SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1997.
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____________ to
____________.
Commission File Number: 0-19041
AMERICAN BIOGENETIC SCIENCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-2655906
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1375 Akron Street, Copiague, New York 11726
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 789-2600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.001 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of the close of business on March 13, 1998, there were outstanding 19,616,869
shares of the registrant's Class A Common Stock and 1,725,500 shares of its
Class B Common Stock. The approximate aggregate market value (based upon the
closing price on The Nasdaq Stock Market's National Market) of shares held by
non-affiliates of the registrant as of March 13, 1998 was $32,809,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
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MATTERS
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The Company's Class A Common Stock ("Common Stock") is traded on the
Nasdaq National Market tier of The Nasdaq Stock Market under the trading symbol
MABXA. The following table sets forth the high and low closing bid prices for
the Company's Common Stock for the periods indicated, as reported by Nasdaq,
without retail mark-us, mark-downs or commissions.
Fiscal Years High Low
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1997
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First Quarter $6 $3 3/8
Second Quarter 3 15/16 2 1/8
Third Quarter 3 15/16 2 15/16
Fourth Quarter 3 3/4 1 1/2
1996
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First Quarter 6 7/8 2 7/16
Second Quarter 8 1/8 5
Third Quarter 6 1/8 4 3/16
Fourth Quarter 6 1/16 4
There were approximately 679 holders of record of Common Stock as of
March 13, 1998 (exclusive of stockholders whose shares are held in street name
by brokers, depositories and other institutional firms).
The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying dividends for the foreseeable
future.
During the quarter ended December 31, 1997, a holder of $150,000 of
the Company's 7% Convertible Debentures converted such debentures into 50,805
shares of the Company's Class A Common Stock. The Company believes that the
exemption from registration afforded by Section 3(a)(9) of the Securities Act of
1933, as amended (the "Act"), is applicable to the issuance of such shares as
such issuance involved a security exchanged by the Company with existing
securityholders exclusively where no commission or other remuneration was paid
or given directly or indirectly for soliciting such exchange.
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On November 26, 1997, December 15, 1997 and December 30, 1997, Mr.
Alfred J. Roach, Chairman of the Board of Directors and a director, purchased
50,000, 100,000 and 100,000 shares, respectively, of the Company's Class B
Common Stock for $109,375, or $2.1875 per share; $168,800, or $1.688 per share;
and $156,250, or $1.5625 per share, respectively, the closing bid prices of the
Company's Class A Common Stock (into which the Company's Class B Common Stock is
convertible on a share-for-share basis) on the Nasdaq Stock Market's National
Market on the respective dates. Mr. Roach agreed to acquire the shares for
investment and not with a view to the distribution thereof. The Company believes
that the exemption from registration afforded by Section 4(2) of the Act is
applicable to the issuance of such shares.
In connection with a lease agreement for certain facilities, the
Company may, at its option, pay a portion of the annual lease obligation with
shares of Class A Common Stock (the "Issued Shares") plus a warrant (the
"Warrant") to purchase an identical number of shares of Class A Common Stock
(the "Warrant Shares"). The number of Issued Shares are computed by dividing the
lease obligation to be paid with shares by the average market price of the
Company's Class A Common Stock during the ten days prior to issuance. The
Warrant Shares are to be exercisable for a period of four years from the date of
issuance at a price equal to the closing price of the underlying Class A Common
Stock on the date the Warrant is issued. Pursuant to the lease agreement, on
November 28, 1997, the Company approved the issuance of 15,543 shares of Class A
Common Stock and a Warrant to purchase 15,543 shares of Class A Common Stock at
an exercise price of $2.13 per share. In connection with such acquisition, the
purchaser agreed to acquire the Issued Shares, the Warrant and the Warrant
Shares for investment and not with a view to the distribution of such
securities. In connection therewith, the Company has granted the purchaser
certain rights to cause the Warrant Shares to be registered under the Act at the
Company's expense. The Company believes that the exemption from registration
afforded by Section 4(2) of the Act is applicable to the issuance of such
securities.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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The directors and executive officers of the Company are as follows:
Name Position
Alfred J. Roach Chairman of the Board, Chief Executive Officer
and Director
Stephen H. Ip, Ph.D. President, Chief Operating Officer and Director
Ellena M. Byrne Executive Vice President and Director
Timothy J. Roach Treasurer, Secretary and Director
Emer Leahy, Ph.D. Senior Vice President-Business Development
James M. McLinden, Ph.D. Vice President-Molecular Biology
Josef C. Schoell Vice President-Finance and Chief Financial
Officer
Gustav Victor Rudolf Born, M.D. Director
Joseph C. Hogan, Ph.D. Director
William G. Sharwell Director
ALFRED J. ROACH, 82, has been Chairman of the Board of Directors of
the Company since its organization in September 1983 and, from September 1983
until October 1988, also served as President of the Company. Mr. Roach has
served as Chairman of the Board and/or President of TII Industries, Inc.
("TII"), a corporation engaged in manufacturing and marketing telecommunications
products, and its predecessor since its founding in 1964. Mr. Roach devotes a
majority of his time to the business of the Company.
STEPHEN H. IP, Ph.D., 51, joined the Company in January 1997 as
Executive Vice President and Chief Operating Officer and was elected President
and a director, in addition to continuing as Chief Operating Officer, in
January, 1998. Prior to joining the Company, Dr. Ip served as Vice President,
Corporate and Business Development at Paracelsian, Inc., a publicly-held company
engaged in clinical and pre-clinical development of drugs and supplements for
the treatment of AIDS and cancer, from February,1996. From 1990 through
December, 1995, Dr. Ip served as President, Chief Operating Officer and director
of CytoMed, Inc., a biopharmaceutical company engaged in the research and
development of synthetic chemical drugs and recombinant proteins for the
treatment of acute and chronic diseases. From 1984 through 1989, he was Vice
President and a scientific co-founder of T Cell Sciences, Inc., a biotechnology
company.
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ELLENA M. BYRNE, 47, has been Executive Vice President and a director
of the Company since March 1995. From January 1986 until December 1991, Ms.
Byrne served as Vice President-Administration of the Company and, from December
1991 until March 1995, Ms. Byrne served in various capacities with the Company,
including Director of Operations for Europe and Asia.
TIMOTHY J. ROACH, 51, has been Treasurer, Secretary and a director of
the Company since September 1983. He has also been affiliated with TII since
1974, serving as its President since July 1980, Chief Operating Officer since
May 1987, Vice Chairman of the Board since October 1993, Chief Executive Officer
since January 1995 and a director since January 1978. Mr. Roach devotes such
time as is necessary to the business of the Company to discharge his duties as
Treasurer, Secretary and a director. Timothy J. Roach is the son of Alfred J.
Roach.
EMER LEAHY, Ph.D., 32, rejoined the Company in December 1997, serving
as Senior Vice President-Business Development. From April 1995 to December 1997,
Dr. Leahy was employed by AMBI, Inc., a biotechnology and nutraceutical company,
as Vice President-Product Development, and Director-Business Development, where
she coordinated licensing technologies and products as well as participating in
corporate acquisitions. From April 1994 to April 1995, Dr. Leahy was Vice
President-Neuroscience and, from August 1993 to April 1994, was Vice
President-Regulatory Affairs of the Company. From February 1992 until August
1993, Dr. Leahy was employed by Boehringer Ingelheim, GmbH, a multinational
pharmaceutical company, where she coordinated clinical trials in Ireland. In
addition, from October 1991 to August 1993, Dr. Leahy was lecturer in
Pharmacology at the Royal College of Surgeons of Ireland.
JAMES H. MCLINDEN, Ph.D., 47, has been Vice President - Molecular
Biology of the Company since November 1991. Prior thereto (and since joining the
Company in January 1987), Dr. McLinden served as Director of Molecular Biology
of the Company.
JOSEF C. SCHOELL, 48, joined the Company in July 1992 as its
Controller and was elected Vice President-Finance and Chief Financial Officer in
July 1995. Mr. Schoell is a Certified Public Accountant in the State of New
York.
GUSTAV VICTOR RUDOLF BORN, M.D., D.Phil., F.R.S., 76, has been a
director of the Company since January 1997. Since 1988, Dr. Born has been
Research Director of The William Harvey Research Institute at St. Bartholomew's
Hospital Medical College, London, England and Emeritus Professor of Pharmacology
in the University of London. Among Dr. Born's distinctions, appointments and
activities are: Fellowship and Royal Medal of the Royal Society; and Foundation
President of the British Society for Thrombosis and Haemostasis.
JOSEPH C. HOGAN, Ph.D., 75, has been a director of the Company since
December 1983. Dr. Hogan served as Dean of the College of Engineering of the
University of Notre Dame from 1967 to 1981, following which he performed various
services for the University of Notre Dame until 1985, where he remains Dean
Emeritus. From 1985 until his retirement in 1987, Dr. Hogan was Director of
Engineering Research and Resource Development at Georgia Institute of Technology
("Georgia Tech"). Dr. Hogan is a director of TII.
WILLIAM G. SHARWELL, D.C.S., 77, has been a director of the Company
since October 1986. Dr. Sharwell was President of Pace University in New York
from 1984 until his retirement in
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1990. He was Senior Vice President of American Telephone & Telegraph Company
between 1976 and 1984, and previously served as Executive Vice President of
Operations of New York Telephone Company. Dr. Sharwell serves on the Board of
Directors of TII and as an independent general partner of Equitable Capital
Partners, L.P. and Equitable Capital Partners (Retirement Fund), L.P.,
registered investment companies under the Investment Company Act of 1940.
Directors serve until the next Annual Meeting of the Shareholders of
the Company following their election and until their respective successors are
elected and qualified.
Each executive officer is scheduled to hold office until the Annual
Meeting of Directors which is scheduled to be held after each Annual Meeting of
Shareholders. Any executive officer may be removed by the Board of Directors
either with or without cause.
There are no understandings between any director or executive officer
and any other person pursuant to which any director or executive officer was
elected as such. Ms. Byrne and Drs. Ip and Leahy are parties to employment
agreements with the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Company's Common Stock, to file initial reports of ownership, and reports
of changes of ownership, of the Company's equity securities with the Securities
and Exchange Commission and furnish copies of those reports to the Company.
Based solely on a review of copies of the reports furnished to the Company, or
written representation that no reports were required, the Company believes that
all reports required to be filed by such persons with respect to the Company's
year ended December 31, 1997 were timely filed.
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ITEM 11. EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company during
1995, 1996 and 1997 of the Company's chief executive officer and each executive
officer of the Company whose annual cash compensation for 1997 exceeded
$100,000:
ANNUAL LONG-TERM
NAME AND COMPENSATION COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
Alfred J. Roach, Chairman 1997 $250,000 -- --
of the Board and Chief 1996 $250,000 -- --
Executive Officer 1995 $250,000 -- 135,000
Stephen H. Ip, Executive Vice 1997 $146,000 $ 25,000 200,000
President and Chief Operating
Officer
Josef C. Schoell, Vice President- 1997 $103,000 -- 25,000
Finance 1996 $ 95,000 -- 10,000
1995 $ 76,000 -- 60,000
Paul E. Gargan, Former President 1997 $137,000 -- --
1996 $162,000 -- --
1995 $150,000 -- 31,500
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(1) Dr. Ip joined the Company in January 1997.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options to
purchase shares of the Company's capital stock granted by the Company during the
year ended December 31, 1997 to the executive officers named in the Summary
Compensation Table. No stock appreciation rights have been granted by the
Company.
INDIVIDUAL OPTIONS POTENTIAL
------------------------------------------------------ REALIZABLE VALUE
PERCENT AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE(1) DATE 5% 10%
---- ---------- ----------- ------------ ---------- --- ---
Stephen H. Ip 200,000 21.8% $3.66 1/02/2007 $460,351 $1,166,619
Josef C. Schoell 25,000 2.7% $3.47 1/20/2007 $ 54,557 $ 138,257
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(1) Exercisable as to 25% of the number of shares of Class A Common Stock
subject to the option commencing six months after the date of grant, on a
cumulative basis. The exercise price of each of the options granted to
Messrs. Ip and Schoell is the market value of the Class A Common Stock on
the date of grant.
(2) These are hypothetical values using assumed compound growth rates
prescribed by the Securities and Exchange Commission and are not intended
to forecast possible future appreciation, if any, in the market price of
the Company's Class A Common Stock.
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OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
No options to purchase shares of the Company's capital stock were
exercised during 1997 by the executive officers named in the Summary
Compensation Table. The following table contains information concerning the
number of shares of Class A Common Stock underlying unexercised options held at
December 31, 1997 by the executive officers named in the Summary Compensation
Table.
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
(EXERCISABLE/ (EXERCISABLE/
NAME UNEXERCISABLE) UNEXERCISABLE(1)
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Alfred J. Roach 1,160,000/ 0 $ 0 /$ 0
Stephen H. Ip 0 /200,000 $ 0 /$ 0
Josef C. Schoell 95,000/130,000 $ 9,375/$ 0
Paul E. Gargan (2) 164,000/ 0 $ 4,922/$ 0
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(1) The closing price of the Company's Class A Common Stock The Nasdaq Stock
Market's National Market on December 31, 1997 less the exercise price of
each option.
(2) Excludes options held by Dr. Gargan's wife.
EMPLOYMENT AGREEMENTs
The Company is a party to an employment agreement with Dr. Stephen H.
Ip, dated December 16, 1996, under which Dr. Ip is serving as President of the
Company. The agreement provides for a term expiring December 31, 1999, with the
Company and Dr. Ip having the right to terminate the agreement without cause on
thirty and sixty days' notice, respectively. In the event of termination of the
agreement by the Company without cause, Dr. Ip is to remain as a consultant to
the Company at his then existing compensation for a period of one year, provided
that the consulting and compensation arrangement is to terminate if Dr. Ip
enters into full-time employment with a third party. Under the agreement, Dr.
Ip's current annual salary is $175,000 per annum. Dr. Ip recieved a one-time
$25,000 bonus in connection with his entering into the agreement and is entitled
to an annual bonus of up to 20% of his annual salary based on goals mutually
agreed upon between the Company and Dr. Ip.
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The Company is also a party to an employment agreement with Dr. Emer
Leahy, dated November 12, 1997, under which Dr. Leahy is serving as Senior Vice
President-Business Development of the Company. The agreement provides for a term
expiring November 30, 2001. Under the agreement, Dr. Leahy's current annual
salary is $150,000 per annum. Dr. Leahy is entitled to annual bonuses and salary
increases based upon performance, as well as reimbursement for tuition fees for
an Executive MBA program.
As part of their respective employment agreements, Drs. Ip and Leahy
have agreed not to disclose confidential information about the Company during or
after employment and agreed not to compete with the Company during their term of
employment and, in certain instances, following employment.
REMUNERATION OF DIRECTORS
Directors receive no compensation for service on the Board. Each
director serving on the Audit Committee receives a fee of $600 for each meeting
of the committee attended by that director in person and not telephonically. All
directors are reimbursed for travel expenses incurred in attending Board and
committee meetings.
The Company's 1993 Non-Employee Director Stock Option Plan, approved
by stockholders at the Company's 1993 Annual Meeting of Stockholders, provides
for the automatic grant of an option to purchase 10,000 shares of the Company's
Class A Common Stock to each non-employee director holding office immediately
after each annual meeting of stockholders. The exercise price for each option is
equal to the fair market value of the Company's Class A Common Stock on the date
of grant. All options have a term of five years and are exercisable, on a
cumulative basis, at the rate of one quarter of the number of shares subject to
the option in each year commencing one year after the date of the grant.
See "Executive Compensation" for information concerning the
compensation of Mr. Alfred J. Roach and Dr. Stephen H. Ip for their services as
executive officers of the Company. The Company is also a party to an employment
agreement dated October 1, 1996 with Ms. Ellena M. Byrne, pursuant to which Ms.
Byrne is serving as Executive Vice President of the Company. The Employment
Agreement provides for a term extending, subject to certain terms and
conditions, until September 30, 2001. Ms. Byrne's current annual salary is U.S.
$18,200 and (pound)50,000 Irish Pounds (approximately U.S. $68,000 at March 31,
1998). Dr. Born serves as a consultant to the Company for which he receives
compensation at the rate of $12,000 per annum.
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ITEM 12. SECURITY HOLDINGS OF CERTAIN STOCKHOLDERS AND MANAGEMENT
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The following table sets forth information at April 20, 1998 with
respect to the beneficial ownership of the Company's Class A Common Stock and
Class B Common Stock by (i) each person known by the Company to beneficially own
more than 5% of the outstanding shares of Class A Common Stock or Class B Common
Stock, (ii) each director of the Company, (iii) each executive officer named in
the Summary Compensation Table in Item 11 of this Report and (iv) all executive
officers and directors of the Company as a group. Each share of Class A Common
Stock is entitled to one vote per share while each share of Class B Common Stock
is entitled to ten votes per share. The Company understands that, except as
noted below, each beneficial owner has sole voting and investment power with
respect to all shares attributable to such owner.
Class A Common Stock(1) Class B Common Stock
Percent Percent
Beneficial Owner No. Shares of Class No. Shares of Class
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Alfred J. Roach (2) 3,668,750(2) 16.3% 1,725,500 100%
Stephen H. Ip 71,668(3) * -- --
Ellena M. Byrne 200,000(3)(4) 1.0% -- --
Timothy J. Roach 595,000(3) 2.9% -- --
Gustav V. R. Born 20,000(3) * -- --
Joseph C. Hogan 50,000(3) * -- --
William G. Sharwell 55,000(3) * -- --
All executive officers
and directors as a group
(10 persons, including
the foregoing) 4,930,918(5) 20.8% 1,725,500 100%
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(1) Asterisk indicates less than one percent. Shares of Class A Common Stock
subject to issuance upon conversion of Class B Common Stock into Class A
Common Stock and upon exercise of options that were exercisable on, or
become exercisable within 60 days after, April 20, 1998 are considered
owned by the holder thereof and outstanding for purposes of computing the
percentage of outstanding Class A Common Stock that would be owned by such
person, but (except for the computation of beneficial ownership by all
executive officers and directors as a group) are not considered
outstanding for purposes of computing the percentage of outstanding Class
A Common Stock owned by any other person.
(2) The address of Mr. Roach is Route 2 - Kennedy Avenue, Guaynabo, Puerto
Rico 00657. Beneficial ownership of Class A Common Stock includes
1,725,500 shares of Class A Common Stock issuable upon conversion of the
same number of shares of Class B Common Stock on a share for share basis
and 1,160,000 shares of Class A Common Stock subject to outstanding
options.
(Footnotes continued on next page)
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(3) Includes shares of Class A Common Stock subject to options as follows:
Stephen H. Ip, 66,668; Ellena M. Byrne, 165,000 (including 10,000 shares
subject to options held by her husband); Timothy J. Roach, 595,000; Gustav
V.R. Born, 20,000; Joseph C. Hogan, 40,000; and William G. Sharwell,
45,000.
(4) Includes 10,000 shares owned by Ms. Byrne's son. The inclusion of these
amounts should not be construed as an admission that Ms. Byrne is the
beneficial owner of these shares.
(5) Includes 1,725,500 shares of Class A Common Stock issuable upon conversion
of the same number of shares of Class B Common Stock and 2,336,668 shares
of Class A Common Stock subject to outstanding options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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On January 17, 1997, November 26, 1997, December 15, 1997 and
December 30, 1997, Mr. Alfred J. Roach purchased 100,000, 50,000, 100,000 and
100,000 shares, respectively, of the Company's Class B Common Stock for
$343,750, or $3.4375 per share; $109,375, or $2.1875 per share; $168,800, or
$1.688 per share; and $156,250, or $1.5625 per share, respectively, the closing
bid prices of the Company's Class A Common Stock (into which the Company's Class
B Common Stock is convertible on a share-for-share basis) on The Nasdaq Stock
Market's National Market on the respective dates.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMERICAN BIOGENETIC SCIENCES, INC.
Dated: April 30, 1998 By: /s/ Josef C. Schoell
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Josef C. Schoell
Vice President-Finance
(Principal Financial and
Accounting Officer)
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