-----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, Ixxe6I/pOcNQN9kGfZfQ/FqCN6WkFDFVOFG5izawdcfIF0f5CjDJjV3Bw+V3fGSy jTYtCcUVlpJOgTqUa5011Q== 0000912057-97-024052.txt : 19970714 0000912057-97-024052.hdr.sgml : 19970714 ACCESSION NUMBER: 0000912057-97-024052 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970711 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IGEN INTERNATIONAL INC /CA/ CENTRAL INDEX KEY: 0000916304 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 942852543 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23252 FILM NUMBER: 97639750 BUSINESS ADDRESS: STREET 1: 16020 INDUSTRIAL DRIVE CITY: GAITHERSBURG STATE: MD ZIP: 20877 BUSINESS PHONE: 3019848000 MAIL ADDRESS: STREET 1: 16020 INDUSTRIAL DRIVE CITY: GAITHERSBURG STATE: MD ZIP: 20877 FORMER COMPANY: FORMER CONFORMED NAME: IGEN INC /CA/ DATE OF NAME CHANGE: 19931216 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 For Fiscal Year Ended March 31, 1997 -------------- Commission File Number 0-23252 -------- IGEN International, Inc. ------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 94-2852543 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 16020 INDUSTRIAL DRIVE, GAITHERSBURG, MD 20877 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 301-984-8000 ---------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.001 par value ----------------------------- (Title of Class) 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 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 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. ----- The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 17, 1997, computed by reference to the closing sale price of such stock quoted on the Nasdaq National Market, was approximately $59,109,800. For the purposes of this calculation, shares owned by officers, directors and 5% shareholders known to the Registrant have been deemed to be owned by affiliates. The number of shares outstanding of the Registrant's Common Stock as of June 17, 1997 was 15,006,017. DOCUMENTS INCORPORATED BY REFERENCE The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K. Certain information required in Part III of this Annual Report on Form 10-K is incorporated from the Company's definitive Proxy Statement relating to its Annual Meeting of Shareholders to be held on September 9, 1997. 1 PART I IN ADDITION TO HISTORICAL INFORMATION, THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. REFERENCE IS MADE IN PARTICULAR TO STATEMENTS REGARDING THE POTENTIAL MARKET FOR DIAGNOSTIC PRODUCTS, THE POTENTIAL IMPACT OF COMPETITIVE PRODUCTS, THE COMPANY'S EXPECTATIONS REGARDING THE LEVEL OF ANTICIPATED ROYALTY AND REVENUE GROWTH IN THE FUTURE, THE POTENTIAL MARKET FOR PRODUCTS IN DEVELOPMENT, THE DESCRIPTION OF THE COMPANY'S PLANS AND OBJECTIVES FOR FUTURE OPERATIONS, ASSUMPTIONS UNDERLYING SUCH PLANS AND OBJECTIVES AND OTHER FORWARD-LOOKING STATEMENTS INCLUDED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ("MD&A"). SUCH STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF FACTORS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. IN PARTICULAR, CAREFUL CONSIDERATION SHOULD BE GIVEN TO CAUTIONARY STATEMENTS MADE IN THE MD&A AND IN THE BUSINESS SECTION OF THIS DOCUMENT UNDER THE HEADING "RISK FACTORS." IGEN DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS. ITEM 1. BUSINESS INTRODUCTION IGEN International, Inc. ("IGEN" or the "Company") develops, manufactures and markets diagnostic systems utilizing its patented ORIGEN-Registered Trademark- technology, which is based on electrochemiluminescence. This proprietary technology utilizes labels that, when attached to a biological substance and electrochemically stimulated, emit light at a particular wavelength to signal the presence of an analyte. The light emission then can be measured with a high degree of accuracy to detect and quantify the analyte. The ORIGEN technology thus provides a uniform assay format for conducting a multitude of diagnostic tests, including immunoassays, nucleic acid probe and clinical chemistry tests. The Company believes that ORIGEN-based diagnostic systems offer significant advantages over existing systems in terms of speed, sensitivity, flexibility, throughput and cost effectiveness. The Company is designing its diagnostic systems to become the industry standard for all segments of the diagnostic market, from large central laboratories to patient point-of-care, industrial and in-home testing. The Company's business strategy is to commercialize certain products in collaboration with established healthcare and information technology companies and to develop and market other products either independently or with corporate partners in the patient point-of-care, life science research, animal health and industrial markets. - Collaborations with established diagnostic and pharmaceutical companies have provided the Company with revenues from licensing agreements, as well as access to large marketing organizations that it believes are well positioned to maximize market penetration of ORIGEN-based products. The Company has entered into several strategic alliances, including: - Boehringer Mannheim GmbH ("Boehringer Mannheim")--the second largest worldwide manufacturer of diagnostic equipment and supplies that is part of Corange Limited, a multinational corporation with annual revenues exceeding $4 billion--to commercialize ORIGEN-based clinical immunodiagnostic and nucleic acid probe systems that are marketed worldwide to clinical reference laboratories. IGEN received $50 million in license fees from Boehringer Mannheim and receives royalties on all product sales. Boehringer Mannheim presently markets two ORIGEN-based systems under the Elecsys product line. In January 1997, the Company received $6 million under an Advance Royalty Agreement with Boehringer Mannheim. In May 1997, F. Hoffman-LaRoche AG ("Roche") and Corange Ltd. announced that Roche would acquire all shares of Corange. The merger, when completed, will create a $15 billion global company that will be the world's largest diagnostic supplier. - Organon Teknika B.V. ("Organon Teknika")--a company specializing in hospital and blood bank products, which is a business unit of Akzo Nobel N.V., a multinational corporation with annual revenues of approximately $10 billion--to develop and commercialize ORIGEN-based nucleic acid probe systems that will be marketed worldwide to clinical diagnostic and life science research markets. IGEN received $20 million under its agreements with Organon Teknika. Organon Teknika markets the NASBA QR System together with test kits for the detection of HIV-1 RNA. - Eisai Co., Ltd. ("Eisai")--the fourth largest Japanese pharmaceutical company--to market in Japan an ORIGEN-based diagnostic system for agreed-upon diagnostic tests. Eisai has received regulatory approvals in Japan and expects to introduce its first ORIGEN-based product under the trade name Picolumi during 1997. 2 IGEN currently sells the ORIGEN Detection System and related reagents and services for life science research applications. The Company believes that its ORIGEN Detection System can replace many of the complex and less sensitive immunoassay methods presently in use, including radioimmunoassays. The Company believes that applications of the ORIGEN technology include point-of-care diagnostic systems for use outside the central laboratory because of speed, simplicity and cost effectiveness. The Company also anticipates that applications will exist in the field of in-home testing (patient self-testing), in which IGEN's technology may enable the creation of compact, inexpensive diagnostic products. The Company is currently monitoring the development of healthcare communication networks and intends to design its point-of-care and in-home testing systems for integration into such networks. IGEN, Inc. was incorporated in California in 1982 and reincorporated in Delaware during 1996 as IGEN International, Inc. IGEN's executive offices, laboratory and manufacturing operations are located at 16020 Industrial Drive, Gaithersburg, Maryland 20877. INDUSTRY BACKGROUND In vitro diagnostic testing is the process of analyzing blood, urine and other specimens to screen for, monitor and diagnose diseases and other medical conditions or to determine the chemical and microbiological constituents of the specimens. The major procedures currently used are chemistry, immunodiagnostic, nucleic acid probe, hematological and microbiological tests. Chemistry tests utilize established analytical methods for measuring simple compounds such as glucose and cholesterol, elements such as sodium and potassium, gases and enzymes. The types of samples that can be analyzed include biological specimens such as blood and urine as well as environmental materials, foods and beverages. The results of the analysis can be qualitative, identifying only the presence or absence of an analyte, or quantitative, identifying also the precise level of the analyte in the specimen. Immunodiagnostic tests utilize antibodies to detect specific analytes such as viruses, hormones, therapeutic drugs and other substances present in the blood or other specimens in extremely low concentrations. To develop an immunodiagnostic test, an antibody is created that binds specifically to the analyte to be detected. The antibody is then coupled to a label that signals to an instrument the presence of the analyte in a way that can be measured. Immunodiagnostic tests are characterized by a relatively high rate of technological change and the frequent introduction of new clinical tests. Currently, most immunodiagnostic tests are performed in clinical laboratories by skilled technicians who must process the specimen, measure its volume, add reagents and use sophisticated machines to read and calculate the results. Nucleic acid probe tests allow the detection of disease at the fundamental genetic level. The absence or presence of certain genes or gene mutations have been found to be reliable indicators of specific cancers, genetic disorders and infectious diseases. Nucleic acid probes provide a direct means of detecting nucleic acid sequences associated with either infectious agents or certain genes in a biological sample. One difficulty in the development of nucleic acid-based diagnostic technology is the low concentration of nucleic acid in the sample, which generally renders direct detection impractical. Recent solutions to this problem, including the DNA Polymerase Chain Reaction ("PCR") or Nucleic Acid Sequence-Based Amplification ("NASBA"), are capable of amplifying trace amounts of target nucleic acid hundreds of millions of times and allow for the detection of disease-causing genes before symptoms appear. Diagnostic procedures are performed primarily in three different markets: the clinical diagnostic market, including hospitals, reference laboratories, blood banks, patient point-of-care testing and home testing; the life science market, including laboratories in pharmaceutical and biotechnology companies, universities, private institutes and the government; and the industrial market, which consists of food and water quality assurance programs, agricultural diagnostics and animal health testing. 3 ORIGEN TECHNOLOGY The ORIGEN technology is a proprietary technology based on electrochemiluminescence which utilizes labels that, when attached to a biological substance and electrochemically stimulated, emit light at a particular wavelength to signal the presence of an analyte. The light emission can then be measured with a high degree of accuracy to detect and quantify the analyte. The Company's ORIGEN technology thus provides a uniform assay format to conduct a multitude of diagnostic tests including immunoassay, nucleic acid probe and clinical chemistry tests. The ORIGEN technology is protected by numerous patents in the United States and internationally. Using the ORIGEN technology as a platform, IGEN and its collaborators are developing diagnostic systems that offer many advantages over current technologies. The Company believes that its ORIGEN technology offers improved speed, sensitivity, flexibility and throughput relative to existing diagnostic technologies and lowers the cost of diagnostic procedures. The ORIGEN system directly measures electrochemiluminescence, and does not involve the use of enzymes common in competing systems, thus permitting a simplified assay format. The ORIGEN diagnostic systems can be automated to provide in a uniform format a large number of immunoassay, nucleic acid probe and clinical chemistry tests. The major features and benefits of proprietary ORIGEN-based diagnostic systems are:
FEATURE BENEFIT - -------------------------------------------------------- -------------------------------------------------------- Simple Assay Format Reduces time and labor in performing an assay. Flexibility Enables a single instrument to perform immunoassays on large and small molecules and to perform DNA and RNA probe assays.Permits immunoassays to be integrated with clinical chemistry systems. Cost Reduces assay cost per test. Speed Produces quick results.Enables high throughput (random access). Sensitivity Allows detection of analytes at very low concentrations. Precision Provides highly-reproducible measurements. Label Stability Extends reagent shelf life.Improves measurement accuracy.
The essential component of the ORIGEN system is the measurement module, which consists of a flow cell containing an electrode and a light detection means such as a photomultiplier tube. The ORIGEN measurement module has been designed so that it can be easily incorporated into a variety of instruments from large central laboratory random-access systems to small batch point-of-care ORIGEN. The current design of the ORIGEN measurement module includes a reusable platinum or gold electrode to generate electrochemiluminescence. IGEN is also developing disposable electrodes to be used in portable instruments. PRODUCT DEVELOPMENT STRATEGY The Company is designing its diagnostic systems to become the industry standard for all segments of the diagnostic market, from large central laboratories to patient point-of-care and in-home testing. IGEN has selectively established corporate alliances with companies that it believes are well positioned to maximize market penetration in the central laboratory market. In particular, the Company has established relationships with Boehringer Mannheim for the development and marketing of clinical reference laboratory systems worldwide; with Organon Teknika for the development and marketing of 4 nucleic acid probe systems for worldwide use in clinical diagnostic and life science research markets; and with Eisai for the marketing in Japan of a specified diagnostic system for certain diagnostic tests. The Company will exploit either independently or with corporate partners, the opportunities presented by the expansion of diagnostic testing into patient point-of-care sites as well as opportunities available in the life science research and industrial markets. The Company will apply its ORIGEN technology to the development of a line of quantitative diagnostic products to address the needs of these markets. IGEN is currently marketing the ORIGEN Detection System and related reagents and services for life science research applications. The Company believes that as the use of patient point-of-care and in-home testing systems expands, it will become necessary to integrate the information that is being generated by these systems into the data and communication networks that are rapidly expanding as a result of the tremendous improvements in information handling. The Company is monitoring the development of healthcare communication networks and intends to design its point-of-care and in-home testing systems for integration into such networks. ORIGEN PRODUCTS IGEN and its strategic collaborators are developing a broad range of products based on its proprietary ORIGEN technology, which are applicable to the clinical diagnostics, industrial and life science research markets. The Company believes that its ORIGEN technology is well suited for the development of a family of instruments to be used in hospital and reference laboratories and at the patient point-of-care. The technology permits virtually all clinical chemistry, immunodiagnostic, DNA probe and RNA probe tests to be performed on the same instrument using the same detection method. The ORIGEN technology also could serve as the basis for portable hand-held devices that perform with the efficiency and reliability of larger systems. The table on page 6 summarizes the Company's product and development programs. CLINICAL DIAGNOSTIC PRODUCTS Hospital/Reference Laboratory Systems. One of the most important applications of the Company's ORIGEN technology is in large, highly-automated clinical immunoassay systems of the type used in hospitals, reference laboratories and blood banks. Reference laboratories constitute the vast majority of the clinical diagnostic market today. Reference laboratory systems must be able to perform a wide variety of immunoassay tests on a large number of samples both reliably and cost-effectively. The Company and its corporate collaborators believe that systems based on the ORIGEN technology are well suited to serve this market, and may surpass those immunoassay and nucleic acid probe systems currently available in terms of speed, cost effectiveness and simplicity. The Company's strategic partner, Boehringer Mannheim, introduced its first ORIGEN-based random-access immunoassay system, the Elecsys 2010, for the reference laboratory market in 1996. The Elecsys 2010 is designed to perform multiple assays in a random-access mode while handling stat tests, i.e., tests performed on clinical samples where the results are needed immediately, without interfering with the system workflow. Boehringer Mannheim and Hitachi have cooperated in the development of the Elecsys 2010, building on their successful cooperation in clinical chemistry instrumentation. The Elecsys 2010 is modular so that it can be integrated with Boehringer Mannheim's clinical chemistry systems. Boehringer Mannheim offers a competitive panel of assays with the Elecsys 2010 and continues to develop additional assays for market introduction in the subsequent months and years. IGEN is collaborating with Boehringer Mannheim to develop at least 10 assays, each of which should have applicability to the point-of-care market pursued by IGEN. IGEN is reimbursed by Boehringer Mannheim for certain of these assay development costs. Boehringer Mannheim recently introduced the Elecsys 1010 system, which is a random access system designed for customers who have a lower throughput requirement. Organon Teknika is developing nucleic acid probe diagnostic tests that are used to analyze human gene sequences or to detect the presence of gene sequences of infectious organisms. IGEN and its corporate collaborators believe that the ORIGEN technology applied to nucleic acid probe assays will offer the advantages of greater accuracy and efficiency demanded by the market. Organon Teknika markets the NASBA QR System, the first nucleic acid probe system based on the ORIGEN technology and Nucleic Acid Sequence-Based Amplification ("NASBA"), a proprietary nucleic acid amplification technique. 5 PRODUCT AND DEVELOPMENT PROGRAMS
- ------------------------------------------------------------------------------------------------------------------ MARKET PRODUCT APPLICATION COMMERCIAL STATUS RIGHTS - ------------------------------------------------------------------------------------------------------------------ Clinical Diagnostic Market Hospital/ Reference Elecsys 2010 Immunoassays Boehringer Mannheim Product Sales Laboratory Systems Elecsys 1010 Immunoassays Boehringer Mannheim Product Sales NASBA QR System Nucleic Acid Probe Organon Teknika Product Sales Detection Picolumi Immunoassays (Japan) Eisai(Japan) Product Launch -- 1997(1) Random Access Systems Nucleic Acid Probe Organon Teknika; Development Detection Boehringer Mannheim High Throughput Immunoassays Boehringer Mannheim Development Elecsys System Patient Point-of-Care Physician's Office/ Immunoassays IGEN Development Systems Hospital Analyzer Home Self Testing Health Screening and IGEN Research Monitoring - ------------------------------------------------------------------------------------------------------------------ Life Science Research Market ORIGEN Detection Immunoassays/ Nucleic IGEN Product Sales System, Reagents and Acid Probe Detection Services Cell Culture Reagents Research Biologicals IGEN Product Sales NASBA QR System Nucleic Acid Probe Organon Teknika Product Sales Detection - ------------------------------------------------------------------------------------------------------------------ Industrial Markets Environmental/ Water Immunoassays and IGEN; Organon Teknika Development Testing/ Food Nucleic Acid Probe Processing System Detection Animal Health Systems Immunoassays and IGEN Development Nucleic Acid Probe Detection
(1) Product launch dates are based on estimates provided by the Company's collaborators. - ------------------------------------------------------------------------------- 6 The NASBA System has four stages which are sample preparation and nucleic acid isolation, amplification and detection. The NASBA QR System utilizes ORIGEN technology which provides automated, rapid, specific, sensitive and homogenous detection. The first NASBA test kit introduced in 1994 was a product for the direct detection of HIV-1 RNA, both quantitatively and qualitatively. Products under development by Organon Teknika include tests for hepatitis, cytomeglovirus, chlamydia and mycobacteria. In addition to the diagnosis of infectious disease, the NASBA System has potential applications in the fields of genetic diseases, oncologic diseases and HLA typing for organ transplants. Patient Point-of-Care Systems. IGEN is independently developing applications of its ORIGEN technology that can be used to perform immunoassays outside the central laboratory by an operator with no special skill or training. This market includes patient point-of-care settings such as the physician's office, ambulatory clinics, hospital emergency rooms, surgical and intensive care units, nurse's stations or the hospital patient's bedside. Physicians, patients and third-party payors have created a demand for bringing laboratory testing to the point of care, closer to the patient so as to allow the medical practitioner to provide immediate feed-back to the patient. Immunodiagnostic systems for individual physicians have had limited market penetration because of the lengthy turnaround time for test results (1-2 days), the need for skilled labor in performing tests and high cost. The Company believes that the emergence of simple, accurate and cost effective diagnostic products is shifting the site of in vitro diagnostic testing from the clinical laboratory to alternate sites. IGEN believes that significant demand exists for immunodiagnostic products that reduce turnaround time and cost. IGEN's point-of-care system is being designed to conduct immunodiagnostic tests that will provide accurate results to the physician within 15 minutes, thereby permitting the physician to make an immediate decision regarding the patient's course of treatment. The ORIGEN technology permits development of a system that is simple to operate at a very low cost per test. The Company is designing its point-of-care system to consist of a simple, low cost instrument and a line of reagents packaged in a disposable single test format. The Company is also developing the system to include information processing and transfer capabilities to update the patient's medical history and provide the physician with current patient information. As most immunodiagnostic assays can be conducted on the ORIGEN system in a uniform format, the Company believes that a broad menu of tests could be marketed on its point-of-care system. In-Home Testing. Longer term applications of the ORIGEN technology also exist in the field of in-home testing (patient self-testing), in which IGEN's technology may enable the creation of compact, inexpensive diagnostic products. The Company is exploring the feasibility of using its ORIGEN technology for such products. LIFE SCIENCE RESEARCH PRODUCTS Immunoassay Systems. IGEN currently sells the ORIGEN Detection System and a line of related reagents and services. The ORIGEN Detection System is used by researchers who wish to perform immunoassays for life science applications. The ORIGEN Detection System is an open architecture assay platform that quantitates the binding of any two molecules that come together with specificity. The "open architecture" component of ORIGEN refers to the researcher's ability to customize their assays for their particular performance parameters. The System is optimized for immunoassays, but offers researchers the flexibility to build other assays for direct detection of nucleic acids, and receptor ligand studies. Whether the need is for greater sensitivity, faster turnaround time, expanded linear range, or other key features, a researcher has the flexibility to design an assay to meet these goals. 7 ORIGEN is being implemented throughout the life science market as a replacement technology for Radioimmunoassays (RIA) and Enzyme Linked Immunosorbent Assays (ELISA), the most commonly used systems, as well as a replacement for newer chemiluminescent and fluorescent procedures. The change is occurring as scientists see the enhancements to sensitivity (10-100 fold improvements), dynamic range of up to 5 logs, and the elimination of time consuming technical steps, such as assay washes. IGEN's market focus in bio/pharmaceuticals has resulted in successful application of ORIGEN technology by customers in drug discovery and development, compound screening, basic research, clinical trials, quality control and manufacturing, ORIGEN is often replacing standard technologies such as radioimmunoassays. Bio/pharmaceutical researchers are benefiting from the ORIGEN Detection System's sensitivity as well as the reduction of time and labor, and significantly, the reduction in use of rare assay components such as proprietary compounds, antibodies, or clinical trial samples. The Company believes that the ORIGEN Detection System has established itself as a new tool that will help our customers bring pharmaceutical products to market faster. Performance is key to new technology implementation by the bio/pharmaceutical researcher. IGEN has established added value in its customized approach to our customers. The versatility of ORIGEN technology allows for product customization rather than forcing a "one size fits all" approach. IGEN has focused its scientific resources to provide custom support to the client, based on their specific research needs, often at the customer site. This "mass customization" approach has spurred growth of complementary businesses such as assay development, custom compound labeling and assay validation services. To date there have been over 200 assay applications developed with the ORIGEN Detection System for over 100 customers. While IGEN's market focus has been with bio/pharmaceutical customers, we have also established customers at government and university research centers. These customers are performing research in strategic IGEN growth areas such as food and water quality testing. We have also broadened our assay versatility by expanding into detection of DNA and quantitation of PCR. ORIGEN technology even offers the unique capability of sensitive detection of DNA without costly amplification steps. OTHER ORIGEN RESEARCH PRODUCTS. The Company will seek to develop with corporate collaborators other research products based on its ORIGEN technology, including detectors for column chromatography and capillary zone electrophoresis, electrochemiluminescence-based gel readers for DNA sequencers and a high-throughput reader for hybridoma screening and antibody production. RESEARCH BIOLOGICALS. The Company produces and sells a line of research reagents under its ORIGEN brand name. The products are purified biological extracts that promote the growth of certain types of cells used in laboratory investigations. The Company markets the products directly as well as through distributors. INDUSTRIAL PRODUCTS The Company is seeking to develop further, either independently or with joint venture partners, ORIGEN-based products for use in food and water quality assurance programs and animal health testing. The emergence of simple, accurate and cost effective products is shifting testing from traditional labor intensive methods such as gas chromatography, to immunodiagnostics. The Company believes that its ORIGEN Detection System and reagents together with simpler, low-cost instruments under development will be particularly suited for these market applications. COLLABORATION AND LICENSE AGREEMENTS IGEN's business strategy is to develop and market products both independently and in collaboration with established healthcare and information technology companies. The Company's ORIGEN technology has already provided near-term revenues which have enabled the Company to pursue its strategic objectives in the diagnostic business. IGEN may seek additional corporate collaborators to provide financial resources, research and manufacturing capabilities and marketing infrastructure. 8 BOEHRINGER MANNHEIM GMBH. Boehringer Mannheim is a business unit of Corange Limited, a multinational corporation with annual revenues exceeding $4 billion and the second largest worldwide manufacturer of diagnostic equipment and supplies. Boehringer Mannheim's principal strength is in the area of clinical chemistry systems, in which it is the market leader. In 1991, the Company entered into an agreement under which Boehringer Mannheim was granted rights to develop and market clinical diagnostic systems worldwide based on the Company's technology. Under the agreement, IGEN received $50 million in license fees. Boehringer Mannheim pays additional amounts for certain assay product development being performed by IGEN, and is obligated to pay the Company a royalty on all product sales. In January 1997, the Company received $6 million under an Advance Royalty Agreement with Boehringer Mannheim. In May 1997, Roche and Corange announced that Roche would acquire all shares of Corange. The merger, when completed, will create a $15 billion global company that will be the world's largest diagnostic supplier. The ORIGEN products being marketed by Boehringer Mannheim under the name Elecsys, are a series of highly-automated diagnostic systems designed for the large clinical laboratory market, such as hospitals, clinical reference laboratories and blood banks. IGEN believes that Elecsys systems will enable Boehringer Mannheim to increase its market presence in immunodiagnostics and to market systems capable of performing both clinical chemistry and immunodiagnostic tests. Boehringer Mannheim has placed in excess of 1,500 Elecsys systems since market introduction in mid-1996. The Company has granted Boehringer Mannheim an exclusive right to market these products worldwide, except for rights previously licensed to Eisai to market in Japan a specific ORIGEN-based system. The Company has also granted Boehringer Mannheim a co-exclusive license to use the ORIGEN technology for nucleic acid probe tests in the centralized laboratory market. Organon Teknika B.V. Organon Teknika, a company specializing in hospital and blood bank products, is a business unit of Akzo Nobel N.V., a multinational corporation with annual revenues of approximately $10 billion. In 1993, the Company entered into a $20 million license agreement and a stock purchase agreement with Organon Teknika. The license agreement provides Organon Teknika with co-exclusive rights to commercialize certain products utilizing the Company's ORIGEN technology for detecting nucleic acids in centralized clinical markets, research markets and for certain pathogens for food testing. Organon Teknika has combined the Company's ORIGEN technology with NASBA, a proprietary nucleic acid amplification technique. The agreement provides for royalty payments to IGEN and for product supply arrangements. The Company also issued shares of Common Stock to Organon Teknika and agreed to devote specified resources to research and development activities in the field of clinical diagnostics. Robert Salsmans, a director of the Company, is President and Chief Executive Officer of the Organon Teknika group of companies. Eisai Co., Ltd. Eisai is the fourth largest Japanese pharmaceutical company. The Company granted a license to Eisai to market in Japan a clinical diagnostic system based on the Company's ORIGEN technology. Under this agreement, Eisai has paid $6 million to IGEN and is obligated to pay IGEN an additional $2 million in license fees tied to the achievement of product development milestones. The ORIGEN-based products to be marketed by Eisai under the trade name Picolumi consist of an immunodiagnostic instrument and certain assays for use in Japan in the market regulated by the Japanese Ministry of Health and Welfare for use in diagnosing or advising a patient's clinical condition, health or general make-up. The Company expects to receive royalties from Eisai's sales. RESEARCH AGREEMENTS In 1993, the Company established HyperGen, a joint venture partnership, with Hyperion Catalysis International ("Hyperion") to develop and commercialize biomedical products utilizing advanced materials such as Hyperion's proprietary Graphite Fibrils-TM- nanotubes. Hyperion, a privately-held company based in Cambridge, Massachusetts, is engaged in the development and manufacture of Graphite Fibrils-TM-, an innovative carbon-based nanofiber. IGEN has licensed the exclusive right to use products developed by HyperGen for diagnostic applications, for which it paid $750,000. The Company contributed cash of $3 million for its initial 50% interest in HyperGen and made additional cumulative payments of $2 million based on the attainment of certain research milestones. During 1995, the Company acquired the remaining 50% interest in HyperGen for $3 million. IGEN assumed operating control of HyperGen and consolidated HyperGen's research and development programs into the Company's internal programs. 9 Acquisition of the HyperGen rights to Graphite Fibrils-TM- enabled IGEN to commence the development of proprietary products to complement its business in the medical and life science marketplace. One product under investigation by HyperGen is a filter comprised of Graphite Fibrils-TM- that could be used as a disposable electrode for electrochemiluminescent measurements for ORIGEN-based products. Other products under investigation include: separation media for the purification and analysis of biomolecules which would reduce the time and cost required for discovery, development and manufacture of biopharmaceuticals; and biocatalyst support materials for chiral drug intermediates. During November, 1995 the Company formed a Joint Venture for the development and commercialization of advanced diagnostics products utilizing a proprietary combination of multi-array technology together with the Company's ORIGEN technology . Products based on these technologies would be used for high throughput, multiparameter analysis for DNA sequencing, clinical chemistry and immunodiagnostics. The joint venture is named Meso Scale Diagnostics, LLC ("MSD"), and was formed together with Meso Scale Technologies, LLC ("MST"), a company based in Maryland. MST is a technology-based company established and operated by Jacob Wohlstadter, the son of Samuel J. Wohlstadter, the Chief Executive Officer of the Company. Nadine Wohlstadter, a member of MST, is the spouse of Samuel J. Wohlstadter. The Company has agreed to provide initial capital contributions to MSD of $5 million over time, in exchange for its ownership interest and to fund the organizational and certain ongoing (non-research) expenses of MSD. The Company will also participate in a collaborative research programs under which no funds have been expended. MSD's research programs to develop products will be based on multi-array diagnostic techniques and the ability to control and adapt surface chemistry reactions on a microscopic level. The process may generate thousands of reactions on a single chip with diagnostic results presented on an array and read using electrochemiluminescence. The multiple results would represent an advance in diagnostic testing enabling researchers and clinicians to explore complex information rapidly and cost-effectively. PATENTS AND PROPRIETARY RIGHTS IGEN pursues a policy of seeking patent protection to preserve its proprietary technology and its right to capitalize on the results of its research and development activities and, to the extent it may be necessary or advisable, to exclude others from appropriating its proprietary technology. IGEN also relies upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain its competitive position. The Company plans to prosecute and defend its intellectual property, including any patents that may issue, and proprietary technology. The Company regularly searches for third-party patents in its fields of endeavor, both to shape its own patent strategy as effectively as possible and to identify licensing opportunities. IGEN owns or co-owns and has exclusive rights to 18 issued U.S. patents and 69 pending U.S. applications in the diagnostics field. Worldwide, the Company owns or co-owns and has exclusive rights to an additional 54 issued patents, and 150 pending patent applications covering the same technology. These patents and patent applications cover various aspects of IGEN's ORIGEN technology and products, and the methods for their production and use. The patent positions of diagnostic firms, including the Company, are highly uncertain and involve complex legal and factual questions. Patent applications in the United States are maintained in secrecy until patents issue and therefore the Company cannot be certain that it or any party from whom it obtained licenses was the first creator of inventions covered by issued patents or pending patent applications or that it or such licensor was the first to file patent applications for such inventions. The Company may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention, which could result in substantial cost to the Company even if the eventual outcome is favorable to the Company. Consequently, the Company does not know whether its applications will result in issued patents or whether its patents will provide significant proprietary protection or will be circumvented or invalidated. A number of healthcare and information technology companies and research and academic institutions have filed patent applications or received patents in the diagnostic field. Some of these applications or patents may be competitive with the Company's issued patents or pending patent applications or conflict in certain respects with claims made in the Company's 10 patents or patent applications or the Company's ability to practice the technology covered thereby. Such conflicts could result in a significant reduction of the Company's ability to practice the inventions covered by its patents and pending patent applications. In addition, if patents containing competitive or conflicting claims are issued to others and such claims are ultimately determined to be valid, there can be no assurance that the Company will be able to obtain licenses to these patents at a reasonable cost or be able to develop or obtain alternative technology. The Company filed an opposition in Europe to a patent (EP 0 285 05781) owned by Enzo Biochem, Inc. This patent covers labeled oligonucleotides useful in DNA probe assays. Separate oppositions have been lodged by Boehringer Mannheim and Organon Teknika. The Company is vigorously opposing this patent. Since the opposition is in a very early stage, it is not possible to predict the outcome or the effect, if any, on the Company's intellectual property or products. GOVERNMENT REGULATION The Company's research and development activities and the future manufacturing and marketing of products by the Company are subject to regulation by numerous governmental authorities in the United States and other countries. In the United States, clinical diagnostic devices are subject to rigorous U.S. Food and Drug Administration ("FDA") regulation. The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of the clinical Company's products. In addition to FDA regulations, the Company is subject to other federal and state regulations such as the Occupational Safety and Health Act and the Environmental Protection Act. Product development and approval within this regulatory framework may take a number of years and involves the expenditure of substantial resources. In addition, there can be no assurance that this regulatory framework will not change or that additional regulation will not arise at any stage of the Company's product development, which may affect approval or delay an application or require additional expenditures by the Company. The Company's regulatory strategy is to pursue development and marketing approval of its products worldwide, either independently or through corporate collaborators. The Company intends to seek input from the regulatory authorities at each stage of the clinical process to facilitate appropriate and timely clinical development. The clinical development of certain products may be the responsibility of the Company's collaborators. CLINICAL DIAGNOSTIC SYSTEMS. The manufacture, distribution and sale in the United States of the Company's products for clinical diagnostic purposes will require prior authorization by the FDA. The FDA and similar agencies in foreign countries have promulgated substantial regulations that apply to the testing, marketing, export and manufacturing of diagnostic products. To obtain FDA approval of a new product for diagnostic purposes, the Company or its collaborators will in most cases be required to submit proof of the safety and efficacy of the product. Such proof typically entails clinical and laboratory tests. The testing, preparation of necessary applications and processing of those applications by the FDA is expensive and time consuming. Significant difficulties or costs may be encountered by the Company in its efforts to obtain FDA approvals that could delay or preclude the Company from marketing its products for diagnostic purposes. Furthermore, there can be no assurance that the FDA will not request the development of additional data following the original submission. With respect to patented products or technologies, delays imposed by the governmental approval process may materially reduce the period during which the Company or its collaborators will have the exclusive right to exploit those products or technologies. The Company's and its collaborative partners' diagnostic products, as presently contemplated, will be regulated as medical devices. Prior to entering commercial distribution, all medical devices must undergo FDA review under one of two basic review procedures depending on the type of assay: a Section 510(k) pre-market notification ("510(k)") or a pre-market approval application ("PMA"). 510(k) notification is generally a relatively simple filing submitted to demonstrate that the device in question is "substantially equivalent" to another legally marketed device and includes tests for therapeutic drugs and hormones. Approval under this procedure may be granted within 90 days if the product qualifies, but generally takes longer. When the product does not qualify for approval under the 510(k) procedure, the manufacturer must file a PMA to show that the product is safe and efficacious, based on extensive clinical testing among several diverse testing sites and 11 population groups, and shows acceptable sensitivity and specificity. This procedure requires much more extensive pre-filing testing than does the 510(k) procedure and involves a significantly longer FDA review after the date of filing. In responding to a PMA, the FDA may grant marketing approval, may request additional information, may set restrictive limits on claims for use or may deny the application altogether. After product approvals have been received, they may still be withdrawn if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. The FDA may require surveillance programs to monitor the effect of products which have been commercialized, and has the power to prevent or limit further marketing of the products based on the results of these post-marketing programs. In addition to obtaining FDA approval for each product, under the PMA guidelines, the Company must seek FDA approval of the manufacturing facilities and procedures. The FDA will also inspect diagnostic companies on a routine basis for regulatory compliance with its Good Manufacturing Practices ("GMP"). The Company's products for the physician's office market will be affected by the Clinical Laboratory Improvement Amendments of 1988 ("CLIA"), which is intended to insure the quality and reliability of medical testing and may have the effect of discouraging, or increasing the cost of, testing in physicians' offices. The regulations establish requirements for laboratories in the area of administration, participation in proficiency testing, patient test management, quality control, personnel, quality assurance and inspection. Under these regulations, the specific requirements that a laboratory must meet depend upon the complexity of the tests performed by the laboratory. Laboratory tests are categorized as either waived tests, tests of moderate complexity or tests of high complexity. Laboratories that perform either moderate or high complexity tests must meet standards in all areas, with the major difference in requirements between moderate and high complexity testing concerning quality control and personnel standards. Quality control standards for moderate complexity testing are being implemented in stages. Personnel standards for high complexity testing are more rigorous then those for moderate complexity testing. In general, personnel conducting high complexity testing will need more education and experience than those doing moderate complexity testing. Under the CLIA regulations, all laboratories performing moderately complex or highly complex tests will be required to obtain either a registration certificate, certificate, or certificate of accreditation from the Healthcare Financing Administration ("HCFA"). Because the regulations are new and their interpretation is uncertain, it is possible that certain of the Company's products may be categorized as tests of high complexity, in which case the Company's penetration of the point-of-care market would be reduced since not all laboratories would meet the standards required to conduct such tests. The Company understands that laboratories, including physician office laboratories, will be evaluating the requirements of CLIA in determining whether to perform certain types of moderate and high complexity diagnostic tests. The Company believes that the sale of its products will not be adversely affect by CLIA. However, no assurances can be given that the statute and its implementing regulations will not have a material adverse impact on the Company and its ability to market and sell any products that the Company develops. Although the Company believes that it will be able to comply with all applicable regulations regarding the manufacture and sale of diagnostic devices, such regulations are always subject to change and depend heavily on administrative interpretations. There can be no assurance that future changes in regulations or interpretations made by the HHS, FDA, HCFA or other regulatory bodies, with possible retroactive effect, will not adversely affect the Company. In addition to the foregoing, the Company is subject to numerous federal, state and local laws and regulations relating to such matters as safe working conditions, laboratory and manufacturing practices, environmental, fire hazard control, and disposal of hazardous or potentially hazardous substances. To date, compliance with these laws and regulations has not had a material effect on the Company's financial results, capital requirements or competitive position, and the Company has no plans for material capital expenditures relating to such matters. However, there can be no assurance that it will not be required to incur significant costs to comply with such laws and regulations in the future, or that such laws or regulations will not have a materially adverse effect upon the Company's ability to do business. Sales of the Company's products outside the United States are also subject to extensive regulatory requirements, which vary widely from country to country. The time required to obtain such approval may be longer or shorter than that required for FDA approval. 12 RESEARCH PRODUCTS. The Company's products that are being sold for research use only must be properly labeled as such, as required by the FDA, but do not generally require FDA approval prior to marketing. The FDA has recently begun to impose new distribution requirements and procedures on companies selling research-only products, such as the requirement that the seller receive specified certifications from its customers as to the customers' intended use of the product. The Company expects that the FDA will in the near future develop additional restrictions of this nature. The Company is unable at this time to predict the form these restrictions may take, their likely magnitude or their ultimate impact on the Company or its sales. ENVIRONMENTAL REGULATION. Due to the nature of its current and proposed research, development and manufacturing processes, the Company is subject to stringent federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials and wastes. Although the Company believes that it has complied with these laws and regulations in all material respects and has not been required to take any action to correct any noncompliance, there can be no assurance that the Company will not be required to incur significant costs to comply with environmental and health and safety regulations as it expands its production operations. REIMBURSEMENT. Third party payors, such as governmental programs and private insurance plans, can indirectly affect the pricing or the relative attractiveness of the Company's products by regulating the maximum amount of reimbursement they will provide for diagnostic testing services. In recent years, healthcare costs have risen substantially, and third-party payors have come under increasing pressure to reduce such costs. In this regard, the Federal government, in an effort to reduce healthcare costs, may take actions which may involve reductions in reimbursement rates. If the reimbursement amounts for diagnostic testing services are decreased in the future, it may decrease the amount which physicians, clinical laboratories and hospitals are able to charge patients for such services and consequently the price the Company can charge for its products. COMPETITION Competition in the diagnostic industry is intense, and a small number of large and well established companies are major participants. In view of the nature of the industry, the Company has elected to rely on alliances with established companies to exploit fully the advantages of its diagnostic systems. There can be no assurance, however, that IGEN's corporate collaborators will be successful in commercializing the ORIGEN technology. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may develop potentially competing products or technologies and may establish collaborative arrangements with competitors of the Company. The Company's competition will be determined in part by the potential applications for which the Company's products are developed and ultimately approved by regulatory authorities. For certain of the Company's future products, an important factor in competition may be the timing of market introduction of its own or competing products. Accordingly, the relative speed with which IGEN or its corporate collaborators can develop products, complete the clinical trials and approval processes and supply commercial quantities of the products to the market are expected to be important competitive factors. The Company expects that competition with products approved for sale will be based, among other things, on product efficacy, safety, reliability, availability, price and patent position. Many of the Company's existing or potential competitors have substantially greater financial, technical and human resources than the Company and may be better equipped to develop, manufacture and market products. These companies may develop and introduce products and processes competitive with or superior to those of the Company. The Company's competitive position also depends upon its ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes and secure sufficient capital resources for the often substantial period between technological conception and commercial sales. 13 Manufacturing The Company's current commercial manufacturing operations consist of the manufacture of the ORIGEN Detection system and related reagents and cell culture research biologicals as well as quality assurance processes. IGEN operates a qualified GMP (Good Manufacturing Practices) facility. The Company uses a variety of subcontractors and believes that it does not depend on any single-source supplier that it cannot replace in the ordinary course of business. The Company has not yet introduced any clinical diagnostic products. Initial clinical diagnostics products based on the Company's ORIGEN technology will be manufactured by the Company's corporate collaborators. Although certain future products may be manufactured by the Company, it has not yet developed plans for establishing manufacturing operations for these products. SALES AND MARKETING IGEN markets and sells the ORIGEN Detection System and related reagents and services directly to the life science research market. In conjunction with its national launch of this System during 1994, the Company expanded its direct sales force, including the addition of application specialists and in-house technical services personnel. The Company continues to develop marketing plans for Europe and Japan, while currently utilizing a small direct sales force. The ORIGEN cell culture products are sold directly and through distributors. HUMAN RESOURCES As of June 17, 1997, IGEN employed 119 individuals full-time, of which 70 were engaged in research, products development, manufacturing and operations support, 27 in marketing, sales and applications support and 22 in general administration. Of the Company's employees, 30 have Ph.D. degrees. A significant number of the Company's management and professional employees have had prior experience with pharmaceutical, biotechnology, diagnostic or medical products, computer software or electronics companies. None of the Company's employees is covered by collective bargaining agreements, and management considers relations with its employees to be good. The Company's ability to maintain its competitive position will depend, in part, upon its continued ability to attract and retain qualified scientific and managerial personnel. Competition for such personnel is intense. RISK FACTORS Early Stage of Development; Accumulated Losses. The Company is at an early stage of development and is subject to all of the risks inherent in the establishment of a new business enterprise, including the need for substantial capital to support the expenses of developing new technologies, the need to attract and retain qualified management and scientific staff and other risks as outlined in the following risk factors. Since inception, the Company has been engaged in the research and development of products based on new technologies, and at March 31, 1997, the Company had an accumulated deficit of approximately $56.7 million. The Company's operations may be affected by problems frequently encountered in connection with the development and utilization of new and unproven technologies and by the competitive environment in which the Company operates. Although a limited number of ORIGEN-based products has been developed and introduced to the life science research market, there can be no assurance that the ORIGEN technology will be successfully applied to the development of additional commercial products for the clinical diagnostic or other markets. Diagnostic products resulting from the development of the Company's technology will require significant additional development and investment prior to their commercialization. There can be no assurance that products will be successfully developed by the Company or its licensees, meet applicable regulatory standards, be capable of being manufactured in commercial quantities at reasonable costs or be marketed successfully. RELIANCE ON COLLABORATIONS AND LICENSE AGREEMENTS. The Company has entered into collaborative research or licensing agreements with Boehringer Mannheim, Organon Teknika and Eisai pursuant to which these companies are entitled to certain product manufacturing and marketing rights. Some of these companies have the responsibility for additional development and, where required, the submission of applications for the regulatory approval of any products to the U.S. Food and Drug Administration ("FDA") and corresponding regulatory agencies in other countries. Although the Company 14 believes that its partners in these collaborations have an economic motivation to succeed in performing their contractual responsibilities, the amount and timing of resources to be devoted to these activities are not within the control of the Company. There can be no assurance that such collaborators will perform their obligations as expected or that the company will derive any additional revenue from such arrangements. Moreover, the collaboration agreements may be terminated under certain circumstances. The Company also expects to rely on additional collaboration or license agreements to develop and commercialize certain future products. There can be no assurance that the Company will be able to negotiate acceptable collaboration or license agreements in the future, or that such new agreements or existing agreements will be successful. In addition, there can be no assurance that the parties to collaboration or license agreements will not pursue alternative technologies as a means for developing diagnostic products targeted by the collaborations or licenses. TECHNOLOGICAL CHANGE AND COMPETITION. The diagnostic industry is subject to technological change. Competition from diagnostic and pharmaceutical companies and research and academic institutions is intense and expected to increase. There can be no assurance that the Company's competitors will not succeed in developing products that are more effective than any which are being developed by the Company and its collaborators or which would render the ORIGEN technology and products obsolete and non-competitive. Many of the Company's competitors in the diagnostic field have substantially greater financial, technical and human resources than the Company. In addition, many of these competitors have significantly greater experience than the Company in obtaining regulatory approvals of new diagnostic products. Accordingly, the Company's competitors may succeed in obtaining FDA approval for products more rapidly than the Company. Furthermore, as the Company expands commercial sales of products, it will have to become competitive with respect to manufacturing efficiency and marketing capabilities, areas in which it has limited experience. Uncertainty of Healthcare Reform Measures and Third-Party Reimbursement. Legislative and regulatory proposals aimed at changing the healthcare system in the United States continue to be discussed by various bodies of Federal and State Governments. While the Company cannot predict whether any such legislative or regulatory proposals will be adopted or the effect such proposals may have on its business, the pendency or adoption of such proposals could have a have a material adverse effect on the Company and its ability to raise capital. Furthermore, the Company's ability to commercialize its products may be adversely affected to the extent that such proposals have a material adverse effect on the business, financial condition and profitability of other companies that are prospective collaborators for certain of the Company's products. In both domestic and foreign markets, sales of the Company's or its collaborators' products will depend in part on the availability of reimbursement from third-party payors such as government health administration authorities, private health insurers and other organizations. Third-party payors are increasingly challenging the price and cost effectiveness of medical products and services. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. There can be no assurance that the Company's or its collaborators' products will be considered cost effective or that adequate third-party reimbursement will be available to enable the Company or its collaborators to maintain price levels sufficient to realize an appropriate return on their investment in product development. Legislation and regulations affecting the pricing of medical products and services may change before any of the Company's or its collaborators' products are approved for marketing. Adoption of such legislation could further limit reimbursement for medical products and services. COMPLIANCE WITH GOVERNMENT REGULATIONS. The production and marketing of the Company's products and its ongoing research and development activities are subject to regulation by governmental authorities in the United States and other countries. Diagnostic systems utilizing the Company's ORIGEN technology will require government clearance before being marketed in the United States and in certain foreign countries. In the United States, the Company or its marketing collaborators may be required to submit test data from clinical trials to establish "substantial equivalence" of the ORIGEN diagnostic system with previously approved systems. In such case, the Company or its collaborators may commence sales only after the FDA has issued a written order finding such substantial equivalence, which may take longer than the 90-day 15 period generally provided for FDA review. There can be no assurance that the Company or its collaborators will be able to establish substantial equivalence for the ORIGEN diagnostic systems, or that the FDA or certain corresponding government agencies will permit marketing of such systems in their respective jurisdictions. Should the Company fail to demonstrate substantial equivalence, the Company would need to perform extensive clinical testing to demonstrate safety and efficacy, incurring substantial costs and delays. Even if regulatory approval is obtained, a marketed product, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections. The regulatory standards for manufacturing are currently being applied stringently by the FDA. Discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer, including costly recalls or even withdrawal of the product from the market. The Company is also subject to numerous environmental and safety laws and regulations, including those governing use of hazardous materials. Any violation of, and the cost of compliance with, these regulations could adversely impact the Company's operations. RELIANCE ON PATENTS AND PROPRIETARY RIGHTS. The Company's success will depend in part on its ability to obtain and maintain patent protection for its products, both in the United States and other countries. The patent position of diagnostic companies is highly uncertain and involves complex legal and factual questions. There is no consistent policy regarding the breadth of claims allowed in medical patents. The Company owns or co-owns and has been granted exclusive rights to 18 issued U.S. patents and 69 pending U.S. applications in the diagnostics field. Worldwide, the Company owns or co-owns and has been granted exclusive rights to an additional 54 issued patents, and 150 pending patent applications covering the same technology. There can be no assurance that patents will issue from any present or future applications or that, as to existing patents or patents which may issue, that claims are or will be sufficiently broad to protect the Company's technology. In addition, there can be no assurance that the patents issued to the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection to the Company. The commercial success of the Company will also depend in part on its neither infringing patents issued to competitors nor breaching the technology licenses upon which the Company's products might be based. The Company is a licensee under certain patents and patent applications that it considers necessary for its business. While the Company is aware of additional third-party patents and patent applications relating to specific reagents, it is uncertain whether any of these will require the Company to alter any products or processes, obtain licenses or cease certain development activities with respect to these reagents. There can be no assurance that the Company will be able to obtain necessary licenses at reasonable cost. Failure by the Company to obtain a license to any technology that it requires to commercialize its products may have a material adverse impact on the Company. Litigation, which could result in substantial costs to the Company, may also be necessary to enforce any of its patent rights or to determine the scope and validity of others' proprietary rights. In addition, the Company may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office, which could result in substantial costs to the Company to determine the priority of inventions. IGEN also protects its proprietary technology and processes in part by confidentiality agreements with its collaborative partners, employees, consultants and other advisors. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that the Company's trade secrets will not otherwise become known or be independently discovered by competitors. Limited Manufacturing, Sales, Marketing and Distribution Experience. The Company's clinical diagnostic products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. The Company has no experience in large scale manufacturing and currently lacks the capability to manufacture its diagnostic products in accordance with regulatory requirements. If the Company is unable to develop or contract for manufacturing capabilities on acceptable terms, the Company's ability to manufacture products will be adversely affected, resulting in the delay of submission of products for regulatory approval, which in turn could adversely affect the Company's competitive position and financial condition. The Company also has limited experience in sales, marketing and distribution. To market any of its clinical diagnostic products directly, the Company must develop a substantial marketing and sales force with technical expertise and supporting distribution capability. Alternatively, the Company may obtain the assistance of established companies, as it has done with certain of its diagnostic products. There can be no assurance that the Company 16 will be able to establish sales and distribution capabilities or that it or its collaborators will be successful in gaining market acceptance for its clinical diagnostics products. Future Capital Needs; Uncertainty of Additional Funding. The Company may require substantial additional funds to conduct the research and development and regulatory testing of its products, to establish commercial scale manufacturing facilities and to market its products. The Company's future capital requirements will depend on many factors, including, but not limited to: continued progress in the development of diagnostic products; the time and costs involved in obtaining regulatory approvals; the costs involved in filing, prosecuting and enforcing patent claims; competing technological and market developments; the ability of the Company to maintain its existing, and to establish new, collaborative and licensing arrangements; the cost of manufacturing scale-up; and effective commercialization activities and arrangements. The Company may be required to seek additional funding either through collaborative and licensing arrangements or through public or private debt or equity financings. There can be no assurance that additional financing will be available in a timely manner or on acceptable terms. If additional funds are raised by issuing equity securities, further dilution to existing shareholders may result. If adequate funds are not available, the Company may be required to delay, scale back or eliminate one or more of its programs or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates or products that the Company would not otherwise relinquish. Need to Attract and Retain Key Employees and Consultants. The Company is highly dependent on the principal members of its scientific and management staff, the loss of whose services might impede the achievement of its research and development or strategic objectives. Recruiting and retaining qualified scientific personnel to perform research and development work in the future will also be critical to the Company's success. There can be no assurance that the Company will be able to attract and retain such personnel given the competition between numerous diagnostic and biotechnology companies and research and academic institutions for experienced scientists. The Company's anticipated growth and expansion into areas and activities requiring additional expertise, such as clinical trials, government approvals, manufacturing and marketing, are expected to place increased demands on the Company's resources. These demands are expected to require the addition of new management personnel and the development of additional expertise by existing management personnel. The failure to acquire needed personnel or to develop needed expertise could have a material adverse effect on the Company's prospects for success. In addition, the Company relies on consultants and advisors to assist in formulating its research and development strategy. All of the Company's consultants and advisors are employed by entities other than the Company and may have commitments to or consulting or advisory contracts with other entities that may affect their ability to contribute to the Company. Risk of Product Liability; Availability of Insurance. The Company's business will in the future expose it to potential liability risks that are inherent in the testing, manufacturing and marketing of diagnostic products. The Company presently has only limited product liability insurance, and there can be no assurance that it will be able to maintain such insurance or obtain additional insurance on acceptable terms or that insurance will provide adequate coverage against potential liabilities. CONTROL BY EXISTING SHAREHOLDERS. The Company's directors, officers and their affiliates own beneficially approximately 40% of the outstanding shares of Common Stock, of which approximately 25% is held by the Company's Chief Executive Officer. Accordingly, the Company's officers and directors, if they act in concert, will have the ability to influence significantly the election of the Company's directors and most other shareholder actions. In addition, the Board of Directors has the authority to fix the rights and preferences of and issue shares of Preferred Stock without further action by the shareholders, which may have the effect of delaying, deferring or preventing a change in control of the Company. ITEM 2. PROPERTIES The Company's principal administrative, marketing, manufacturing and research and development facility consists of an 84,000 square foot building located in Gaithersburg, Maryland. The Company took occupancy of this newly leased facility during 1995. The lease expires in 2005 but provides the Company an option to terminate in 2000. The Company believes that its current facility will be adequate for anticipated expansion needs. 17 ITEM 3. LEGAL PROCEEDINGS NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year covered by this report. EXECUTIVE OFFICERS OF THE COMPANY The names and ages of all executive officers of the Company at June 13, 1997 and their respective positions and offices with the Company are as follows:
NAME AGE POSITION - ----------------------------------------------------- --- ----------------------------------------------------- Samuel J. Wohlstadter 55 Chairman, Chief Executive Officer and Director Richard J. Massey, Ph.D. 50 President, Chief Operating Officer and Director Robert Connelly 37 Vice President, Marketing and Sales Gary Henricksen 46 Vice President, Separations Business Unit George V. Migausky 42 Vice President, Chief Financial Officer Richard Pytelewski 47 Vice President, Operations Herman H. Spolders, Ph.D. 51 Vice President, Business Development and Planning
Samuel J. Wohlstadter is a founder of the Company and has been Chairman of the Board and Chief Executive Officer since its formation in 1982. Mr. Wohlstadter has been a venture capitalist for more than 20 years and has experience in founding, supporting and managing high technology companies, including Amgen Inc., a biopharmaceutical company, and Applied Biosystems, Inc., a medical and biological research products company. Mr. Wohlstadter is also Chief Executive Officer of Hyperion Catalysis International, an advanced materials company, which he founded in 1981, of Pro-Neuron, Inc., a drug discovery company, which he founded in 1985, of Proteinix Corporation, a development stage company organized to conduct research in intracellular metabolic processes, which he founded in 1988 and of Pro-Virus, Inc., a drug discovery company, which commenced operations in 1994. Richard J. Massey, Ph.D. is a founder of the Company, has been President and Chief Operating Officer of the Company since 1992, a Director of the Company since 1990 and served as Senior Vice President since 1985. From 1981 until he joined IGEN in 1983, Dr. Massey was a faculty member in the Microbiology and Immunology Department at Rush Medical Center in Chicago. Prior to that, he was Senior Research Scientist at the National Cancer Institute, Frederick Cancer Research Center. Robert Connelly, has been Vice President of Marketing and Sales since 1994, when he joined the Company. Previously, Mr. Connelly was the U.S. Marketing Manager for the Instrument Group at Abbott Laboratories where he was responsible for the marketing of chemistry and hematology systems and point-of-care and near-patient testing instruments. Gary Henricksen, joined the Company in January 1996 as Vice President of the Separations Business Unit. From 1994 until he joined the Company, Mr. Henricksen was Director, Laboratory Product Business Unit in the Separations Division of Sartorius Corporation where he was responsible for North American sales and marketing of laboratory separations products and commercialization of membrane absorbers in bioprocessing. Prior to 1994, he was the Director of Marketing and Technical Service for the same company. George V. Migausky has been associated with IGEN as Chief Financial Officer since 1985, assuming that position on a full-time basis in 1992. Between 1985 and 1992, in addition to serving as Chief Financial Officer of IGEN on a part-time 18 basis, Mr. Migausky also served as financial advisor to several other privately held companies. Prior to joining IGEN in 1985, he spent nine years in financial management and public accounting positions, most recently as a Manager with the High Technology Group of Deloitte Haskins & Sells. Richard Pytelewski, has been Vice President of Operations since he joined the Company in 1994. From 1992 until joining the Company, Mr. Pytelewski provided operations consulting support to medical, pharmaceutical and diagnostic ventures. Previously, Mr. Pytelewski was Vice President of Operations at Biomira, Inc., in Edmonton, Canada, supporting the worldwide distribution of in-vitro and in-vivo diagnostic and therapeutic products. Herman H. Spolders, Ph.D. has been Vice President of Business Development and Planning since 1995 and served previously as Vice President International Operations since he joined the Company in 1993. From 1991 to 1993, he was a member of the Organon Teknika executive board and from 1989 to 1993, he was the Vice President of the worldwide research and development organization at Organon Teknika. PART II ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is quoted on the NASDAQ National Market System under the symbol IGEN. As of June 17, 1997, there were approximately 1,500 holders of record of the Company's Common Stock. No cash dividends have been paid on the Common Stock to date, and the Company currently intends to retain any earnings for development of the Company's business. The following table sets forth, for periods indicated, the range of high and low closing sales prices of the Common Stock as quoted on the NASDAQ National Market System.
HIGH LOW --------- --------- Fiscal 1996 - First Quarter $ 6-5/8 $ 4-7/8 Second Quarter $ 7-7/8 $ 5-3/8 Third Quarter $ 6-5/8 $ 4-3/4 Fourth Quarter $ 6-7/16 $ 4-7/8 Fiscal 1997 - First Quarter $ 8-1/8 $ 4-5/8 Second Quarter $ 8-1/4 $ 6 Third Quarter $ 7-3/8 $ 4-5/8 Fourth Quarter $ 7-5/8 $ 5
19 ITEM 6. SELECTED FINANCIAL DATA. The selected financial data set forth below with respect to the Company's statements of operations for each of the years in the three year period ended March 31, 1997 and with respect to the balance sheets at March 31, 1997 and 1996 are derived from, and are qualified by reference to, the financial statements that have been audited by Deloitte & Touche LLP, independent auditors, and are included elsewhere in this Form 10-K. The statement of operations data for each of the years in the two year period ended March 31, 1994, and the balance sheet data at March 31, 1995, 1994 and 1993 are derived from audited financial statements not included in this Form 10-K. The following selected financial data should be read in conjunction with the financial statements and notes thereto included elsewhere in this Form 10-K.
Fiscal Year Ended March 31, ----------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- (In thousands, except per share data) Statement of Operations Data: Revenues: License fees and contract revenue $ 8,802 $ 11,266 $ 12,259 $ 22,021 $ 10,708 Product Sales 6,360 4,583 2,555 1,356 1,074 Royalty income 843 75 20 -- -- --------- --------- --------- --------- --------- Total 16,005 15,924 14,834 23,377 11,782 --------- --------- --------- --------- --------- Operating Costs and Expenses: Products Costs 2,448 1,848 1,278 658 654 Research and development 13,114 14,078 12,267 10,911 3,872 Marketing, general and administrative 10,910 8,725 8,707 4,608 2,615 --------- --------- --------- --------- --------- Total operating expenses 26,472 24,651 22,252 16,177 7,141 --------- --------- --------- --------- --------- Income (loss) from continuing operations (10,467) (8,727) (7,418) 7,200 4,641 Interest income -- net 586 1,079 1,489 559 57 --------- --------- --------- --------- --------- Income (loss) from continuing operations before income taxes (9,881) (7,648) (5,929) 7,759 4,698 Income taxes -- -- -- 163 108 --------- --------- --------- --------- --------- Income (loss) from continuing operations (9,881) (7,648) (5,929) 7,596 4,590 Loss from discontinued operations -- -- -- (10,573) (3,064) --------- --------- --------- --------- --------- Net income (loss) $ (9,881) $ (7,648) $ (5,929) $ (2,977) $ 1,526 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Income (loss) per share: Continuing operations $ (.66) $ (.52) $ (.40) $ .57 $ .37 Discontinued operations -- -- -- (.79) (.25) --------- --------- --------- --------- --------- Net income (loss) $ (.66) $ (.52) $ (.40) $ (.22) $ .12 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Shares used in computing net income (loss) per share 14,959 14,779 14,769 13,413 12,436 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
March 31, ----------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- (In thousands) Balance Sheet Data: Cash, cash equivalents and short-term Investments $ 9,044 $ 20,217 $ 30,226 $ 41,746 $ 2,965 Working capital (deficit) 4,431 13,700 21,484 31,437 (1,590) Total assets 17,794 29,276 37,806 45,364 7,501 Accumulated deficit (56,700) (46,819) (39,171) (33,242) (29,173) Shareholders' equity 7,882 17,435 24,998 31,467 413
20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Company has devoted substantially all of its resources to the research and development of its proprietary technologies primarily the ORIGEN technology for clinical diagnostic and life science research products. In February 1994, the Company completed an initial public offering of 2,990,000 shares of common stock from which it received net proceeds of approximately $32 million. In addition to product sales, the Company's sources of revenue have consisted primarily of license or research payments pursuant to licensing or collaborative research agreements. The Company has entered into collaborative arrangements with corporate collaborators that provide for the development and marketing of certain ORIGEN systems. These agreements provide fees and royalties payable to the Company in exchange for licenses to produce and sell the resulting products. In the near term, the Company may selectively pursue additional strategic alliances although, over time, it expects an increasing amount of its revenues to be derived from sales of its products and royalties from corporate collaborations. RESULTS OF OPERATIONS YEARS ENDED MARCH 31, 1997 AND 1996 The Company had revenues of $16.0 million for the year ended March 31, 1997, compared to revenues of $15.9 million for the corresponding period in 1996. Fiscal 1997 revenue reflects a change in the revenue mix as compared to prior years. During 1997, a significant portion of the Company's license and contract fees have converted to royalty income based on product sales of corporate partners. Fees from licenses and for contract research declined by $2.5 million in fiscal 1997 to $8.8 million and revenue from product sales and royalties increased to $7.2 million in fiscal 1997 from $4.7 million in the prior year. This transition occurred primarily in the fourth quarter of fiscal 1997 as license and contract revenue declined by $2.7 million while product sales and royalty income increased by $500,000 when compared to 1996. The increase in royalty income is directly attributable to royalties generated through the Company's License Agreement with Boehringer Mannheim GmbH. Boehringer Mannheim recently launched its Elecsys series of immunodiagnostic products which are based on the Company's ORIGEN-Registered Trademark-technology. Through March 31, 1997, Boehringer Mannheim had more than 1,000 customer installations of its Elecsys 2010/1010 systems. Product costs were $2.4 million in the year ended March 31, 1997 (38% of Product Sales) and $1.8 million for the corresponding period in 1996 (40% of Product Sales) representing a change in the product mix between instruments, services and reagents. Research and Development costs decreased to $13.1 million for the year ended March 31, 1997 from $14.1 million during 1996. This decrease is attributable to expiring external collaborations during 1997. Marketing, general and administrative expenses increased $2.2 million to $10.9 million for the year ended March 31, 1997 when compared with the same prior year period. This increase resulted primarily from increased marketing efforts associated with the ORIGEN Detection System and administrative costs associated with the Company's re-incorporation in the State of Delaware. Interest income (net) decreased to $586,000 in the year ended March 31, 1997 from $1.1 million in the corresponding period in 1996. The decrease reflects the lower level of interest income derived from lower cash balances during the 1997 period as well as accrued interest expense attributable under an Advance Royalty Agreement with Boehringer Mannheim. See "Liquidity and Capital Resources" following. Income (loss) from continuing operations over the next several years is likely to fluctuate substantially from quarter to quarter as a result of differences in the timing of revenues earned under license and product development agreements, and associated product development expenses. As of March 31, 1997, the Company had net operating loss and general business credit tax carryforwards of approximately $41.9 million and $2.4 million, respectively. The Company's ability to utilize its net operating loss and general business credit tax carryforwards may be subject to an annual limitation in future periods pursuant to the "change in ownership rules" under Section 382 of the Internal Revenue Service Code of 1986, as amended. 21 YEARS ENDED MARCH 31, 1996 AND 1995 The Company had revenues of $15.9 million for the year ended March 31, 1996, compared to revenues of $14.8 million for the corresponding period in 1995. The increase in revenue is attributable to higher product sales which offset a decrease in revenue from contract research. Product sales from the Company's ORIGEN Detection System and related reagents and cell culture products increased to $4.6 million in 1996 from $2.6 million in 1995, reflecting higher direct sales of the ORIGEN systems. Revenue from contract research decreased to $1.9 million in 1996 from $2.8 million in 1995 due to the level of research performed under a joint development contract with Organon Teknika. Product costs were $1.8 million in the year ended March 31, 1996 (40% of product sales) and $1.3 million in the corresponding period in 1995 (50% of product sales). The decreased percentage of product costs in 1996 reflected a change in the product sales mix between instruments and reagents. Research and development expenses increased to $14.1 million in 1996 from $12.3 million in 1995. This increase resulted from higher staffing levels; facilities costs associated with the Company's relocation to a new building; and expanded external technical collaborations. Interest income (net) decreased to $1.1 million in the year ended March 31, 1996, from $1.5 million for the corresponding period in 1995. The decrease reflects a lower amount of interest derived from lower cash balances during the 1996 period. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations through placements of Preferred and Common Stock, aggregating approximately $60 million through March 31, 1997, including $32 million in net proceeds received from the Company's Initial Public Offering which was completed during February 1994. In addition, the Company has received funds from collaborative research and licensing agreements, and sales of its ORIGEN line of products. As of March 31, 1997, the Company had $9 million in cash and cash equivalents. Working capital, excluding current deferred revenue which is classified as a current liability, was $9.8 million at March 31, 1997. Including current deferred revenue, working capital was $4.4 million. Net cash used for operating activities was $10.4 and $8.4 million during the years ended March 31, 1997 and 1996, respectively. License and collaboration agreements between the Company and its strategic corporate collaborators (Boehringer Mannheim, Organon Teknika, Eisai and Perkin-Elmer) provided payments to the Company of $80 million , of which $78 million has been received through March 31, 1997. Additionally, the Company received $6 million in January 1997 under an Advance Royalty Agreement with Boehringer Mannheim. The Company used approximately $800,000, $1.4 million and $2 million of net cash for investing activities substantially related to the acquisition of laboratory equipment, furniture and leasehold improvements during the years ended March 31, 1997, 1996, and 1995, respectively. Additionally, during fiscal years 1997, 1996 and 1995, the Company incurred capital lease obligations of approximately $113,400, $150,000 and $750,000, respectively, related to acquisition of laboratory equipment, furniture and leasehold improvements. Through March 31, 1997, the Company, cumulatively, used approximately $1.2 million to repurchase shares of its stock under a Stock Repurchase Plan which was established in fiscal 1995. No repurchases were made during fiscal 1997. The Company expects to incur substantial research and development expenses, manufacturing costs and marketing and distribution expenses in the future. It is the Company's intention to selectively seek additional collaborative or license agreements with suitable corporate collaborators, although there can be no assurance the Company will be able to enter into such agreements or that amounts received under such agreements will reduce substantially the Company's funding requirements. Additional equity or debt financing may be required, and there can be no assurance that these funds may be available on favorable terms, if at all. The Company's future capital requirements depend on many factors, including continued scientific progress in its diagnostics programs, the magnitude of these programs, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patent claims, competing technological and market developments, changes in its existing license and other agreements, the ability of the Company to establish development arrangements, the cost of manufacturing scale-up and effective commercialization activities and arrangements. 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS PAGE - -------------------------------------------------------- ---- INDEPENDENT AUDITORS' REPORT 24 Statements of Operations for the Three Years Ended March 31, 1997, 1996 and 1995 25 Balance Sheets at March 31, 1997 and 1996 26 Statements of Cash Flows for the Three Years Ended March 31, 1997, 1996 and 1995 27 Statements of Shareholders' Equity for the Three Years Ended March 31, 1997, 1996, and 1995 28 Notes to Financial Statements 29 23 TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF IGEN INTERNATIONAL, INC.: We have audited the accompanying balance sheets of IGEN International, Inc. (the Company) as of March 31, 1997 and 1996, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1997. 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 in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. Deloitte & Touche, LLP Washington, D.C. May 9, 1997 24 IGEN International, Inc. STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, ------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- REVENUES (Notes 1 and 2): License fees and contract revenue $ 8,801,918 $ 11,266,462 $ 12,258,864 Product sales 6,359,866 4,582,566 2,554,577 Royalty income 843,356 75,444 20,490 ------------- ------------- ------------- Total 16,005,140 15,924,472 14,833,931 ------------- ------------- ------------- OPERATING COSTS AND EXPENSES: Product costs 2,447,714 1,848,363 1,277,854 Research and development (Note 2) 13,114,311 14,077,514 12,266,992 Marketing, general, and administrative 10,910,174 8,725,146 8,707,293 ------------- ------------- ------------- Total 26,472,199 24,651,023 22,252,139 ------------- ------------- ------------- LOSS FROM OPERATIONS (10,467,059) (8,726,551) (7,418,208) INTEREST INCOME--NET 585,951 1,078,777 1,489,694 ------------- ------------- ------------- NET LOSS $ (9,881,108) $ (7,647,774) $ (5,928,514) ------------- ------------- ------------- ------------- ------------- ------------- LOSS PER SHARE (Note 1): Net loss per common share $ (.66) $ (.52) $ (.40) ------------- ------------- ------------- ------------- ------------- ------------- SHARES USED IN COMPUTING NET LOSS PER SHARE (Note 1) 14,958,901 14,778,848 14,768,598 ------------- ------------- -------------
See notes to financial statements. 25 IGEN International, Inc. BALANCE SHEETS
MARCH 31, ---------------------------- 1997 1996 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 1) $ 789,895 $ 4,001,147 Short-term investments (Note 1) 8,254,164 16,215,889 Accounts receivable, net 1,782,884 1,891,693 Notes receivable 417,459 -- Inventory (Note 1) 2,074,685 1,648,418 Prepaid expenses (Note 1) 647,556 1,035,303 Other current assets (Notes 1, 4 and 6) 218,150 420,384 ------------- ------------- Total current assets 14,184,793 25,212,834 ------------- ------------- EQUIPMENT, FURNITURE, AND IMPROVEMENTS (Notes 1 and 7) 6,949,687 6,172,014 Accumulated depreciation and amortization (3,781,171) (2,590,281) ------------- ------------- Equipment, furniture, and improvements, net 3,168,516 3,581,733 ------------- ------------- PURCHASED PRODUCT TECHNOLOGY--NET (Note 1) 183,393 213,657 OTHER ASSETS (Note 1) 257,024 268,273 ------------- ------------- TOTAL $ 17,793,726 $ 29,276,497 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 4,266,165 $ 3,792,935 Deferred revenue (Note 1 and 2) 5,392,507 7,532,181 Obligations under capital leases (Note 7) 95,051 187,263 ------------- ------------- Total current liabilities 9,753,723 11,512,379 ------------- ------------- OBLIGATIONS UNDER CAPITAL LEASES-- NONCURRENT (Note 7) 158,303 329,062 ------------- ------------- STOCKHOLDERS' EQUITY: (Notes 1 and 3) Common stock: $.001 par value, 50,000,000 shares authorized; 14,987,416 and 14,908,530 shares issued and outstanding 14,987 14,909 Additional paid-in capital 64,876,126 64,675,784 Accumulated deficit (56,699,602) (46,818,494) Deferred notes receivable and compensation (309,811) (437,143) ------------- ------------- Total stockholders' equity 7,881,700 17,435,056 ------------- ------------- TOTAL $ 17,793,726 $ 29,276,497 ------------- ------------- ------------- -------------
See notes to financial statements. 26 IGEN International, Inc. STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, ------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- CASH FLOWS FROM OPERATIONS: CONTINUING OPERATING ACTIVITIES: Net loss from continuing operations $ (9,881,108) $ (7,647,774) $ (5,928,514) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Interest on note receivable from sale of common stock (3,200) (28,700) (29,900) Amortization of deferred compensation 90,715 108,840 108,840 Depreciation and amortization 1,221,154 1,025,753 535,265 Loss on disposal of equipment, furniture, and improvements -- -- 240,071 Deferred revenue (2,139,674) (505,215) (1,664,272) Add (deduct) items not affecting cash: Decrease (increase) in accounts receivable 108,809 (602,564) (861,635) Increase in notes receivable (417,459) -- -- Increase in inventory (426,267) (584,172) (759,087) Decrease (increase) in prepaid expenses 387,747 (161,092) (521,282) Decrease in other assets 213,483 261,111 105,092 Increase (decrease) in accounts payable and accrued expenses 473,230 (224,824) 1,789,616 ------------- ------------- ------------- Net cash used in continuing operating activities (10,372,570) (8,358,637) (6,985,806) ------------- ------------- ------------- DISCONTINUED OPERATIONS: Items not requiring cash: Net liabilities of discontinued operations -- -- (1,967,977) ------------- ------------- ------------- Total funds used in discontinued operations -- -- (1,967,977) ------------- ------------- ------------- Net cash used in operating activities (10,372,570) (8,358,637) (8,953,783) ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for equipment, furniture, and improvements (777,673) (1,418,319) (1,946,214) Sale of short-term investments 30,725,898 8,496,327 5,952,628 Purchase of short-term investments (22,764,173) (24,712,216) -- ------------- ------------- ------------- Net cash provided by (used in) investing activities 7,184,052 (17,634,208) 4,006,414 ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes receivable from sale of common stock, net 39,817 106,016 8,047 Issuances of common stock 200,420 309,594 152,392 Repurchases of common stock -- (410,550) (779,938) Principal payments under capital lease obligations (262,971) (237,317) -- ------------- ------------- ------------- Net cash used in financing activities (22,734) (232,257) (619,499) ------------- ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (3,211,252) (26,225,102) (5,566,868) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,001,147 30,226,249 35,793,117 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 789,895 $ 4,001,147 $ 30,226,249 ------------- ------------- ------------- ------------- ------------- ------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest Paid $ 65,114 $ 64,368 $ 1,358
Supplemental Disclosures of Non-cash Investing and Financing Activities: During the years ended March 31, 1997, 1996 and 1995, the Company incurred capital lease obligations of approximately $113,000, $150,000 and $750,000 for equipment, furniture and improvements. See notes to financial statements. 27 IGEN International, Inc. STATEMENTS OF STOCKHOLDERS' EQUITY
NOTES RECEIVABLE ADDITIONAL FROM SALE COMMON STOCK PAID-IN ACCUMULATED DEFERRED OF COMMON SHARES AMOUNT CAPITAL DEFICIT COMPENSATION STOCK TOTAL ----------- ------- ------------ --------------- ------------ ----------- ------------ BALANCE, APRIL 1, 1994 14,658,720 $ 14,659 $ 65,404,536 $ (33,242,206) $ (308,395) $ (401,891) $ 31,466,703 Issuance of 271,070 shares of common stock 271,070 271 152,121 -- -- -- 152,392 Repurchase of 148,100 shares of common stock (148,100) (148) (779,790) -- -- -- (779,938) Amortization of deferred compensation -- -- -- -- 108,840 -- 108,840 Changes in notes receivable -- -- -- -- -- (21,853) (21,853) Net loss -- -- -- (5,928,514) -- -- (5,928,514) -------------- ------------ ------------- -------------- ----------- -------------- ------------- BALANCE MARCH 31, 1995 14,781,690 14,782 64,776,867 (39,170,720) (199,555) (423,744) 24,997,630 Issuance of 207,349 shares of common stock 207,349 207 309,387 -- -- -- 309,594 Repurchase of 80,509 shares of common stock (80,509) (80) (410,470) -- -- -- (410,550) Amortization of deferred compensation -- -- -- -- 108,840 -- 108,840 Changes in notes receivable -- -- -- -- -- 77,316 77,316 Net loss -- -- -- (7,647,774) -- -- (7,647,774) -------------- ---------- --------------- -------------- ----------- -------------- ------------- BALANCE, MARCH 31, 1996 14,908,530 14,909 64,675,784 (46,818,494) $ (90,715) $ (346,428) $ 17,435,056 Issuance of 78,886 shares of common stock 78,886 78 200,342 -- -- -- 200,420 Amortization of deferred compensation -- -- -- -- 90,715 -- 90,715 Changes in notes receivable 36,617 36,617 Net loss -- -- -- (9,881,108) -- -- (9,881,108) -------------- ---------- ------------- -------------- ----------- -------------- ------------- BALANCE, MARCH 31, 1997 14,987,416 $ 14,987 $64,876,126 $(56,699,602) $ -- $ (309,811) $ 7,881,700 -------------- ---------- ------------- -------------- ----------- -------------- ------------- -------------- ---------- ------------- -------------- ----------- -------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS 28 IGEN International, Inc. NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain amounts from the prior years have been reclassified to conform to the current year presentation. Organization and Business Activity--IGEN International, Inc. (the Company) develops, manufactures, and markets diagnostic systems utilizing its patented ORIGEN technology, which is based on electrochemiluminescence. During November, 1996, IGEN, Inc. was merged into a newly formed Delaware corporation, IGEN International, Inc. (the "Company"). These changes do not affect IGEN's business operations, employees, shareholders or its business locations. Cash Equivalents and Short-Term Investments--Cash equivalents include cash in banks, money market funds, securities of the U.S. Treasury, and certificates of deposit with original maturities of three months or less. The Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1996. In accordance with this statement, the company has classified its short term investments which consist of U.S. Government Obligations and Corporate Debt-Securities as "available for sale" which are recorded at fair value, based on quoted market prices, which approximates cost. Concentration of Credit Risk--The Company has invested its excess cash generally in securities of the U.S. Treasury, money market funds, certificates of deposit and corporate bonds. The Company invests its excess cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to certain types of instruments issued by institutions with strong investment grade credit ratings and places restrictions on their terms and concentrations by type and issuer. The Company has not experienced any losses on its investments, due to credit risk. Inventory is recorded at the lower of cost or market using the first-in, first-out method and consists of the following: 1997 1996 ----------- ----------- Finished Goods....................... $ 1,095,052 $ 1,270,410 Work in process...................... 150,251 243,888 Raw materials........................ 829,382 134,120 ----------- ----------- Total............................... $ 2,074,685 $ 1,648,418 ----------- ----------- ----------- ----------- Equipment, Furniture, and Improvements are carried at cost. Depreciation is computed over the estimated useful lives of the assets, generally five years, using accelerated methods. Such property consists of the following: 1997 1996 ----------- ----------- Laboratory equipment................. $ 3,308,313 $ 2,974,624 Furniture and office equipment....... 2,176,995 1,798,280 Leasehold improvements............... 1,464,379 1,399,110 ----------- ----------- Total................................ $ 6,949,687 $ 6,172,014 ----------- ----------- ----------- ----------- Prepaid Expenses--Prepaid expenses consist primarily of fees incurred in connection with the Company entering into certain license agreements (see Note 2). Amounts are deferred and recognized over the term of such agreements as the Company records related revenue. Purchased Product Technology--The Company amortizes the cost of purchased patent rights on a straight-line basis over the estimated economic lives of such assets, ranging from five to twenty-one years. The Company has acquired certain product and patent rights from a noncontrolled affiliated company that are being amortized over the remaining lives of the underlying patents. 29 Accumulated amortization on purchased product technology rights was $187,315, $157,051 and $126,787 at March 31, 1997, 1996 and 1995, respectively. Revenue Recognition--Nonrefundable license fees and milestone payments in connection with research and development contracts or commercialization agreements with corporate partners are recognized when they are earned in accordance with the applicable performance requirements and contractual terms. Amounts received in advance of performance under contracts or commercialization agreements are recorded as deferred revenue until earned. Product sales revenue is recorded as products are shipped. The Company derives a significant portion of its revenue from product development and license agreements with certain companies (see Note 2). Deferred Income Taxes--Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Loss Per Share has been computed based on the weighted average number of common shares outstanding during each period. Common equivalent shares calculated for the stock options and warrants under the treasury stock method for all periods presented are excluded due to losses reported from both continuing operations and a net loss. NEW ACCOUNTING STANDARDS Long-Lived Assets--In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which became effective for the Company's 1997 fiscal year. The new standard did not have a material impact, upon adoption, on the Company's financial position, results of operations, and cash flows. Earnings Per Share--Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share," ("EPS") was recently issued by the Financial Accounting Standards Board. SFAS No. 128 is effective for periods ending after December 15, 1997 and early adoption is not permitted. SFAS No. 128 requires the company to compute and present a basic and diluted earnings per share. Had the company computed earnings per share in accordance with SFAS No. 128, the resulting EPS would not be different than which has been reported for the years ended March 31, 1997 and 1996. 2. LICENSE AND RESEARCH AGREEMENTS In 1991, the Company entered into an agreement with Boehringer Mannheim GmbH, a European company, under which that company was granted rights to develop and market certain clinical diagnostic systems worldwide based on the Company's ORIGEN technology. Under the terms of the agreement, the Company received five $10 million license payments annually through January 1996 which were recognized as revenue on a ratable basis through December 1996. This agreement also provides the Company with additional payments for certain product development work, as well as royalties on product sales. In January 1997, the Company received $6 million under an Advance Royalty Agreement with Boehringer Mannheim of which $706,000 was recognized as revenue in fiscal 1997. During 1993 the Company entered into a $20 million license and stock purchase agreement with Organon Teknika, B.V., a European company. Under this agreement, the Company sold 346,135 shares of common stock, granted a license to develop and market certain diagnostic systems worldwide utilizing the Company's ORIGEN technology and agreed to invest $5 million in research and development under a joint development program. During the years ended March 31, 1996 and 1995, contract revenue of $1,111,200 and $2,224,663 was recognized while there was no contract revenues recognized for the year ended March 31, 1997. Among other things, the agreement provides for royalty payments to the Company on product sales and for product supply arrangements between the parties. Sales to Organon Teknika under this agreement amounted to approximately $1.4 million, $1.1 million and $780,000 for the years ended March 31, 1997, 1996 and 1995, respectively. During 1990, the Company granted a license to Eisai Co., Ltd., a Japanese company, to market in Japan a certain clinical diagnostic system based on the Company's ORIGEN technology. The agreement provides for additional future license fees tied to the achievement of product development milestones. This agreement also provides for royalty payments to the Company on product sales, and product supply arrangements between the parties. 30 During November, 1995 the Company formed a Joint Venture for the development and commercialization of advanced diagnostic products utilizing a proprietary combination of multi-array technology together with the Company's ORIGEN-Registered Trademark- technology. Products based on these technologies would be used for high throughput, multiparameter analysis for DNA sequencing, clinical chemistry and immunodiagnostics. The joint venture is named Meso Scale Diagnostics, LLC ("MSD"), and was formed together with Meso Scale Technologies, LLC ("MST"), which is a noncontrolled affiliated Company. The Company has agreed to provide initial capital contributions to MSD of $5 million over time, plus certain start up costs, in exchange for a 50% interest and to fund the organizational and certain ongoing (non-research) operating expenses of MSD. The Company will also participate in a collaborative research program. Through the year ended March 31, 1997 the Company made contributions of approximately $200,000. IGEN has accounted for its investments in MSD as research and development funding arrangements and, accordingly, has recorded its payments as research and development expense. 3. STOCKHOLDERS' EQUITY Shareholder Rights Plan--In November 1996, the Board of Directors adopted a shareholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock par value $.001 per share, of the Company. The dividend was effective as of November 6, 1996 with respect to the shareholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $.001 per share, of the Company at a price of $65.00 per one one-hundredth of a Preferred Share, subject to adjustment. The description and terms of the Rights are set forth in a Rights Plan, between the Company and The First National Bank of Boston. Stock Option Plan--During fiscal 1995, the Company adopted the 1994 Stock Option Plan under which 1,000,000 shares of Common Stock have been reserved for issuance upon exercise of options granted to employees or consultants and the 1994 Non-Employee Directors Stock Option Plan under which 150,000 shares of Common Stock have been reserved for issuance upon exercise of options granted to Non-Employee Directors. The 1994 Stock Option Plan replaced the 1985 Stock Option Plan which expired in February 1995. The Option Plans provide for the granting of both incentive stock options intended to qualify as such under Section 422 of the Internal Revenue Code of 1986, as amended, and supplemental stock options that do not so qualify. A SUMMARY OF THE OPTION ACTIVITY IS AS FOLLOWS: EXERCISE PRICE NUMBER OF RANGE SHARES ($/SHARE) --------- -------------- Outstanding on April 1, 1994............. 1,680,589 $0.29--$4.57 Granted.................................. 356,500 $5.50--$9.63 Exercised................................ (271,070) $0.29--$4.57 Forfeited................................ (11,845) $0.29--$4.57 --------- Outstanding on March 31, 1995............ 1,754,174 $0.29--$9.63 Granted.................................. 67,800 $4.87--$6.25 Exercised................................ (207,349) $0.29--$5.50 Forfeited................................ (122,279) $0.57--$5.50 --------- Outstanding on March 31, 1996............ 1,492,346 $0.29--$9.63 Granted.................................. 310,000 $5.00 Exercised................................ (78,886) $0.29--$5.50 Forfeited................................ (82,797) $0.29--$5.50 -------- Outstanding on March 31, 1997............ 1,640,663 $0.29--$9.63 --------- --------- Stock-Based Compensation -- In 1997, the Company adopted Statement of Financial Accounting Standard No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation. Upon adoption of SFAS 123, the Company continues to measure compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees, and has provided below pro forma disclosures of the effect on net income (loss) and earnings (loss) per share as if the fair value-based method prescribed by SFAS 123 had been applied in measuring compensation expense. If compensation cost for the Company's 1997 and 1996 grants for stock-based compensation had been determined consistent with the fair value-based method of accoung per SFAS 123, the Company's pro forma net income (loss) and pro forma earnings (loss) per share for the years ended March 31, 1997 and 1996 would be as follows: 31 1997 1996 Net income (loss) As reported............................ $(9,881,108) $(7,647,774) Pro forma.............................. (9,996,268) (7,684,584) Primary earnings (loss) per share As reported............................ $ (.66) $ (.52) Pro forma.............................. $ (.67) $ (.52) The fair value of the option grant is estimated on the date of grant using the Black-Scholes option pricing models with the following assumptions: 1997 1996 Expected dividend yield.................. 0% 0% Expected stock price volatility.......... 3.5% 49.0% Risk-free interest rate.................. 6% 5.5% Expected option term..................... 5 years 5 years Notes Receivable From Stockholders--Notes receivable arising from the sale of common stock (net of subsequent repayments) are presented in the accompanying financial statements as a reduction of stockholders' equity. The notes have terms of four years and bear interest with a range of 6-8%. Stock Repurchase Plan--The Company's Board of Directors has authorized the repurchase of up to $2,000,000 of its common stock. Through March 31, 1996, the Company had repurchased 228,609 shares at a cost of approximately $1.2 million. There were no repurchases during the year ended March 31, 1997. All shares repurchased under this Plan have been retired. 4. INCOME TAXES For the years ended March 31, 1997, 1996, and 1995 the Company recorded no income tax expense and did not pay federal or state tax, as calculated by applying statutory rates to pretax income. As of March 31, 1997, the Company has available for income tax reporting purposes net operating loss and general business credit carryforwards approximating $41,900,000 and $2,400,000, respectively. These carryforwards expire in varying amounts through March 31, 2012. Under the provisions of the Tax Reform Act of 1986, the use of the Company's net operating loss carryforward may be significantly reduced, if substantial changes in stock ownership take place. The potential tax benefits of the unused carryforwards have been reserved for financial statement purposes because of the uncertainty of realizing those benefits in the future. The approximate tax effects of temporary differences that gave rise to the Company's deferred tax assets and liabilities are as follows: YEAR ENDED MARCH 31, ---------------------------- 1997 1996 ------------- ------------- Deferred tax assets: Deferred revenue........................... $ 2,046,996 $ 2,836,000 Net operating loss and tax credit carryforwards................. 18,305,819 12,427,000 Other...................................... 304,221 Less valuation allowance................... (20,657,036) (15,218,000) ------------ ------------ Net deferred tax assets...................... $ -- $ 45,000 ------------ ------------ ------------ ------------ 5. EMPLOYEE SAVINGS PLAN The Company has an Employee Savings Plan (the Plan) qualifying under Section 401(k) of the Internal Revenue Code and subject to the Employee Retirement Income Security Act of 1974, as amended. Qualified individuals are eligible to participate in the Plan, and the Company may, but is not required to, make matching contributions. Through March 31, 1997 the Company has not made a contribution to this Plan. 32 The Company is not obligated under any other postretirement benefit plan. 6. RELATED PARTIES Certain shareholders of the Company are also shareholders of several other companies which are considered affiliates of IGEN for the purpose of this disclosure. As discussed in Note 2, the Company has entered into transactions with companies that were affiliated through common shareholders. Amounts due from affiliated companies for services rendered and certain shared costs were $58,430 and $281,860 at March 31, 1997 and 1996, respectively. There were no amounts due at March 31, 1997. During 1997 and 1996, the Company incurred $212,506 and $487,494, respectively, in expenses under a research contract with an affiliate. Additionally during 1996, the Company prepaid $500,000 for a research and supply agreement with another affiliate. The Company has licensed certain diagnostic technologies from affiliated companies and has licensed certain pharmaceutical technologies to affiliated companies. No royalties have ever been earned or accrued under these license agreements. 7. COMMITMENTS Capital Leases--The Company is obligated under capital lease agreements, for certain equipment, furniture and building improvements. The aggregate discounted lease payments are recorded as a liability, and the fair market value of the related leased assets are capitalized and amortized over the assets estimated useful lives. Total assets capitalized pursuant to such agreements were approximately $1 million at March 31, 1997. The future minimum payments under these lease agreements at March 31, 1997 are as follows: 1998.................................................... $ 163,106 1999.................................................... 47,037 2000.................................................... 45,274 2001.................................................... 12,483 -------- Total minimum payments.................................. 267,900 Amount representing interest............................ (14,546) -------- Obligations under capital leases........................ 253,354 Current portion......................................... (95,051) -------- Obligations under capital leases-noncurrent............. $ 158,303 -------- -------- Operating Leases--During 1995, the Company entered into a lease for an office, laboratory and manufacturing facility with a term of ten years, and an option to terminate the lease after five years. Rent expense for facility and equipment operating leases totaled approximately $1.5 million, $1.6 million and $1.3 million for the years ended March 31, 1997, 1996, and 1995, respectively. Research Agreements--The Company has entered into agreements with entities to fund research and development programs. IGEN is obligated to pay royalty payments on any future product sales. At March 31, 1997, the future minimum lease and research payments under these agreements are as follows: OPERATING LEASES RESEARCH AGREEMENTS ---------------- ------------------- 1998..................... $ 1,413,778 $2,000,000 1999..................... 1,455,591 1,000,000 2000..................... 1,478,659 1,000,000 2001..................... 1,523,019 800,000 2002..................... 1,568,838 -- Thereafter............... 4,703,321 -- ----------- ---------- Total.................... $12,143,206 $4,800,000 ----------- ---------- ----------- ---------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. 33 PART III Certain information required by Part III is omitted from this Report in that the registrant will file a definitive proxy statement pursuant to Regulation 14A (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a.) Directors. The information with respect to directors required under this item is incorporated herein by reference to the section captioned "Election of Directors" in the Company's Proxy Statement with respect to the Annual Meeting of Shareholders to be held on September 9, 1997. (b) Executive Officers. The information with respect to executive officers required under this item is incorporated herein by reference to Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information required under this item is incorporated herein by reference to the sections entitled "Election of Directors--Compensation for Directors", "--Compensation of Executive Officers", "-- Compensation Arrangements and Employment Agreements", "--Report of the Compensation Committee", in the Company's Proxy Statement with respect to the Annual Meeting of Shareholders to be held on September 9, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required under this item is incorporated herein by reference to the section entitled "Principal Shareholders" in the Company's Proxy Statement with respect to the Annual Meeting of Shareholders to be held on September 9, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required under this item is incorporated herein by reference to the sections entitled "Election of Directors--Compensation Arrangements and Employment Agreements" and "--Certain Transactions" in the Company's Proxy Statement with respect to the Annual Meeting of Shareholders to be held on September 9, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) (1) Index to Financial Statements. The financial statements listed in the Index to Financial Statements are filed as part of this Annual Report on Form 10-K. (a) (2) Index to Financial Statement Schedules. All schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto. (a) (3) Index to Exhibits. The Exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits. (b) Reports on Form 8-K. None. 34 (c)(1) Exhibits The response to this portion of Item 14 is submitted as a separate section of this Form 10-K. (c)(2) Management Contracts and Other Compensatory Arrangements. None (d) Financial Statement Schedules. All schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto. --------------------------------------------------------------------- 35 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. IGEN INTERNATIONAL, INC. JULY 11, 1997 BY: /s/Samuel J. Wohlstadter ------------------------------- CHIEF EXECUTIVE OFFICER KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Samuel J. Wohlstadter, Richard J. Massey and George V. Migausky as his attorney-in-fact for him in any and all capacities, to sign any amendments to this report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that the said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof. 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. SIGNATURE TITLE DATE - --------- ------ ---- /s/ SAMUEL J. WOHLSTADTER Chief Executive Officer July 11, 1997 - ---------------------------- (Principal Executive Officer); Samuel J. Wohlstadter Director /s/ GEORGE V. MIGAUSKY Vice President July 11, 1997 - ---------------------------- and Chief Financial Officer George V. Migausky (Principal Financial and Accounting Officer) /s/ RICHARD J. MASSEY President, Chief Operating Officer; July 11, 1997 - ---------------------------- Director Richard J. Massey /s/ EDWARD LURIER Director July 11, 1997 - ---------------------------- Edward Lurier /s/ William O'Neill Director July 11, 1997 - ---------------------------- William O'Neill /s/ ROBERT SALSMANS Director July 11, 1997 - ---------------------------- Robert Salsmans 36 INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION OF DOCUMENT PAGE NO. PAGE NO. - --------- --------------------------------------------------------------------------------- --------- ---------- 2.1(7) Agreement and Plan of Merger effective November 19, 1996 (by virtue of a reincorporation), by and between IGEN, Inc., a California corporation, and IGEN International, Inc. a Delaware corporation. 3.1(3) Third Amended and Restated Articles of Incorporation of the Registrant. 3.2(2) Bylaws of the Registrant. 3.3(7) The Registrant's (as successor in interest to IGEN, Inc. by virtue of a reincorporation effective November 19, 1996) Certificate of Incorporate, as filed with the Secretary of State of the State of Delaware on August 30, 1996. 3.4(7) The Registrant's Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on November 18, 1996. 3.5(7) The Registrant's (as successor in interest to IGEN, Inc. by virtue of a reincorporation effective November 19, 1996) Bylaws, as currently in effect. 4.1(5) Rights Agreement, dated as of December 21, 1995, between the Company and the First National Bank of Boston. 4.2(5) Form 8-A, filed December 29, 1995, registering the Preferred Share Purchase Rights. 4.3 Reference is made to Exhibits 3.1 and 3.2. 4.4(6) Form of Specimen Right Certificate. 4.5(6) Rights Agreement, dated November 6, 1996, between the Registrant and The First National Bank of Boston. 10.1(2) Registration Agreement between the Registrant and the parties names therein dated March 17, 1988, as amended through March 30, 1993. 10.2(2) Form of Waiver and Amendment of Registration Agreement executed in December 1993, amending in certain respects the Registration Agreement dated as of March 17, 1988. 10.3(2) Agreement between the Registrant and The Perkin-Elmer Corporation dated March 30, 1990, with Addendum to Agreement dated February 21, 1991 (with certain confidential information deleted). 10.4(2) Agreement between the Registrant and Eisai Co., Ltd. dated May 25, 1990 (with certain confidential information deleted). 10.5(2) License and Development Technology Agreement between the Registrant and Boehringer Mannheim GmbH dated September 23, 1992 (with certain confidential information deleted). +10.5.1(1) Advanced Royalty Agreement between the Registrant and Boehringer Mannheim GmbH dated January 9, 1997. 10.6(2) License Agreement between the Registrant and Hyperion Catalysis International ("Hyperion") dated October 10, 1993 as amended March 15, 1990. 10.7(2) Common Stock Purchase Agreement between the Registrant and Organon Teknika B.V. ("Organon") dated May 19, 1993. 10.8(2) License and Technology Development agreement between the Registrant and Organon dated May 19, 1993 (with certain confidential information deleted). 10.9(2) Agreement and Plan of Reorganization and Agreement and Plan of Merger between the Registrant and Molecular Displays, Inc. dated March 9, 1993.
+ Confidential treatment has been requested. 37
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION OF DOCUMENT PAGE NO. PAGE NO. - --------- --------------------------------------------------------------------------------- --------- ---------- 10.10(2) Term Sheet for Consolidation of Research Projects between the Registrant and Proteinix Corporation dated December 14, 1993 (with certain confidential information deleted). 10.11(2) Term Sheet for consolidation of Cancer Research Projects between the Registrant and Pro-Neuron, Inc. dated December 14, 1993 (with certain confidential information deleted). 10.12(2) Join Venture Agreement between the Registrant and Hyperion dated May 28, 1993. 10.13(2) Product Development and Marketing Agreement between the Registrant, Hyperion and HyperGen dated May 29, 1993. 10.14(2) Form of Indemnity Agreement entered into between the Registrant and its Directors and Officers. 10.15(2) Registrant's 1985 Stock Option Plan, as amended, and related Form of Incentive Stock Option Grant and Form of Nonqualified Stock Option Grant. 10.16(4) Registrant's 1994 Stock Option Plan, and related Form of Incentive Stock Option Grant. 10.17(4) Registrant's 1994 Non-Employee Directors Stock Option Plan, and related Form of Incentive Stock Option Grant. 10.18(4) Lease Agreement between the Registrant and W-M 16020 Limited Partnership dated October 5, 1994. 10.19(4) Agreement for Purchase and Sale of Joint Venture Interest between Registrant and Hyperion Catalysis International, dated December 28, 1994 10.20(5) Joint Venture Agreement, dated as of November 30, 1995, between MSD, MST and the Company. 10.21(5) Limited Liability Company Agreement, dated as of November 30, 1995, between MSD, MST and the Company. 10.22(5) IGEN/MSD License Agreement, dated as of November 30, 1995, between MSD and the Company. 10.23(5) Indemnification Agreement, dated as of November 30, 1995, between the Company and Jacob Wohlstadter. 11.1(1) Calculation of net loss per share. 23.1(1) Consent of Deloitte & Touche LLP 24.1 Power of Attorney. Reference is made to the signature page. 27.1(1) Financial Data Schedule.
- ------------------------ (1) Filed as an exhibit to this Annual Report on Form 10-K. (2) Previously filed as an exhibit to the Registration Statement on Form S-1, as amended (Registration No. 33-72992) and incorporated by reference herein. (3) Previously filed as an exhibit to the Registrant's Form 10-K for the fiscal year ended March 31, 1994. (4) Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995. (5) Previously filed as an exhibit to the Registrant's Form 10-Q for the quarter ended December 31, 1995. (6) Incorporation by reference to Exhibit 1.1 of the Registrant's Form 8-A filed December 11, 1996. (7) Previously filed as an exhibit to the Registrant's Form 10-Q for the quarter ended December 31, 1996. 38 EX-10.5 2 EXHIBIT 10.5.1 Confidential Treatment Requested EXHIBIT 10.5.1 ADVANCE ROYALTY AGREEMENT THIS ROYALTY ADVANCE AGREEMENT (the "Agreement") is made this 9th day of January, 1997, by and between Boehringer Mannheim GmbH ("BM"), a German corporation, having a principal place of business at Sandhofer Strasse 116, D-6800 Mannheim 31, Federal Republic of Germany, and IGEN International Incorporated ("IGEN"), a Delaware corporation, having a principal place of business at 16020 Industrial Drive, Gaithersburg, Maryland 20877, with reference to the following facts: A. IGEN and BM are parties to a License and Technology Development Agreement dated as of September 23, 1992 (the "License Agreement"), pursuant to which, among other things, IGEN granted to BM certain licenses to make, use and sell certain instruments and assays based upon the ECL Technology, as such term is defined in the License Agreement. B. IGEN and BM now desire to enter into an agreement whereby BM will advance to IGEN royalties that will become due under the License Agreement. THEREFORE, in consideration of the foregoing premises and the mutual covenants herein set forth, IGEN and BM do hereby agree as follows: 1. DEFINITIONS As used herein, capitalized terms shall have the respective meanings set forth below. All capitalized terms used herein and not defined in this Section 1 shall have the meaning given them in the License Agreement. 1.1 "Advance Royalty Account" means an account on IGEN's books that reflects the amount, as it may increase as a result of interest accrual and decrease as a result of Royalties earned by IGEN, to be credited to BM pursuant to Section 2 hereof. 1.2 "Collateral" means IGEN's rights under the License Agreement to receive Royalties from BM, all IGEN accounts receivable from BM with respect to Royalties earned under the License Agreement, the monies due and to become due under the License Agreement, and in all proceeds of such accounts. 1.3 "Default" means the occurrence of any one or more of the following events (including the passage of time, if any, specified therefor): (i) IGEN shall become insolvent, fail to pay its debts generally as they become due, voluntarily seek, consent to, or acquiesce in the benefit or benefits of any IGEN Relief Law, or become a party to ( or be made the subject of) any proceeding provided for by any IGEN Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the rights of BM hereunder (unless, in the event such proceeding is involuntary, the petition instituting same is dismissed within 60 days of the filing of same); (ii) the failure to have discharged within a period of 30 days after the commencement thereof any attachment, sequestration, or similar proceeding against any of the assets of IGEN; (iii) IGEN fails to pay any money judgment against it at least ten days prior to the date on which any of the assets of IGEN may be lawfully sold to satisfy such judgment; or (iv) the acceleration by the holder thereof of the maturity of any indebtedness owned by IGEN. 1.4 "Debtor Relief Law" means the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, Bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar IGEN relief laws from time to time in effect affecting the rights of creditors generally. 1.5 "Interest Rate" means the sum of (i) [ ] as reported in the Wall Street Journal, Midwest Edition, on the morning of January 13, 1997; plus (ii) [ ]. 39 Confidential Treatment Requested 1.6 "Royalties" means the royalty payments due IGEN from BM pursuant to Section 6.2 and 6.3 of the License Agreement. 1.7 "Sales Report" means the quarterly accounting of Net Sales of Products by BM and its Affiliate Sublicensees provided by IGEN by BM pursuant to Section 7.1 of the License Agreement. 1.8 "Security Interest" means the security interest granted and the pledge and assignment made under Section 3. 2. ADVANCE ROYALTY 2.1 ADVANCE ROYALTY. BM hereby agrees to pay to IGEN, on or before January 13, 1997, the sum of Six Million United States Dollars ($6,000,000). Such sum shall be paid by wire transfer of immediately available funds to: Bank: [ ] Account Number: [ ] Account Name: ABA Number: [ ] Reference: "For further credit to IGEN, Inc." IGEN agrees to immediately reflect such sum as a credit to BM in the Advance Royalty Account. 2.2 INTEREST. The sum in the Advance Royalty Account shall accrue interest at the Interest Rate, compounded annually. Such interest shall be treated as a further credit to BM. 2.3 CURRENT BALANCE OF ACCOUNT. Within fifteen (15) days after receiving BM's quarterly Sales Report, IGEN shall advise BM in writing of the balance of the Advance Royalty Account as of the end of such quarter. 2.4 PAYMENT OF ROYALTIES. BM's payment to IGEN and the establishment of the Advance Royalty Account in accordance with Section 2.1 hereof constitute a pre-payment of Royalties which otherwise would have become due and payable to IGEN from BM pursuant to Section 6.2 and 6.3 of the License Agreement. So long as there is a balance of greater than zero in the Advance Royalty Account, all such Royalties reflected in each Sales Report delivered by BM to IGEN shall automatically be deducted from and reduce the balance of the Advance Royalty Account as of the sixtieth day following the end of the quarter which was the subject of the Sales Report. In the event that the amount of Royalties due from BM to IGEN as reflected in a Sales Report exceeds the balance of the Advance Royalty Account, BM shall remit to IGEN with such Sales Report a payment reflecting the difference between the balance of the Advance Royalty Account as of the due date for such Sales Report and the amount of Royalties due as reflected in such Sales Report. 3. SECURITY INTEREST 3.1 GRANT OF SECURITY INTEREST. As security for IGEN's obligation to credit BM for Royalties due, IGEN here grants to BM a security interest in the Collateral. 3.2 COVENANT OF IGEN. So long as the balance of the Advance Royalty Account is greater than zero, IGEN agrees that: 40 Confidential Treatment Requested (a) it will not, without the prior written consent of BM, pledge or grant any security interest in the Collateral to anyone except BM, or permit any lien or encumbrance to attach to the Collateral, or any levy to be made on the Collateral, or any financing statement(except BM's statement) to be on file with respect to the Collateral; (b) it will not relocate IGEN's principal place of business, chief executive office, or place where IGEN's books and records related to accounts are kept, unless prior thereto IGEN (i) gives BM 30 days prior written notice of such proposed relocation (such notice to include, without limitation, the name of the county or parish and state into which such relocation is to be made) and (ii) (unless the relocation is to a jurisdiction in which existing financing statements or other required filings have previously been made to perfect the Security Interest in such Collateral) executes and delivers all such additional acts as BM in its sole discretion may request in order to continue or maintain the existence and priority of the Security Interest in such Collateral. (c) it will, from time to time, promptly execute and deliver to BM all such other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as BM may reasonably request in order to more fully create, evidence, perfect, continue, and preserve the priority of the Security Interest. 3.3 REMEDIES. Should a Default occur and be continuing, BM may, at its election, exercise any and all rights and remedies available to a BM under the Uniform Commercial Code, in addition to any and all other rights available to BM at law, in equity, or otherwise, including, without limitation, (a) reduce any claim to judgment; (b) exercise the rights of offset against the interest of IGEN in and all amounts due IGEN from BM to the extent of the full amount of the Advance Royalty Account; (c) foreclose the Security Interest and any other Liens BM may have or otherwise realize upon any and all of the rights BM may have in and to the Collateral, or any part thereof; or (d) applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and IGEN hereby consents to any such appointment). 4. MISCELLANEOUS 4.1 TERM. At such time as the balance of the Advance Royalty Account is reduced to zero, this agreement shall thereafter terminate upon receipt by BM of IGEN's written notice of such termination. 4.2 ACTIONS NOT RELEASES. The Security Interest and IGEN's obligations and BM's rights hereunder shall not be released, diminished, impaired, or adversely affected by the occurrence of any one or more of the following events: (i) the taking or accepting of any other security or assurance for any or all of IGEN's obligation under the License Agreement or hereunder; (ii) any release, surrender, exchange, subordination, or loss of any security or assurance at any time existing in connection with any or all of IGEN's obligations under the License Agreement or hereunder; (iii) the insolvency, bankruptcy, or lack of corporate or trust power of any party at any time liable for the performance of any or all of IGEN's obligations under the License Agreement or hereunder, whether now existing or hereafter occurring; (iv) any neglect, delay, omission, failure, or refusal of BM to take or prosecute any action in connection with any other agreement, document, guaranty, or instrument evidencing, securing, or assuring the performance of all or any of IGEN's obligations under the License Agreement or hereunder; (v) any failure of BM to notify IGEN of any renewal, extension, or assignment of IGEN's obligations under the License Agreement or Hereunder or any part thereof, or the release of any security, or of any other action taken or refrained from being taken by BM against IGEN or any new agreement between BM and IGEN; (vi) the illegality, invalidity, or unenforceability of all or any part of IGEN's obligations under the License Agreement or hereunder against any party obligated with respect thereto by reason of the fact that the act of creating IGEN's obligations under the License Agreement or hereunder, or any 41 Confidential Treatment Requested part thereof, is ultra vires, or the officers creating same acted in excess of their authority, or for any other reason; or (vii) if any payment by any party obligated with respect thereto is held to constitute a preference under applicable laws or for any other reason BM is required to refund such payment or pay the amount thereof to someone else. 4.3 Captions: Arrangements. The headings, captions, and arrangements used herein are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms hereof nor affect the meaning thereof. Whenever herein the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any gender herein shall include each other gender where appropriate. The words "herein," "hereof," and "hereunder," and other words of similar import refer to this agreement as a whole and not to any particular part or subdivision hereof. 4.4 NOTICES. Any notice or other communication required or permitted to be given to either party hereto shall be in writing and shall be deemed to have been properly given to be effective on the date of delivery if delivered in person or by facsimile or five days after mailing by registered or certified mail, postage paid, to the other party at the address specified for notice to such party in the License Agreement. 4.5 GOVERNING LAW. This agreement is being executed and delivered, and is intended to be performed, in the state of Maryland, and the laws of such state and of the United States of America shall govern the rights and duties of the parties hereto and the validity, construction, enforcement, and interpretation hereof. 4.6 INVALID PROVISIONS. If any provision hereof is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable; this agreement shall be constructed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provision hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance here from. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part hereof a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. 4.7 ENTIRETY AND AMENDMENTS. This instrument and the License Agreement embody the entire agreement between the parties, supersede all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended only by an instrument in writing executed jointly by an authorized officer of each party hereto and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof. 4.8 MULTIPLE COUNTERPARTS. This agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but in making proof of this agreement, it shall not be necessary to produce or account for more than one such counterpart. 4.9 PARTIES BOUND; ASSIGNMENT. This agreement shall be binding on IGEN and IGEN's successors, and assigns and shall inure to the benefit of BM and BM's successors and assigns. Neither party may, without the prior written consent of the other, assign any of its rights, duties or obligations hereunder, and any such attempted assignment shall be void. (next page is signature page) 42 Confidential Treatment Requested IN WITNESS WHERE OF, the parties have executed this Agreement to be effective as of the date first written above. BOEHRINGER MANNHEIM GMBH IGEN INTERNATIONAL INCORPORATED ppa. / / / / /s/ Walter Funk /s/ George Migausky - ------------------------------- ------------------------------- Title: Senior Vice President Title: Chief Financial Officer Accounting and Finance ppa. /s/ Klaus Gilow - ------------------------------- Title: Senior Vice President Legal 43 EX-11.1 3 EXHIBIT 11.1 EXHIBIT 11.1 STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE FOR THE YEARS ENDED MARCH 31, ------------------------------- 1997 1996 1995 --------- --------- --------- (IN THOUSANDS,)EXCEPT PER SHARE AMOUNTS Weighted Average Number of Shares of Common Stock Outstanding 14,959 14,779 14,769 Net Effect of Dilutive Stock Options -- -- -- --------- --------- --------- Weighted Average Shares Outstanding 14,959 14,779 14,769 --------- --------- --------- Net Loss from Continuing Operations $ (9,881) $ (7,648) $ (5,929) --------- --------- --------- --------- --------- --------- Net Loss $ (9,881) $ (7,648) $ (5,929) --------- --------- --------- --------- --------- --------- Net Loss Per Share From Continuing Operations $ (.66) $ (.52) $ (.40) --------- --------- --------- --------- --------- --------- Net Loss Per Share $ (.66) $ (.52) $ (.40) --------- --------- --------- --------- --------- --------- EX-23.1 4 EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference in Registration Statement No. 33-77132 of IGEN International, Inc. on Form S-8 of our reports dated May 9, 1997, appearing in and being incorporated by reference in the Annual Report on Form 10-K of IGEN International, Inc. for the year ended March 31, 1997. DELOITTE & TOUCHE, LLP Washington, DC July 11, 1997 45 EX-27 5 EXHIBIT 27
5 YEAR MAR-31-1997 APR-01-1996 MAR-31-1997 789,895 8,254,164 2,200,343 0 2,074,685 14,184,793 6,949,687 3,781,171 17,793,726 9,753,723 0 0 0 14,987 7,866,713 17,793,726 6,359,866 16,005,140 2,447,714 26,472,199 0 0 585,951 0 0 0 0 0 0 (9,881,108) (.66) (.66)
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