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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File No. 0-21990
OXiGENE, INC.
(Exact name of registrant as specified in its charter)
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Delaware 13-3679168
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(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
One Copley Place, Suite 602, Boston, MA 02116
(Address of principal executive offices)
(617) 536-9500
(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, par value $.01 per share
Warrant to purchase one share of Common Stock
Title of Each 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 Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 19, 1998 was $160,791,403, based on
the closing price of $17.125 on that date.
As of March 19, 1998, the aggregate number of outstanding shares of Common Stock
of the registrant was 10,195,765 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the Annual Meeting of Stockholders,
scheduled to be held on June 5, 1998, is incorporated by reference to Part III
(Items 10, 11, 12 and 13) of this Form 10-K.
SAFE HARBOR FOR FORWARDLOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Annual Report on
Form 10-K ("Annual Report") contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks and uncertainties that may cause the
Company's actual results or outcomes to be materially different from those
anticipated and discussed herein. Further, the Company operates in an industry
sector where securities values may be volatile and may be influenced by
regulatory and other factors beyond the Company's control. Important factors
that the Company believes may cause such differences are discussed in the "Risk
Factors" section of this Annual Report and in the cautionary statements
accompanying the forward-looking statements in this Annual Report. In assessing
forward-looking statements contained herein, readers are urged to read carefully
all Risk Factors and cautionary statements contained in this Annual Report.
PART I
1. BUSINESS.
Introduction
OXiGENE, Inc. ("OXiGENE" or the "Company") is engaged primarily in research
into and development of products designed to enhance the clinical efficacy of
radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. The Company's proprietary technology involves the
inhibition, measurement and stimulation of the cellular DNA repair process.
Since 1997, the Company, through collaborative arrangements, has also been
engaged in the development of two new classes of compounds that will be
clinically tested as a direct treatment of cancer.
OXiGENE's principal products, Neu-Sensamide(TM) and Oxi-104 (proposed
generic name declopramide), are sensitizers, drugs that make a tumor more
susceptible to damage by radiation or chemotherapy. Both products are based on
the Company's proprietary knowledge of the processes by which certain enzymes
repair damaged DNA sites, a function essential to a cell's survival. The cell's
enzymes that normally repair DNA damage to the tumor cell counter the cytotoxic
(cell-killing) effects of radiation and chemotherapy by repairing the tumor
cell's DNA that has been damaged by either of those therapies. When administered
in accordance with its prescribed regimen, the Company believes, on the basis of
its clinical studies, that Neu-Sensamide(TM) should make cancerous tumor cells
more sensitive to radiation by inhibiting DNA repair activity, consequently
increasing tumor damage from radiation therapy in those cells. Accordingly, the
Company expects that patient response to radiation therapy should be improved
and may result in increased tumor shrinkage, reduced side effects, or both.
Based on the results of preclinical animal studies, OXiGENE believes that
Oxi-104 alone may induce tumor growth-inhibiting and tumor-killing effects.
Neu-Sensamide(TM) is a proprietary reformulation of Sensamide,(TM) a
prototype drug in which metoclopramide is the active ingredient. In September
1997, the Company announced the first preliminary results of its European,
randomized, controlled Phase II/III clinical trial of Sensamide(TM) in
combination with radiation therapy in 218 patients with inoperable non-small
cell lung cancer ("NSCLC"), which indicated an increased median survival time
for those patients who received a full dosage of Sensamide(TM) plus radiation.
In March 1998, the Company supplemented those preliminary results with tumor
response data. The additional study data indicate that more patients with
squamous cell carcinoma (the most common form of lung cancer) and a Karnofsky
score (a benchmark for assessing the degree of illness in terminally ill
patients) of 90 or higher, when receiving Sensamide(TM) plus radiation,
experienced tumor response. Forty-seven (47%) of those patients experienced
complete or partial (complete is 100% and partial is 50% or greater) tumor
response, compared to 30% for patients who received radiation only. A
significant number of patients did not complete the Sensamide(TM) treatment
because of either the Central Nervous System (CNS) side effects associated with
metoclopramide (approximately 25%) or the progressive deterioration of their
health (approximately 20%). These CNS side effects (sedation, anxiety,
restlessness and depression), however, are reversible, have been well documented
in the clinical literature for more than 30 years, and were not unexpected by
the Company. The Company believes those results constitute sufficient proof of
the theory underlying its principal scientific concept to provide a basis for it
to continue advanced clinical studies with respect to its later generation
drugs, which, the Company believes, have reduced side effects from those
experienced with Sensamide(TM) (as described above).
In the fourth quarter of 1996, OXiGENE commenced an additional randomized,
controlled Phase III clinical trial in 226 patients with NSCLC using
Neu-Sensamide(TM), the Company's second-generation sensitizer drug. Based on
preliminary preclinical studies and a Phase I clinical trial, the Company
believes that Neu-Sensamide(TM) will show a reduced CNS side effect profile
compared to Sensamide,(TM) resulting in an increase of the number of patients
completing treatment. The Company intends to use the results of the
Sensamide(TM) study to support a New Drug Application ("NDA") for
Neu-Sensamide(TM) as a radiation sensitizer for the treatment of patients with
NSCLC.
In the fourth quarter of 1997, a 15-patient, open-label, Phase I study of
Neu-Sensamide(TM) in patients with glioblastoma, a highly malignant form of
brain cancer, commenced in the United States. The European Phase I/II
counterpart of this study was initiated in Sweden in the second quarter of 1996.
After the filing of an Investigational New Drug ("IND") application with
the U.S. Food and Drug Administration ("FDA") in March 1997, the Company
commenced Phase I/II clinical tests of Oxi-104, the Company's third generation
sensitizer, in combination with 5-FU and Cisplatin (chemotherapeutic agents) in
patients with advanced stages of cancer. This study is the first in which the
Company utilizes its compounds in combination with chemotherapeutic agents, as
distinguished from radiation. Oxi-104 is an N-substituted benzamide but, unlike
Sensamide(TM) and Neu-Sensamide,(TM) it is not based on metoclopramide (which is
a different compound in the chemical family of N-substituted benzamides).
Oxi-104 has been designed with a molecular structure that, the Company believes,
may reduce adverse side effects in patents while maintaining the sensitizing
properties of other N-substituted benzamides.
The first of the Company's products being developed, under a collaborative
arrangement, as a direct treatment of cancer is Cordycepin. A Phase I clinical
study of Cordycepin in combination with Pentostatin in patients with refractory
TdT-positive acute lymphoid leukemia started in the first quarter of 1997, in
collaboration with Boston Medical Center Corporation, an affiliate of Boston
University Medical Center ("BMC"), and the National Cancer Institute. The
collaboration with BMC was expanded with the appointment of Dr. Ronald Pero,
OXiGENE's Chief Scientific Officer, as a professor and member of BMC's
scientific staff and the creation of an OXiGENE-sponsored research facility that
will conduct research into, among other things, the potential therapeutic
synergies between N-substituted benzamides and Cordycepin and related compounds.
OXiGENE has an option to acquire an exclusive, world-wide, royalty-bearing
license with respect to any invention or product, including Cordycepin,
conceived in the course of work performed under the BMC agreement.
In May 1997, OXiGENE entered into an agreement with Arizona State
University ("ASU") to develop and test certain Combretastatin compounds,
including Combretastatin (hereinafter generally referred to as
"Combretastatin"). Combretastatins are naturally-occurring substances that were
identified and isolated by Dr. George R. Pettit, Regents Professor of Chemistry,
and his colleagues at ASU, from the South African bushwillow tree.
Combretastatin is believed to block the growth of new blood vessels into the
tumor and to destroy recently-formed blood vessels within the tumor. OXiGENE has
an option to acquire from ASU an exclusive, world-wide, royalty-bearing license
with respect to the commercial rights to Combretastatin.
The Company has also developed proprietary assays (tests) that measure
levels of the DNA repair enzyme PARP (Poly (ADP Ribose) Polymerase) in blood,
thereby suggesting DNA repair activity that the Company believes correlates to
immune function and status, and has identified a mixture of compounds, called
Nicoplex, that it believes may be capable of stimulating DNA repair. Based on
preclinical studies to date, OXiGENE has commenced the clinical development of
these product types.
There can be no assurance that the Company's existing and planned product
development efforts and clinical trials for Sensamide,(TM) Neu-Sensamide(TM),
OXI-104 or any other compound, will be successful or completed within
anticipated time frames, or at all; that regulatory approvals will be obtained
or will be as broad as those sought by the Company; or that any products, if
introduced, will achieve market acceptance. In addition, there can be no
assurance that the Company's technology will prove effective, that the Company
will be able to enter into strategic alliances or joint ventures or that the
terms thereof will be favorable to the Company, or that the Company will be
profitable. See "Risk Factors."
The Company was incorporated in New York in 1988, and subsequently was
re-incorporated in Delaware in 1992. The Company established a Swedish
subsidiary, OXiGENE Europe AB, in December 1994. The Company's principal
executive office is located at One Copley Place, Suite 602, Boston, MA 02116
(phone no.: 617-536-9500; fax no.: 617-536-4700, and in Sweden at
Blasieholmsgatan 2C, S-111 48 Stockholm, Sweden (phone no.: 011 46 8 678 8720;
fax no.: 011 46 8 678 8605) and at Scheelevagen 17, S-223 70 Lund, Sweden
(telephone no.: 011 46 46 16 8860; fax no.: 011 46 46 16 8866). Any references
in this Annual Report to "OXiGENE" or the "Company" shall mean OXiGENE, Inc. and
its wholly-owned Swedish subsidiary OXiGENE Europe AB.
Product Development and Marketing Strategy
OXiGENE's primary goal to date has been to develop products that enhance
the efficacy of existing forms of cancer treatment, such as radiation and
chemotherapy, and improve a patient's quality of life, by reducing side effects
and inhibiting the DNA repair function of, and increasing DNA damage in, tumor
cells that have been subjected to treatment. In 1997, the Company began to
expand its focus to include the development and clinical testing of Cordycepin
and Combretastatin, two classes of compounds that aim to treat cancer directly.
The Company believes these compounds complement its traditional sensitizer
program, and offer an opportunity to broaden the Company's product pipeline.
The Company currently intends to continue and expand its ongoing clinical
trial program in Europe and further develop and broaden its research and
clinical trial activities in the United States. The Company does not own or
lease any laboratories or other research and development facilities. In
connection with the BMC agreement, the Company has set up an office in Boston to
monitor its clinical trials and research activities in the United States.
The Company's policy has been to establish relationships with universities,
research organizations and other institutions in the field of oncology. The
Company intends further to broaden these relationships, rather than expand its
in-house research, development and clinical staff. Although the Company plans to
market its products, if and when approved for marketing, directly in certain
European countries, it has had preliminary discussions with unaffiliated
pharmaceutical companies regarding the formation of possible strategic alliances
or joint ventures for the manufacturing and marketing of its products in the
United States, the Far East and elsewhere. To date, the Company has not entered
into any such alliances or ventures. While OXiGENE is likely to explore license
and development opportunities for its technologies with other companies, there
can be no assurance that the Company will be successful in establishing and
maintaining collaborative agreements or licensing arrangements; that any
collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that, if established, such future licensees will be successful in
commercializing products. If the Company's collaboration arrangements are
terminated prior to their expiration or if the other parties to such
arrangements fail to adequately perform, there can be no assurance that
submission of product candidates for regulatory approval will not be delayed.
See "--Research and Development and Collaborative Arrangements."
OXiGENE has selected Caneire Teoranta (trading as Bioniche Teoranta,
"Bioniche"), a Canadian pharmaceutical company with FDA current Good
Manufacturing Practice ("cGMP") standard facilities, for the commercial batch
manufacturing of Neu-Sensamide(TM). The Bioniche agreement will enable the
Company to assemble and evaluate shelf-life and stability data for
Neu-Sensamide(TM) produced by Bioniche in connection with the Company's ongoing
Neu-Sensamide(TM) clinical trials in patients with inoperable NSCLC. Production
of quantities sufficient to conduct the Company's current and projected clinical
trials commenced at Bioniche's facilities in Ireland in January 1997.
Currently, the Company has collaborative arrangements with a number of
academic and other research institutions and organizations in the United States
and Europe, including: the University of Lund in Lund, Sweden; Boston Medical
Center in Boston, Massachusetts; the Swedish Cancer Society in Stockholm,
Sweden; the University of Kentucky Research Foundation in Lexington, Kentucky;
Aarhus University in Aarhus, Denmark; Gray Laboratory in Middlesex, United
Kingdom; Angiogene Ltd. in Oxfordshire, United Kingdom; Georgetown University in
Washington, D.C.; University of Florida in Gainesville, Florida; The University
of Texas M.D. Anderson Cancer Center in Houston, Texas; Baylor University in
Waco, Texas; and Arizona State University in Tempe, Arizona. See "--Research and
Development and Collaborative Arrangements."
In particular, the Company believes that its collaborations with the
University of Lund enable it to conduct clinical trials of its products in an
environment offering a more homogenous patient population at less cost and more
rapidly than the Company could achieve in the United States. The University of
Lund has historically provided, and continues to provide, the Company with
access to clinical trial facilities, patients and research facilities.
Additionally, the Company benefits indirectly from certain research grants
received by the University of Lund.
Technology Overview
OXiGENE's proprietary technology is based on the relationship between DNA
repair and DNA damage as affected by both the operation of Poly (ADP Ribose)
Polymerase ("PARP") (a DNA repair enzyme also known and formerly referred to as
Adenosine Diphosphate Ribosyl Transferase or ADPRT) and cell replication. Normal
cells in the human body are constantly subjected to external assault from
harmful environmental agents such as the sun's ultraviolet rays, toxic chemicals
in the diet and carcinogens such as smoke that are absorbed into the body, as
well as from internal assault from metabolic byproducts produced within the
cell. These assaults cause damage, or genetic lesions, to the DNA molecules,
which contain the genetic blueprint (instructions) for the cell. The cell's
structural integrity is dependent on its ability to read and translate those
blueprints. Repairing DNA damage is, therefore, essential to a cell's survival.
Consequently, the body attempts to counter this constant assault through its
genetic mechanisms that monitor genetic lesions to a cell's DNA molecules and to
repair them enzymatically.
Repair enzymes move constantly along the DNA molecule seeking out genetic
lesions and attempting to repair them through a process called "excision
repair." One of these enzymes is PARP. It identifies a genetic lesion, attaches
to the damaged site and engages other enzymes to help in the repair process. The
injured portion of the DNA molecule is then removed by enzymatic digestion and
additional enzymes repair the damage to that part of the molecule. As DNA is a
double helix composed of diametrically opposed strands, the repair enzymes can
use the unaffected strand of nucleotides (the class of nucleic acid compounds
from which genes are constructed) as a template for determining the correct
nucleotides to serve as replacement for the injured portion that has been
removed. The process is completed by the repair enzymes, which produce the
"complementary twin" and implant it in the previously removed damaged section.
The excision repair process is selective in that it concentrates on active
regions of the DNA helix, i.e., those containing the genes that are most vital
to the cell. Thus, when the rate of damage to a cell is more than the repair
system can handle, generally the repair mechanism first repairs lesions in a
cell that occur in frequently read genes, which are the genes that are important
to a cell's day-to-day survival. Damage occurring in inactive or structural
portions of the DNA that are not immediately important to a cell's survival is
repaired only as time permits, if at all. Therefore, OXiGENE believes that cells
become malignant or age by the accumulation of genetic lesions that the DNA
repair system has failed to correct properly or in a timely manner.
[BIOCHEMICAL PROCESS OF EXCISION REPAIR OF DAMAGED DNA]
Throughout life, cells replicate by division. Cell division (replication)
occurs very quickly and defects are unavoidable. Genetic defects constitute a
serious threat to a cell's survival. A persistent genetic defect, or mutation,
increases the risk of disease and death. Cancer is a disease in which a mutated
tumor cell divides uninterruptedly and in an uncontrolled manner. Normal cells
in the presence of tumor cells die because the tumor cells exhaust their
nourishment, inhibiting a normal cell's ability to survive and eventually
leading to organic malfunctions and possibly death.
[DRAWING OF THE DNA REPAIR PROCESS IN THE HUMAN BODY]
Traditionally, cancer treatment has been based on the theory that stopping
uncontrolled cell division may halt or slow tumor growth. Both radiation and
chemotherapy increase DNA damage in tumorous cells, causing toxicity and cell
death. Tumorous cells are known to die by either of two mechanisms, necrosis
(death with cell replication) and apoptosis (death without cell replication), or
both. Based on recent scientific evidence, the Company believes that lower doses
of radiation or chemotherapy cause tumor cell death primarily by apoptosis,
whereas at higher doses necrotic death is proportionately more prevalent.
OXiGENE's main product line of DNA repair inhibitors are based on N-substituted
benzamides, which, the Company believes, cause tumor toxicity primarily by
apoptosis. Presented in biological terms, apoptosis can be viewed as an
enzymatic inhibition of the DNA repair enzyme PARP, leading to the induction of
massive DNA damage, blocking of cell replication and eventually cell death.
Necrosis on the other hand is influenced by non-enzymatic DNA repair inhibition
such as would be the case if oxidative damage interacts directly with certain
chemical groups in the PARP enzyme to inhibit its function of removing DNA
lesions introduced by radiation or chemotherapy.
Apoptosis is initiated by cells as an alternative pathway to block cell
replication and induce death. Necrosis on the other hand causes cells to die
during replication (mitotic cell death) or permits cells to survive but with
mutation, potentially causing tumor disease. The advantage to a patient of
apoptotic death of tumorous cells, in contrast to necrotic death, is that it
allows normal living cells to absorb the various components that make up the
apoptotic, dying cells without further enzymatic digestion of the cellular
components as occurs with necrotic cell death. Accordingly, apoptosis causes
cell death without the many toxic side effects associated with necrosis and
enzymatic digestion. This is an important basis for OXiGENE's product research
and development, particularly its second and third generation products, since
its goal is to create drugs to counteract cancer that are also less hazardous to
the individual than those used today.
The Company's drugs are based on metoclopramide, a compound in the family
of N-substituted benzamides. N-substituted benzamides, together with the family
of nicotimamide compounds, have been developed into drugs for many different
medical indications, some of which have been used for more than 30 years. The
Company's recent research has focused on the mechanism of action of these
compounds and their possible regulation of PARP activity and, thereby,
regulation of the processes of DNA repair and apoptosis (programmed cell death
or cell death without cell replication). Based on its preclinical studies to
date, OXiGENE believes that DNA damage, such as that induced by radiation and
chemotherapy, activates the nuclear transcription factor kappa B ("NF-kB"),
which in turn may modulate PARP activity and activate several other genes that
protect cells against apoptosis-induced cytotoxicity and induce inflammatory
cytokine product. Therefore, the Company believes that a drug that can inhibit
NF-kB may be able to induce tumor killing by apoptosis and inhibit inflammatory
responses, which would sensitize DNA-damaging radio- and chemotherapies and at
the same time inhibit inflammation, a contributing factor to unwanted side
effects.
[SCHEMATIC OVERVIEW OF MODE OF ACTION OF DNA REPAIR INHIBITION]
OXiGENE's products are in an early stage of development. In order to
achieve profitable operations on a continuing basis, the Company, alone or in
collaboration with others, must successfully develop, manufacture, introduce and
market its products. The time frame necessary to achieve market success for any
individual product is long and uncertain. See "--Product Development and
Regulatory Processes." The products currently under development by the Company
will require significant additional research and development and extensive
preclinical and clinical testing prior to application for commercial use. There
can be no assurance that the Company's research or product development efforts
or those of its collaborative partners will be successfully completed, that any
compounds currently under development by the Company will be successfully
developed into drugs, or that any products will receive regulatory approval on a
timely basis, if at all.
DNA Repair Inhibition. Cancer therapy typically involves either or both of
surgery, to remove the primary tumor, and the application of cytotoxic
(cell-killing) agents, such as radiation or chemotherapy, to destroy primary and
secondary tumors that are too small, diverse or broadly spread to be removed
surgically (called metastases). Nearly all available radiation and
chemotherapies work by increasing DNA damage to tumor cells, thus blocking
replication of those cells and inhibiting their growth by necrosis or apoptosis,
or both, and eventually leading to their death. As tumorous cells replicate
substantially more frequently than normal cells, the body's normal DNA repair
mechanism tends to counteract the effects of radiation and chemotherapy
treatment by promoting the replication, or "regrowth," of the very tumors that
have been treated. The Company believes that this process may be prevented by
inhibiting the body's normal repair mechanism. Further, the Company believes
that certain chemical compounds are capable of serving as "sensitizers," which
supplement the radiation or chemotherapy phase of cancer treatment by inhibiting
DNA repair of the tumor cell and increasing DNA damage, thereby increasing the
efficiency of the cytotoxic agents. Drugs that exhibit sensitizing properties
permit an oncologist to elect either to achieve greater results with a given
dose of radiation therapy or chemotherapy, or to reduce the level of the
cytotoxic agent needed to achieve the same result. Frequently, however,
oncologists must cut short therapy because side effects associated with certain
sensitizing agents become intolerable before effective tumor killing can occur.
The Company believes that its principal, second and third generation products
are sensitizers that should be capable of inhibiting DNA repair of the tumor
cell and increasing DNA damage without intolerable side effects when used in
conjunction with traditional cancer treatments. See "--OXiGENE's Clinical Trial
Program."
DNA Repair Measurement and Stimulation. The PARP enzyme is an important
enzyme in the DNA repair process because it recognizes DNA damage and alters
certain proteins in the damaged site, enabling the other repair enzymes to gain
access to that site and to complete the excision repair process. Therefore, the
Company believes that if an individual's level of PARP is high, DNA repair is
being facilitated and DNA damage is being removed, and if an individual's level
of PARP is low, DNA repair is being inhibited and DNA damage will accumulate.
Consequently, by measuring individual levels of PARP, the Company believes it is
possible to determine how well the DNA repair process is functioning in
preventing accumulated DNA damage. OXiGENE believes that knowledge of DNA repair
activity may be useful for monitoring or screening individuals for
susceptibility to cancer, immune deficiencies, chemotherapeutic drug resistance
and the success or failure of chemopreventive treatment.
OXiGENE believes that knowledge of the body's metabolic function and its
related process known as "oxidative stress," in which a small number of
metabolic "mistakes" occur and cause the formation of certain intermediates that
damage DNA, and knowledge of the body's inflammatory response that causes a
decline in DNA repair, may lead to the development of drugs that may stimulate
DNA repair. Drugs of that type, the Company believes, could reduce a person's
susceptibility to cancer and certain diseases associated with the aging process
by increasing net DNA repair capacity.
Although the Company has conducted extensive preclinical cell and animal
research into, and is currently in the early stages of clinical testing of,
assays and drugs in some of the areas of DNA repair measurement and DNA repair
stimulation, there can be no assurance that any assays or drugs related to
either of these areas can or will be developed by the Company. See "--OXiGENE's
Clinical Trial Program."
OXiGENE's Clinical Trial Program
DNA Repair Inhibiting Products. OXiGENE has discovered certain compounds in
the family of N-substituted benzamides that it believes should be capable of
inhibiting PARP-modulated DNA repair and selectively reacting with radiation to
cause additional DNA damage preferentially in the treated area. OXiGENE believes
that this selectivity is due to tumor cells exhibiting increased DNA repair
activity as compared to normal cells, rendering them more sensitive to DNA
repair inhibition and death by apoptosis. The Company believes, on the basis of
its research activities to date, that its principal product, Neu-Sensamide(TM),
should act as a selective, targeted sensitizer of tumor tissue that will
sensitize radiation preferentially inside the treated area without producing
significant toxic side effects outside the treated area.
The current emphasis of the Company's clinical trial program is on
evaluating the safety and efficacy of Neu-Sensamide(TM) as a sensitizing agent
in combination with radiation therapy, with the goal of obtaining approval for
Neu-Sensamide(TM) as a radiation sensitizer. The Company does not intend to seek
marketing approval of Sensamide,(TM) the prototype of Neu-Sensamide,(TM)
although a European, randomized, controlled Phase II/III clinical trial of
Sensamide(TM) in 218 patients with inoperable NSCLC has been completed. In
September 1997, the first preliminary results of this study were announced,
which indicated an increased median survival time for those patients who
received a full dosage of Sensamide(TM) plus radiation. In March 1998, the
Company supplemented those preliminary results with tumor response data. The
additional study data indicate that more patients with squamous cell carcinoma
(the most common form of lung cancer) and a Karnofsky score (a benchmark for
assessing the degree of illness in terminally ill patients) of 90 or higher,
when receiving Sensamide(TM) plus radiation, experienced tumor response.
Forty-seven percent (47%) of those patients experienced complete or partial
(complete is 100% and partial is 50% or greater) tumor response, compared to 30%
for patients who received radiation only. A significant number of patients did
not complete the Sensamide(TM) treatment because of either the Central Nervous
System (CNS) side effects associated with metoclopramide (approximately 25%) or
the progressive deterioration of their health (approximately 20%). These CNS
side effects (sedation, anxiety, restlessness and depression), however, are
reversible, have been well documented in the clinical literature for more than
30 years, and were not unexpected by the Company. The Company believes those
results constitute sufficient proof of the theory underlying its principal
scientific concept to provide a basis for it to continue advanced clinical
studies with respect to its later generation drugs, which, the Company believes,
have reduced side effects from those that are experienced with Sensamide(TM) (as
described above).
In the fourth quarter of 1997, the Company commenced an additional
randomized, controlled Phase III clinical trial of Neu-Sensamide(TM) in 226
patients with NSCLC. The Company intends to use the results of the Sensamide(TM)
study to support an NDA for Neu-Sensamide(TM) as a radiation sensitizer for the
treatment of patients with NSCLC.
In the fourth quarter of 1996, the Company commenced a 15-patient,
open-label Phase I study of Neu-Sensamide(TM) in patients with glioblastoma, a
highly malignant form of brain cancer. The European Phase I/II counterpart of
this study was initiated in Sweden in the second quarter of 1996.
OXiGENE has collaborated with ILEX Oncology, Inc., a contract research
organization based in San Antonio, Texas ("ILEX"), on the development and
pre-clinical testing of Oxi-104. Oxi-104, the Company's third generation
sensitizer, is an N-substituted benzamide and, therefore, is covered by
OXiGENE's use patent for all N-substituted benzamides as sensitizers for
chemotherapy and radiation. The Company believes that Oxi-104 alone may induce
tumor growth-inhibiting and tumor-killing effects. Oxi-104 is an N-substituted
benzamide but, unlike Sensamide(TM) or Neu-Sensamide,(TM) it is not based on
metoclopramide. Oxi-104 has been designed with a molecular structure that, the
Company believes, may reduce side effects while maintaining the sensitizing
properties of other N-substituted benzamides. The Company intends to develop
Oxi-104 as a chemosensitizer. For the Company's two radiation sensitizers,
Sensamide(TM) and Neu-Sensamide(TM), currently the limiting doses are determined
by their central nervous system (CNS) side effects. By comparison, Oxi-104 has
not yet been shown to cause any CNS side effects in animal studies. After the
filing of an IND with the FDA in March 1997, the Company commenced a Phase I
clinical trial of Oxi-104.
Cordycepin/Pentostatin. In December 1996, the Company entered into a
clinical trial and sponsored research agreement with BMC, an affiliate of Boston
University Medical Center, pursuant to which BMC is conducting a Phase I
clinical study of 3'-deoxyadenosine (cordycepin) and 2'-deoxycoformycin
(pentostatin) in patients with refractory TdT-positive acute lymphoid leukemia.
The Phase I study commenced in the first quarter of 1997 in collaboration with
Boston University and the National Cancer Institute. The collaboration under the
BMC Agreement was expanded in August 1997, with the appointment of Dr. Pero,
OXiGENE's Chief Scientific Officer, as Research Professor of Medicine at BMC and
the set-up of an OXiGENE-sponsored laboratory facility at BMC. The BMC agreement
contemplates a collaborative program that focuses on research aimed at the
continued development of, and potential synergies between, N-substituted
benzamides, cordycepin and related compounds, and the conduct of clinical trials
in connection therewith. The BMC agreement grants OXiGENE an option to acquire
an exclusive, world-wide, royalty-bearing license with respect to the commercial
rights to any inventions made in the course of work conducted pursuant to the
BMC agreement, including to cordycepin.
Combretastatin. In May 1997, OXiGENE and Arizona State University entered
into an agreement to develop and test Combretastatin. Combretastatins are
naturally-occurring substances, that were identified and isolated by Dr. George
R. Pettit, Regents Professor of Chemistry, and his colleagues at ASU, from the
South African bushwillow tree. Combretastatin is believed to block the growth of
new blood vessels into the tumor and to destroy recently-formed blood vessels
within the tumor. Vasculature is critical to both the survival of a solid tumor
mass and its continued growth and, therefore, represent a key target in novel
cancer treatment. OXiGENE has an option to acquire an exclusive, world-wide,
royalty-bearing license with respect to the commercial rights to Combretastatin.
Early in the third quarter of 1998, the Company anticipates the commencement of
clinical trials of Combretastatin in the United Kingdom, and the filing of an
IND in the United States.
OXiGENE's products are in an early stage of development. In order to
achieve profitable operations on a continuing basis, the Company, alone or in
collaboration with others, must successfully develop, manufacture, introduce and
market its products. The time frame necessary to achieve market success for any
individual product is long and uncertain. See "--Product Development and
Regulatory Processes." The products currently under development by the Company
will require significant additional research and development and extensive
preclinical and clinical testing prior to application for commercial use. A
number of companies in the biotechnology and pharmaceutical industries have
suffered significant setbacks in clinical trials, even after showing promising
results in earlier studies or trials. Although the Company has obtained
favorable results to date in preclinical studies and clinical trials of certain
of its products, such results may not be indicative of results that will
ultimately be obtained in or throughout such clinical trials, and there can be
no assurance that clinical testing will show any of the Company's products to be
safe or efficacious. Additionally, there can be no assurance that the Company
will not encounter problems in its clinical trials that will cause the Company
to delay, suspend or terminate those clinical trials. There can also be no
assurance that the Company's research or product development efforts or those of
its collaborative partners will be successfully completed, that any compounds
currently under development by the Company will be successfully developed into
drugs, or that any products will receive regulatory approval on a timely basis,
if at all. If any such problems occur, the Company could be materially and
adversely affected.
A summary of the clinical trials related to the Company's products that are
currently under development is set forth in the table on the following page.
DNA Repair Measuring Products
- -----------------------------
PARP Assay Products. The Company believes that its knowledge of DNA repair
activity may be applied to monitor or screen individuals for susceptibility to
cancer, immune deficiencies and chemotherapeutic drug resistance. Studies have
shown that DNA repair capacity may vary from one individual to another. OXiGENE
has quantified individual levels of PARP as a DNA repair estimate. Pursuant to
an agreement, dated October 7, 1991, with Preventive Medicine Institute, a
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York, the Company holds an exclusive worldwide license, which
expires in 2011, to certain patents and related know-how covering a PARP
diagnostic test that measures PARP levels in white blood cells. The Company
believes that a simple and inexpensive serum-based test may give a reliable
surrogate indication of the level of PARP in white blood cells. OXiGENE filed a
U.S. patent application in October 1994, with respect to such a test.
The New York University Medical Center, Department of Environmental
Medicine and the Center of Aids Research have conducted an investigation using
OXiGENE's assay for measuring PARP levels (i.e., a serum thiol-based surrogate
test) on 133 patients who were intravenous narcotic drug users and were infected
with the HIV virus that causes AIDS. The Company believes that this repair assay
may assess DNA repair activity by measuring total serum thiol levels. The
Company believes that preliminary results of this investigation indicate that
this assay may be effective in monitoring the progression of HIV-related
diseases. The Company believes that measuring a person's immune function through
DNA repair activity may be a better indication of HIV-related disease
progression and, consequently, survival than more commonly used indicators such
as CD4 cell counts. The Company intends to pursue the development of a
more-cost-effective, easy-to-administer version of the assay for
commercialization.
Summary of OXiGENE's Clinical Trial Program
Study Code Drug/Indication Phase and Design Total Patients Treatment Assignment
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
Lu-01 Sensamide(TM)in I/II; 23 All patients on
NSCLC uncontrolled, Sensamide(TM)(i.v.) with
open-label radiation
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-01 Sensamide(TM)in II/III; 226 Sensamide(TM)(i.v.) with
NSCLC controlled, radiation - 113;
randomized, Radiation only - 113
open-label
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-02 Comparative study I; placebo, 18 All patients receive
in healthy controlled, one dose of placebo
volunteers of double-blind (i.m.), Sensamide(TM)
Placebo, cross-over (i.v.), Neu-Sensamide(TM)
Sensamide(TM)and (i.m.) and
Neu-Sensamide(TM) Neu-Sensamide(TM)(i.m.)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-03 Neu-Sensamide(TM)in III; controlled, 226 Neu-Sensamide(TM)(i.m.
NSCLC randomized, or i.v.) with
open-label radiation - 113;
Radiation only - 113
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-04 Neu-Sensamide(TM) in I/II; 15 All patients on
glioblastoma uncontrolled, dose Neu-Sensamide(TM) (i.v.
escalation or i.m.)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-05 Neu-Sensamide(TM) in I/II; 20 All patients on
NSCLC uncontrolled, dose Neu-Sensamide(TM) (i.v.
escalation or i.m.)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-06 Neu-Sensamide(TM) in I; uncontrolled, 15 All patients on
glioblastoma dose escalation Neu-Sensamide(TM) (i.v.
or i.m.)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-07 Neu-Sensamide(TM)in I; single-dose, 10 All patients on
NSCLC tumor uptake, Neu-Sensamide(TM)(i.m.)
pre-surgery
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-09 Neu-Sensamide(TM)in II; uncontrolled, 60 Radiation and
NSCLC combination study Neu-Sensamide(TM)in
combination with Taxol
and Cisplatin
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-10 Neu-Sensamide(TM)in II; uncontrolled, 60 Radiation and
NSCLC combination study Neu-Sensamide(TM)in
combination with
Cisplatin and Navelbine
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-401 OXi-104 in I; 15 Patients scheduled for
miscellaneous pharma-cokinetics OXi-104 in combination
cancers and dose with 5-FU (a
escalation, chemo-therapeutic
open-label agent)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
OXi-402 OXi-104 in I; uncontrolled, 15 Patients scheduled for
miscellaneous dose escalation, OXi-104 in combination
cancers open-label with Cisplatin (a
chemo-therapeutic
agent)
- -------------------- ------------------------- -------------------- ------------------ ----------------------------
BU-01 Cordycepin in I; 30 Patient groups on
leukemia pharmaco-kinetics, various doses to
dose escalation, determine maximum
open-label tolerated dosage
Study Code Drug/Indication Country Status
- -------------------- ---------------------------- ------------------------------------- ---------------------------
Lu-01 Sensamide(TM)in NSCLC Sweden Completed; Published 1995
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-01 Sensamide(TM)in NSCLC Norway; Denmark; Sweden; Completed with 218
Germany; UK patients
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-02 Comparative study in UK Completed
healthy volunteers of
Placebo, Sensamide(TM)
and Neu-Sensamide(TM)
- -------------------- ---------------------------- ------------------------------------- ----------------------------
OXi-03 Neu-Sensamide(TM) in NSCLC Norway; Denmark; Sweden; Ongoing
Germany; UK; USA
- -------------------- ---------------------------- ------------------------------------ -----------------------------
OXi-04 Neu-Sensamide(TM) in Sweden Ongoing
glioblastoma
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-05 Neu-Sensamide(TM) in NSCLC USA Ongoing
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-06 Neu-Sensamide(TM) in USA Ongoing
glioblastoma
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-07 Neu-Sensamide(TM) in NSCLC Sweden Ongoing
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-09 Neu-Sensamide(TM) in NSCLC USA Ongoing
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-10 Neu-Sensamide(TM) in NSCLC USA Ongoing
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-401 OXi-104 in USA Ongoing
miscellaneous cancers
- -------------------- ---------------------------- ------------------------------------- ---------------------------
OXi-402 OXi-104 in USA Ongoing
miscellaneous cancers
- -------------------- ---------------------------- ------------------------------------- ---------------------------
BU-01 Cordycepin in leukemia USA Ongoing
Certain terms and abbreviations used in the foregoing table are explained in the
Glossary on page --.
DNA Repair Stimulating Products
- -------------------------------
Cancer, as well as the general deterioration of the body leading to aging
disorders connected to immunity, is generally recognized in medicine as a
mutational disease arising from the build-up of genetic damage in unrepaired
areas of DNA. By enhancing DNA repair in the inactive areas of the DNA
structure, genetic damage build-up may be reduced with a reduction in cell
mutation. OXiGENE research in this area has to date concentrated on identifying
compounds that, the Company believes, may slow the natural production of DNA
repair inhibitors produced by the body when inflammatory cells are activated as
an early defense against infections or cancer cells. The Company believes, based
on its research to date, that by blocking this natural production of DNA repair
inhibitors by inflammatory cells, a net increase in DNA repair capacity can be
achieved.
The Company has developed a screening method based on DNA repair
measurements of in vivo-exposed spleen and cells. The Company has identified a
new mixture of naturally-occurring compounds that it believes should be capable
of stimulating DNA repair, and which is currently under evaluation by the
Company in human cell and animal models to improve enhancement of DNA repair.
OXiGENE has filed an international (PCT) patent application for this mixture of
potential DNA repair stimulators. There can be no assurance whether or when a
patent may be issued or its coverage, if one is issued.
The Company believes that DNA-repair-enhanced compounds may be used to
supplement, or under certain circumstances replace, chemopreventive or cancer
retardant agents already in use for cancer treatment, such as Tamoxifen(TM), as
well as chemopreventive agents in various stages of development. Any
DNA-repair-enhancer drugs currently being developed by OXiGENE are expected to
be based on naturally occurring compounds, rather than synthetic analogs.
Consequently, the Company believes that they may be less inherently toxic than
newly-synthesized chemopreventive agents developed by others that are already in
clinical trials. However, there can be no assurance that the Company will be
able to develop any such a drug, or if developed, that such a drug could be
successfully marketed.
Product Development and Regulatory Processes
Research in areas of interest to the Company typically initially involves
optimization of leading chemical structures into leading compounds. Once a
leading compound has been identified, the preclinical phase commences. In that
phase, certain selected compounds are tested for therapeutic potential in a
number of animal models and undergo laboratory testing, with the objective of
characterizing the investigated compounds in relation to existing treatment and
getting a first indication of the compounds' development potential. Successful
preclinical work may lead to the filing of an IND, or a foreign equivalent, with
the relevant national regulatory authorities. The IND is a permission to
administer the compound to humans in clinical trials in the United States.
Several years of research and testing generally are necessary before an IND may
be obtained and clinical development may commence. There can be no certainty
that submission of an IND will result in FDA authorization to commence clinical
trials or that authorization of a particular phase of a clinical trial program
will result in authorization of other phases or that the completion of any
clinical trials will result in FDA approval of a new product.
The clinical development of new drugs is subject to approval by the health
authorities in individual countries, which have broad discretionary powers. For
example, in the United States, the FDA reviews the results of all clinical
studies and can discontinue a trial at any time if it concludes there is a
significant safety issue, or if there is convincing evidence that the therapy is
not effective for the chosen indication. The requirements regarding the duration
of a clinical phase vary considerably among countries. For life threatening and
severely debilitating conditions where products provide meaningful therapeutic
benefit over existing treatments or where no satisfactory treatment currently
exists, however, it is possible to accelerate the development process in the
United States through the "Accelerated Drug Approval Program." In other
countries, the trial process for drugs directed toward life threatening diseases
is shortened typically by lowering the requirements regarding the patient sample
size required to be met in the trials.
The development and testing, time periods mentioned below are indications
only and may vary and be materially longer. Upon successful completion of the
development program, a New Drug Application ("NDA"), or a foreign equivalent,
may be submitted to the appropriate regulatory authorities, and, if approved,
the product may then be marketed upon the terms and conditions of such approval.
Submission of an NDA does not assure that the FDA will approve a product for
manufacturing and marketing. Clinical trials are typically conducted in three
sequential phases, but the phases may overlap.
Phase I. The purpose of a Phase I study is to evaluate the toxicity of the
tested compound and to establish how the tested compound is tolerated and
decomposed in the human body. A Phase I clinical trial traditionally tests the
compound for safety (adverse effects), dosage tolerance, metabolism,
distribution, excretion and pharmacodynamics in a small group of healthy
individuals. A Phase I study may last up to one year.
Phase II. A Phase II study marks the beginning of clinical trials on a
limited number of patients to (i) determine the efficacy of the compound for
specific indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. The Phase II trials
also seek to establish the most effective route of administration. Trials are
conducted on a larger, but still limited number of carefully monitored patients.
A Phase II study may last up to two and one-half years.
Phase III. If preliminary evidence suggesting effectiveness has been
obtained during Phase II evaluations and the compound is found to have an
acceptable safety profile in Phase II evaluations, a Phase III trial may be
undertaken. A Phase III study is an extensive clinical trial involving a large
number of patients. The number of patients in a Phase III trial program depends
to a great extent on the clinical indications that the drug addresses. Trials
are often double-blinded and involve a detailed statistical evaluation of test
results. The compound is tested against placebo and existing treatment, if such
treatment is available. The product is manufactured in commercial quantities
(batch manufacturing) and tested for shelf life, or stability, and further
evaluation of the clinical efficacy and safety of the compound takes place. A
Phase III study may last several years and is the most time-consuming and
expensive part of a clinical trial program.
There can be no assurance that Phase I, Phase II or Phase III testing will
be completed successfully within any specified time period, if at all, with
respect to any of the Company's products.
OXiGENE, like other pharmaceutical companies, will be subject to strict
controls covering the manufacture, labeling, supply and marketing of any
products it may develop and market. The most important regulation is the
requirement to obtain and maintain regulatory approval of a product from the
relevant regulatory authority to enable that product to be marketed in a given
country. Further, OXiGENE is subject to strict controls over clinical trials of
its potential pharmaceutical products.
The regulatory authorities in each country may impose their own
requirements and may refuse to grant, or may require additional data before
granting, an approval even though the relevant product has been approved by
another authority. The United States and European Union ("EU"), as well as
certain other countries such as Japan and Israel, countries have very high
standards of technical appraisal and, consequently, in most cases a lengthy
approval process for pharmaceutical products. The time required to obtain such
approval in particular countries varies, but generally takes from six months to
several years, if at all, from the date of application, depending upon the
degree of control exercised by the regulatory authority, the duration of its
review procedures and the nature of the product. The trend in recent years has
been towards stricter regulation and higher standards.
In the United States, the primary regulatory authority is the FDA. In
addition to regulating clinical procedures and processes, the FDA investigates
and approves market applications for new pharmaceutical products and is
responsible for regulating the labeling, marketing and monitoring of all such
products, whether marketed or under investigation. Upon approval in the United
States, a drug may only be marketed for the approved indications in the approved
dosage forms and dosages. In addition to obtaining FDA approval for each
indication to be treated with each product, each domestic drug manufacturing
establishment must register with the FDA, list its drug products with the FDA,
comply with cGMP requirements and be subject to inspection by the FDA. Foreign
manufacturing establishments distributing drugs in the United States also must
comply with cGMP requirements and list their products and are subject to
periodic inspection by the FDA or by local authorities under agreement with the
FDA.
In Europe, the European Committee for Proprietary Medicinal Products
provides a mechanism for EU-member states to exchange information on all aspects
of product licensing and assesses license applications submitted under two
different procedures (the multistate and the high-tech concentration
procedures). The EU has established a European agency for the evaluation of
medical products, with both a centralized community procedure and a
decentralized procedure, the latter being based on the principle of mutual
recognition between the member states.
There can be no assurances that any of those products will ever obtain the
governmental approvals necessary to permit commercial sales of any of its
products. Further, even if regulatory approval of a product is obtained, such
approval may entail limitations on the indicated uses for which that product may
be marketed.
Research and Development and Collaborative Arrangements
OXiGENE's research and development programs are generally pursued in
collaboration with academic and other institutions. The Company incurred
approximately $7.3 million, $4.8 million and $2.8 million in research and
development expenses in the years ended December 31, 1997, 1996 and 1995,
respectively. Substantially all of these amounts represent external research and
development expenditures.
Currently, the Company is not required to pay any royalties or licensing
fees for technology and products developed with financial assistance from or at
the facilities of such agencies and institutions, except for a 5% gross royalty
payable in respect of an exclusive worldwide license of the patent covering the
PARP diagnostic assay and certain costs related to the filing, prosecuting and
maintaining of patents and copyrights. Recently, however, the Company has
entered into agreements with a number of universities, particularly in the
United States, that may require payment of royalties in respect of inventions
made in the course of work performed pursuant to those agreements in the event
the Company exercises its option under those agreements to acquire an exclusive,
world-wide license. Generally, royalty rates are not fixed and will be
negotiated when and if the Company exercises its option to acquire a license.
There can be no assurance that such licensing negotiations will be concluded
successfully or that any royalties or fees will not be material as to their
amount.
Unless otherwise noted, each of the below-described agreements and
arrangements terminates upon completion of the study or the expiration of one
year, whichever is earlier.
University of Lund, Lund, Sweden. In 1987, Dr. Ronald Pero, OXiGENE's Chief
Scientific Officer, was appointed to lead an international effort to develop
biomarkers and to contribute to the basic knowledge of DNA repair in relation to
human diseases, and was awarded professorial privileges and laboratory space at
the University of Lund in Lund, Sweden. The program is conducted primarily at
the Univerity of Lund's Wallenberg Laboratory. The Wallenberg Laboratory
specializes in providing research space to selected research projects being
developed within the academic community. Currently, the program focuses its
research efforts on immunology and tumor biology, areas directly related to the
Company's technology development. Most of the Company's research, development,
preclinical testing and clinical trials are carried out at the Wallenberg
Laboratory, financed by research grants and contracts. The University of Lund
has not claimed any proprietary interest in the products developed by the
Company there.
In April 1994, the Department of Oncology, Lund University Hospital and the
Company entered into an agreement with respect to the multicentered clinical
trial of 226 patients to evaluate Sensamide(TM) as a radiosensitizer. This
agreement provides that the Department of Oncology, Lund University Hospital
will provide all the clinical items necessary for the study in accordance with
the protocol approved by the Swedish Medical Drug Agency.
Boston Medical Center, Boston, Massachusetts. In August 1997, the Company
entered into a collaborative research agreement with Boston Medical Center
Corporation, an affiliate of Boston University Medical Center ("BMC"), pursuant
to which an ongoing research program will be conducted by Dr. Ronald Pero, Dr.
Ronald McCaffrey and Dr. Alan Sugar. The BMC research program consists of the
following components: (i) research by Dr. Pero into the DNA repair inhibiting
and other disease specific activities of N-substituted benzamides; (ii) research
by Drs. McCaffrey and Sugar into Cordycepin, Deoxycoformycin and related
compounds as novel therapeutic agents in the treatment of cancer and infectious
diseases, and (iii) research into the potential therapeutic synergies between
N-substituted benzamides and cordycepin and related compounds, and the
identification of other, novel therapeutic agents and develop and conduct
clinical trials for such agents. The budget for the research program will be
fixed from time to time by a committee consisting of OXiGENE and BMC
representatives established to administer the research program. Dr. McCaffrey
will continue to conduct a Phase I clinical study of Cordycepin in combination
with Pentostatin in patients with refractory TdT-positive acute lymphoid
leukemia (the Phase I study commenced in the first quarter of 1997, under a
prior agreement dated December 1, 1996 between the Company and BMC) in
collaboration with Boston University and the National Cancer Institute. The
initial term of the agreement expires on June 30, 2000, although the term is
automatically extended for additional twelve-month periods, provided that the
agreement may be terminated by either party upon twelve months' prior written
notice or upon certain other events. OXiGENE has an option to acquire an
exclusive, world-wide, royalty-bearing license with respect to any invention or
discovery made during and as a part of the research performed pursuant to the
agreement.
Swedish Cancer Society, Stockholm, Sweden. In 1992, the Swedish Cancer
Society awarded Dr. Ronald Pero, in his capacity as a faculty member of the
University of Lund, a three-year grant for a total of approximately $0.3 million
to investigate benzamide and nicotinamide analogs relating to Sensamide(TM) as
radiosensitizers. This grant was renewed in 1995 for a one year period totaling
approximately $0.2 million. The Company was not the recipient of any of these
funds. The study's principal objective was to determine what chemical features
give benzamide/nicotinamide compounds multiple forms of radiosensitizing action.
Although the grant has not been formally renewed, research under this
arrangement continues on an ongoing basis.
In 1992, Dr. Pero, in his capacity as a faculty member of the University of
Lund, was awarded another Swedish Cancer Society research grant (under principal
investigator Professor Goran Berglund), for a total of approximately $0.4
million over a three-year period, to direct the biological bank and biomarker
program portion of the Malmo Diet Study. This project had its funding renewed
until October 1996, but research under this arrangement has continued since then
research under this arrangement continues on an ongoing basis without a formal
renewal of the funding. The Company was not the recipient of any of these funds.
The Malmo Diet Study, sponsored in part by the World Health Organization,
involves a large ongoing controlled case study in which individuals between the
ages of 46 years and 64 years, living in the city of Malmo, Sweden, were invited
to participate in a study designed to evaluate dietary factors as causative
agents for cancer. Patient enrollment for the study was completed in October
1996. The city of Malmo was selected as the site of this study because of the
historically high incidence of cancer in its relatively homogeneous population.
University of Kentucky Research Foundation, Lexington, Kentucky. The
Company has entered into three agreements with the University of Kentucky
Research Foundation, under which research will be conducted by: (i) Professor
Myron K. Jacobson, into the structural basis of the difference between
Sensamide(TM) and Neu-Sensamide(TM); (ii) Professor Elaine L. Jacobson, into the
effects of Sensamide(TM), Neu-Sensamide(TM) and Oxi-104 on ADP-Ribose
metabolism; and (iii) Associate Professor Ching-Shih Chen, to synthesize
Combretastatin phosphate.
Dr. Michael Horsman, the Danish Cancer Society, Aarhus, Denmark. Under an
agreement, dated October 9, 1997, with the Danish Cancer Society, Department of
Experimental Clinical Oncology, Dr. Horsman will conduct research into the
enhancement of radiation damage and chemotherapeutic agents by N-substituted
benzamides, and the anti-tumor activity of Combretastatin.
Dr. David J. Chaplin, the Gray Laboratory Cancer Research Trust, Middlesex,
United Kingdom. Dr. Chaplin is Head of the Tumour Microcirculation Group at the
Gray Laboratory Cancer Research Trust ("Gray") and a director of Angiogene
Pharmaceuticals Ltd. Dr. Chaplin also serves as the Secretary of the Company's
Scientific Advisory Board. Under an agreement, dated December 12, 1997, between
the Company and Gray, Dr. Chaplin will conduct research into the vascular and
therapeutic effects of Combretastatin in various tumor models.
Dr. David J. Chaplin, Angiogene Ltd., Oxfordshire, United Kingdom. Under an
agreement, dated April 1, 1997, with Angiogene Pharmaceuticals Ltd., a Company
that is affiliated with Dr. Chaplin but is not affiliated with the company, Dr.
Chaplin will conduct research into the anti-inflammatory and anti-tumor necrosis
factor (alpha) effects of N-substituted benzamides and nicotinamides.
Dr. Mark Smulson, Georgetown University, Washington D.C. Under a September
1997 research agreement with Georgetown University, Dr. Smulson will conduct
research into the interference of N-substituted benzamides with the functioning
of PARP and related enzymes.
Dr. Dietmar W. Siemann, University of Florida, Gainesville, Florida. The
Company has entered into two agreements with the University of Florida, under
which research will be conducted by Dr. Siemann. Under a July 1997 agreement,
Dr. Siemann will conduct research into the molecular interactions underlying the
radio-and chemosensitizing effects of N-substituted benzamides. Under an October
1997 agreement, Dr. Siemann will conduct research into the influence of
Combretastatin on (i) the anti-tumor efficacy of certain chemotherapeutic drugs
and (ii) the metastatic spread of cancer cells.
Professor K. Kian Ang, The University of Texas M.D. Anderson Cancer Center,
Houston, Texas. Under a sponsored laboratory study agreement, dated June 11,
1997, with the University of Texas M.D. Anderson Cancer Center, Dr. Ang will
conduct research into the enhancing effect of Neu-Sensamide(TM) and Oxi-104 on
radiation-induced apoptosis in various tumor models.
Professor Robert R. Kane, Baylor University, Waco, Texas. Under a sponsored
program agreement, dated June 24, 1997, with Baylor University, Professor Kane
will conduct research into the molecular basis for the radiosensitizing action
of Sensamide(TM) and other N-substituted benzamides.
Arizona State University, Tempe, Arizona. The Company has entered into a
technology development agreement, dated May 27, 1997, with Arizona State
University ("ASU"), under which the Company has the exclusive option to acquire
an exclusive worldwide license to develop and commercialize the technology that
relates to a family of anti-cancer compounds known in the scientific community
by the name combretastatin, including Combretastatin, the University's patent
rights to develop, use and sell Combretastatin A-4. The Company's option expires
on May 28, 1999, provided that the agreement may be terminated by the Company
upon thirty days' prior written notice or upon certain other events. The
agreement also gives the Company the right to file an IND with respect to
clinical testing of Combretastatin and the right to technical assistance from
representatives of ASU.
Patents and Trade Secrets
Certain of OXiGENE's current products are based on available compounds that
are produced by others and are not subject to patent protection currently. The
Company anticipates that any products it develops hereafter may include or be
based on the same or other compounds owned or produced by unaffiliated parties,
as well as synthetic compounds it may discover. Although the Company expects to
seek patent protection for any compounds it discovers, there is no assurance
that any or all of them will be subject to effective patent protection. Further,
the development of regimens for the administration of pharmaceuticals, which
generally involve specifications for the frequency, timing and amount of
dosages, has been, and the Company believes will continue to be, important to
the Company's efforts, although those processes, as such, may not be patentable.
Patent Protection. It is the Company's policy to seek patent protection in
the United States and in foreign countries. Primarily because of differences
among patent laws in various jurisdictions, the scope of, and hence the
protection afforded by, any patents OXiGENE may receive may vary from
jurisdiction to jurisdiction even though they relate essentially to the same
subject matter.
The patent position of firms in the Company's industry generally involves
highly complex legal and other issues, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that patent applications owned by the
Company will result in patents being issued or that, if issued, the patents will
afford competitive protection.
Further, there can be no assurance that products or processes developed by
the Company will not be covered by third party patents, in which case continued
development and marketing of those products or processes could require a license
under such patents. There can be no assurance that if a legal action were to be
brought against the Company on the basis of any third party patents, such action
would be resolved in the Company's favor. An unfavorable result against the
Company could result in monetary damages and injunctive relief. Further, even a
favorable result could cause expenditure of substantial monetary and other
resources in connection with the Company's defense against any such action.
Granted Patents and Pending Applications. The following is a brief
description of the Company's current patent position, both in the United States
and abroad. As U.S. patent applications are maintained in secrecy by the U.S.
Patent and Trademark Office until patents issue and because publication of
discoveries in the scientific or patent literature often lags behind actual
discoveries, OXiGENE cannot be certain that it was the first creator of
inventions covered by its pending applications or that it was the first to file
patent applications for those inventions.
As of March 8, 1998, the Company is the assignee of four granted U.S.
patents, five pending U.S. patent applications, and of granted patents and/or
pending applications in other countries (and/or international applications
designating other countries) corresponding to three of the granted U.S. patents
and all five of the pending U.S. applications. One of the pending U.S.
applications was filed in 1996; another is the national phase (entered in 1998)
of an international application based on a U.S. provisional application filed in
1995. Three of the pending U.S. applications were filed in 1997, of which one is
a continuation of an original U.S. application filed in 1994, and two are based
on a U.S. provisional application filed in 1996. In addition, the Company will
be the assignee of another pending U.S. provisional patent application filed in
1997, and of expected (but not yet filed) international and foreign counterparts
thereof.
Specifically, the Company is the assignee of a U.S. patent, granted April
20, 1993, for glutathione-s-transferase mu (an inherited enzyme) as a measure of
drug resistance, covering a test for resistance to nitrosoureas (a class of
chemotherapeutic agents). In addition, the Company is the assignee of a U.S.
patent, granted August 23, 1994, for tumor or cancer cell-killing therapy
(covering methods of using N-substituted benzamides including Sensamide(TM) and
Neu-Sensamide(TM) as radio- and chemosensitizers), and of granted patents in
Australia, Canada, Europe (designating 13 countries), Ireland, Israel, Mexico,
Russia and South Africa and an allowed patent application in Japan (as well as a
pending application in Denmark) corresponding thereto. The Company is also the
assignee of two U.S. patents, both granted October 1, 1996, for methods of
administering and pharmaceutical formulations containing N-substituted
benzamides and/or acid addition salts thereof (covering, e.g.,
Neu-Sensamide(TM)) and for methods of administering phenothiazines and/or acid
addition salts thereof, and of a granted South African patent and pending
European and other foreign applications corresponding to these two U.S. patents.
The Company's pending U.S. applications and international counterparts cover
further methods of testing or treatment and compositions, including methods of
using the Oxi-104 product.
Moreover, the Company is the exclusive licensee of a U.S. patent, granted
January 9, 1996, for a diagnostic test involving measurements related to the
cellular process of DNA repair and drug resistance, and is the exclusive
licensee of corresponding granted Canadian and European patents and a
corresponding pending Japanese patent application. The owner of the licensed
patents and application is Preventive Medicine Institute, a New York
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York.
Trade Secrets and Technological Know-How. While the Company generally has
and will continue to pursue a policy of seeking patent protection to preserve
its proprietary technology, it also has and will continue to rely on trade
secrets, unpatented proprietary information and continuing technological
innovation to develop and maintain its competitive position. There can be no
assurance, however, that others will not independently develop substantially
equivalent proprietary information and technology or otherwise gain access to
such or equivalent trade secrets, proprietary information or technology or that
OXiGENE can meaningfully protect its rights to such secrets, proprietary
information and technology.
OXiGENE generally requires its employees and Scientific Advisory Board
members to enter into confidentiality agreements with the Company. Those
agreements provide that all confidential information developed or made known to
the individual during the course of the relationship is to be kept confidential
and not to be disclosed to third parties, except in specific circumstances. In
the case of employees, the agreements also provide that all inventions conceived
by such employees shall be the exclusive property of OXiGENE. There can be no
assurance, however, that any such agreement will provide meaningful protection
for the Company's trade secrets, proprietary information or technology in the
event of unauthorized use or disclosure of such information. Moreover, although
the Company has confidentiality agreements with the institutions that perform
its research, development, preclinical tests and clinical trials, the Company
has no such agreements with the employees of such institutions, and there can be
no assurance that these employees will abide by the terms of such agreements.
Employees
The Company's policy has been, and continues to be, to maintain a
relatively small number of executives and other employees and to rely as much as
possible on consultants and independent contractors for its research,
development, preclinical tests and clinical trials. As of March 31, 1997, the
Company had twenty-four full-time employees, of which twenty were engaged in
research and development and monitoring of clinical trials. Most of the
Company's preclinical tests and clinical trials are subcontracted and performed
at the University of Lund, Sweden, and at other European and U.S. centers and
organizations, including ILEX Oncology Inc., a contract research organization in
San Antonio, Texas.
Scientific Advisory Board
In August 1992, the Company established a Scientific Advisory Board, which
currently consists of nine members. The Scientific Advisory Board discusses, and
meets annually to evaluate, the Company's research and development projects.
Members of the Scientific Advisory Board receive no cash compensation, but are
reimbursed for reasonable out-of-pocket expenses, and have, from time to time,
received warrants or options to purchase shares of Common Stock of the Company.
Prior to the establishment of the Scientific Advisory Board, certain of its
members advised the Company on certain projects. Certain members of the
Scientific Advisory Board also have other relationships with the Company. See
"--Research and Development and Collaborative Arrangements." The members of the
Company's Scientific Advisory Board are:
Hans Wigzell, M.D., Ph.D., is Professor of Immunology at the Karolinska
Institute, Stockholm, Sweden, a well-known medical research institute in Europe.
Professor Wigzell is the chairman of OXiGENE's Scientific Advisory Board and
also serves as an advisor to the Company's Board of Directors. He has for many
years been a member of the Nobel committee for the prize in medicine, of which
he also has served as chairman. Professor Wigzell is currently a member of the
editorial board of several international medical journals and has published more
than 400 articles in the areas of tumor biology, immunology, cell biology and
infectious diseases.
David J. Chaplin, Ph.D., is head of the Tumor Microcirculation Group at the
Gray Laboratory, Mount Vernon Hospital, Middlesex, United Kingdom, and a
consultant to the Company. The Gray Laboratory is a leading radiation biology
research laboratory. He is a member of the Cancer Research Campaigns Clinical
Trials committee. Dr. Chaplin has published more than 100 papers in the area of
chemical radiosensitizers and tumor biology.
Michael R. Horsman, Ph.D., D.M.Sc., is an Associate Professor in the Danish
Cancer Societies' Department of Experimental Oncology at Aarhus University
Hospital, Denmark. Dr. Horsman has published more than 100 papers in the area of
tumor biology and the chemical modification of radiation, drug and heat damage
in tumors and normal tissues.
Myron Jacobson, Ph.D., is Professor and Chairman of the Division of
Medicinal Chemistry and Pharmaceutics, College of Pharmacy, and a member of the
Lucille Parker Markey Cancer Center of the University of Kentucky. Dr. Jacobson
has published more than 100 papers in the area of biological responses to DNA
damage.
Dick Killander, M.D., Ph.D., is Professor and Chairman of the Department
of Oncology, University of Lund Hospital, Lund, Sweden. Dr. Killander serves on
the board of the Swedish Cancer Foundation, and has published more than 100
articles in the areas of quantitative cytochemistry and clinical oncology. Dr.
Killander is the principal clinical investigator for the Company's ongoing
clinical trials.
Ronald P. McCaffrey, M.D., is Professor of Medicine, and Head of the
Developmental Therapeutics Unit at Boston University School of Medicine. Dr.
McCaffrey has published more than 100 papers in the general field of cancer
biology and treatment, with particular emphasis on leukemia and lymphoma. For
the past five years he has been Chairman of the Committee on Medical and
Scientific Affairs at the Leukemia Society of America, and a member of several
professional journal editorial boards.
Dietmar W. Siemann, Ph.D., is Professor and Associate Chair for Research in
the Department of Radiation Oncology at the University of Florida. Dr. Siemann
is a tumor biologist who has a particular interest in the interface between the
laboratory and the clinic. He has published more than 135 papers in the areas of
the tumor microenvironmental and chemical modification of cancer treatments.
Mark E. Smulson, Ph.D., is Professor of Biochemistry and Molecular Biology,
Georgetown University Medical Center, Washington, D.C., and is co-director of
the University's Lombardi Cancer Center's Program of ADP-Ribosylation and
Radiation Biology. Dr. Smulson has published over 200 papers and chapters on the
molecular biology aspects of the ADPRT (PARP) repair enzyme and its gene.
Recently, he was involved in the first purification of apopain (Caspase-3),
which cleaves PARP during programmed cell death (apoptosis), and has continued
to study the regulatory involvement of PARP, in the latter process in human
osteosarcoma cells and PARP knockout murine cells.
Alan Sugar, M.D., is Professor of Medicine, Boston University School of
Medicine, Boston, MA, and is Director of the Clinical Mycology Center at Boston
Medical Center. Dr. Sugar is an infectious diseases physician who specializes in
medical mycology, which are diseases caused by fungi. His research interests
include pre-clinical and clinical antifungal drug development and the mechanisms
of action of antifungal drugs. He has published over 100 papers and book
chapters and is the co-author of a book on medical mycology.
Competition
The industry in which the Company is engaged is characterized by rapidly
evolving technology and intense competition. The Company's competitors include,
among others, major pharmaceutical and biotechnology companies, many of which
have financial, technical and marketing resources significantly greater than
those of the Company. In addition, many of the small companies that compete with
the Company have also formed collaborative relationships with large, established
companies to support research, development, clinical trials and
commercialization of products that may be competitive with those of the Company.
Academic institutions, governmental agencies and other public and private
research organizations are also conducting research activities and seeking
patent protection and may commercialize products on their own or through joint
ventures or other collaborations.
The Company is aware of a number of companies engaged in the research,
development and testing of new cancer therapies or ways of increasing the
effectiveness of existing therapies. Such companies include, among others,
Agouron Pharmaceuticals, Inc., Bristol-Myers Squibb Company, Ciba-Geigy Ltd.,
Eli Lilly and Company, Glaxo Wellcome PLC, Johnson & Johnson, Matrix
Pharmaceuticals, Inc., NeoPharm, Inc., Pharmacyclics, Inc., Pierre Fabre S.A.
and U.S. Bioscience Inc., some of whose products have already received, or are
in the process of receiving, regulatory approval or are in later stages of
clinical trials. The Company is also aware of companies engaged in the research,
development and testing of diagnostic assays for cancer, including Introgen
Therapeutics, Inc., AntiCancer Inc., Transgene S.A. and Medarex Inc. There are
other companies that have developed, or are in the process of developing,
technologies that are, or in the future may be, the basis for competitive
products in the field of cancer therapy or other products the Company intends to
develop. Some of those products may have an entirely different approach or means
of accomplishing the same desired effects as the products being developed by the
Company, such as gene transfer therapy, immunotherapy and photodynamic therapy.
There can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective, safer or more
affordable than those being developed by the Company.
Radiation therapy has been increasingly accepted as a complement to
chemotherapy in a multi-modality treatment of NSCLC. Further, a number of
organizations have developed new chemotherapeutic regimens that are under study
in late-stage clinical trials. To the best knowledge of the Company, however,
none of those organizations is, and none of the new forms of non-surgical cancer
treatment currently under development and in clinical trials appears to be,
directly competitive with Neu-Sensamide(TM) or Oxi-104 as a sensitizer.
As the Company's existing products are intended to complement and enhance
radiation therapy and chemotherapy as applied to NSCLC, the Company believes
that enhancements in those treatments, particularly if they lead to their
successful application, could increase the potential market for the Company's
products, although there can be no assurance in this regard. Moreover, if the
Company's products also complement new cancer treating therapies, the use of
these new therapies might also expand the Company's potential market.
The Company expects that if any of its products gain regulatory approval
for sale they will compete primarily on the basis of product efficacy, safety,
patient convenience, reliability, price and patent position. The Company's
competitive position also will depend on its ability to attract and retain
qualified scientific and other personnel, develop effective proprietary products
and implement joint ventures or other alliances with large pharmaceutical
companies in order to jointly market and manufacture its products.
Risk Factors
This Annual Report contains, in addition to historical information,
forward-looking statements that involve known and unknown risks and
uncertainties that may cause the Company's actual results or outcomes to be
materially different from those anticipated and discussed herein. Factors that
could cause or contribute to such differences include those discussed below as
well as those discussed elsewhere in this Annual Report.
History of Losses and Anticipated Future Financial Results; Uncertainty of
Future Profitability. The Company, as a development stage enterprise, has
experienced net losses every year since its inception and, as of December 31,
1997, had a deficit accumulated during the development stage of approximately
$25.5 million. The Company anticipates incurring substantial additional losses
over at least the next several years due to, among other factors, the need to
expend substantial amounts on its continuing clinical trials and anticipated
research and development activities and the general and administrative expenses
associated with those activities. The Company has not commercially introduced
any product and its products are in varying stages of development and testing.
The Company's ability to attain profitability will depend upon its ability to
develop products that are effective and commercially viable, to obtain
regulatory approval for the manufacture and sale of its products and to license
or otherwise market its products successfully. There can be no assurance that
the Company will ever achieve profitability or that profitability, if achieved,
can be sustained on an ongoing basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Early Stage of Product Development; Uncertainties of Clinical Trials;
Unproven Safety and Efficacy. OXiGENE's products are in an early stage of
development. In order to achieve profitable operations on a continuing basis,
the Company, alone or in collaboration with others, must successfully develop,
manufacture, introduce and market its products. The time frame necessary to
achieve market success for any individual product is long and uncertain. See
"--Product Development and Regulatory Processes." The products currently under
development by the Company will require significant additional research and
development and extensive preclinical and clinical testing prior to application
for commercial use. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical trials,
even after showing promising results in earlier studies or trials. Although the
Company has obtained favorable results to date in preclinical studies and
clinical trials of certain of its products, such results may not be indicative
of results that will ultimately be obtained in or throughout such clinical
trials, and there can be no assurance that clinical testing will show any of the
Company's products to be safe or efficacious. Additionally, there can be no
assurance that the Company will not encounter problems in its clinical trials
that will cause the Company to delay, suspend or terminate those clinical
trials. There can also be no assurance that the Company's research or product
development efforts or those of its collaborative partners will be successfully
completed, that any compounds currently under development by the Company will be
successfully developed into drugs, or that any products will receive regulatory
approval on a timely basis, if at all. If any such problems occur, the Company
could be materially and adversely affected.
Need for Additional Funds; Uncertainty of Future Funding. The Company's
operations to date have consumed substantial amounts of cash. Negative cash flow
from the Company's operations is expected to continue and even to accelerate
over at least the next several years. The Company's capital requirements will
depend on numerous factors, including: the progress of preclinical testing and
clinical trials; the progress of the Company's research and development
programs; the time and costs required to obtain regulatory approvals; the
resources devoted to manufacturing methods and advanced technologies; the
ability to obtain licensing arrangements; the cost of filing, prosecuting and,
if necessary, enforcing patent claims; the cost of commercialization activities
and arrangements; and the demand for the Company's products if and when
approved. The Company will have to raise substantial additional funds to
complete development of any product or bring products to market. Issuance of
additional equity securities by the Company, for these or other purposes, could
result in dilution to then existing stockholders. There can be no assurance that
additional financing will be available on acceptable terms, if at all. If
adequate funds are not available on acceptable terms, the Company may be
required to delay, scale back or eliminate one or more of its product
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies or products that the Company would not otherwise relinquish,
which may have a material adverse effect on the Company.
Dependence on Others for Clinical Development and Manufacturing and
Marketing. The Company has limited experience in drug development, the
regulatory approval process, manufacturing and marketing. Other than Dr. Ronald
W. Pero, Ph.D., the Company's Chief Scientific Officer, and two other employees,
the Company does not directly employ any scientists or other laboratory
personnel and all of its preclinical tests and clinical trials are subcontracted
to and performed at the University of Lund, Sweden and at other centers in
Europe and the United States, with the assistance of research and consulting
firms. Accordingly, OXiGENE has depended, and in the future is likely to
continue to depend, on others for assistance in many areas, including research,
conducting preclinical testing and clinical trials, the regulatory approval
process, manufacturing and marketing. Although the Company considers its
relations with existing collaborative partners to be satisfactory, all its
current arrangements are short term in nature. Funding requirements, competitive
factors or prioritization of other opportunities may lead the Company to seek
additional arrangements with third parties. While OXiGENE is likely to explore
license and development opportunities for its technologies with other companies,
there can be no assurance that the Company will be successful in establishing
and maintaining collaborative agreements or licensing arrangements; that any
collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that, if established, such future licensees will be successful in
commercializing products. Finally, if the Company's collaboration arrangements
are terminated prior to their expiration or if the other parties to such
arrangements fail to adequately perform, there can be no assurance that
submission of product candidates for regulatory approval will not be delayed.
See "--Research and Development and Collaborative Arrangements."
Clinical Trials; Government Regulation and Health Care Reform; Managed
Care. The Company's research and development activities, preclinical testing and
clinical trials, and the manufacturing and marketing of its products are subject
to extensive regulation by numerous governmental authorities in the United
States and other countries. See "--Product Development and Regulatory
Processes." Preclinical testing and clinical trials and manufacturing and
marketing of OXiGENE's products are and will continue to be subject to the
rigorous testing and approval processes of the FDA, the Swedish Medical Products
Agency and other corresponding foreign regulatory authorities. Clinical testing
and the regulatory process generally take many years and require the expenditure
of substantial resources. In addition, delays or rejections may be encountered
during the period of product development, clinical testing and FDA regulatory
review of each submitted application. Similar delays may also be encountered in
foreign countries. There can be no assurance that, even after such time and
expenditures, regulatory approval will be obtained for any products developed by
OXiGENE or that a product, if approved in one country, will be approved in other
countries. See "--Product Development and Regulatory Processes." Moreover, if
regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which that product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
(such as previously undiscovered side effects) with a product, manufacturer or
facility may result in restrictions on such product, manufacturer or facility,
including a possible withdrawal of the product from the market. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions, injunctions and criminal prosecution. Additionally, further
government regulation may be established which could prevent or delay regulatory
approval of the Company's products. Further, the U.S. Congress continues to
debate various health care reform proposals which, if adopted, may have a
material adverse effect on the Company. Moreover, continued cost control
initiatives by health care maintenance organizations and similar programs may
affect the financial ability and willingness of patients and their health care
providers to utilize certain therapies.
Competition and Risk of Technological Obsolescence. The Company is engaged
in a rapidly evolving field. Competition from other pharmaceutical companies,
biotechnology companies and research and academic institutions is intense and
expected to increase. Many of those companies and institutions have
substantially greater financial, technical and human resources than the Company.
Those companies and institutions also have substantially greater experience in
developing products, in conducting clinical trials, in obtaining regulatory
approval and in manufacturing and marketing pharmaceutical products.
Accordingly, competitors may succeed in obtaining regulatory approval for their
products more rapidly than the Company. The Company also competes with
universities and other research institutions in the development of products,
technologies and processes. Competitors have developed or are in the process of
developing technologies that are, or in the future may be, the basis for
competitive products. Some of those products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company. See "--Competition." There can be no assurance
that the Company's competitors will not succeed in developing technologies and
products that are more effective and/or cost competitive than those being
developed by the Company or that would render the Company's technology and
products less competitive or even obsolete. In addition, one or more of the
Company's competitors may achieve product commercialization or patent protection
earlier than the Company, which could materially adversely affect the Company.
Dependence on Patents and Proprietary Technology. To date, OXiGENE's
initial products, Sensamide(TM) and Neu-Sensamide(TM), have been based on
certain available compounds that are produced by others. The Company anticipates
that products it develops hereafter may include or be based on the same or other
compounds owned or produced by unaffiliated parties, as well as synthetic
compounds it may discover. Although the Company expects to seek patent
protection for any compounds it discovers and/or for any specific uses it
discovers for new or previously known compounds, there is no assurance that any
or all of them will be subject to effective patent protection. Further, the
development of regimens for the administration of pharmaceuticals, which
generally involve specifications for the frequency, timing and amount of
dosages, has been, and the Company believes may continue to be, important to the
Company's efforts, although those processes, as such, may not be patentable.
The Company's success will depend, in part, on its ability to obtain
patents, protect its trade secrets and operate without infringing on the
proprietary rights of others. As of March 8, 1998, the Company is the assignee
of four granted U.S. patents, five pending U.S. patent applications, and of
granted patents and/or pending applications in other countries (and/or
international applications designating other countries) corresponding to three
of the granted U.S. patents and all five of the pending U.S. applications. In
addition, the Company will be the assignee of a U.S. provisional patent
application filed in 1997, and of international and foreign counterparts thereof
expected to be filed in 1998. The patent position of pharmaceutical and
biotechnology firms like OXiGENE generally is highly uncertain and involves
complex legal and factual questions, resulting in both an apparent inconsistency
regarding the breadth of claims allowed in U.S. patents and general uncertainty
as to their legal interpretation and enforceability. Accordingly, there can be
no assurance that the Company's patent applications will result in patents being
issued, that any issued patents will provide the Company with competitive
protection or will not be challenged by others, or that the patents of others
will not have an adverse effect on the ability of the Company to do business.
Moreover, since some of the basic research relating to one or more of the
Company's patent applications and/or patents was performed at various
universities and/or funded by grants, particularly in Sweden, there can be no
assurance that one or more universities, employees of such universities and/or
grantors will not assert that they have certain rights in such research and any
resulting products, although the Company is not aware of any such assertions or
any basis therefor. Furthermore, there can be no assurance that others will not
independently develop similar products, will not duplicate any of the Company's
products or, if patents are issued to the Company, will not design around such
patents. In addition, the Company may be required to obtain licenses to patents
or other proprietary rights of others. No assurance can be given that any
licenses required under any such patents or proprietary rights would be made
available on terms acceptable to the Company, if at all. If the Company does not
obtain such licenses, it could encounter delays in product market introductions
while it attempts to design around such patents, or could find that the
development, manufacture or sale of products requiring such licenses is
foreclosed. In addition, the Company could incur substantial costs in defending
itself in suits brought against it or in connection with patents to which it
holds a license or in bringing suit to protect the Company's own patents against
infringement. The Company generally requires employees, Scientific Advisory
Board members and the institutions that perform its preclinical and clinical
tests (though not the employees of such institutions) to enter into
confidentiality agreements with the Company. Those agreements provide that all
confidential information developed or made known to the individual during the
course of the relationship with the Company is to be kept confidential and not
to be disclosed to third parties, except in specific circumstances. In the case
of employees, the agreements also provide that all inventions conceived by such
employees shall be the exclusive property of the Company. There can be no
assurance, however, that any such agreement will provide meaningful protection
for the Company's trade secrets or other confidential information in the event
of unauthorized use or disclosure of such information. See "--Patents and Trade
Secrets."
Dependence on Certain Officers and Directors and Others. The Company
believes that its success is, and will likely continue to be, materially
dependent upon its ability to retain the services of certain of its current
officers and directors, particularly Dr. Bjorn Nordenvall, its Chief Executive
Officer, Dr. Claus Moller, its Chief Medical Officer, and Dr. Ronald Pero, its
Chief Scientific Officer. The loss of the services of any of these individuals
could have a material adverse effect on the Company. In addition, the Company
has established relationships with universities, hospitals and research
institutions, particularly the University of Lund, Lund, Sweden, which have
historically provided, and continue to provide, the Company with access to
research laboratories, clinical trials, facilities and patients. Dr. Pero is a
Professor of Molecular Ecogenetics at the University of Lund. The Company
benefits indirectly from certain research grants received by Dr. Pero. The
Company is materially dependent on the research and development efforts of Dr.
Pero and his various relationships and affiliations, the loss of which could
have a material adverse effect on the Company's business. Additionally, the
Company believes that it may, at any time and from time to time, be materially
dependent on the services of consultants and other unaffiliated third parties.
Product Liability Exposure; Limited Insurance Coverage. The use of the
Company's products in clinical trials and for commercial applications, if any,
may expose the Company to liability claims, in the event such products cause
injury, disease or result in adverse effects. These claims could be made
directly by health care institutions, contract laboratories, patients or others
using such products. Although the Company has obtained liability insurance
coverage for its ongoing clinical trials, and there can be no assurance that
such coverage will be in amounts sufficient to protect the Company against
claims or recalls that could have a material adverse effect on the financial
condition and prospects of the Company. Further, adverse product and similar
liability claims could negatively impact the Company's ability to obtain or
maintain regulatory approvals for its technology and products.
Price Volatility of the Common Stock. The market price of the Common Stock
has been, and likely will continue to be, highly volatile as frequently is the
case with the publicly-traded securities of pharmaceutical research and
development companies. See "Market For Registrant's Common Equity and Related
Stockholder Matters." Factors such as results of clinical trials, announcements
of research developments and results by the Company or its competitors and
government regulatory action affecting the Company's products in both the United
States and foreign countries have had, and may continue to have, a significant
effect on the Company's business and on the market price of the Common Stock. As
of December 31, 1997, an aggregate of 49,612 Stock appreciation rights ("SARs"),
with a weighted average exercise price of $7.19 per SAR, had been granted to
certain clinical investigators and consultants. The Company is not required to
make any cash payments upon exercise of any such SAR. If and when the spread
between the market price of the Company's Common Stock and the exercise price of
the SARs changes, the charge for financial reporting purposes to research and
development will be adjusted to reflect an increase or decrease, as the case may
be, in the market price of the Company's Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition, substantially all of the shares of Common Stock issuable upon exercise
of outstanding options, SARs and warrants have been registered and may be sold
from time to time hereafter. Such sales, as well as future sales of Common Stock
by existing stockholders, or the perception that sales could occur, could
adversely affect the market price of the Common Stock. The price and liquidity
of the Common Stock may also be significantly affected by trading activity and
market factors related to the Nasdaq and Stockholm Stock Exchange markets, which
factors and the effects thereof may differ between those markets.
No Dividends. The Company has not declared or paid dividends on its Common
Stock since its inception and does not intend to declare or pay any dividends to
its stockholders in the foreseeable future. See "Market For Registrant's Common
Equity and Related Stockholder Matters."
GLOSSARY OF SCIENTIFIC TERMS
Anti-emetic A drug which controls nausea and vomiting
Apoptosis A natural programmed cell death not involving cell
replication
CD4 cell counts A sub-set of white blood cells directly involved in
the natural protection against diseases
CGMP standards Current good manufacturing practice standards
required for regulatory affairs
Chemotherapy Drugs that control cancer growth
Cisplatin A chemotherapeutic compound
Control group A group of patients involved in a clinical trial
who are receiving placebos
Cross-over study A study in which each patient receives all
treatments singly, but at different times of the
study
Cytotoxic agent Tumor-killing agent
DNA Chemical building blocks of genetic material
Double-blind study A study in which neither the investigators
assessing the outcome of the trial nor the patients
know whether the patient is receiving the drug
being investigated or merely a placebo. The outcome
can only be determined when the results are decoded
Enzyme A protein that carries out a metabolic function by
converting one substance to another
Genetic blueprint The code that tells cells what to do and how to
function
Genetic lesions Damage to the DNA or in the genetic blueprint
i.m. Intramuscular
Immune deficiencies Suppression of the cells that fight disease within
the body
IND An "Investigational New Drug" application
filed with the U.S. Food and Drug
Administration that permits the
administration of compounds to humans in
clinical trials
In vivo-exposed spleen Spleen cells are exposed in the animal then taken
and cell out for testing
i.v. Intravenous
Malignant cell Cancer cell
Metabolic function Living process of growth and reproduction
NDA A "New Drug Application" filed with the U.S.
Food and Drug Administration, which, if
approved, allows a drug to be marketed in
the U.S.
Necrosis Cell death by decomposition after replication
N-substituted benzamide Class of drugs believed by OXiGENE to sensitize
radiation and chemotherapy
Nucleotides A class of nucleic acid compounds from which genes
are constructed
Open-label clinical trial A non-blinded clinical trial
Oxidative stress Undesired natural metabolism of oxygen-derived
molecules by the body that can induce DNA damage
PARP Poly (ADP Ribose) Polymerase--an enzyme involved in
the DNA repair process. Also known as Adenosine
Diphosphate Ribosyl Transferase or ADPRT
Placebo A non-active substance given to a control group of
patients in a clinical trial to duplicate the
treatment method, but without the administration of
the active drug under investigation
Radiation Physical energy that splits molecules and induces
DNA damage
Randomized clinical trial A clinical trial in which the allocation of
patients to treatment groups is made on a random
basis
Sensitization The process that renders a tumor more susceptible
to damage by radiation or chemotherapy
Serum thiol level The level of compounds in serum that react with
oxidative stress
2. PROPERTIES.
In conjunction with the set-up of a laboratory facility at Boston Medical
Center, and in order to monitor the recently-commenced clinical trials in the
United States the Company closed its office in New York, New York, and relocated
its executive offices to Boston, Massachusetts. The Boston office lease has a
current annual rent of approximately $63,000 and expires on April 30, 2002, but
may be terminated at any time by the Company upon six months' written notice and
payment of a cancellation fee. In connection with the listing of its Common
Stock on the Stockholm Stock Exchange, the Company opened an executive office in
Stockholm, Sweden. The Stockholm office is leased at an annual rate of
approximately $41,000, and the lease expires on September 30, 2000. The Company
also leases an office at the Ideon Research Park in Lund, Sweden. The lease
expires on March 31, 2000, and the annual rent is approximately $42,000. The
Company does not own or lease any laboratories or other research and development
facilities.
3. LEGAL PROCEEDINGS.
There are no material suits or claims pending or, to the best of the
Company's knowledge, threatened against the Company.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to the vote of security holders of the Company
during the fourth quarter of the year ended December 31, 1997.
Executive Officers of the Company
The executive officers of the Company and their ages at December 31, 1997,
were as follows:
Name Age Position
- ---- --- --------
Bjorn Nordenvall, M.D., Ph.D.. 45 Chief Executive Officer, President and
Chairman of the Board of Directors
Claus Moller, M.D., Ph.D...... 35 Chief Medical Officer and a Director
Ronald W. Pero, Ph.D.......... 57 Chief Scientific Officer and a Director
Bo Haglund.................... 45 Chief Financial Officer
Bjorn Nordenvall, M.D., Ph.D. was appointed as a Director in March 1995,
and became the Company's President and Chief Executive Officer in June 1995 and
Chairman of the Board of Directors in June 1996. From March to August 1996, Dr.
Nordenvall served as the Company's Chief Financial Officer. Dr. Nordenvall
serves as Chairman of the Company's Audit Committee. Dr. Nordenvall is a
specialist in general surgery and, from 1987 to September 1996, was president of
Sophiahemmet AB, a Stockholm-based hospital. During 1983 and 1984, Dr.
Nordenvall was president of Carnegie Medicine AB, Stockholm, Sweden, a
biotechnology company, and from 1977 through 1985, he practiced surgery at
Danderyd Hospital, Stockholm. From 1984 through 1986, Dr. Nordenvall served as a
consultant to Carnegie, a Swedish investment banking company, and, since 1984,
he has been a consultant to Skandia Insurance Company, a Swedish insurance
company.
Claus Moller, M.D., Ph.D. was appointed as a Director in March 1995 and
became the Company's Chief Medical Officer in March 1995. Since April 1, 1994,
Dr. Moller has served as a consultant to the Company, responsible for
coordinating the Company's European clinical trials. Dr. Moller is a director
and a principal shareholder of IPC Nordic A/S, a Danish pharmaceutical
consulting firm. From 1989 to 1994, Dr. Moller was medical director for
Synthelabo Scandinavia A/S, a Danish pharmaceutical company, and from 1983 to
1992, he was involved in cell biology and biomedical research at the University
of Copenhagen, Denmark.
Ronald W. Pero, Ph.D. is a co-founder of OXiGENE, and has been a Director
and the Company's Chief Scientific Officer since its inception. From November
1993 to June 1995, Dr. Pero also served as President of the Company. Dr. Pero
specializes in the field of DNA repair and its relation to cancer treatment, and
directs and coordinates the Company's research and development efforts. Dr. Pero
has been a fellow of the National Institute of Environmental Health Sciences in
Research Triangle Park, North Carolina, a director of the Division of
Biochemical Epidemiology at the Strang Cancer Prevention Center in New York
City, and currently holds faculty positions at both New York University Medical
Center and the University of Lund in Lund, Sweden, where he is a Professor of
Molecular Ecogenetics. Dr. Pero is also a member of the American Association of
Science, New York Academy of Sciences, International Preventive Oncology
Society, European Society for Therapeutic Radiation Oncology and The American
Association of Cancer Research, as well as serving as Scientific Director of the
Board of Trustees of the Swedish American Research Foundation. Dr. Pero has
published more than 175 manuscripts related to his research.
Bo Haglund was appointed Chief Financial Officer in August 1996. From
January 1992 to August 1996, Mr. Haglund was employed by D. Carnegie AB
("Carnegie") in various capacities, most recently heading its London operations,
focusing on the marketing of Nordic securities to U.K. investors. Prior to
joining Carnegie, from November 1990 to January 1992, Mr. Haglund was executive
vice president and chief financial officer of Swedish Exploration Consortium AB,
a Swedish publicly-traded company engaged in oil and gas exploration. From
January 1988 to October 1990, Mr. Haglund was vice president finance of Cool
Carriers AB, a shipping company, and from April 1982 to December 1987, he was
chief financial officer of Gulf Agency Group, a ship brokerage company.
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Effective November 19, 1996, the Company's Common Stock and Warrants
commenced trading on the Nasdaq National Market under the symbols "OXGN" and
"OXGNW," respectively. Prior thereto, since the completion of the Company's
initial public offering in August 1993, the Company's securities had been listed
for quotation on the Nasdaq Small-Cap Market. The Company's shares of Common
Stock are also traded on the Stockholm Stock Exchange in Sweden. The following
table sets forth the high and low per share and per warrant prices for the
Company's Common Stock and Warrants for each quarterly period within the two
most recent fiscal years.
Common Stock Warrants
------------ ---------
Calendar Year High Low High Low
- ------------- ---- --- ---- ---
1996
First Quarter $23.38 $ 9.25 $15.50 $ 2.88
Second Quarter 32.63 17.63 24.00 10.25
Third Quarter 27.00 17.00 18.00 8.63
Fourth Quarter 26.70 22.00 15.50 11.00
1997
First Quarter $36.25 $22.63 $26.25 $12.25
Second Quarter 35.00 26.25 25.25 15.56
Third Quarter 41.88 24.00 29.25 15.25
Fourth Quarter 29.25 15.25 18.50 6.50
As of March 24, 1998, there were 34 holders of record of the Company's
Common Stock and two holders of record of the Company's Warrants. The Company
believes, based on the number of proxy statements and related materials
distributed in connection with its 1997 Annual Meeting of Stockholders, that
there are more than 5,000 beneficial owners of its Common Stock.
The Company has not declared any cash dividends on its Common Stock since
its inception in 1988, and does not intend to pay cash dividends in the
foreseeable future. The Company presently intends to retain future earnings, if
any, to finance the growth and development of its business.
6. SELECTED FINANCIAL DATA.
Summary Financial Information
OXiGENE, Inc.
(A development stage company)
1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
Statement of Operations Data:
Revenues:
Research income - - - - -
Interest income 50,897 265,440 420,949 684,039 2,217,467
------------------------------------------------------------------------------------------------
Total revenues 50,897 265,440 420,949 684,039 2,217,467
Operating Expenses:
Research and development 879,195 1,764,462 2,843,593 4,822,834 7,281,504
General and administrative 1,191,714 1,340,737 1,295,191 1,819,638 3,046,484
------------------------------------------------------------------------------------------------
Total operating expenses 2,070,909 3,105,199 4,138,784 6,642,472 10,327,988
------------------------------------------------------------------------------------------------
Net loss (2,020,012) (2,839,759) (3,717,835) (5,958,433) (8,110,521)
================================================================================================
Net loss per common share (0.50) (0.56) (0.63) (0.80) (0.83)
Weighted average number of
common shares outstanding
(in thousands) 4,026 5,037 5,876 7,440 9,770
1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
Balance Sheet Data:
Cash and cash equivalents 7,516,941 1,193,999 10,406,605 40,517,182 40,136,662
Securities available for sale 0 3,291,128 502,020 0 0
Working capital 7,207,265 4,447,080 10,510,024 40,418,846 39,889,394
Total assets 7,550,838 4,770,951 11,227,251 41,168,759 41,152,357
Total liabilities 309,970 290,969 670,077 650,001 951,088
Deficit accumulated during
the development stage (4,842,280) (7,682,039) (11,399,874) (17,358,307) (25,468,828)
Total stockholders' equity 7,240,866 4,479,982 10,557,174 40,518,758 40,201,269
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Overview
OXiGENE is a development-stage pharmaceutical company engaged in the
research and development of products designed to enhance the clinical efficacy
of radiation and chemotherapy, the most common and traditional forms of
non-surgical cancer treatment. OXiGENE has devoted substantially all of its
efforts and resources to research and development conducted on its own behalf
and through strategic collaborations with clinical institutions and other
organizations, particularly the University of Lund in Lund, Sweden.
Consequently, OXiGENE believes that its research and development expenditures
have been somewhat lower than those of other comparable development-stage
companies. OXiGENE has generated a cumulative net loss of approximately $25.5
million for the period from its inception through December 31, 1997.
OXiGENE expects to incur significant additional operating losses over at
least the next several years, principally as a result of its continuing clinical
trials and anticipated research and development expenditures. The principal
source of OXiGENE's working capital has been the proceeds of private and public
equity financings. As of December 31, 1997, OXiGENE had no long-term debt or
loans payable. Since its inception, the Company has had no material amount of
licensing or other fee income, and does not anticipate any such income for the
foreseeable future.
Results of Operations
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
During the years ended December 31, 1997 and 1996, the Company had no revenues,
except for approximately $2.2 million and $0.7 million of interest income,
respectively. The increase in interest income is attributable to the investment
of the net proceeds of the Company's secondary offering in connection with its
listing on the Stockholm Stock Exchange ("SSE"), which was completed in November
1996, as well as cash received upon exercise of options and warrants throughout
the year. See "Liquidity and Capital Resources." The Company's total operating
expenses for the year ended December 31, 1997 increased to approximately $10.3
million from approximately $6.6 million for the comparable 1996 period. Research
and development expenses for those years were approximately $7.3 million and
$4.8 million, respectively. Research and development expenditures are net of a
credit for financial reporting purposes of approximately $0.2 million related to
stock appreciation rights ("SARs") previously granted to certain clinical
investigators. Research and development expenditures for 1996 included a charge
for financial reporting purposes of approximately $1.0 million with respect to
such SARs. This charge was recorded because the market value per share of Common
Stock on December 31, 1997 ($17.50) exceeded the exercise price of stock
appreciation rights previously granted by the Company to certain clinical
investigators and consultants. Without giving effect to such charge, research
and development expenses increased by approximately $3.7 million compared to the
comparable 1996 period. The increase is primarily attributable to research and
development expenditures related to the Company's third generation sensitizer
OXi-104, Cordycepin, Combretastatin and its ongoing clinical trial program.
Generally, the Company makes payments to its clinical investigators if and when
certain predetermined milestones in its clinical trials are reached, rather than
on a fixed quarterly or monthly basis. As a result of the foregoing and the
existence of outstanding stock appreciation rights, research and development
expenses have fluctuated, and are expected to continue to fluctuate, from year
to year. General and administrative expenses for the year ended December 31,
1997 increased to approximately $3.0 million from approximately $1.8 million for
the comparable 1996 period. The increase in general and administrative expenses
is primarily attributable to: (i) the Company's participation in scientific
symposium, particularly the ECCO conference held in September 1997, in Hamburg,
Germany, where the Company released the first preliminary data of its
Sensamide(TM) study in patients with NSCLC, and other promotion activities, (ii)
establishing a clinical trial and research coordination center in Boston,
Massachusetts, and (iii) an increase in the number of staff required to monitor
the Company's clinical trials, and a general increase in expenses due to a
higher level of business activities. In an effort to preserve cash and reduce
cash flow requirements, the Company's policy has been to minimize the number of
employees and to use outside consultants to the extent practicable. OXiGENE
expects that its clinical trial expenses will increase as it proceeds with and
expands the Neu-Sensamide(TM) clinical trial program and it initiates research
and clinical trials on new compounds, including OXi-104, Combretastatin and
Cordycepin.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
OXiGENE had no revenues, except for approximately $0.7 million and $0.4 million
of interest income in the years ended December 31, 1996 and 1995, respectively.
The increase in interest income is attributable to the investment of the net
proceeds of the Company's secondary offering in connection with its listing on
the Stockholm Stock Exchange ("SSE"), which was completed in November 1996, as
well as cash received upon exercise of options and warrants throughout the year.
Total operating expenses for the year ended December 31, 1996 increased to
approximately $6.6 million from approximately $4.1 million for the comparable
1995 period. Research and development expenses for the year ended December 31,
1996 increased to approximately $4.8 from approximately $2.8 for the comparable
1995 period. General and administrative expenses for the year ended December 31,
1996 increased to approximately $1.8 from approximately $1.3 for the comparable
1995 period. The increase in operating expenses is primarily due to (i) the
costs and expenses associated with an expansion of the clinical trial program,
(ii) increases in research and development activities in connection with
OXiGENE's new compounds, (iii) investment banking fees paid to D. Carnegie AB
("Carnegie"), and (iv) expenses related to the establishing of an office in
Stockholm. The increase in research and development expenses was partly
attributable to an increase in the charge for financial reporting purposes of
approximately $1.0 million related to SARs previously granted to certain
clinical investigators.
Liquidity and Capital Resources
OXiGENE has experienced net losses and negative cash flow from operations
each year since its inception and, as of December 31, 1997, has an accumulated
deficit of approximately $25.5 million. The Company expects to incur substantial
additional expenses, resulting in significant losses, over at least the next
several years due to, among other factors, its continuing clinical trials and
anticipated research and development activities. To date, the Company has
financed its operations principally through the net proceeds it has received
from private and public equity financings, and from the exercise of outstanding
options and warrants.
OXiGENE had cash and cash equivalents of approximately $40.1 million and
$40.5 million at December 31, 1997 and December 31, 1996, respectively. This
relatively small decrease in cash and cash equivalents is due to the receipt by
OXiGENE of approximately $7.9 million from the exercise of outstanding options
and warrants during the year ended December 31, 1997, which almost offset the
net cash used in operating activities during that year.
OXiGENE's policy is to contain its fixed expenditures by maintaining a
relatively small number of employees and relying as much as possible on outside
services for its research, development, preclinical testing and clinical trials.
Quarterly payments are being made to the University of Lund, Lund, Sweden, for
preclinical research and clinical trials. For the years ended December 31, 1997,
1996, and 1995, the amount of such retainer was approximately $1.0 million, $0.3
million, and $0.2 million, respectively. In late 1991, OXiGENE engaged Cato
Research, Ltd., an independent clinical research firm in Durham, North Carolina
("Cato"), to, among other things, monitor OXiGENE's clinical trials. The amount
billed to OXiGENE by Cato during the years ended December 31, 1997, 1996, and
1995 was approximately $0.2 million, $0.3 million, and $0.7 million,
respectively. The continuous decrease in the amount billed by Cato prior to 1997
is due to the completion of the Company's Phase II/III clinical trial of
Sensamide(TM). In May 1996, OXiGENE in collaboration with ILEX(TM) Oncology Inc.
("ILEX"), a contract research organization in San Antonio, Texas, established a
large-scale synthesis of OXi-104 in accordance with FDA current U.S. Good
Laboratory Practice standards ("cGLP"). In the year ended December 31, 1997 and
1996, the Company paid ILEX approximately $1.6 and $0.9 million, respectively.
The increase in the amounts paid to ILEX reflects the research and development
with respect to OXi-104 and Combretastatin, a compound that in preclinical
studies indicates toxicity toward tumor vasculature. The Company expects that
the amounts payable to ILEX will increase from time to time.
OXiGENE anticipates that the cash and cash equivalents at December 31,
1997, and income it will earn thereon should be sufficient to satisfy the
Company's projected cash requirements for approximately the next 30 months.
However, working capital and capital requirements may vary materially from
those now planned due to numerous factors including, but not limited to, the
progress with preclinical testing and clinical trials; progress of the Company's
research and development programs; the time and costs required to obtain
regulatory approvals; the resources the Company devotes to manufacturing methods
and advanced technologies; the ability of the Company to obtain collaborative or
licensing arrangements; the cost of filing, prosecuting, and, if necessary,
enforcing patent claims; the cost of commercialization activities and
arrangements; and the demand for its products if and when approved. The Company
anticipates that it might have to seek substantial additional private or public
financing or enter into a collaborative arrangement with one or more third
parties to complete the development of any product or bring products to market.
There can be no assurance that additional financing will be available on
acceptable terms, if at all.
OXiGENE had no material commitments for capital expenditures as of December
31, 1997.
Impact of Year 2000
The Company has completed a preliminary assessment to determine if its
computer system will function properly with respect to dates in the year 2000
and thereafter. Based on that assessment the Company believes that its computer
systems are year 2000 compliant.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Item 14 for a list of the OXiGENE Financial Statements and Schedules
and Supplementary Information filed as part of this report.
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item, insofar as it relates to directors,
is incorporated herein by reference to the Company's definitive Proxy Statement
with respect to the Company's Annual Meeting of Stockholders scheduled to be
held on June 5, 1998. The information regarding executive officers is included
in Part I hereof under the caption "Executive Officers of the Company," and is
incorporated by reference into this Item 10.
11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference
to the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 5, 1998.
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference
to the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 5, 1998.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference
to the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 5, 1998.
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents Filed with this Report.
The following documents are filed as part of this report.
1. Financial Statements
The financial statements listed in the accompanying List of
Financial Statements covered by Report of Independent
Auditors.
2. Financial Statement Schedules
None.
3. Exhibits
Exhibit
Number Description
-------- -----------
3.1 Restated Certificate of Incorporation of the
Registrant.*
3.2 By-Laws of the Registrant.*
3.3 Certificate of Amendment of Certificate of
Incorporation.***
4.1 Representatives' Warrant Agreement (including form of
Representatives' Warrant Certificate), dated August 26,
1993, between the Company and RAS Securities Corp.*
4.2 Warrant Agreement (including form of Warrant
Certificate), dated August 26, 1993, between the
Company and America Stock Transfer & Trust Company.*
10.1 Patent License Agreement dated as of October 7, 1991
between Preventive Medicine Institute and Bio-Screen,
Inc.*
10.2 Amended and Restated Stock Incentive Plan of Registrant
dated as of May 15, 1993.*
10.3 Employment Agreement, dated as of April 4, 1997,
between Registrant and Dr. Ronald W. Pero.
10.4 Executive Employment Agreement, dated as of October 9,
1993, between Registrant and Bjorn Nordenvall, M.D.,
Ph.D.**
10.5 Consulting Agreement, dated as of October 9, 1995,
between OXiGENE (Europe) AB and B. Omentum Consulting
AB.**
10.6 Consulting Agreement, dated as of August 1, 1995,
between Registrant and IPC Nordic A/S.**
10.7 OXiGENE 1996 Stock Incentive Plan.***
10.8 Collaborative Research Agreement, dated as of August 1,
1997, between the Registrant and Boston Medical Center
Corporation.
10.9 Technology Development Agreement, dated as of May 27,
1997, between the Registrant and the Arizona Board of
Regents, acting for and on behalf of Arizona State
University. Portions of this Exhibit have been omitted
pursuant to a request for Confidential Treatment filed
with the Commission simultaneously with the filing of
this Annual Report.
10.10 Office Lease, dated February 26, 1997, between
Registrant and Copley Place Associates Nominee
Corporation.
10.11 Employment Agreement, dated as of April 4, 1997,
between Registrant and Dr. Claus Moller.
23 Consent of Ernst & Young, LLP.
27 Financial Data Schedule.
99.1 U.S. Patent Number 5,204,241, issued April 20, 1994,
registered to Ronald W. Pero, regarding
glutathione-s-transferase Mu as a measure of drug
resistance. ***
99.2 U.S. Patent Number 5,340,565, issued August 23, 1994,
registered to Ronald W. Pero, regarding tumor or cancer
cell killing therapy and agents useful therefor. ***
99.3 U.S. Patent Number 5,482,833, issued January 9, 1996,
registered to Ronald W. Pero and Daniel G. Miller,
regarding a test to determine the predisposition or
susceptibility to DNA-associated diseases. ***
99.4 International Application Published under the Patent
Cooperation Treaty (PCT) Number WO96/14565, published
May 17, 1996, registered to Ronald W. Pero, regarding a
method of testing immune competency. ***
-------------------------
* Incorporated by reference to the Registrant's
Registration Statement on Form S-1 (file no. 33-64968)
and any amendments thereto.
** Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994.
*** Incorporated by reference to the Registrant's
Registration Statement on Form S-3 (file no. 333-12867)
and any amendments thereto.
(b) Reports on Form 8-K.
The registrant filed no reports on Form 8-K during the fourth quarter
of the year ended December 31, 1997.
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.
OXiGENE, INC.
By:/S/ BJORN NORDENVALL
Bjorn Nordenvall
President and
Chief Executive Officer
April 14, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ BJORN NORDENVALL President, Chief Executive Officer April 14, 1998
- --------------------------- and Director (principal executive
Bjorn Nordenvall officer)
officer)
/S/ BO HAGLUND Chief Financial Officer April 14, 1998
- ---------------------------
Bo Haglund
/s/ MARVIN H. CARUTHERS Director April 14, 1998
- ---------------------------
Marvin H. Caruthers
Director April , 1998
- ---------------------------
Michael Ionata
/S/ CLAUS MOLLER Director April 14, 1998
- ---------------------------
Claus Moller
/S/ RONALD W. PERO Director April 14, 1998
- ---------------------------
Ronald W. Pero
/S/ PER-OLOF SODERBERG Director April 14, 1998
- ---------------------------
Per-Olof Soderberg
/S/ GERALD A. EPPNER Director April 14, 1998
- ---------------------------
Gerald A. Eppner