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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
Commission File No. 0-14116
NEORX CORPORATION
(Exact name of Registrant as specified in its charter)
Washington 91-1261311
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
410 West Harrison Street, Seattle, Washington 98119
(Address of principal executive offices)
Registrant's telephone number, including area code: (206) 281-7001
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.02 Par Value
9 3/4% Convertible Subordinated Debentures, due 2014
$2.4375 Convertible Exchangeable Preferred Stock, Series 1
Series 2 Convertible Preferred Stock
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. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 7, 1997 was approximately $76.8 million (based on the
closing price for shares of the Registrant's Common Stock as reported by the
Nasdaq National Market for the last trading date prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of March 7, 1997, approximately 16.5 million shares of the Registrant's
Common Stock, $.02 par value per share, were outstanding.
Documents Incorporated by Reference
(1) Portions of the Registrant's 1996 Notice of Annual Meeting and Proxy
Statement for the Registrant's Annual Meeting of Shareholders to be held on May
13, 1997 are incorporated by reference in Part III of this Form 10-K.
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PART I
Item 1. Business
NeoRx Corporation ("NeoRx" or the "Company") develops innovative
biopharmaceuticals for the diagnosis and treatment of cancer and cardiovascular
disease. As part of its cancer treatment program, NeoRx is developing a
proprietary pretargeting platform for the delivery of therapeutic agents
directly to tumor sites.
The Company's portfolio of products include VERLUMA(TM), a small cell lung
cancer imaging kit, that was cleared for marketing by the United States Food and
Drug Administration (the "FDA") in August 1996. The Company's AVICIDIN(R) cancer
therapy agent is currently in Phase I/II clinical trials for the treatment of
solid tumors. Phase I patient accrual for the BIOSTENT(R) product, a
pharmaceutical agent designed to reduce restenosis following balloon angioplasty
through the inhibition of vascular remodeling, was completed in 1996 and data on
the final patients to complete the six month follow-up are being collected.
NeoRx is also conducting investigations into atherosclerosis in a Phase I study
to determine safety and dosage of a pharmaceutical agent with the intent of
inhibiting atherosclerosis.
All statements in this document that are not historical facts are considered
forward-looking statements. Sentences or phrases that use words such as
"believes," "anticipates," "hopes," "plans," "may," "can," "will," and others
are often used to flag such statements, but their absence does not mean a
statement is not forward-looking. Such statements reflect management's current
opinion and are designed to help readers understand management's thinking. By
their very nature, however, such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. See "Important Factors Regarding Forward-Looking Statements." Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
release publicly any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Cancer and Its Treatment
Cancer is second only to cardiovascular disease as a cause of death in the
United States. The American Cancer Society estimates that approximately
1,382,000 new cases of cancer will be diagnosed in the United States in 1997, of
which 60% are expected to be tumors of the lung, colon, breast and prostate.
Cancer is a large group of diseases characterized by uncontrolled and
proliferative cell division. Cancer cells have the tendency to dislodge from the
sites where the tumors originate and metastasize (spread from one part of the
body to another).
Current regimens for the treatment of cancer include chemotherapy,
external-beam radiation and surgical intervention. Generally, existing cancer
therapy for high-incidence tumors such as lung, colon and breast is
characterized by both relatively low efficacy and considerable toxicity.
Chemotherapy drugs are generally administered intravenously so that the drug can
circulate throughout the body. With rare exceptions, chemotherapy is the only
available treatment for tumors that have spread throughout the body, but it
provides only modest benefits for patients with the most frequently occurring
malignancies, such as lung, colon or breast cancer. As chemotherapy drugs
circulate throughout the body, they kill cancer cells, but are also toxic to
normal cells. Consequently, cancer patients receiving chemotherapy often suffer
severe, sometimes life- threatening, side effects, such as damage to bone
marrow, lungs, heart, kidneys and nerves. The optimal drug dose for killing
cancer cells must therefore often be reduced to avoid intolerable toxicities.
Pretargeting: NeoRx's Approach to Delivering Drugs. NeoRx's cancer
therapeutic product under development employ monoclonal antibody based
technology. Antibodies are proteins produced by certain white blood cells in the
body's immune system in response to antigens (foreign substances) such as
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viruses, bacteria, toxins and specific types of cancer cells. An antibody will
recognize and bind specifically only to a single type of antigen. This quality,
known as "specificity," makes antibodies potentially useful for the delivery of
imaging and therapeutic agents to disease sites.
Monoclonal antibodies are laboratory-produced and share the ability of
natural human antibodies to bind to one particular antigen target. In 1975, the
first practical method was demonstrated for producing monoclonal antibodies in
significant quantities. This method consists of obtaining antibody-producing
cells from mice immunized against a selected antigen and fusing these cells with
a type of cell that reproduces indefinitely. The products of the fusion of these
two types of cells are called hybridomas. Hybridomas secrete the specific
antibody desired, grow well in culture and multiply to generate a vast number of
duplicate hybridomas that also secrete the desired antibody. These antibodies
can be purified for use as pharmaceutical agents.
In the conventional approach to radioimmunotherapy ("RIT"), the radiation is
linked to the antibody that is then administered to patients. The antibody and
the radiation circulate together. NeoRx's pretargeting technology employs an
antibody-mediated targeting strategy that is designed to deliver high doses of
an active agent to tumor cells, while minimizing toxicity to normal tissue
associated with conventional therapy.
AVICIDIN: The First NeoRx Agent to Use the Pretargeting Platform. The
AVICIDIN agent takes advantage of the high binding affinity of two molecules:
biotin and streptavidin. An antibody linked to streptavidin is administered to
the patient and allowed to accumulate on the surface of the tumor cells. This
accumulation occurs because the antibody portion of the antibody-streptavidin
conjugate recognizes and binds to antigen markers on the tumor cell surface. In
animal experiments, the conjugate attains peak uptake in the tumor after 24-36
hours, at which time a clearing agent is administered to remove circulating
conjugate from the bloodstream. The final step involves administering biotin
linked to the therapeutic radionuclide, yttrium-90. This small molecule
biotin-yttrium complex is designed to bind specifically to where the
streptavidin has accumulated, with the resultant beta particle emission from the
yttrium-90 killing tumor cells. Biotin-yttrium that does not bind to the
streptavidin is quickly eliminated through the kidneys, thereby reducing the
radiation dose to the bone marrow. In preclinical studies in animals, the
AVICIDIN agent achieved a tenfold improvement in the therapy ratio compared to
conventional RIT, accompanied by durable, complete regressions of
chemotherapy-resistant human lung, breast and colon cancer tumors in mice.
Results of preclinical studies are not necessarily indicative of results that
will be attained in human clinical trials.
The AVICIDIN agent is being tested in Phase I/II clinical trials in patients
with tumors that bind with the antibody, such as cancers of the lung, colon,
breast and prostate. The purposes of the study are to determine the maximum
tolerated dose ("MTD") of radiation, to observe anti-tumor effects, and to
determine the optimal timing and dosing of each component.
In one series of tests, the Company's investigators are trying to optimize
the dosing and timing of the three components ("dosimetry"). In a second series
of tests, the investigators are raising the radiation dose in groups of three
patients to determine the MTD and to observe anti-tumor effects when they occur.
These studies use an antibody produced by mouse cells so that the antibody is a
murine protein and results in a human anti-mouse antibody ("HAMA") response
after the first dose. Once the Company is satisfied it has a suitable humanized
antibody, it plans to substitute this for the foreign murine antibody.
To date, the AVICIDIN dosimetry studies have shown substantially less
exposure of bone marrow than conventional RIT. This has permitted safe
administration of higher radiation doses, and tumor shrinkage has been observed
following just a single AVICIDIN dose even in patients with advanced, bulky
tumors.
Other Uses of Pretargeting. NeoRx is testing the delivery of additional
agents such as other forms of radiation, drugs, immune response modifiers (e.g.
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tumor necrosis factor). This unique pretargeting platform may also offer the
first real opportunity to deliver alpha emitters, a form of radiation
significantly more potent than yttrium-90, effectively and safely to solid
tumors. NeoRx has received a Small Business Innovative Research ("SBIR") grant
to study alpha emitter chemistry.
Cancer: Diagnosis and Staging of Disease. Early diagnosis and precise
detection of the malignant cells are important for cancer treatment. Current
diagnostic imaging techniques include x-rays, computerized tomography ("CT"),
ultrasonography, radioisotopic imaging and nuclear magnetic resonance imaging
("MRI"). Once cancer is suspected, its presence must be confirmed by biopsy (the
examination of cells removed from the body). The next step is to use diagnostic
imaging to "stage" the patient, that is, to determine the extent of the disease
throughout the body. Accurate staging is important for designing appropriate
treatment. Using current methods, several diagnostic imaging procedures may be
required to determine the organs to which the cancer has spread. Staging may be
inaccurate if all possible body sites are not examined or if tumor metastases
are too small to be detected by the diagnostic procedure used.
Small Cell Lung Cancer: Diagnosis and Staging. The American Cancer Society
estimates that approximately 178,000 new cases of lung cancer will occur in the
United States in 1997, of which the Company believes approximately 47,000 will
be small cell lung cancer. Symptoms of this disease usually appear only after
the disease has advanced beyond the stage when it may be surgically cured.
According to the American Cancer Society, the five-year survival rate for lung
cancer is 13%. Although most small cell lung cancer patients respond to
chemotherapy, most also suffer a relapse. Current treatment of this disease is
based on the extent to which the tumor has spread throughout the body. As a
result, accurate imaging to determine the extent of the disease is important for
designing appropriate treatment. Patients whose disease has not spread
extensively are generally treated with chemotherapy and externally applied chest
radiation. Those patients whose disease has spread to the point that radiation
treatment would not encompass all known tumors within one radiation port are
treated with chemotherapy only.
The degree to which small cell lung cancer has spread is generally
determined using a standard battery of four imaging tests, including CT scans of
the head, chest and abdomen and a bone scan. This standard battery of tests may
take up to one week. Bone marrow aspirate, a procedure in which a bone marrow
sample is removed for examination, is occasionally used as an additional test.
The VERLUMA Kit: Imaging for Small Cell Lung Cancer. The VERLUMA kit is the
Company's diagnostic imaging product that is indicated to detect extensive
disease in patients with biopsy-confirmed, previously untreated small cell lung
cancer. Boehringer Ingelheim International GmbH ("Boehringer Ingelheim") holds
world-wide manufacturing rights and non-North American marketing rights to the
VERLUMA kit. Boehringer Ingelheim will pay royalties to NeoRx on future
non-North American product sales, if any.
The DuPont Merck Pharmaceutical Company ("DuPont Merck") markets the VERLUMA
kit in the United States and holds exclusive North American rights to market the
VERLUMA kit. In addition to paying NeoRx $4.5 million upon the FDA marketing
clearance in the United States, DuPont Merck will pay NeoRx royalties on sales
of the VERLUMA Kit in North America. To date, the VERLUMA kit is approved only
in the United States. No applications for foreign approvals have been filed.
The VERLUMA kit employs a Fab fragment of an antibody, designated NR-LU-10,
linked to a nontoxic dose of the gamma-emitting radionuclide technetium-99m that
is injected intravenously and allowed to concentrate at the tumor sites. A gamma
camera is then used to determine the location of the tumors. In a Phase I/II
clinical trial, the VERLUMA kit localized to primary and/or metastatic small
cell and non-small cell lung cancer, and breast, colon and prostate cancers.
Data from a completely blinded analysis of NeoRx's Phase III small cell lung
cancer clinical trial show that the VERLUMA kit is more sensitive than any
single test used in the standard battery of four tests to determine how far the
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tumor has spread and has an accuracy level comparable to the standard battery of
tests. The Company believes that its use may result in cost savings, as well as
reduced staging time compared to conventional tests.
Cardiovascular Disease and Its Treatment
The American Heart Association estimates that approximately 60 million
Americans have one or more types of cardiovascular disease, and that the cost of
cardiovascular diseases and stroke in 1997 will be $259 billion. Nearly one
million people die of cardiovascular disease each year in the United States,
making it the leading cause of death.
Cardiovascular disease is divided into four main categories: high blood
pressure, coronary heart disease, stroke and rheumatic heart disease. Medical
procedures to treat coronary heart disease include percutaneous transluminal
coronary angioplasty, coronary artery bypass surgery and heart transplantation.
Angioplasty: The Procedure. Angioplasty is a medical procedure used to
increase blood flow through coronary arteries that have been partially blocked
by the build-up of plaque on the interior of the arterial wall.
Restenosis is the recurrent narrowing of an artery following angioplasty.
This narrowing, that reduces blood flow through the artery, is believed to be
caused by a combination of at least three distinct but interrelated factors: (1)
vascular remodeling, or chronic constriction of the artery, (2) blood clot
formation and (3) the migration and proliferation of smooth muscle cells at the
site of the angioplasty procedure that encroach upon the flow of blood. Data
from human studies suggests that vascular remodeling accounts for the majority
of late lumen loss that leads to restenosis following balloon angioplasty.
The Company believes that over 500,000 angioplasties were performed in the
United States in 1996, and that approximately 30% of such patients will
experience restenosis following the angioplasty procedure. If restenosis occurs,
it may necessitate open heart surgery (coronary artery bypass graft), sometimes
on an emergency basis, or additional coronary angioplasty procedures, such as
repeat angioplasty and/or the placement of a metal stent in the artery.
BIOSTENT: NeoRx's Approach to Treating Restenosis. The Company's BIOSTENT
agent under development is designed to inhibit vascular remodeling following
balloon angioplasty. By addressing remodeling, the BIOSTENT agent may be
complementary to the anti-thrombotics currently on the market or under
development by other companies for the treatment of restenosis. The drug is
intended to be delivered locally immediately following angioplasty using a
delivery catheter. The Company believes that this method delivers the drug to
the angioplasty site and reduces the chances of toxicity that might occur if
systemic treatment were used to deliver similar concentrations at the site.
NeoRx's preclinical studies have shown that administering the BIOSTENT
agent immediately after angioplasty inhibits chronic construction of the artery
wall and thus helps maintain its dilated position. As a normal response to
injury caused by angioplasty, the muscle cells in the ballooned arterial wall
secrete a biological "cement" called collagen, a supportive protein of the body.
The Company believes that the collagen forms a rigid matrix, thereby
biologically supporting or "stenting" the arterial wall during the period that
treatment with the BIOSTENT agent inhibits arterial constriction.
The BIOSTENT agent may be unique with respect to other pharmaceutical agents
that have been evaluated in animal models and reported in the scientific
literature in that it not only inhibits restenosis, but actually sustains the
increase in the luminal area following balloon trauma compared to the ballooned,
but untreated, arteries. NeoRx scientists have assessed the effects of the
BIOSTENT treatment method in a swine femoral artery model that was then extended
to swine coronary arteries. Analysis of swine femoral arteries for as long as
4
eight weeks and of swine coronary arteries for as long as three weeks following
a single exposure to the BIOSTENT agent has indicated in these experiments that
the treatment sustains the increase in the luminal area following balloon trauma
compared to the ballooned, but untreated, arteries.
The BIOSTENT treatment method consists of the cytoskeletal inhibiting agent,
cytochalasin B, delivered through a specialized intracoronary delivery catheter.
The catheter is an over-the-wire design that allows rapid placement using the
same guidewire used for balloon dilation. Commercialization of the BIOSTENT
agent will depend on obtaining the FDA approval of the catheter. NeoRx completed
patient accrual of a multidose, multicenter, randomized, double-blinded Phase I
trial. An interim analysis of the majority of the patients revealed no evidence
of drug-related toxicity. A final analysis of the data for the six month
follow-up is being performed.
Atherosclerosis. Atherosclerosis is a complex disease of blood vessels
commonly understood as clogging of arteries with cholesterol. It is a leading
cause of deaths from heart attack and stroke. Clogged arteries do not deliver
oxygen-carrying blood to organs as well as normal arteries and are more likely
to become completely restricted with blood clots that shut off blood flow. The
result is the affected organ receives insufficient oxygen and may die if flow is
not restored rapidly, leading to conditions such as heart attack and stroke.
Surgery and/or angioplasty (as described above) can improve blood flow, but
prevention or reduction in the disease progression would be preferred.
Raising TGF(beta) Levels: NeoRx's Approach to Treating Atherosclerosis.
Scientists at the University of Cambridge in the United Kingdom ("Cambridge"),
working with NeoRx, have discovered that patients with advanced coronary artery
disease have low levels of active TGF(beta), a protein that regulates the growth
of certain cell types such as those found in the lining of arteries. They have
reported that segments of arteries prone to atherosclerosis are low in active
TGF(beta) and that the elevation of active TGF(beta) can prevent the development
of lesions in arteries of a mouse animal model that express the human apo(a)
associated with atherosclerosis lesions in humans.
A Phase I dosing study is being conducted to determine safety and the dose
of a drug that maximally increases activated TGF(beta) in patients with advanced
coronary artery disease. This drug has been provisionally licensed from a third
party. Either NeoRx or the third party may terminate at will the further
development of this drug.
Products Under Development
The following table summarizes products under development by NeoRx:
Product Indication Status
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Cancer Therapy:
AVICIDIN pretargeted cancer Treatment of solid tumors, e.g., Phase I/II human clinical
therapy product lung cancer, colon cancer, trials
etc.(1)
Cardiovascular Therapy:
Anti-restenosis
BIOSTENT agent Inhibition of restenosis Phase I human clinical trials
Atherosclerosis
TGF upregulation Treatment of atherosclerosis Phase I human clinical trials
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(1) The Company's currently planned first indication for this product is for the
treatment of small cell lung cancer.
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Patents and Proprietary Rights
The Company's policy is to protect its proprietary technology aggressively.
In addition to filing patent applications in the United States for many of its
inventions, the Company files patent applications in Canada, major European
countries, Japan and additional foreign countries on a selective basis to
protect important inventions.
The Company holds a co-exclusive license for the monoclonal antibody used in
its cancer imaging and treatment products and also has obtained U.S. and foreign
patent protection relating to its cancer imaging products. NeoRx has an
exclusive license from Stanford University for a patent issued in the U.S.,
Europe and Japan that covers the pretargeting technology used in NeoRx's
AVICIDIN cancer therapy product under development. The Company has been awarded
additional U.S. patents pertaining to its pretargeting technology, and has
received notices of allowance in the U.S. on several others; other applications
are pending. The Company has also received a notice of allowance in the U.S. for
its BIOSTENT technology and has several patent applications pending in both the
U.S. and foreign jurisdictions. NeoRx has exclusively licensed from Indiana
University a patent covering catheter delivery into blood vessel walls of
sustained release therapeutic agents contained within a particulate dosage form.
NeoRx is the exclusive assignee of a two U.S. patents granted to its Cambridge
collaborators for the use of various TGF(beta) elevating agents to treat a
variety of cardiovascular indications and has additional pending applications
related to this technology.
Competitors have filed applications for, or have been issued, patents and
may obtain additional patents and proprietary rights relating to products or
processes competitive with or relating to those of the Company. The scope and
validity of these patents, the extent to which the Company may be required to
obtain licenses thereunder or under other proprietary rights, and the cost and
availability of licenses are unknown. Accordingly, there can be no assurance
that the Company's patent applications will result in additional patents being
issued or that, if issued, the patents will afford protection against
competitors with similar technology, nor can there be any assurance that any
patents issued to the Company will not be infringed or designed around by others
or that others will not obtain patents that the Company would need to license or
design around.
As part of NeoRx's ongoing research activities, the Company in the ordinary
course seeks assurances that it will own or license any rights that may be
necessary or useful to its business. The Company believes that in certain
circumstances licensing or cross-licensing arrangements pertaining to the
relevant technologies and providing reasonable economic terms may be an
expedient way to resolve any potential infringement issues. In other
circumstances, such arrangements may not be warranted or obtainable on
commercially reasonable terms. In the event it were determined that one or more
of the Company's products infringe one or more of such patents, the Company
could seek to enter a licensing or cross-licensing arrangement, but there can be
no assurance that such an arrangement would be available or, if available, that
the terms of such an arrangement would be reasonable.
Competition
Research and development in cancer and cardiovascular diseases is highly
competitive. NeoRx faces competition from emerging companies and established
biotechnology, pharmaceutical and chemical companies. Many emerging companies
have corporate partnership arrangements with large, established companies to
support research, development and commercialization efforts of products that may
be competitive with those being developed by the Company. In addition, a number
of established pharmaceutical and chemical companies are developing proprietary
technologies or have enhanced their capabilities by entering into arrangements
with, or acquiring, companies with proprietary monoclonal antibody-based
technology or other technologies applicable to the imaging or treatment of
cancer, the prevention of restenosis or the treatment of atherosclerosis. Many
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of the Company's existing or potential competitors have or have access to
substantially greater financial, research and development, marketing and
production resources than those of the Company.
Other companies may develop and introduce products and processes competitive
with or superior to those of the Company. Further, the development by others of
new cancer diagnostic or treatment products, anti- restenosis products or any
cancer or atherosclerosis prevention products could render the Company's
technology and products under development less competitive, uneconomical or
obsolete.
Timing of market introduction and health care reform, both uncertainties,
will affect the competitive position of the Company's products. The Company
believes that competition among products approved for sale will be based, among
other things, on product safety, efficacy, reliability, availability, price and
patent position.
Other companies are developing antibody-based cancer imaging products.
Conventional radiography, conventional nuclear medicine scanning (including an
indium-labeled peptide for neuroendocrine tumors), CT and MRI are already widely
available and used by a large number of physicians. These, along with a nuclear
medicine test now being marketed, constitute the current competition for use of
the Company's VERLUMA lung cancer imaging product.
The Company's cancer therapy products under development are designed for the
treatment of metastatic cancer or where there is a very high statistical risk
that the cancer has spread. The Company anticipates that the principal
competition in this type of cancer treatment will come from existing
chemotherapy, hormone therapy and biological therapies that are designed to
treat the same cancer stage. Many pharmaceutical, emerging pharmaceutical and
biotechnology companies are testing a large array of alternative cancer
treatments. If any of these proves to be more effective, safer or less expensive
than the Company's products under development, the Company's competitive
position could be adversely affected.
The Company's anti-restenosis product under development is designed to
prevent restenosis of blood vessels following angioplasty where such narrowing
is due to vascular remodeling. Due to the incidence and severity of
cardiovascular diseases, the market for therapeutic products that address such
diseases is large, and competition is intense and expected to increase. There is
no obligation for the licensor of the drug being studied for TGF upregulation to
permit its continued development after the dosing study is completed.
Government Regulation and Product Testing
The manufacture and marketing of the Company's proposed products and its
research and development activities are subject to regulation for safety,
efficacy and quality by numerous government authorities in the U.S. and other
countries. In the U.S., drugs and biologics are subject to rigorous regulation
by the FDA. The Federal Food, Drug and Cosmetic Act of 1976, as amended, and the
regulations promulgated thereunder, and other federal and state statutes and
regulations govern, among other things, the testing, manufacture, safety,
efficacy, labeling, storage, record keeping, approval, advertising and promotion
of the Company's products. Product development and approval within this
regulatory framework take a number of years to accomplish and involve the
expenditure of substantial resources.
The steps required before a pharmaceutical agent may be marketed in the U.S.
include (i) preclinical laboratory tests, in vivo preclinical studies and
formulation studies, (ii) the submission to the FDA of an Investigational New
Drug Application ("IND"), which must become effective before human clinical
trials can commence, (iii) adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug, (iv) the submission of a Biologic
License Application ("BLA") or New Drug Application ("NDA") to the FDA, and (v)
the FDA approval of the BLA or NDA prior to any commercial sale or shipment of
the drug. In addition to obtaining FDA approval for each product, each domestic
7
drug manufacturing establishment must be registered with, and inspected by, the
FDA. Domestic manufacturing establishments are subject to biennial inspections
by the FDA and must comply with current Good Manufacturing Practice ("cGMP")
regulations enforced by the FDA through its facilities inspection program for
biologics, drugs and devices. To supply products for use in the U.S., foreign
manufacturing establishments must comply with cGMP and are subject to periodic
inspection by the FDA or by corresponding regulatory agencies in such countries
under reciprocal agreements with the FDA.
Preclinical studies include laboratory evaluation of product chemistry and
formulation, as well as animal studies, to assess the potential safety and
efficacy of the product. Preclinical safety tests must be conducted by
laboratories that comply with the FDA regulations regarding Good Laboratory
Practice. The results of the preclinical studies are submitted to the FDA as
part of an IND and are reviewed by the FDA prior to commencement of human
clinical trials. Unless the FDA provides comments to an IND, the IND will become
effective 30 days following its receipt by the FDA. There can be no assurance
that submission of an IND will result in the FDA authorization to commence
clinical trials.
Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients under the supervision of a qualified
principal investigator. Clinical trials are conducted in accordance with the
FDA's Protection of Human Subjects regulations and Good Clinical Practices under
protocols that detail the objectives of the study, the parameters to be used to
monitor safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an independent Institutional Review Board
("IRB") at the institution at which the study will be conducted. The IRB will
consider, among other things, ethical factors, the safety of human subjects and
the possible liability of the institution.
Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. In Phase I, the drug is tested for safety (adverse effects),
dosage tolerance, metabolism, distribution, excretion and pharmacodynamics
(clinical pharmacology). Phase II involves studies in a limited patient
population to (i) determine the efficacy of the drug for specific, targeted
indications, (ii) determine dosage tolerance and optimal dosage, and (iii)
identify possible adverse effects and safety risks. When a compound is found to
have potential efficacy and to have an acceptable safety profile in Phase II
clinical trials, Phase III clinical trials are undertaken to further evaluate
clinical efficacy and to further test for safety within an expanded patient
population at geographically dispersed clinical study sites. There can be no
assurance that Phase I, Phase II or Phase III clinical trials will be completed
successfully within any specific time period, if at all, with respect to any of
the Company's products subject to such trials. Furthermore, the Company or the
FDA may suspend clinical trials at any time if it is determined that the
subjects or patients are being exposed to an unacceptable health risk.
The results of the pharmaceutical development, preclinical studies and
clinical trials are submitted to the FDA in the form of a BLA or NDA for
approval of the marketing and commercial shipment of the drug. The testing and
approval processes are likely to require substantial time and effort and there
can be no assurance that any approval will be granted on a timely basis, if at
all. The FDA may deny a BLA or NDA if applicable regulatory criteria are not
satisfied, may require additional testing or information, or may require
postmarketing testing and surveillance to monitor the safety of the Company's
products if it does not view the BLA or NDA as containing adequate evidence of
the safety and efficacy of the drug.
Notwithstanding the submission of such data, the FDA may ultimately decide
that the application does not satisfy its regulatory criteria for approval.
Moreover, if regulatory approval of a drug is granted, such approval may entail
limitations on the indicated uses for which it may be marketed. Finally, product
approvals may be withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing.
8
Among the conditions for BLA or NDA approval is the requirement that the
prospective manufacturers' quality control and manufacturing procedures conform
to cGMP. In complying with standards set forth in these regulations,
manufacturers must continue to expend time, money and effort in the areas of
production and quality control to ensure full technical compliance.
In addition to regulations enforced by the FDA, the Company also is subject
to regulations under occupational safety and health laws, environmental
protection laws and other present and potential future federal, state or local
regulations. The Company's research and development involves the controlled use
of hazardous materials, chemicals, and various radioactive compounds. Although
the Company believes that its safety procedures for handling and disposing of
such materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the Company's resources. In addition, federal and state agencies and
congressional committees have expressed interest in further regulation of
biotechnology. The Company is unable to estimate the extent and impact of
regulation in the biotechnology field resulting from any future federal, state
or local legislation or administrative action.
For clinical investigation and marketing outside the United States, the
Company or its collaborative partners also are subject to foreign regulatory
requirements governing human clinical trials and marketing approval for drugs.
The requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely for European countries both within and
outside the European Community.
Important Factors Regarding Forward-Looking Statements
The following important factors, among others, could cause the Company's
actual results to differ materially from those expressed in the Company's
forward-looking statements in this report and presented elsewhere by management
from time to time.
Early Stage of Product Development; Technological Uncertainty. To date,
substantially all of the Company's revenues have consisted of payments received
under agreements with corporate partners and from government research contracts,
none of which provide for material future funding. The Company has received no
revenues to date from product sales, and does not expect to seek United States
regulatory approval for sales of its cancer and anti-restenosis treatment
products before the year 2000. Royalties from the sale of the VERLUMA diagnostic
imaging agent will begin in 1997. The Company's current research and development
activities are focused primarily on its proposed therapeutic products, which are
in an early stage of development. In preclinical studies the Company's
pretargeting technology has shown promise for the treatment of cancer tumors in
animals. Results obtained in preclinical studies are not necessarily indicative
of results that will be obtained in human clinical trials.
The Company will require collaborative partners to assist in developing its
potential products, and there can be no assurance that the Company will be able
to negotiate acceptable collaborative arrangements in the future. In addition,
the Company's potential products will require significant additional research
and development and extensive clinical testing prior to commercial use.
There can be no assurance that these potential products will be successfully
developed into drugs that can be administered to humans or that any such drugs
or related therapies will prove to be safe and effective in clinical trials or
cost-effective to manufacture. Further, these potential products may prove to
have undesirable and unintended side effects that may prevent or limit their
commercial use.
History of Losses; Need for Additional Funds. The Company has been
unprofitable since inception and expects to incur additional operating losses
over the next several years. These operating losses may fluctuate from period to
9
period. The Company's existing capital resources and interest income thereon are
currently expected to be sufficient to fund the Company's operations through the
second quarter of 1998. The Company's actual expenditures will depend on
numerous factors, including results of research and development activities,
clinical trials, the levels of resources that the Company devotes to
establishing and expanding marketing and manufacturing capabilities, competitive
and technological developments and the timing and cost of relationships with
parties to collaborative agreements. The Company will require substantial
additional funds to complete the development of its therapeutic products.
Adequate funds for these purposes, whether through additional financings,
collaborative arrangements with corporate sponsors or other sources, may not be
available when needed or on terms favorable to the Company.
Dependence on Suppliers. The Company depends on the timely delivery from
suppliers of certain materials and services. In connection with its research,
preclinical studies and clinical trials, the Company has periodically
experienced interruption in the supply of monoclonal antibodies, including the
1990 loss of its former sole supplier of the antibody used in its cancer imaging
products. Interruptions in these and other supplies could occur in the future.
The Company will need to develop sources for commercial quantities of
yttrium-90, the radionuclide used in its proposed cancer therapeutic products,
and for the antibody, streptavidin and clearing agent used in the AVICIDIN
agent. The catheter used to deliver the Company's proposed anti-restenosis
products has not yet been approved for sale by the FDA; commercial use of such
catheter depends on receiving such approval. In addition, the Company depends on
a supply of the catheter from its manufacturer, and there can be no assurance
that the manufacturer will provide a timely and adequate supply of catheters to
the Company. Any failure by the manufacturer to timely and adequately supply
catheters would have a material adverse effect on the Company's ability to
commercialize these products. Also, the drug used in the atherosclerosis
clinical trial to raise activated TGF(beta) levels is dependent on a third party
both for supply and for agreement to continue testing and commercialization
after Phase I.
Dependence on Others for Commercial Manufacturing and Marketing. The
Company has no manufacturing facilities for commercial production of its
products under development. The Company also has no experience in sales,
marketing or distribution. The Company's strategy for commercialization of its
products requires entering into various arrangements with corporate
collaborators, licensors, licensees and others to manufacture, distribute and
market its products. The Company will depend on the success of these outside
parties in performing their responsibilities. Although the Company believes that
parties to its existing and any future arrangements will have an economic
motivation to successfully perform their contractual responsibilities, the
amount and timing of resources to be devoted to these activities are not within
the Company's control. There can be no assurance that such parties will perform
their obligations as expected, that the Company will derive any revenues from
such arrangements or that the Company's reliance on others for manufacturing
products will not result in unforeseen problems with product supply. The Company
entered into agreements with Boehringer Ingelheim and DuPont Merck under which
Boehringer Ingelheim has worldwide manufacturing rights and non-North American
marketing rights and DuPont Merck has exclusive North American marketing rights
to the Company's VERLUMA lung cancer imaging product. The Company intends to
seek collaborative partners to assist in developing, manufacturing and marketing
its therapeutic products under development. There can be no assurance that the
Company will be able to negotiate acceptable collaborative arrangements in the
future or that its current or future collaborative arrangements will be
successful.
Competition. Cancer imaging and therapy, and cardiovascular disease product
development is highly competitive. There are numerous competitors developing
products to detect, stage or treat each of the diseases for which the Company is
seeking to develop products. Some competitors have adopted product development
strategies similar to the Company's approach of targeting cancer cells by
linking radionuclides to monoclonal antibodies. Many emerging companies have
corporate partnership arrangements with large, established companies to support
research, development and commercialization efforts of products that may be
competitive with those being developed by the Company. In addition, a number of
10
established pharmaceutical and chemical companies are developing proprietary
technologies or have enhanced their capabilities by entering into arrangements
with, or acquiring, companies with proprietary monoclonal antibody-based
technology or other technologies applicable to the imaging or treatment of
cancer and restenosis. Many major pharmaceutical companies, either alone or
through collaboration with smaller companies, have active programs in
anti-restenosis therapy. Moreover, metal stents are now being used to hold open
the arteries after angioplasty by mechanical means. Several major pharmaceutical
companies market a drug from the class of HMG CoA-reductase inhibitors that have
been shown to reduce risk of heart attack. Many of the Company's existing or
potential competitors have or have access to substantially greater financial,
research and development, marketing and production resources than those of the
Company and may be better equipped than NeoRx to develop, manufacture and market
competing products. The Company's competitors already have, or may develop and
introduce products that are more effective than those of the Company or that
would render the Company's technology and products under development less
competitive, uneconomical or obsolete.
Technological Uncertainties Regarding Human Immune Response to Foreign
Proteins. The Company's AVICIDIN cancer therapy product, which is in Phase I/II
clinical testing, currently uses a monoclonal antibody of murine (mouse) origin
coupled to streptavidin, a protein of bacterial origin. These molecules appear
as foreign proteins to the human immune system, which develops its own antibody
in response. The HAMA response, or the "human anti-streptavidin antibody"
("HASA") response, may limit the number of doses that may be safely or
effectively administered to a patient, thereby limiting a product's efficacy.
The Company believes that humanized antibodies may reduce HAMA and that
modification of streptavidin may reduce HASA. Gene cloning technology permits
splicing of human and murine antibody portions together, thereby yielding
humanized molecules. Although the Company has produced a humanized version of
the murine antibody used in AVICIDIN agent and has initiated a collaboration to
modify streptavidin, there can be no assurance that either would reduce the
extent to which HAMA or HASA may limit the effectiveness of the Company's cancer
therapy products or that the Company will successfully commercialize products
incorporating the humanized antibody.
Uncertainty Regarding Patents and Proprietary Rights. The patent position
of biotechnology firms generally is highly uncertain and involves complex legal
and factual questions, and currently no consistent policy has emerged regarding
the breadth of claims allowed in biotechnology patents. Products and processes
important to NeoRx are subject to this uncertainty. Accordingly, there can be no
assurance that the Company's patent applications will result in additional
patents being issued or that, if issued, patents will afford protection against
competitors with similar technology, nor can there be any assurance that any
patents issued to the Company will not be infringed by or designed around by
others or that others will not obtain patents that the Company would need to
license or design around. Moreover, the technology applicable to the Company's
products is developing rapidly. Research institutes, universities and
biotechnology companies, including the Company's competitors, have filed
applications for, or have been issued, numerous patents and may obtain
additional patents and proprietary rights relating to products or processes
competitive with or relating to those of the Company. The scope and validity of
such patents, the extent to which the Company may be required to obtain licenses
thereunder or under other proprietary rights and the cost and availability of
licenses are unknown. To the extent licenses are required, there can be no
assurance that they will be available on commercially reasonable terms, if at
all. The Company also relies on unpatented proprietary technology. There can be
no assurance that others will not independently develop substantially equivalent
proprietary information and techniques, that others will not otherwise gain
access to the Company's proprietary technology, or disclose such technology, or
that the Company can meaningfully protect its rights in such unpatented
proprietary technology.
Delays and Costs Resulting From Government Regulation. The manufacture and
marketing of the Company's proposed products and its research and development
activities are subject to regulation for safety, efficacy and quality by
numerous government authorities in the United States and other countries.
11
Clinical trials, manufacturing and marketing of products are subject to the
rigorous testing and approval processes of the FDA and equivalent foreign
regulatory authorities. Clinical trials and regulatory approval can take a
number of years to accomplish and require the expenditure of substantial
resources. There can be no assurance that clinical trials will be started or
completed successfully within any specified time period. Delays in approval can
occur for a number of reasons, including the Company's failure to obtain
necessary supplies of monoclonal antibodies or other materials or to obtain a
sufficient number of available patients to support the claims necessary for
regulatory approval. There can be no assurance that requisite FDA approvals will
be obtained on a timely basis, if at all, or that any approvals granted will
cover all the clinical indications for which the Company may seek approval.
Delays or failure to obtain regulatory approval would adversely affect or
prevent the marketing of other products developed by the Company and its ability
to receive royalty or other product revenues. The manufacture and marketing of
drugs are subject to continuing the FDA review and later discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions, including withdrawal of the product from the market. Marketing the
Company's products abroad will require similar regulatory approvals and is
subject to similar risks. In addition, the Company is unable to predict the
extent of adverse governmental regulation that might arise from future U.S. or
foreign government action.
Risk of Product Liability. The testing, manufacturing, marketing and sale of
human healthcare products under development by the Company entail an inherent
risk that product liability claims will be asserted against the Company.
Although the Company is insured against such risks up to a $10 million annual
aggregate limit in connection with human clinical trials and commercial sales of
its products under development, there can be no assurance that the Company's
present product liability insurance is adequate. A product liability claim in
excess of the Company's insurance coverage could have a material adverse effect
on the Company and may prevent the Company from obtaining adequate product
liability insurance in the future on affordable terms. In addition, there can be
no assurance that product liability coverage will continue to be available in
sufficient amounts or at an acceptable cost.
Uncertainty of Pharmaceutical Pricing, Healthcare Reform and Reimbursement.
The levels of revenues and profitability of pharmaceutical companies may be
affected by the continuing efforts of government and third-party payors to
contain or reduce the costs of healthcare through various means. For example, in
certain foreign markets pricing or profitability of prescription pharmaceuticals
is subject to governmental control. In the United States, there have been, and
the Company expects that there will continue to be, a number of federal and
state proposals to implement similar governmental control. It is uncertain what
legislative proposals will be adopted or what actions federal, state or private
payors for healthcare goods and services may take in response to any healthcare
reform proposals or legislation. Even in the absence of statutory change, market
forces are changing the healthcare sector. The Company cannot predict the effect
healthcare reforms may have on its business, and there can be no assurance that
any such reforms will not have a material adverse effect on the Company.
Further, to the extent that such proposals or reforms have a material adverse
effect on the business, financial condition and profitability of other
pharmaceutical companies that are prospective collaborators for certain of the
Company's potential products, the Company's ability to commercialize its
products under development may be adversely affected. In addition, both in the
United States and elsewhere, sales of prescription pharmaceuticals depend in
part on the availability of reimbursement to the consumer from third-party
payors, such as governmental and private insurance plans. Third-party payors are
increasingly challenging the prices charged for medical products and services.
If the Company succeeds in bringing one or more products to market, there can be
no assurance that these products will be considered cost-effective and that
reimbursement to the consumer will be available or will be sufficient to allow
the Company to sell its products on a competitive basis.
Reliance on Key Personnel. The Company's success will depend in part on the
efforts of certain key scientists and management personnel. Because of the
specialized nature of the Company's business, the Company's ability to maintain
its competitive position will depend in part on its ability to attract and
12
retain qualified personnel. Competition for such personnel is intense. There can
be no assurance that the Company will be able to hire sufficient qualified
personnel on a timely basis or retain such personnel. The loss of key management
or scientific personnel could have an adverse effect on the Company's business.
The Company does not maintain key person insurance on any of its scientists or
management personnel.
Compliance With Environmental Regulations; Hazardous Materials. The Company
is subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials and wastes in connection
with its research and development activities and its manufacturing of clinical
trial materials. Although the Company believes that it has complied with these
laws and regulations in all material respects, there can be no assurance that it
will not be required to incur significant costs to comply with environmental and
health and safety regulations in the future. The Company's research and
development and clinical manufacturing processes involve the controlled use of
small amounts of hazardous and radioactive materials. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any resulting damages, and any such liability could exceed the Company's
resources.
Employees
As of March 7, 1997, the Company had 70 full-time employees and 9 part-time
employees, 20 of whom hold Ph.D. degrees and two of whom hold M.D. degrees.
Sixty-one employees were engaged in research, development and manufacturing
activities and 18 were employed in finance and administration.
The Company considers its relations with its employees to be excellent. None
of the Company's employees are covered by a collective bargaining agreement.
Item 2. Properties
The Company occupies approximately 36,000 square feet of office, laboratory
and manufacturing space at 410 West Harrison Street, Seattle, Washington, under
a lease that expires May 31, 2001. The lease is renewable through May 31, 2006.
NeoRx believes its facilities are in good condition and are adequate for all
present uses. A portion of its facilities is used for pilot manufacturing to
produce certain of its products under development. The Company believes that the
production capacity of its pilot facility is adequate to satisfy the Company's
Phase I clinical trial requirements, and it passed an FDA inspection for these
purposes in 1993 and a Washington State Board of Pharmacy inspection in 1996.
The Company's strategy is to license manufacturing rights for its products, but
it may decide to produce certain components of its therapy products. Such
production would require a further investment in facilities and equipment, the
cost of which cannot be currently estimated.
Item 3. Legal Proceedings
On June 6, 1996, the United States District Court for the Southern District
of New York dismissed all claims against the Company in a purported class action
suit against David Blech, D. Blech & Co. and a number of other defendants,
including 11 publicly traded biotechnology companies, of which one was NeoRx,
that had been named in an amended complaint on March 27, 1995. The plaintiffs
have not appealed the order. On July 26,1996, the plaintiffs filed a second
amended pleading that did not include any claims against the Company. NeoRx is
not a defendant in the subject suit.
13
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Company
Information with respect to the Company's executive officers is set forth
below.
Name Age Position with the Company
- ---------------------------------------- -------- ---------------------------------------------
Paul G. Abrams, M.D., J.D. 49 President, Chief Executive Officer and
Director
Richard L. Anderson. 57 Senior Vice President, Chief Financial
Officer, Secretary and Treasurer
John M. Reno, Ph.D. 50 Vice President, Research and Development
Robert W. Schroff, Ph.D., M.B.A. 42 Vice President and General Manager,
Cardiovascular Products
Bruce H. Walters 53 Vice President, Human Resources
Business Experience
Dr. Paul G. Abrams is a co-founder of the Company, has been a Director
since January 1985 and has been President and Chief Executive Officer since May
1990. He was the Company's Vice President, Medical Affairs from January 1985
through April 1990. From 1981 to 1984, Dr. Abrams held the position of Expert in
the Biological Response Modifiers Program of the National Cancer Institute. Dr.
Abrams holds J.D., M.D. and B.A. (summa cum laude with exceptional distinction)
degrees from Yale University. He is a board-certified internist and medical
oncologist and is an Affiliate Associate Professor in the Department of
Radiology at the University of Washington.
Richard L. Anderson became Senior Vice President, Chief Financial Officer,
Secretary and Treasurer when hired in January 1997. Mr. Anderson was Vice
President and Controller at Mosaix Inc. (formally called Digital Systems
International), a provider of computer telephony integration products and
services, from November 1994 to January 1997. From September 1993 to October
1994, Mr. Anderson was Vice President of Finance, Chief Financial Officer and
Secretary of Merix Corporation (formally a division of Tektronix Corporation), a
manufacturer of printed circuit boards. From April 1982 to August 1993, he was
with Tektronix Corporation, a manufacturer of test and measurement instruments,
serving in a variety of positions including Director of Corporate Development
and Group Controller. Mr. Anderson holds an M.S. degree in Management from Johns
Hopkins University, an M.S. degree in Solid State Physics from the University of
Maryland, a B.S. in Physics from Bucknell University and is a Certified Public
Accountant.
Dr. John M. Reno has been Vice President, Research and Development since
January 1993. He was the Company's Director, Research and Development from May
1991 until December 1992 and Director, Product Development and Manufacturing
from November 1986 to April 1989. Dr. Reno joined NeoRx in 1984 as a Senior
Scientist. Prior to that time, he held positions as Group Leader with Seragen
Inc., and Project Leader with Dow Chemical Company. He holds a Ph.D. degree in
Biochemistry from Michigan State University.
Dr. Robert W. Schroff has been Vice President and General Manager,
Cardiovascular Products since January 1993. He was the Company's Director,
Business Development and Analytical Labs from November 1991 to December 1992;
Director, Project Management from September 1990 to October 1991; Director,
Clinical Research from July 1986 to August 1990; and Senior Scientist,
Immunological Assessment from January 1985 to July 1986. From 1982 to 1984, Dr.
Schroff was a Senior Staff Fellow of the National Cancer Institute. Dr. Schroff
14
holds a Ph.D. degree in Immunology from the Bowman Gray School of Medicine of
Wake Forest University. He performed postdoctoral studies at the University of
California at Los Angeles. Dr. Schroff also holds an M.B.A. degree from the
University of Washington.
Bruce H. Walters has been Vice President, Human Resources since May 1989.
From April 1987 to April 1989, he was the Company's Director, Human Resources.
From 1985 to 1987, he was Manager, Human Resources for Aviall Inc., a provider
of aircraft repair and overhaul services, and from 1984 to 1985, Manager,
Management Services of American Hospital Supply Corporation. Mr. Walters holds a
B.A. degree in Bacteriology from the University of California at Los Angeles.
15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Stock Trading and Price Range of Common Stock
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol NERX. The following table sets forth for the periods indicated the high
and low sales prices for NeoRx Common Stock as reported by Nasdaq.
SALES PRICE
---------------------
HIGH LOW
-------- -------
1996:
First Quarter...................... $9 13/16 $6 3/16
Second Quarter..................... 8 1/4 4 5/8
Third Quarter...................... 6 3/8 4 3/8
Fourth Quarter..................... 6 13/16 4
1995:
First Quarter...................... $7 1/8 $4 11/16
Second Quarter..................... 7 5/16 4 15/16
Third Quarter...................... 7 7/8 4 13/16
Fourth Quarter..................... 7 3/8 4 7/8
There were approximately 1,005 shareholders of record at December 31, 1996.
The Company has not paid cash dividends on its Common Stock and does not intend
to pay cash dividends on its Common Stock in the foreseeable future.
Item 6. Selected Financial Data (In thousands, except per share data)
Years Ended
----------------------------------------------------------- Three Months Ended
December 31, December 31,
------------------------------------------ September 30, -------------------
1996 1995 1994 1993 1992 1992 1991
------ ------ ------ ------ ------ ------ -----------
(unaudited)
Statement of Operations Data:
Contract revenues and fees.... $ 4,784 $ 307 $ 1,568 $ 3,676 $ 9,180 $ 277 $ 119
Operating expenses............ 14,763 13,343 12,605 12,334 11,094 2,825 2,665
Loss from operations.......... (9,979) (13,036) (11,037) (8,658) (1,914) (2,548) (2,546)
Net loss...................... (9,001) (12,271) (11,144) (8,536) (2,763) (2,425) (3,688)
Net loss per common share..... $ (0.68) $ (0.98) $ (1.02) $ (1.10) $ (0.60) $ (0.36) $ (0.78)
Weighted average common shares
outstanding................. 15,604 13,142 11,616 8,449 6,530 7,303 5,169
Balance Sheet Data:
Cash and cash equivalents..... $ 2,945 $ 7,182 $ 2,428 $14,347 $12,359 $10,520 $11,094
Short-term investments........ 15,322 8,937 14,723 13,421 4,000 2,500 4,168
Working capital............... 17,523 15,245 15,992 26,934 14,463 11,720 14,096
Total assets.................. 20,510 18,518 20,035 29,848 18,511 14,943 17,355
Long-term debt................ 1,242 1,283 1,212 1,222 1,239 1,236 1,293
Shareholders' equity.......... $17,079 $14,892 $15,841 $26,776 $14,531 $11,740 $13,146
- ----------
<FN>
Note: In February 1993, the Company changed its fiscal year-end from September 30 to December 31.
</FN>
16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The NeoRx Corporation ("NeoRx" or the "Company") develops biopharmaceutical
products for the detection and treatment of human diseases. The Company is no
longer considered a company in the development stage as the Company's first
product, VERLUMA(TM) Small Cell Lung Cancer Imaging Kit, received marketing
approval by the Food and Drug Administration (the "FDA") in August 1996. Sales
began in February 1997, from which NeoRx will receive royalties. To date, the
Company's revenues have consisted principally of license fees from Boehringer
Ingelheim International GmbH ("Boehringer Ingelheim"), payments from The DuPont
Merck Pharmaceutical Company ("DuPont Merck"), Sterling Winthrop Inc. and from
federal government research contracts. The Company plans to enter into
additional collaborative agreements with corporate partners, but does not
currently have firm commitments for any such agreements. Expenses incurred have
been primarily for research and development activities and administration.
Successful future operations depend upon the Company's ability to develop,
obtain regulatory approval for and commercialize its products. The Company will
require a substantial amount of additional funds to complete the development of
most of its products and to fund additional operating losses which the Company
expects to incur during the next several years.
Years Ended December 31, 1996, 1995 and 1994
The Company's revenues in 1996, 1995 and 1994 were $4.8 million, $.3 million
and $1.6 million, respectively, and consisted of license fees and payments
received under its collaborative and license agreements. Revenues in 1996 and
1994 consisted primarily of license fees of $4.5 million and $1.4 million,
respectively, from DuPont Merck for exclusive North American rights to market
NeoRx's VERLUMA lung cancer imaging products. As part of the agreement, DuPont
Merck also purchased 269,000 shares of Common Stock in October 1994.
The Company's total operating expenses were $14.8 million, $13.3 million and
$12.6 million in 1996, 1995 and 1994, respectively. Of these amounts, research
and development expenditures were $9.8 million, $8.7 million and $7.5 million in
1996, 1995 and 1994, respectively. Research and development expenses increased
12% in 1996 and 16% in 1995. The increase in research and development expenses
in 1996 and 1995 was primarily due to activities relating to antibody
humanization, increased clinical trial activities and a one-time license fee
payment in 1995. Approximately 100% of the Company's research and development
expenses in 1996 and 1995 were attributable to the Company's self-funded
research programs, and approximately 98% were self-funded in 1994. General and
administrative expenses were $5.0 million, $4.6 million and $5.1 million in
1996, 1995 and 1994, respectively. General and administrative expenses increased
8% in 1996 and decreased 9% in 1995. The increase in general and administrative
expenses in 1996 was principally due to patent filing costs and other legal
expenses associated with collaborative agreements. The decrease in general and
administration expenses in 1995 resulted primarily from reduced legal fees and
costs associated with the Company's patent enforcement suit against and
counterclaim by Immunomedics, Inc. which was settled in 1994.
Investment and interest income was $1.1 million, $1.0 million and $.9 million
in 1996, 1995 and 1994, respectively. The increase in 1996 and 1995 was
primarily due to higher average cash balances resulting from sales of Common and
Preferred Stock. Interest expense was $.1 million in 1996, 1995 and 1994.
17
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued)
Liquidity and Capital Resources
The Company's operations have been financed primarily by funds raised through
the issuance of equity securities and amounts received under manufacturing and
marketing licenses. Sales of the Company's Common and Preferred Stock raised an
aggregate of $21.2 million and cash fees received from license agreements
totaled $5.9 million during the past three years.
The Company has invested $.7 million in equipment, furniture and leasehold
improvements over the past three years, primarily to support its research and
manufacturing activities. As of December 31, 1996, the Company was committed to
spending approximately $2.2 million pursuant to operating and capital lease
obligations.
The Company has no material commitments for capital expenditures. The
Company's strategy is to form corporate alliances with pharmaceutical companies
to provide for the manufacture of its products under development, thereby
avoiding the need to make significant investments in production capacity.
During 1996, total cash, cash equivalents and short-term investments
increased $2.1 million and improved the Company's current ratio to 9.0 from 7.5.
The increases were primarily due to the receipt of a $4.5 million license fee
payment and stock sales.
In January 1996, the Company issued 370,000 shares of Common Stock and 47,000
shares of Series 2 Convertible Preferred Stock in private transactions and
received net proceeds of $6.6 million. In October 1995, the Company registered
650,000 shares of Common Stock to be sold from time to time. During 1996, the
Company issued 464,000 shares and received net proceeds of $3.8 million, and
during 1995, the Company issued 186,000 shares and received net proceeds of $1.2
million. Also during 1995, the NeoRx received net proceeds of $8.3 million from
the sale of 1.4 million units consisting of Common Stock and three-year
warrants. In October 1994, the Company received $2.0 million from DuPont Merck,
for which DuPont Merck received VERLUMA marketing rights in North America and
269,000 shares of NeoRx Common Stock.
The Company's cash investment policy is to earn a market rate of interest on
its marketable securities while assuming minimal risk of principal. The
investment portfolio must meet the following objectives: preservation of
principal, fulfillment of liquidity needs, reasonable yield and avoidance of
inappropriate concentrations. All investments must carry an investment grade
rating and no single non-Federal government issue may represent more than 10% of
portfolio assets.
The Company expects that its capital resources and interest income will be
sufficient to finance its currently anticipated working capital and capital
requirements through the second quarter of 1998. The Company's working capital
and capital requirements will depend upon numerous factors, including results of
research and development activities, clinical trials, the levels of resources
that the Company devotes to establishing and expanding marketing and
manufacturing capabilities, competitive and technological developments and the
timing and cost of relationships with parties to collaborative agreements. The
Company will need to raise substantial additional funds to conduct research and
development activities, preclinical studies and clinical trials necessary to
bring its products to market, and to establish marketing and limited
manufacturing capabilities. The Company intends to seek additional funding
through public or private equity financings, arrangements with corporate
collaborators or other sources. Adequate funds may not be available when needed
or on terms acceptable to the Company.
18
Item 8. Financial Statements and Supplementary Data
Page
Numbers
-------
Report of Independent Public Accountants..................................... 20
Balance Sheets - December 31, 1996 and 1995.................................. 21
Statements of Operations - For the Years Ended December 31, 1996, 1995 22
and 1994.....................................................................
Statements of Cash Flows - For the Years Ended December 31, 1996, 1995 23
and 1994.....................................................................
Statements of Shareholders' Equity - For the Years Ended December 31, 24
1996, 1995 and 1994..........................................................
Notes to Financial Statements................................................ 25
All financial schedules are omitted since the required information is
applicable or has been presented in the financial statements and the notes
thereto.
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of NeoRx Corporation:
We have audited the accompanying balance sheets of NeoRx Corporation, a
Washington corporation, as of December 31, 1996 and 1995, and the related
statements of operations, cash flows and shareholders' equity for each of the
years ended December 31, 1996, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NeoRx Corporation as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the years ended December 31, 1996, 1995 and 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Seattle, Washington
February 25, 1997
20
NEORX CORPORATION
BALANCE SHEETS
(In thousands, except share data)
DECEMBER 31,
----------------------
1996 1995
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 2,945 $ 7,182
Short-term investments ...................................................... 15,322 8,937
Inventories ................................................................. 600 538
Prepaids and other .......................................................... 845 931
--------- ---------
Total current assets ......................................... 19,712 17,588
--------- ---------
Facilities and equipment, at cost:
Equipment and furniture ..................................................... 3,744 3,498
Leasehold improvements ...................................................... 3,237 3,233
--------- ---------
6,981 6,731
Less: accumulated depreciation and amortization ............................ (6,295) (5,914)
--------- ---------
Facilities and equipment, net .......................................... 686 817
--------- ---------
Other assets ................................................................ 112 113
--------- ---------
$ 20,510 $ 18,518
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 1,235 $ 1,511
Accrued liabilities ......................................................... 910 531
Deferred revenue ............................................................ -- 250
Current portion of capital leases ........................................... 44 51
--------- ---------
Total current liabilities .................................... 2,189 2,343
--------- ---------
Non-current liabilities:
Convertible subordinated debentures, 9 3/4% ................................. 1,195 1,195
Capital leases, less current portion ........................................ 47 88
--------- ---------
Total non-current liabilities ................................ 1,242 1,283
--------- ---------
Commitments and contingencies
Shareholders' equity:
Series preferred stock, $.02 par value, 3,000,000 shares authorized:
Convertible exchangeable preferred stock, Series 1,
208,000 shares issued and outstanding, and
Convertible preferred stock, Series 2,
7,000 and -0- shares issued and outstanding, respectively .... 4 4
Common stock, $.02 par value, 60,000,000 shares authorized,
16,451,000 and 14,359,000 shares issued and outstanding, respectively .. 329 287
Additional paid-in capital .................................................. 140,789 128,098
Deferred compensation ....................................................... -- (139)
Accumulated deficit ......................................................... (124,043) (113,358)
--------- ---------
Total shareholders' equity ................................... 17,079 14,892
--------- ---------
$ 20,510 $ 18,518
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
21
NEORX CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Revenues:
Contract revenues and fees .................................................. $ 4,784 $ 307 $ 1,568
-------- -------- --------
Operating expenses:
Research and development .................................................... 9,758 8,690 7,464
General and administrative .................................................. 5,005 4,653 5,141
-------- -------- --------
Total operating expenses .......................................... 14,763 13,343 12,605
-------- -------- --------
Loss from operations ........................................................ (9,979) (13,036) (11,037)
Other income (expense):
Investment and interest income, net ...................................... 1,120 1,002 908
Interest expense ......................................................... (142) (140) (127)
Litigation expense, net .................................................. -- (97) (888)
======== ======== ========
Net loss .................................................................... $ (9,001) $(12,271) $(11,144)
======== ======== ========
Preferred stock dividends ................................................... (1,684) (597) (725)
-------- -------- --------
Net loss applicable to common shares ........................................ $(10,685) $(12,868) $(11,869)
======== ======== ========
Net loss per common share.................................................... $ (.68) $ (.98) $ (1.02)
======== ======== ========
Weighted average common shares outstanding ................................. 15,604 13,142 11,616
======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
22
NEORX CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Cash flows from operating activities:
Net loss .................................................................. $ (9,001) $(12,271) $(11,144)
-------- -------- --------
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization ....................................... 381 402 290
(Increase) decrease in inventories .................................. (62) (145) 108
(Increase) decrease in prepaids and other assets .................... 119 699 (922)
Increase in accounts payable and accrued
liabilities ....................................................... 432 844 1,120
Increase (decrease) in deferred revenue ............................. (250) -- 48
Compensation expense on stock awards
and options ....................................................... 167 184 204
Common stock for consulting services ................................ 290 239 --
-------- -------- --------
Total adjustments ............................................... 1,077 2,223 848
-------- -------- --------
Net cash used in operating activities ..................................... (7,924) (10,048) (10,296)
-------- -------- --------
Cash flows from investing activities:
Proceeds from (purchases of) short-term
investments, net ..................................................... (6,385) 5,786 (1,302)
Facilities and equipment purchases ........................................ (250) (129) (280)
-------- -------- --------
Net cash provided by (used in) investing activities ....................... (6,635) 5,657 (1,582)
Cash flows from financing activities:
Proceeds from sale of common stock and warrants ........................... 5,767 9,215 635
Proceeds from sale of preferred stock ..................................... 4,418 -- --
Repayments of capital lease obligations ................................... (48) (35) (44)
Proceeds from stock options exercised ..................................... 693 423 95
Preferred stock dividends ................................................. (508) (458) (727)
-------- -------- --------
Net cash provided by (used in) financing activities ....................... 10,322 9,145 (41)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents ............................................................... (4,237) 4,754 (11,919)
Cash and cash equivalents:
Beginning of period ....................................................... 7,182 2,428 14,347
-------- -------- --------
End of period ............................................................. $ 2,945 $ 7,182 $ 2,428
======== ======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
23
NEORX CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share data)
Additional Total
Number Par Number Par Paid-In Deferred Accumulated Shareholders'
of Shares Value of Shares Value Capital Compensation Deficit Equity
--------- ----- --------- ----- ---------- ------------ ------------ -------------
Balance, December 31, 1993 ......... 298 $ 6 11,543 $231 $ 114,779 $(325) $ (87,915) $ 26,776
Sale of common stock ($2.36 per
share) ............................. -- -- 269 5 630 -- -- 635
Exercise of stock options
($1.50-$2.94 per share) ............ -- -- 35 1 94 -- -- 95
Issuance of restricted common
stock to employees ($6.00-$6.38
per share) ......................... -- -- 18 -- 111 -- -- 111
Amortization of deferred
compensation ....................... -- -- -- -- -- 93 -- 93
Preferred stock dividends ($2.44
per share) ......................... -- -- -- -- -- -- (725) (725)
Net loss ........................... -- -- -- -- -- -- (11,144) (11,144)
---- ---- ------- ---- --------- ----- --------- ---------
Balance, December 31, 1994 ......... 298 6 11,865 237 115,614 (232) (99,784) 15,841
Sale of common stock and
warrants ........................... -- -- 1,700 34 9,181 -- -- 9,215
Exercise of stock options
($1.50-$3.75 per share) ............ -- -- 219 4 419 -- -- 423
Issuance of common stock in
payment of expenses
($5.71-$6.25 per share) ............ -- -- 321 6 1,932 -- -- 1,938
Exchange of preferred stock for
common stock ....................... (90) (2) 225 5 703 -- (706) --
Issuance of compensatory stock
options ($5.13 per share) .......... -- -- -- -- 91 -- -- 91
Amortization of deferred
compensation ....................... -- -- -- -- -- 93 -- 93
Preferred stock dividends ($2.44
per share) ......................... -- -- 29 1 158 -- (597) (438)
Net loss ........................... -- -- -- -- -- -- (12,271) (12,271)
---- ---- ------- ---- --------- ----- --------- ---------
Balance, December 31, 1995 ......... 208 4 14,359 287 128,098 (139) (113,358) 14,892
Sale of common stock ($6.00-$9.42
per share) ......................... -- -- 803 16 5,751 -- -- 5,767
Sale of preferred stock ($100.00 per
share) ............................. 47 1 -- -- 4,417 -- -- 4,418
Exercise of stock options
($1.50-$6.38 per share) ............ -- -- 281 6 719 -- -- 725
Issuance of common stock in payment
of expenses ($5.50-$7.87) per share -- -- 116 2 691 -- -- 693
Exchange of preferred stock for
common stock ....................... (40) (1) 860 17 (16) -- -- --
Amortization of deferred
compensation ....................... -- -- -- -- -- 139 -- 139
Preferred stock dividends .......... -- -- 32 1 1,129 -- (1,684) (554)
Net loss ........................... -- -- -- -- -- -- (9,001) (9,001)
---- ---- ------- ---- --------- ----- --------- ---------
Balance, December 31, 1996 ......... 215 $ 4 16,451 $329 $ 140,789 $ -- $(124,043) $ 17,079
==== ==== ======= ==== ========= ===== ========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
24
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. The Company
NeoRx Corporation ("NeoRx" or the "Company"), incorporated in the state of
Washington, develops biopharmaceutical products for the detection and treatment
of human diseases. The Company is no longer considered a company in the
development stage and will therefore no longer present results of operations and
cash flows for the period from inception. The Company's first product,
VERLUMA(TM) Small Cell Lung Cancer Imaging Kit, received marketing approval by
the Food and Drug Administration (the "FDA") in August 1996. Sales began in
February 1997, from which NeoRx will receive royalties. The Company's revenues
have consisted principally of license fees from Boehringer Ingelheim
International GmbH ("Boehringer Ingelheim"), payments from The DuPont Merck
Pharmaceutical Company ("DuPont Merck"), Sterling Winthrop Inc. and from federal
government research contracts. The Company's development activities involve
inherent risks. These risks include, among others, dependence on key personnel,
availability of raw materials, determination of the patentability of the
Company's products and processes and approval by the FDA before the Company's
products may be sold domestically. Expenses incurred have been primarily for
research and development activities and administration. Successful future
operations depend upon the Company's ability to develop, obtain regulatory
approval for and commercialize its products. The Company will require a
substantial amount of additional funds to complete the development of most of
its products and to fund additional operating losses which the Company expects
to incur during the next several years.
NOTE 2. Summary of Significant Accounting Policies
Cash Flows. For the purpose of the accompanying Statements of Cash Flows,
the Company considers all highly liquid investments with a remaining maturity of
three months or less when purchased to be cash equivalents.
No capital lease obligations were incurred during the years ended December
31, 1996 and 1994. Capital lease obligations incurred to acquire equipment were
$143,000 in 1995.
Interest paid by the Company was $143,000, $141,000 and $127,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
In January 1996, the Company sold approximately 47,000 shares Series 2
Convertible Preferred Stock, $.02 par value per share ("Series 2 Preferred
Stock") at a stated value of $100 per share that may be converted into Common
Stock valued at $120.50. A non-cash dividend charge of $956,000 was recognized
by the Company in 1996 for the amount of the excess of the conversion value over
the stated value.
During the year 1996, the Company exchanged 40,000 shares of Series 2
Preferred Stock and paid accrued dividends by issuing 892,000 shares of Common
Stock. In June 1995, the Company exchanged 90,000 shares of Convertible
Exchangeable Preferred Stock, Series 1, $.02 par value per share ("Series 1
Preferred Stock") and paid accrued dividends by issuing 254,000 shares of Common
Stock.
Estimates and Uncertainties. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
25
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
Research and Development Revenues and Expenses. Revenues from collaborative
agreements are recognized as earned as the Company performs research activities
under the terms of each agreement. Billings in excess of amounts earned are
classified as deferred revenue. License fees earned are recognized as revenue
unless subject to a contingency, which results in a deferral of revenue until
the contingency is satisfied. Research and development costs are expensed as
incurred.
Inventories. Inventories consist primarily of raw materials priced at the
lower of cost (first-in, first-out) or market.
Facilities and Equipment. Facilities and equipment, including equipment
under capital leases, are stated at cost. Depreciation is provided using the
straight-line method over an estimated useful life of five years for equipment
and furniture. Leasehold improvements and equipment under capital leases are
amortized using the straight-line method over the shorter of the assets'
estimated useful lives or the terms of the leases.
Net Loss Per Common Share. Net loss per common share is computed after
deduction of preferred stock dividends and is based upon the weighted average
number of shares of Common Stock outstanding during each period. Common Stock
equivalents include shares issuable upon the exercise of outstanding warrants or
stock options, but are not included in the computation of net loss per share
because the effect of including such shares would be antidilutive.
NOTE 3. Short-Term Investments
Short-term investments consisted of the following (in thousands):
DECEMBER 31,
------------------------
1996 1995
------- -------
Federal government and agency securities .... $9,485 $6,988
Corporate debt securities ................... 5,837 1,949
------- ------
$15,322 $8,937
======= ======
As of December 31, 1996, the Company considers that all short-term
investments as held-to-maturity securities and amortized cost approximates fair
value. All securities mature within one year.
NOTE 4. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
DECEMBER 31,
----------------------
1996 1995
----- -----
Compensation ................................ $781 $450
Preferred stock dividends ................... 88 42
Interest .................................... 9 9
Other ....................................... 32 30
---- ----
$910 $531
==== ====
26
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5. Leases
The Company leases certain equipment under capital leases which expire on
various dates through 1999. The total amount of equipment under capital leases
included in facilities and equipment on the accompanying balance sheets was
$294,000 at December 31, 1996 and 1995, and accumulated amortization applicable
to such leases was $184,000 and $122,000 at December 31, 1996 and 1995,
respectively.
The lease for the Company's principal location expires in 2001 and contains
one five-year renewal option. Total rent payments under operating leases were
$515,000, $450,000 and $418,000 for the years ended December 31, 1996, 1995 and
1994, respectively.
Minimum lease payments and the present value of capital lease obligations
as of December 31, 1996, were as follows (in thousands):
Operating Capital
YEAR Leases Leases
- ---- --------- -------
1997 ................................................ $ 501 $48
1998 ................................................ 501 44
1999 ................................................ 501 5
2000 ................................................ 476 -
2001 ................................................ 167 -
Thereafter .......................................... - -
------ ----
Total minimum lease payments ................... $2,146 97
======
Less: amount representing interest
(5% - 12% annual interest rates) ................... (6)
----
Present value of capital lease obligations .... 91
Less: current portion of capital leases ............. (44)
---
Obligations under capital leases, non-current.. $47
===
NOTE 6. Revenues
In 1996, the Company recorded as revenue a $4,500,000 milestone payment
from DuPont Merck upon FDA approval to market VERLUMA in the United States. In
October 1994, the Company entered into a marketing agreement with DuPont Merck,
under which DuPont Merck received exclusive North American rights to market
NeoRx's VERLUMA lung cancer imaging product that incorporates the NR-LU-10
antibody, and 269,000 shares of Common Stock. In exchange, NeoRx received
$2,000,000, of which the excess of the fair value of the shares of Common Stock
issued was recorded as revenue. The Company will receive royalties on sales of
the product.
NOTE 7. Convertible Subordinated Debentures
The Company has outstanding $1,195,000 principal amount of Convertible
Subordinated Debentures, 9 3/4% (the "Debentures"), that will be retired June 1,
2000. The Debentures are convertible at the option of the holder into the
Company's Common Stock at a conversion price of $25.73 per share, subject to
adjustment under certain conditions. Interest is payable semi-annually on June 1
and December 1. The Debentures are redeemable, in whole or in part, at any time,
at the option of the Company at 102.9% of par,
27
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
reducing to par by 1999, together with accrued interest. The Debentures are
subordinated in right of payment to any outstanding senior indebtedness of the
Company, as defined in the indenture.
NOTE 8. Contingencies
Litigation. On June 6, 1996, the United States District Court for the
Southern District of New York dismissed claims against NeoRx in a purported
class action suit against David Blech, D. Blech & Co. and a number of other
defendants, including 11 publicly traded biotechnology companies, of which one
was NeoRx, that had been named in an amended complaint on March 27, 1995. The
plaintiffs have not appealed the order. On July 26, 1996, the plaintiffs filed a
second amended pleading which did not include any claims against the Company.
NeoRx is not a defendant in the subject suit.
Product Liability. The testing, manufacturing, marketing and sale of human
healthcare products by the Company entail an inherent risk that product
liability claims will be asserted against the Company. The Company has product
liability insurance coverage of $10,000,000 for aggregate claims that may arise
from the use of its products.
NOTE 9. Shareholders' Equity
Common Stock Transactions. During 1996, the Company issued 919,000 shares
of Common Stock and received net proceeds and services valued at $6,460,000.
During 1995, the Company issued 186,000 shares and received net proceeds of
$1,155,000. In April and September 1995, the Company sold 1,557,000 shares of
Common Stock and 1,635,000 three-year warrants to purchase 409,000 shares of
Common Stock, exercisable at a price of $5.31 per share. Net proceeds amounted
to $8,309,000. In October 1994, the Company issued to DuPont Merck 269,000
shares of Common Stock in connection with the VERLUMA marketing license
agreement.
During 1996, the Company exchanged 40,000 shares of Series 2 Preferred
Stock for 860,000 shares of Common Stock and paid accrued dividends on the
shares valued at $174,000 by issuing 32,000 shares of Common Stock. In June
1995, the Company exchanged 90,000 shares of Series 1 Preferred Stock for
225,000 shares of Common Stock and paid accrued dividends on those shares valued
at $159,000 by issuing 29,000 shares of Common Stock.
Preferred Stock Transactions. Holders of Series 1 Preferred Stock are
entitled to receive an annual cash dividend of $2.4375 per share if declared by
the Board of Directors (the "Board"), payable semi-annually on June 1 and
December 1. Dividends are cumulative. Each share of Series 1 Preferred Stock is
convertible into approximately 1.14 shares of Common Stock, subject to
adjustment in certain events. The Series 1 Preferred Stock is redeemable at the
option of the Company at $25.73 per share, decreasing to $25.00 per share by
1999. Holders of Series 1 Preferred Stock have no voting rights, except in
limited circumstances.
In June 1995, the Company exchanged 90,000 shares of Series 1 Preferred
Stock for 225,000 shares of Common Stock. (See "Common Stock Transactions"
above.)
Holders of Series 2 Preferred Stock are entitled to receive cumulative
dividends at the rate of 8% per annum compounded quarterly on the $100 per share
stated value of the Series 2 Preferred Stock. The dividend is payable, in cash
or Common Stock at the Company's option, at the time the Series 2 Preferred
Stock is redeemed or converted into Common Stock. The Series 2 Preferred Stock
is redeemable at the
28
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
option of the Company at $120.50 per share. Each share of the Series 2 Preferred
Stock is convertible at the option of the holder into the number of shares of
Common Stock determined by dividing $120.50 by the average stock market closing
bid price of the Common Stock for the five trading days prior to the day of
conversion, but not less than $4.41 nor more than $8.36 per share. The discount
to be realized by the difference between the conversion value and the stated
value of the Series 2 Preferred Stock issued was recognized by the Company as a
non-cash dividend charge of $956,000. The holders of the Series 2 Preferred
Stock have no voting rights, except in limited circumstances. The Series 2
Preferred Stock ranks junior to the Company's Series 1 Preferred Stock, as to
dividends, distributions and payments in liquidation.
In January 1996, the Company issued 47,000 shares of Series 2 Preferred
Stock and received net proceeds of $4,418,000. During 1996, 40,000 shares of
Series 2 Preferred Stock were converted to 860,000 shares of Common Stock. (See
"Common Stock Transactions" above.)
Shareholders' Rights Plan. On April 10, 1996, the Board adopted a
Shareholders' Rights Plan intended to protect the rights of shareholders by
deterring coercive or unfair takeover tactics. The Board declared a dividend to
holders of the Company's Common Stock, payable on April 19, 1996, to
shareholders of record on that date, of one preferred share purchase right (the
"Right") for each outstanding share of the Common Stock. The Right is
exercisable 10 days following the offer to purchase or acquisition of beneficial
ownership of 20% of the outstanding Common Stock by a person or group of
affiliated persons. Each Right entitles the registered holder, other than the
acquiring person or group, to purchase from the Company one-hundredth of one
share of Series A Junior Participating Preferred Stock ("Series A Preferred
Stock") at a price of $40, subject to adjustment. The Rights expire April 10,
2006. The Series A Preferred Stock will be entitled to a minimum preferential
quarterly dividend $1 per share and has liquidation provisions. Each share of
Series A Preferred Stock has 100 votes, and will vote with the Common Stock.
Prior to the acquisition by a person or group of 20% of the outstanding Common
Stock, the Board may redeem each Right at a price of $.001.
In lieu of exercising the Right by purchasing one one-hundredth of one share
of Series A Preferred Stock, the holder of the Right, other than the acquiring
person or group, may purchase for $40, that number of the Company's Common Stock
having a market value of twice that price.
The Board may, without further action by the shareholders of the Company,
issue preferred stock in one or more series and fix the rights and preferences
thereof, including dividend rights, dividend rates, conversion rates, voting
rights, terms of redemption, redemption price or prices, liquidation preferences
and the number of shares constituting any series or the designations of such
series.
Stock Options. The Company has two stock option plans, the 1994 Stock Option
Plan (the "1994 Plan") and the 1991 Stock Option Plan for Non-Employee Directors
(the "Directors Plan"). The Company accounts for its stock option plans under
the guidelines of Accounting Principles Board Opinion No. 25 ("APB 25"), under
which no compensation cost has been recognized. In 1996, the Company adopted
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," effective for years beginning after December 15,
1995. The Company has continued to measure compensation cost for employee stock
compensation plans under the guidelines of APB 25, as allowed by SFAS 123.
29
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
Had compensation cost for these stock option plans been determined in
accordance with SFAS 123, the Company's "Net loss" and "Net loss per common
share" would have increased to the following pro forma amounts for the years
ended December 31, 1996 and 1995 (in thousands, except per share data):
1996 1995
------- --------
Net loss................... As reported ....... $(9,001) $(12,271)
Pro forma ........... (9,503) (12,364)
Net loss per common share.. As reported ......... $(.68) $(.98)
Pro forma ........... (.72) (.99)
Because the SFAS 123 method of accounting has not been applied to stock
options granted before January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The 1994 Plan authorizes the Board or an Option Committee appointed by the
Board to grant options to purchase a maximum of 2,500,000 shares of Common
Stock. The 1994 Plan replaced the 1984 Stock Option Plan that expired November
1, 1994. The 1994 Plan allows for the issuance of incentive stock options and
nonqualified stock options to employees, officers, Directors, agents,
consultants, advisors and independent contractors of the Company, subject to
certain restrictions. All option grants expire ten years from the date of grant.
In general, two-thirds of the option grants become exercisable in increments at
a rate of 25% per year over a four-year period from the grant date, and the
remaining one-third becomes exercisable over a period of one to nine years from
the grant date unless accelerated by the Option Committee. The exercise price of
options granted under the 1994 Plan is equal to the fair market value of the
Common Stock at the date of grant. As of December 31, 1996, there were 424,000
shares of Common Stock available for issuance under the 1994 Plan.
In October 1996, the Company canceled and reissued at an exercise price
range of $5.13 - $5.25 per share, the fair market value of the Common Stock on
the date of cancellation, all options held by non-executive employees with
exercise prices greater than the price range of $5.13 - $5.25 per share.
The Directors Plan, as amended at its 1994 Annual Meeting of Shareholders,
authorizes the grant of stock options to non-employee Directors to purchase a
maximum of 250,000 shares of Common Stock. Under the terms of the amended plan,
each eligible Director receives annually, concurrent with the annual election of
Directors, an option to purchase 5,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
The options become exercisable in two equal annual installments beginning with
the first annual meeting of shareholders after the date of grant. In addition,
each newly appointed non-employee Director receives a one-time initial option to
purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. Options expire on the
earlier of ten years from the date of grant or five years after the Director's
termination of service as a Director. As of December 31, 1996, there were
134,000 shares of Common Stock available for issuance under the Directors Plan.
30
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
Information relating to activity under the Company's stock option plans is
as follows (in thousands, except per share data):
1996 1995 1994
----------------------- ---------------------- ------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Shares Share Price of Shares Share Price of Shares Share Price
--------- ----------- --------- ----------- --------- ------------
Outstanding at beginning of year ..... 2,911 $4.85 2,985 $4.61 1,003 $9.20
Granted .............................. 994 6.19 174 5.35 2,657 3.92
Exercised ............................ (281) 2.62 (219) 1.93 (35) 2.67
Canceled ............................. (815) 6.35 (29) 4.98 (640) 13.61
----- ----- ----- ------ ----- -----
Outstanding at end of year ........... 2,809 $5.11 2,911 $4.85 2,985 $4.61
===== ===== ===== ===== ===== =====
Exercisable at end of year ........... 1,267 $6.03 1,104 $6.86 769 $6.75
===== ===== ===== ===== ===== =====
Information relating to stock options outstanding and stock options
exercisable at December 31, 1996 is as follows (in thousands, except per share
data):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
RANGE OF EXERCISE PRICES of Shares Life in Years Share Price of Shares Share Price
- ------------------------ ---------- ------------- ----------- --------- -----------
$1.50 - $3.75 ........................ 1,506 7.4 $2.92 703 $2.85
$4.75 - $6.38 ........................ 689 8.7 5.34 211 5.75
$7.00 - $21.75 ....................... 614 7.0 10.25 353 12.54
----- --- ----- ----- -----
2,809 7.6 $5.11 1,267 $6.03
===== === ===== ===== =====
The fair value of each stock option granted is valued on the date of grant
using the Black-Scholes option pricing model. The weighted average grant-date
fair value of stock options granted during 1996 was $3.66 per share using the
assumptions of expected volatility of 70%, expected option lives of five to ten
years and risk-free rates of interest of 6.5 - 6.7%. During 1995, the weighted
average grant-date fair value of stock options granted was $3.74 per share using
the assumptions of expected volatility of 70%, expected option lives of five to
ten years and risk-free rates of interest of 6.0 - 6.2%.
Warrants. In connection with financing transactions in April and September
1995, the Company issued 1,635,000 three-year warrants to purchase 409,000
shares of Common Stock, exercisable at a price of $5.31 per share. The warrants
expire in April 1998.
In September 1992, the Company issued Common Stock purchase warrants to
Boehringer Ingelheim to acquire 250,000 shares of Common Stock at a per share
exercise price of $15.84 and to acquire 375,000 shares of Common Stock at a per
share exercise price of $21.12. The warrants expire in September 1997.
31
NEORX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 10. Federal Income Taxes
Federal income taxes are determined using an asset and liability approach.
The components of the deferred tax asset were as follows (in thousands):
DECEMBER 31,
----------------------
1996 1995
------- -------
Net operating loss carryforwards ................ $18,900 $16,700
Research and development credits ................ 900 600
Amortization and depreciation .................... 600 600
Other ........................................... 500 600
------- -------
Deferred tax asset ......................... 20,900 18,500
Deferred tax asset valuation allowance .......... (20,900) (18,500)
------- -------
Net deferred taxes ......................... $ -- $ --
======= =======
The Company has established a valuation allowance equal to the amount of
the deferred tax asset because the Company has not had taxable income since its
inception and significant uncertainty exists regarding the ultimate realization
of the deferred tax asset. Accordingly, no tax benefits have been recorded in
the accompanying Statements of Operations.
The Company's net operating loss carryforwards expire during the period
from 1999 to 2011. During 1994, the Company experienced sufficient changes in
ownership such that the amount of net operating loss carryforwards and research
and development carryforwards available to be used in any given year will be
limited under Sections 382 and 383 of the Internal Revenue Code of 1986, as
amended. This limitation will result in the expiration of approximately
$43,000,000 of the Company's net operating loss carryforwards and $2,400,000 of
the research and development credit carryforwards. Accordingly, the deferred tax
asset and related valuation allowance related to these carryforwards were
reduced in 1994 by approximately $17,000,000.
NOTE 11. Subsequent Events
In February 1997, the Company's marketing partner, DuPont Merck, began
sales of VERLUMA Small Cell Lung Cancer Imaging Kit, the Company's first
product, from which NeoRx will receive royalties.
32
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors. The information required by this item is incorporated herein
by reference to the section captioned "Election of Directors" in the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on May 13,
1997, filed with the Securities and Exchange Commission (the "Commission")
pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(b) Executive Officers. The information with respect to executive officers
required by this item is incorporated herein by reference to pages 14 and 15 of
this Form 10-K.
(C) Compliance With Section 16(a) of the Exchange Act. The information
required by this item is incorporated herein by reference to the section
captioned "Compliance With Section 16(a) of the Securities Exchange Act of 1934"
in the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 13, 1997, filed with the Commission pursuant to Section 14(a) of the
Exchange Act.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to
the sections captioned "Executive Compensation," "Stock Options," "Option
Exercises in 1996 and Year-End Value Table," "Report of the Compensation
Committee on Executive Compensation," "Stock Price Performance Graph,"
"Compensation of Directors" and "Employment Agreements, Termination of
Employment and Change of Control Agreements" in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on May 13, 1997, filed with
the Commission pursuant to Section 14(a) of the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to
the section captioned "Security Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 13, 1997, filed with the Commission pursuant to
Section 14(a) of the Exchange Act.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference to
the section captioned "Certain Relationships and Related Transactions" in the
Company's Proxy Statement for the Annual Meeting of Shareholders to be held May
13, 1997, filed with the Commission pursuant to Section 14(a) of the Exchange
Act.
33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements - See Index to Financial Statements.
(a) (2) Financial Statement Schedules - Not applicable.
(a) (3) Exhibits - See Exhibit Index filed herewith.
(b) Reports on Form 8-K - Not applicable.
(C) Exhibits - See Exhibit Index filed herewith.
34
EXHIBIT INDEX
Page Number
or Incorporation
EXHIBIT Description By Referecnce To
------- ---------------------------------- ------------------
3.1(a) Restated Articles of Incorporation *
3.1(b) Amendment to Restated Articles of Incorporation filed with the
Washington Secretary of State on March 15, 1990 ***
3.1(c) Articles of Amendment, dated November 6, 1991, to Articles of
Incorporation ****
3.1(d) Articles of Amendment of NeoRx Corporation dated January 25, 1996 +++++
3.1(e) Restated Articles of Incorporation, dated April 29, 1996 39
3.2 Bylaws, as amended, of the registrant ***
4.1 Form of Indenture, dated as of June 1, 1989, between NeoRx
Corporation and First Interstate Bank of Washington, N.A., as
trustee **
4.2 Statement of Rights and Preferences relating to Convertible
Exchangeable Preferred Stock Series 1, par value $0.02 per share ***
4.3 Specimen Warrant Certificate +++
4.4 Form of Purchase Agreements dated as of April 18, 1995 between NeoRx
Corporation and the Purchasers +++
4.5 Form of Purchase Agreements dated as of January 30, 1996 between
NeoRx Corporation and the Purchasers ++++
4.6 Rights Agreement, dated April 10, 1996, between NeoRx Corporation
and First Interstate Bank of Washington, N.A. ++++++
10.1 1994 Stock Option Plan ++
10.2 Option and Development Agreement, dated September 5, 1985, between
NeoRx Corporation and Merck Frosst Canada, Inc *
10.3 Amendment, dated May 4, 1989, to Option and Development Agreement
between NeoRx Corporation and Merck Frosst Canada, Inc **
10.4 Lease Agreement for 410 West Harrison facility, dated February 15,
1996, between NeoRx Corporation and Diamond Parking, Inc +++++
10.5 1991 Stock Option Plan for Non-Employee Directors, as amended ++
10.6 1991 Restricted Stock Option Plan *****
10.7 Stock and Warrant Purchase Agreement, dated as of September 11,
1992, between NeoRx Corporation and Boehringer Ingelheim
International GmbH *****
10.8 Amendment to Stock and Warrant Purchase Agreement, dated as of
September 17, 1992, between NeoRx Corporation and Boehringer
Ingelheim International GmbH +
10.9 Second Amendment to Stock and Warrant Purchase Agreement, dated as of
September 29, 1993, between NeoRx Corporation and Boehringer
Ingelheim International GmbH +
10.10 Development and License Agreement, dated as of September 11, 1992,
between NeoRx Corporation and Boehringer Ingelheim International
GmbH *****
10.11 First Amendment to Development and License Agreement, dated September
22, 1994, between NeoRx Corporation and Boehringer Ingelheim
International GmbH ++
10.12 Second Amendment to Development and License Agreement, dated October
31, 1994, between NeoRx Corporation and Boehringer Ingelheim
International GmbH ++
10.13 Technology License Agreement, dated as of September 11, 1992, between
NeoRx Corporation and Boehringer Ingelheim International GmbH *****
10.14 License Agreement, dated as of September 18, 1992, between NeoRx
Corporation and Sterling Winthrop Inc *****
10.15 Collaboration and License Option Agreement, dated August 10, 1992,
between NeoRx Corporation and Organon International B.V. *****
10.16 Contract for Support of Research Project, effective as of July 1,
1992, between NeoRx Corporation and the Curators of the University of
Missouri *****
35
Page Number
or Incorporation
EXHIBIT Description By Reference To
------- -------------------------------- ------------------
10.17 Amendment No. 1 to Contract for Support of Research Project,
effective as of July 1, 1993, between NeoRx Corporation and the
Curators of the University of Missouri +
10.18 Agreement, dated as of December 15, 1995 ++
10.19 License Option Agreement, dated June 1, 1991, between NeoRx
Corporation and the UAB Research Foundation +
10.20 Research Agreement (With Option to License), dated February 8, 1993,
between NeoRx Corporation and Southern Research Institute +
10.21 Consulting Agreement, effective March 15, 1993, between NeoRx
Corporation and Oxford Molecular Inc +
10.22 Agreement, dated as of August 1, 1993, between NeoRx Corporation and
Avalon Medical Partners +
10.23 Registration Rights Agreement, dated September 1993, between NeoRx
Corporation and Avalon Medical Partners +
10.24 Consulting Agreement, dated as of July 7, 1993, between NeoRx
Corporation and Dr. Fred Craves +
10.25 Amendment to consulting agreement, dated May 9,1995 between NeoRx
Corporation and Dr. Fred Craves +++++
10.26 Engagement letter, dated as of June 22, 1993, between NeoRx
Corporation and the Placement Agents ******
10.27 Purchase Agreements, dated May 19, 1993, between NeoRx Corporation
and the Purchasers or representatives thereof ******
10.28 Stock Purchase Agreement, dated as of October 5, 1994, between NeoRx
Corporation and The DuPont Merck Pharmaceutical Company ++
10.29 License Agreement, dated as of October 5, 1994, between NeoRx
Corporation and The DuPont Merck Pharmaceutical Company ++
10.30 Supply Agreement, dated November 10, 1994, between Cordis Corporation
and NeoRx Corporation ++
10.31 License Agreement, effective as of October 12, 1994, between Indiana
University Foundation and NeoRx Corporation, as amended ++
10.32 Agreement, dated as of June 1, 1987, between NeoRx Corporation and
the Board of Trustees of the Leland Stanford Junior University, as
amended ++
10.32(a) Amendment No. 3, dated November 15, 1995, to Contract between NeoRx
Corporation and the Board of Trustees of the Leland Stanford Junior
University ++
10.33 Research Collaboration Agreement, dated September 1, 1995, between
NeoRx Corporation and biosys, Inc ++
10.34 Form of Registration Rights Agreement, dated January 30, 1996, by and
among NeoRx Corporation and Grace Brothers, Ltd., Genesee Fund, Ltd.
and SBSF Biotechnology Partners ++++
10.35 Indemnification Agreement #
10.36 Change of Control Agreement ##
10.37 Form of Key Executive Severance Agreement ##
23.1 Consent of Arthur Andersen LLP 82
- -------- ----------
* Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration
No. 33-20694) effective August 11, 1988 and incorporated herein by reference.
** Filed as an exhibit to the Company's Registration Statement on Form S-1 (Registration
No. 33-28545) effective May 31, 1989 and incorporated herein by reference.
*** Filed as an exhibit to the Company's Registration Statement on Form S-4 (Registration
No. 33-33153) effective March 27, 1990 and incorporated herein by reference.
**** Filed as an exhibit to the Company's Form 10-K for the fiscal year
ended September 30, 1990 and incorporated herein by reference.
***** Filed as an exhibit to the Company's Form 10-K for the fiscal year
ended September 30, 1991 and incorporated herein by reference.
36
****** Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration
No. 33-64992) effective August 25, 1993 and incorporated herein by reference.
+ Filed as an exhibit to the Company's Registration Statement on Form S-2 (Registration
No. 33-71164) effective December 13, 1993 and incorporated herein by reference.
++ Filed as an exhibit to the Company's Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by reference.
+++ Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration
No. 33-60029) effective August 8, 1994 and incorporated herein by reference.
++++ Filed as an exhibit to the Company's Registration Statement on Form S-3 (Registration
No. 333-00785) effective February 7, 1996 and incorporated herein by reference.
+++++ Filed as an exhibit to the Company's Form 10-K for the Year Ended
December 31, 1995 and incorporated herein by reference.
++++++ Filed as an exhibit to the Company's Registration Statement on Form
8-A, dated April 15, 1996 and incorporated herein by reference.
# Filed as an exhibit to the Company's Form 10-Q for the Quarterly Period Ended March 31, 1996
and incorporated herein by reference.
## Filed as an exhibit to the Company's Form 10-Q for the Quarterly
Period Ended June 30, 1996 and incorporated herein by reference.
++ Confidential treatment requested
37
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.
NEORX CORPORATION
(Registrant)
By/s/ RICHARD L. ANDERSON
-------------------------------------------
Richard L. Anderson
Senior Vice President, Chief
Financial Officer, Secretary and Treasurer
Date: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ PAUL G. ABRAMS
- -----------------------------------------
Paul G. Abrams President, Chief Executive March 25, 1997
Officer and Director
(Principal Executive Officer)
/s/ RICHARD L. ANDERSON
- -----------------------------------------
Richard L. Anderson Senior Vice President, Chief March 25, 1997
Financial Officer, Secretary
and Treasurer (Principal
Financial and Accounting
Officer)
/s/ FRED B. CRAVES
- -----------------------------------------
Fred B. Craves Chairman of the Board of March 25, 1997
Directors
/s/ JAMES G. ANDRESS
- -----------------------------------------
James G. Andress Director March 25, 1997
/s/ JACK L. BOWMAN
- -----------------------------------------
Jack L. Bowman Director March 25, 1997
/s/ LAWRENCE H.N. KINET
- -----------------------------------------
Lawrence H.N. Kinet Director March 25, 1997
/s/ CARL-HEINZ POMMER
- -----------------------------------------
Carl-Heinz Pommer Director March 25, 1997
38