Here's the 10-K on the subject:
Academic Collaborations. In addition to its in-house research program, the Company collaborates with several academic institutions to support research in areas of the Company's product development interests. Usually, research supported at outside academic institutions is performed in conjunction with additional in-house research. Often, the faculty members responsible for supervision of the research performed at the academic institution will participate further as consultants to the Company's in-house effort.
Typically under these arrangements, the Company agrees to fund the research it has chosen to support with a specified budget over a specified time period, usually one to three years. In return, the Company usually obtains an exclusive license, with the right to grant sublicenses, and the right to further develop and market products that arise out of the technology being supported. Under several of these licenses, the Company is required to meet specified milestones or diligence requirements in order to retain its license of such technologies. There can be no assurance that the Company will satisfy these milestones and diligence requirements and be able to retain such licenses. In addition to providing research support, the Company usually is required to pay royalties to the academic institution on sales, if any, of any licensed products resulting from such research. The Company in most instances
files and prosecutes patent applications on behalf of the institutions.
The Company's primary academic collaboration is with Children's Hospital. In September 1993, the Company entered into a sponsored research agreement with Children's Hospital to support research conducted under the direction of Dr. M. Judah Folkman on the role of angiogenesis in pathological conditions. Under the agreement, as amended in August 1995, the Company agreed to pay to Children's Hospital $11,000,000, of which $8,000,000 was paid through February 1998, $1,000,000 is due on April 1, 1998 and the remainder is due in equal semi-annual payments of $1,000,000 until April 1, 1999. The Company also granted to Children's Hospital options to acquire 83,334 shares of Common Stock at an exercise price of $6.00 per share and additional options to acquire 50,000 shares at an exercise price of $6.375 per share. The Company obtained an exclusive option to negotiate an exclusive, worldwide, royalty-bearing license to any technology resulting from the research at Children's Hospital in areas covered by the agreement. The Company received a right to sublicense the licensed technologies, although the Company agreed to pay to Children's Hospital a portion of all sublicensing payments, which do not include payments to support research and development by the Company or equity investments in the Company. The Company has also received certain rights of first refusal to certain additional research projects and any new project opportunities arising
from Dr. Folkman's core laboratory activities.
The Company exercised its option in May 1994 to obtain exclusive worldwide licenses to certain oral antiangiogenic technology (thalidomide and its analogs), cancer diagnostic and prognostic technology, and endogenous antiangiogenic technology, Angiostatin(TM) protein. In December 1996, the Company exercised its option to obtain the exclusive worldwide licenses to Endostatin(TM) protein and 2-Methoxyestradiol, an orally available angiogenesis inhibitor. These license agreements provide for certain milestone payments by the Company to Children's Hospital as well as royalties based on sales, if any, of any products developed from the licensed technologies. The milestone payments aggregate $4,650,000, of which $290,000 has been paid through December 31, 1997, and are based upon license fees and
the achievement of regulatory approvals.
On the foregoing language, if Folkman discovered these new compounds at Children's and they relate to the anti-angiogensis field, ENMD has the exclusive option to negotiate a license agreement for each of them. ENMD also appears to have a right of first refusal as to other (that is, not in the anti-angiogensis area) technologies.
Note that an exclusive option is a right greatly superior to a right of first refusal.
My guess is that Dr. Folkman is not well-versed in the legalese applicable to these matters and that in his efforts to quell this week's exuberance, he simply mis-spoke. That is the read of others closer to the company than me as well.
Regards,
John |
