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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 10, 1996
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CYTOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19871 94-3078125
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
2 RICHMOND SQUARE
PROVIDENCE, RHODE ISLAND 02906
(Address, of principal executive offices, including zip code)
(401) 272-3310
(Registrant's Telephone number including area code)
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PAGE 1 OF 9 PAGES.
Exhibit Index is on Page 5
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Item 5.
CytoTherapeutics, Inc. ("CytoTherapeutics" or the "Company") announced
the establishment of Modex Therapeutiques SA as a 50% owned, Swiss company to
pursue extensions of CytoTherapeutics' broad-based, encapsulated-cell technology
for applications outside the central nervous system. Modex, headquartered in
Lausanne, Switzerland, will integrate technologies developed at three
universities located in Lausanne -- the University of Lausanne, the Centre
Hospitalier Universitaire Vaudois (CHUV), the Ecole Polytechnique Federale de
Lausanne (EPFL) -- as well as from the Albert Einstein College of Medicine of
Yeshiva University in New York City and CytoTherapeutics to develop products to
treat diseases such as diabetes, obesity and blood disorders.
CytoTherapeutics has initially invested $2 million in Modex, with a
commitment to invest an additional $2 million on the second anniversary of the
agreement if Modex has, prior to that time, achieved one or more specified
scientific milestones, in exchange for a 50% stake in Modex. An investment fund
managed by Lombard Odier & Cie, a Swiss private bank, has invested $2 million in
Modex, with a commitment to invest an additional $1 million on the second
anniversary of the agreement, in exchange for a 15% stake in the company.
CytoTherapeutics has granted to Modex an exclusive, royalty-bearing
license to CytoTherapeutics' proprietary encapsulated-cell technology for three
applications outside the central nervous system (diabetes, obesity and anemia).
Modex granted to CTI an exclusive royalty-bearing license to any technology
developed or obtained by Modex for application to diseases, conditions and
disorders which affect the central nervous system. In addition to its royalty
obligations, CTI is also obligated under this agreement to issue to Modex up to
300,000 shares of CTI Common Stock on the achievement by Modex of certain
scientific milestones. Substantially all of these shares are expected to be
awarded by Modex as incentive compensation to Modex's founding scientists and
other researchers upon the achievement of such milestones.
Under the terms of its agreement with the fund managed by Lombard
Odier, during the first two years following closing, CytoTherapeutics has the
right to acquire the fund's interest in Modex for approximately $3 million.
Following this two year period, CytoTherapeutics has the right to purchase the
fund's interest in Modex at 110% of fair market value. Following the second
anniversary of the agreement and prior to the tenth anniversary of the
agreement, if no public market exists for the Common Stock of Modex, the fund
has the right to require CytoTherapeutics to purchase the fund's interest in
Modex for 90% of the fair market value of such interest. Any purchase made by
CytoTherapeutics under any of the circumstances described in this paragraph may
be made, at CytoTherapeutics' option, in cash or shares of CytoTherapeutics
Common Stock valued at the market price at the time of purchase.
The scientific founders of Modex are Patrick Aebischer, M.D., Ph.D.,
Professor of Surgery and Director of Surgical Research and the Gene Therapy
Center at the CHUV; Max Wilhelm, Ph.D., who will serve as Modex's Chief
Executive Officer and was previously Director
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of Pharmaceutical Research and Development at Ciba-Geigy Corporation where he
was responsible for worldwide research and development operations; Bernard
Thorens, Ph.D., Professor at the Institute of Pharmacology at the University of
Lausanne, and Shimon Efrat, Ph.D., Associate Professor at the Department of
Molecular Pharmacology at Albert Einstein College of Medicine at Yeshiva
University. Dr. Aebischer is also a scientific founder of CytoTherapeutics and a
member of its Board of Directors.
Under the terms of the agreement between CytoTherapeutics and the
scientific founders of Modex, CytoTherapeutics has the right to acquire, and the
founders have the right to require CytoTherapeutics to acquire, the founders'
initial equity interest in Modex in exchange for the issuance of an aggregate of
approximately 92,000 shares of CytoTherapeutics Common Stock.
Certain statements in this current report include forward looking
comments regarding, among other things, product development programs,
CytoTherapeutics' obligations under certain agreements and the Company's
dependence on outside parties. The Company's actual results may vary materially
from those forward looking statements due to risks and uncertainties to which
the Company is subject. "Cautionary Factors Relevant to Forward Looking
Statements" filed herewith as Exhibit 99 and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYTOTHERAPEUTICS, INC.
By /s/ Frederic A. Eustis
Title: Vice President
Date: July 15, 1996
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Exhibit Index
Exhibit Page No.
99 Cautionary Factors Relevant to Forward Looking Statements 5
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EXHIBIT 99
CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING INFORMATION
CytoTherapeutics, Inc. (the "Company") wishes to caution readers that
the following important factors, among others, in some cases have affected and
in the future could affect the Company's results and could cause actual results
and needs of the Company to vary materially from forward-looking statements made
in this Current Report by the Company on the basis of management's current
expectations. The business in which the Company is engaged is rapidly changing,
extremely competitive and involves a high degree of risk, and accuracy with
respect to forward-looking projections is difficult.
EARLY STAGE DEVELOPMENT; HISTORY OF OPERATING LOSSES - Substantially all of the
Company's revenues to date have been derived, and for the foreseeable future
substantially all of the Company's revenues will be derived, from collaborative
agreements, research grants and income earned on invested funds. The Company
will incur substantial operating losses in the future as the Company conducts
its research, development, clinical trial and manufacturing activities. There
can be no assurance that the Company will achieve revenues from product sales or
become profitable.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING - The development of the
Company's products will require the commitment of substantial resources to
conduct the time-consuming research, preclinical development and clinical trials
that are necessary for regulatory approvals and to establish production and
marketing capabilities if such approvals are obtained. The Company will need to
raise substantial additional funds to continue its product development efforts
and intends to seek such additional funds through partnership, collaborative or
other arrangements with corporate sponsors, public or private equity or debt
financings, or from other sources. Future cash requirements may vary from
projections based on changes in the Company's research and development programs,
progress in preclinical and clinical testing, the Company's ability to enter
into, and perform successfully under, collaborative agreements, competitive and
technological advances, the need to obtain proprietary rights owned by third
parties, facilities requirements, regulatory approvals and other factors. Lack
of necessary funds may require the Company to delay, reduce or eliminate some or
all of its research and product development programs or to license its potential
products or technologies to third parties. No assurance can be given that
funding will be available when needed, if at all, or on terms acceptable to the
Company.
UNCERTAINTIES OF CLINICAL DEVELOPMENT AND NEW MODE OF THERAPY - None of the
Company's proposed products has been approved for commercial sale or entered
Phase II or III clinical trials. Even if the Company's proposed products appear
to be promising at an early stage of research or development such products may
later prove to be ineffective, have adverse side effects, fail to receive
necessary regulatory approvals, be difficult or uneconomical to manufacture or
market on a commercial scale, be adversely affected by government price controls
or limitations on reimbursement, be precluded from commercialization by
proprietary rights of third parties or be subject to significant competition
from other products. There can be no assurance that the
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Company will be able to demonstrate, as required, that its implants, on a
consistent basis and on a commercial scale, among other things: (i) successfully
isolate transplanted cells from the recipient's immune system; (ii) remain
biocompatible with the tissue into which they are implanted, including, for
certain implants, brain tissue; (iii) adequately maintain the viability of cells
contained within the membrane; (iv) safely permit the therapeutic substances
produced by the cells within the membrane to pass through the membrane unto the
patient in controlled doses for extended periods; and (v) are sufficiently
durable for the intended indication.
DEPENDENCE ON OUTSIDE PARTIES - The Company's strategy for the research,
development, commercialization and marketing of its products contemplates that
the Company will enter into various arrangements with corporate sponsors,
pharmaceutical companies, universities, research groups and others. There is no
assurance that the Company will be able to enter into any additional
arrangements on terms acceptable to the Company, or successfully perform its
obligations under its existing or any additional arrangements. If any of the
Company's collaborators fails to perform its obligations in a timely manner or
terminate their agreement with the Company, the development or commercialization
of the Company's product candidate or research program under such collaborative
agreement may be adversely affected.
NEED FOR AND UNCERTAINTY OF OBTAINING PATENT PROTECTION - Patent protection for
products such as those the Company proposes to develop is highly uncertain and
involves complex factual and evolving legal questions. No assurance can be given
that any patents issued or licensed to the Company will not be challenged,
invalidated or circumvented, or that the rights granted under such patents will
provide competitive advantages to the Company.
EXISTENCE OF THIRD PARTY PATENTS AND PROPRIETARY RIGHTS; NEED TO OBTAIN LICENSES
- - There are pending patent applications or issued patents held by others
relating to the Company's proposed products or the technology to be utilized by
the Company in the development of its proposed products. If such patents or
other patents are determined by the Company or a court to be valid and
infringed, the Company may be required to alter its products or processes, pay
licensing fees or royalties or cease certain activities. In particular, the
Company is aware of one issued patent claiming certain methods for treating
defective, diseased or damaged cells in the mammalian CNS by grafting
genetically modified donor cells from the same mammalian species. In addition,
each of the neurotrophic factors which the Company is currently investigating
for use in its proposed products is the subject of one or more claims in patents
or patent applications of third parties, and certain other neurotrophic factors
are the subject of third party patent applications. The Company may also be
required to seek licenses in regard to other cell lines, the techniques used in
creating or obtaining such cell lines, the materials used in the manufacture of
its implants or otherwise. There can be no assurance that the Company will be
able to establish collaborative arrangements or obtain licenses to the foregoing
technology or to other necessary or desirable technology on acceptable terms, if
at all, or that the patents underlying any such licenses will be valid and
enforceable.
GOVERNMENT REGULATION - The Company's research, preclinical development and
clinical trials, as well as the manufacturing and marketing of its potential
products, are subject to extensive regulation by governmental authorities in the
United States and other countries. The process of
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obtaining FDA and other required regulatory approvals is lengthy, expensive and
uncertain. There can be no assurance that the Company or its collaborators will
be able to obtain the necessary approvals to commence or continue clinical
testing or to manufacture or market its potential products in anticipated time
frames, if at all. In addition, several legislative proposals have been made to
reform the FDA. If such proposals are enacted they may result in significant
changes in the regulatory environment the Company faces. These changes could
result in different, more costly or more time consuming approval requirements
for the Company's products, in the dilution of FDA resources available to review
the Company's products, or in other unpredictable consequences.
SOURCES OF CELLS AND OTHER MATERIALS - The Company's potential products require
genetically engineered cell lines or living cells harvested from animal or human
sources. There can be no assurance that the Company will successfully identify
or develop sources of the cells required for its potential products and obtain
such cells in quantities sufficient to satisfy the commercial requirements of
its potential products. These supply limitations may apply, in particular, to
primary cells which must be drawn directly from animal or human sources, such as
the bovine adrenal chromaffin cells currently used in the Company's product for
the treatment of pain. As an alternative to primary cells, the Company is
developing products based on the use of genetically altered cells. Intellectual
property rights to important genetic constructs used in developing such cells,
including the constructs used to develop cells producing neurotrophic factors,
are or may be claimed by one or more companies, which could prevent the Company
from using such cells.
MANUFACTURING UNCERTAINTIES - The Company's pilot manufacturing plant, may not
have sufficient capacity to permit the Company to produce all the products for
clinical trials it anticipates developing. In addition, the Company has not
developed the capability to commercially manufacture any of its proposed
products and is unaware of any other company which has manufactured any
membrane-encapsulated cell product on a commercial scale. There can be no
assurance that the Company will be able to develop the capability of
manufacturing any of its proposed products at a cost or in the quantities
necessary to make a commercially viable product, if at all.
COMPETITION - Competitors of the Company are numerous and include major
pharmaceutical and chemical companies, biotechnology companies, universities and
other research institutions. Currently, several of these competitors market and
sell therapeutic products for the treatment of chronic pain, Parkinson's disease
and other CNS conditions. In addition, most of the Company's competitors have
substantially greater capital resources, experience in obtaining regulatory
approvals and, in the case of commercial entities, experience in manufacturing
and marketing pharmaceutical products, than the Company. A number of other
companies are attempting to develop methods of delivering therapeutic substances
within or across the blood brain barrier. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective than those being developed by the Company or that would
render the Company's technology and products obsolete or non-competitive.
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DEPENDENCE ON KEY PERSONNEL - The Company is highly dependent on the principal
members of its management and scientific staff and certain of its outside
consultants. Loss of the services of any of these individuals could have a
material adverse effect on the Company's operations. In addition, the Company's
operations are dependent upon its ability to attract and retain additional
qualified scientific and management personnel. There can be no assurance the
Company will be able to attract and retain such personnel on acceptable terms
given the competition among pharmaceutical, biotechnology and health care
companies, universities and research institutions for experienced personnel.
REIMBURSEMENT AND HEALTH CARE REFORM - In both domestic and foreign markets,
sales of the Company's potential products will depend in part upon the
availability and amounts of reimbursement from third-party health care payor
organizations, including government agencies, private health care insurers and
other health care payors such as health maintenance organizations and
self-insured employee plans. There is considerable pressure to reduce the cost
of therapeutic products. There can be no assurance that reimbursement will be
provided by such payors at all or without substantial delay, or, if such
reimbursement is provided, that the approved reimbursement amounts will provide
sufficient funds to enable the Company to sell its products on a profitable
basis.
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