprehensive loss during the quarters ended June 30, 1998 and 1997 was $2.6 and $2.5 million, respectively. During the first half of 1998 and 1997, total comprehensive loss amounted to $2.6 million and $4.7 million, respectively. 4. Collaborative Arrangements Effective May 1, 1998, the Company amended and restated the amendment, dated September 1, 1997, to the Technology Development and Services Agreement, dated October 2, 1995, between Lynx and Hoechst Marion Roussel, Inc. and its affiliates (collectively, "Hoechst"). The restated amendment extends the term of the agreement and will have no impact on the operations of the Company. Page 7 of 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this section, as well as in the Company's annual report (Form 10-K) filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1997. Overview Results of Operations Revenue Revenues for the second quarter and six-month period ending June 30, 1998, were $0.7 million and $1.5 million, respectively, as compared to $1.3 million and $2.5 million for the second quarter and six-month period ending June 30, 1997, respectively. Revenues for 1998 include $0.7 million in the second quarter and $1.4 million in the six-month period earned under an agreement with BASF AG ("BASF") for access to gene expression analysis services to be performed by Lynx. The 1997 revenue includes $0.7 million from BASF and $0.4 million from Hoechst in the second quarter and $1.4 million from BASF and $0.8 million from Hoechst in the six-month period, earned under agreements for access to gene expression analysis services. Operating Expenses Research and development expenses of $3.1 million in the three months ended June 30, 1998, compared to $3.4 million in the same period of 1997, were lower primarily due to the March 1998 sale of the Company's portfolio of phosphorothioate antisense patents and licenses, and its therapeutic oligonucleotide manufacturing facility (collectively, the "Antisense Business"). Research and development expenses in the six-month period ended June 30, 1998 were $6.9 million, compared to $6.5 million in the six months ended June 30, 1997, reflecting the Company's efforts to build its production capacity for the anticipated commercial application of its technologies. Lynx expects to continue to incur substantial research and development expenses due to planned spending for ongoing technology development and implementation, and new research applications. General and administrative expenses were $0.5 million and $0.6 million in the three months ended June 30, 1998 and 1997, respectively. The decrease was the result of lower outside professional fees. General and administrative expenses in the six-month period ended June 30, 1998 were $1.0 million, unchanged from the six-month period ended June 30, 1997. Lynx expects to continue to incur substantial administrative expenses in support of its research and development efforts. Interest Income Interest income was $0.3 million and $0.7 million in the three and six months ended June 30, 1998, compared to $0.1 million and $0.3 million in the three and six months ended June 30, 1997. The increase was due to higher average cash balances in 1998 than in the same periods in 1997. Gain on Sale of Antisense Business Other income of $3.2 million for the six months ended June 30, 1998, was comprised of the gain on the sale of Lynx's Antisense Business to Inex Pharmaceuticals Corporation ("Inex") in March 1998. As partial consideration in this transaction, Lynx received $3 million in cash and will receive 1.2 million shares of Inex common stock, in three equal installments, with the first 400,000 shares received on March 10, 1998, and the second and third installments of stock to be received no later than two and three years, respectively, from the closing date of the transaction. The Inex common stock received by Lynx is subject to certain restrictions on trading for specific periods of time following receipt by Lynx. Page 8 of 11 Liquidity and Capital Resources Net cash used in operating activities of $2.8 million for the six months ended June 30, 1998, differed from the net loss for the same period primarily due to current period recognition of a portion of previously deferred revenue, deferred compensation expense, depreciation and amortization, the non-cash consideration received and costs incurred on the sale of the Antisense Business, and changes in other current assets and liabilities. Net cash used in investing activities related to purchases of capital equipment, partially offset by maturities of short-term investments. Net cash provided by financing activities related to the exercise of stock options by employees. Cash and equivalents were $5.7 million at June 30, 1998. Lynx plans to use available funds for the development and implementation of its massively parallel technologies and to build capacity for their early commercial uses. Pending such uses as described above, Lynx intends to invest its excess cash in short-term, investment grade, interest-bearing securities or certificates of deposit. Since commencing operations as an independent company, Lynx has obtained funding for its operations through sales of preferred and common stock to venture capital investors, institutional investors, and collaborative partners; revenue from collaborative research and development arrangements, interest income, product sales, and government grants. The cost, timing, and amount of funds required for specific uses by Lynx cannot be precisely determined at this time and will be based upon Lynx's progress in its research and development, administrative and legal costs, the establishment of corporate collaborations and other arrangements, and the availability of alternate methods of financing. Lynx expects to incur substantial and increasing research and development expenses and intends to seek additional financing, as needed, through contractual arrangements with corporate partners and equity or debt offerings. There can be no assurance that any additional financing required by Lynx will be available or, if available, will be on terms favorable to Lynx. The Company believes that, at current spending levels, its existing capital resources and interest income thereon will enable it to maintain its current and planned operations through mid-1999. Impact of Year 2000 The Company has completed an assessment of its computer operating systems and related software and, with only a few minor exceptions, has found them to be Year 2000 compliant. The Company's exposure is limited due to the fact that most of its computers and software were acquired within the past five years and were Year 2000 compliant at purchase. The Company plans to replace the operating systems on the few non-compliant computers before 2000 and expects that the cost will be immaterial. The Company believes that even if such modifications are not made, there will be no adverse impact on operations. However, Year 2000 problems may affect the computer systems of the Company's business partners, vendors, customers, and financial service organizations with which the Company interacts. The Company is in the process of developing a plan to determine the impact that third parties which are not Year 2000 compliant may have on the operations of the Company. There can be no assurance that such plan will be able to address fully, or at all, the "Year 2000 issue" which could have a material adverse effect upon the Company's business, financial condition and results of operations. Page 9 of 11 PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders At the Company's 1998 annual meeting of stockholders held on May 18, 1998, stockholders voted on the following: Proposal I - Election of Directors: Nominee For Withheld ------- --- -------- Sam Eletr 7,976,262 41,429 William K. Bowes 7,975,920 41,771 Sydney Brenner 8,013,392 4,299 James C. Kitch 7,970,360 47,331 Kathleen D. La Porte 7,975,882 41,809 Craig C. Taylor 7,976,269 41,422 Proposal II - Approval of the 1992 Stock Option Plan, as Amended: For Against Abstain Non-Vote --- ------- ------- -------- 6,158,126 142,968 1,045,056 671,541 Proposal III - Approval of the 1998 Employee Stock Purchase Plan: For Against Abstain Non-Vote --- ------- ------- -------- 6,180,773 120,501 1,044,876 671,541 Proposal IV - Ratification of Selection of Independent Auditors: For Against Abstain Non-Vote --- ------- ------- -------- 6,987,458 2,089 483,144 0 Item 5. Other Information Pursuant to the Company's bylaws, stockholders who wish to bring matters or propose nominees for director at the Company's 1999 annual meeting of stockholders must provide specified information to the Company before December 14, 1998 (unless such matters are included in the Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended). Item 6. Exhibits and Reports on Form 8-K. a) Exhibits - The following documents are filed as Exhibits to this report: Exhibit Number Description -------------- ----------- 10.36* Amended and Restated First Amendment to Technology Development and Services Agreement, dated May 1, 1998, between the Company and Hoechst Marion Roussel, and its affiliates. 27.1 Financial Data Schedule *Portions of this agreement have been deleted pursuant to our request for confidential treatment. b) No reports on Form 8-K were filed during the quarter ended June 30, 1998 Page 10 of 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LYNX THERAPEUTICS, INC. /s/ Sam Eletr ------------------------------------ By: Sam Eletr, Ph.D. Chief Executive Officer and Chairman of the Board Date: August 12, 1998 /s/ Edward C. Albini ------------------------------------ By: Edward C. Albini Chief Financial Officer (Principal Financial and Accounting Officer) Date: August 12, 1998 Page 11 of 11 EXHIBIT INDEX Exhibit Number Description -------------- ----------- 10.36* Amended and Restated First Amendment to Technology Development and Services Agreement, dated May 1, 1998, between the Company and Hoechst Marion Roussel, and its affiliates. 27.1 Financial Data Schedule *Portions of this agreement have been deleted pursuant to our request for confidential treatment. EX-10.36 2 AMENDED AND RESTATED EXHIBIT 10.36 *** TEXT OMITTED AND FILED SEPARATELY CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS.200.80(B)(4), 200.83 AND 240.24B-2 AMENDED AND RESTATED RESTATED FIRST AMENDMENT TO TECHNOLOGY DEVELOPMENT AND SERVICES AGREEMENT This Amended and Restated First Amendment (" Restated First Amendment") to the Technology Development and Services Agreement ("Agreement") is made and entered into as of the first day of May, 1998 (the "Amended Effective Date") by LYNX THERAPEUTICS, INC., a Delaware corporation, and its majority-owned subsidiaries, including SPECTRAGEN, INC., (collectively referred to as "Lynx") and Hoechst Marion Roussel, Inc., a Delaware corporation, to whom the Agreement was assigned, and its affiliates ("HMRI"), for the purpose of replacing in its entirety the Restated First Amendment to the Agreement dated September 1, 1997, which as of the Amended Effective Date shall have no further force or effect. RECITALS WHEREAS, Lynx and HMRI agree that the Practical Application Milestone as set forth in the Agreement may not be achievable as originally defined; WHEREAS, HMRI continues to desire early, preferred access to Lynx's library analysis and other subscription services; NOW THEREFORE, in consideration of the foregoing premises and the covenants and promises in the Agreement and in this Restated First Amendment. ARTICLE 1 DEFINITIONS Capitalized terms used in this Restated First Amendment shall have the meanings ascribed to them in the Agreement unless otherwise defined in or amended by this Restated First Amendment. 1.1 "Massively Parallel Signature Sequencing" or "MPSS" means the acquisition of at least [...***...] contiguous bases (a "Signature Sequence") from each of at least [...***...] templates sampled from a given cell culture or tissue cDNA library or of such other information - ------------------------- * CONFIDENTIAL TREATMENT REQUESTED as may be obtained by customers of technology subscription services developed and made available from time to time by Lynx. 1.2 "MPSS Library Analysis" means a report containing each [...***...] base sequence and its abundance within the [...***...] or more cCNA templates extracted from a given sample or such other information as can be generated and is provided by Lynx to its other subscription service customers. 1.3 No amendment is made to Article 1.3. 1.4 "Practical Application Milestone" as defined in Article 1.4 of the Agreement and Exhibit A thereto are no longer applicable. ARTICLE 2 DEVELOPMENT OF MPSS TECHNOLOGY 2.1 Lynx Program. Lynx shall continue to use commercially reasonable efforts consistent with its normal business practices and objectives to develop its sequencing and solid phase cloning technologies and to define, develop and offer to customers in the ordinary course of its business subscription services based on such technologies. 2.2 Reports and Information. Periodically during the term of this Agreement, and in any event at least once per calendar quarter, Lynx will provide Hoechst written reports summarizing its technical progress to date, its plans with respect to the nature of subscription services that it intends to offer and its assessment of how customers could use such services to further their research objectives. If requested by Hoechst, Lynx will provide relevant supporting data and studies to enable Hoechst to assess its interest in securing access to such services. All such reports, including supporting data and studies, and all information contained therein, shall be deemed "Confidential Information" of Lynx under Article 4 hereof. 2.3 Ownership of Technology. No amendment is made to this Article, except that the parties agree to amend the last sentence thereof if and as necessary to accurately describe the services that Hoechst ultimately determines to access hereunder. 2.4 Development Payments to Lynx. Lynx acknowledges that Hoechst has paid to Lynx Three Million U.S. Dollars ($3,000,000), in part, for Lynx's commitment to undertake the development of technologies that may be useful to Hoechst. Lynx agrees that no additional payment by HMRI to Lynx shall be required for Lynx's continued development work. If in the course of the Development Program Lynx is able to establish to HMRI's satisfaction that the services offered or to be offered by Lynx are applicable for HMRI's purposes and fulfill HMRI's needs as determined by HMRI at its sole discretion then HMRI will pay to Lynx a technology access fee to be negotiated but of not more than [...***...] U.S. Dollars [...***...] within thirty (30) days. In the event that a third party (other than BASF) has paid Lynx less than [...***...] - ------------------------- * CONFIDENTIAL TREATMENT REQUESTED 2 U.S. Dollars [...***...] as a technology access fee, than HMRI will pay no more than such third party technology access fee less [...***...] U.S. Dollars [...***...]. 2.5 If Lynx notifies HMRI that it has developed the MPSS technology to the extent that it is being accessed and used by another party, HMRI will at its sole discretion determine the usefulness of the technology for HMRI's purpose and decide whether to access the technology under the conditions outlined under 2.4. A decision by HMRI during the term of this Agreement not to access the technology does not constitute a termination of the Agreement. ARTICLE 3 LYNX MPSS SERVICES No amendment is made to this Article except that (a) the parties agree to amend the description of the services to be offered if and as necessary to accurately describe the services that Hoechst ultimately determines to access hereunder, (b) HMRI no longer requires that Lynx limit its services to a maximum of three parties and (c) the cost of the renewal of the subscription shall be renegotiated in good faith according to the then prevailing circumstances regarding third party subscribers and the amount of work to be done. ARTICLE 4 CONFIDENTIALITY The provisions of this article the Agreement are not amended by this Restated First Amendment. ARTICLE 5 TERM AND TERMINATION 5.1 The term of the Agreement shall be extended to [...***...], and may be extended for another [...***...] at HMRI's discretion upon written notice to Lynx. If the Agreement terminates pursuant to this section, Lynx agrees that HMRI shall be entitled to a credit of [...***...] U.S. Dollars [...***...] with regard to any future technology access fee and any such technology access fee and subscription fee shall be reduced as set forth in this Restated First Amendment. All other terms and conditions of Article 5 of the Agreement are not amended by this Restated First Amendment. ARTICLE 6 REPRESENTATIONS AND WARRANTIES - ------------------------- * CONFIDENTIAL TREATMENT REQUESTED 3 The provisions of this article of the Agreement are not amended by this Restated First Amendment. ARTICLE 7 MISCELLANEOUS The provisions of the Agreement are not amended by this Restated First Amendment except that all notices to Hoechst pursuant to Article 7.6 of the Agreement shall hereafter be delivered to Hoechst Marion Roussel, Inc. 2110 East Galbraith Road Cincinnati, OH 42512 Attention: General Patent Counsel IN WITNESS WHEREOF, the parties hereto have duly executed this Restated First Amendment as of the date first written above. LYNX THERAPEUTICS, INC. HOECHST MARION ROUSSEL, INC. By: /s/ Sam Eletr By: /s/ Thomas Hofstaetter ----------------------------- ------------------------------------- Title: Chief Executive Officer Title: Senior Vice President, Business -------------------------- ---------------------------------- Development and Strategic Planning ---------------------------------------- Date: June 8, 1998 Date: June 15, 1998 --------------------------- ----------------------------------- 4 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 5,669 15,824 108 0 0 21,919 7,204 3,007 27,033 2,354 0 0 0 74,587 (50,102) 27,033 0 1,505 0 0 7,914 0 0 (2,573) 0 (2,573) 0 0 0 (2,573) (0.31) (0.31)
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