SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 22, 2001
INCARA PHARMACEUTICALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-27410 56-1924222
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(Commission File Number) (IRS Employer ID Number)
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, North Carolina 27709
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (919) 558-8688
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Item 5. Other Events
On January 22, 2001, Incara Pharmaceuticals Corporation ("Incara") closed
on a collaborative transaction with Elan Corporation, plc, an Irish company
("Elan"), Elan International Services, Ltd., a Bermuda exempted limited
liability company ("Elan International"), and Elan Pharma International Limited,
an Irish private limited liability company ("Elan Pharma"). The collaboration
was the subject of a binding letter agreement, dated December 21, 2000, among
Incara, Elan and Elan International. As part of the transaction, Elan
International and Incara formed a Bermuda corporation, Incara Development, Ltd.
("Incara Development"), to develop OP2000, an ultra-low molecular weight
heparin, for the treatment of inflammatory bowel disease. Incara Development
will develop OP2000 using the intellectual property of both Elan and Incara.
In January 2001, Incara began a Phase 2/3 pivotal clinical study of OP2000
in patients with ulcerative colitis, a form of inflammatory bowel disease. The
study will examine the effects of OP2000 in patients receiving standard
treatment with aminosalicylates who have developed symptoms of active ulcerative
colitis. The study is designed to enroll approximately 270 patients with
symptoms of active ulcerative colitis. Patients will be treated with drug or
placebo once a day for six weeks. This initial study will utilize prefilled
syringes to deliver OP2000 by subcutaneous injection. The objective of
treatment will be to cause complete remission or significantly improve the signs
and symptoms of ulcerative colitis.
In the collaborative transaction, Incara purchased all of the common stock
(6,000 shares) of Incara Development for $7,500,000 and 60.2% (3,612 shares) of
the non-voting preferred shares of Incara Development for $4,515,000. The
common stock and the non-voting preferred stock owned by Incara represent 80.1%
of the outstanding combined common and non-voting preferred stock of Incara
Development. Elan International purchased 39.8% (2,388 shares) of the non-
voting preferred shares of Incara Development for $2,985,000. The non-voting
preferred stock of Incara Development owned by Elan International represents
19.9% of the outstanding combined common and non-voting preferred shares of
Incara Development. The non-voting preferred stock of Incara Development is not
convertible by the holders into common shares of Incara Development until two
years from its issuance.
As part of the transaction, Elan International also purchased 825,000
shares of Incara's common stock, 28,457 shares of newly-created Incara Series B
non-voting convertible preferred stock and a five-year warrant to purchase
22,191 shares of Incara Series B non-voting convertible preferred stock at an
exercise price of $72.12 per share for an aggregate purchase price of
$4,000,000. Each share of Series B convertible preferred stock is convertible
into ten shares of common stock.
Elan International also purchased shares of a newly-created class of
convertible exchangeable non-voting Series C preferred stock of Incara for an
aggregate purchase price of $12,015,000. The Series C convertible exchangeable
preferred stock bears an annual mandatory stock dividend of 7%, compounded
annually. The Series C convertible exchangeable preferred stock is convertible
into shares of Incara's Series B convertible preferred stock at the rate of
$64.90 per share; provided it has not previously been converted or exchanged.
Six years after its issuance, Incara will have the option to either redeem the
Series C convertible exchangeable stock for cash or for shares of Incara common
stock or Series B convertible preferred stock having a then fair market value of
the amount due. The redemption price will be the original issue price plus the
compounded 7% annual stock dividend. The proceeds from the Series C convertible
exchangeable preferred stock issuance was used to fund Incara's obligation to
purchase an aggregate of $12,015,000 of the
securities of Incara Development. The Series C convertible exchangeable
preferred stock is exchangeable at the option of Elan International at any time
for all of the preferred stock of Incara Development held by Incara which, if
exchanged, would give Elan International ownership of 50% of the initial amount
of combined common and preferred stock of Incara Development.
Funding for OP2000 research and development is subject to determination and
approval by the management committee of Incara Development, as approved by Elan
International and Incara. Elan International and Incara may provide Incara
Development's required funding on a pro rata basis based on Elan International's
and Incara's respective percentage ownership of the outstanding common and
preferred stock of Incara Development, which currently is 80.1% for Incara and
19.9% for Elan International. Subject to mutual agreement, Elan Pharma will
lend Incara up to $4,806,000 (in minimum increments of $500,000) to fund
Incara's pro rata share of development funding for Incara Development. In
return, Incara issued a convertible promissory note that bears interest at 10%
compounded semi-annually on the amount outstanding thereunder. This note will
mature in six years, when it will be payable (provided that it shall not have
previously been converted) in an amount equal to the outstanding principal plus
accrued interest. Incara has the option to repay the note either in cash or in
shares of Incara Series B convertible preferred stock having a then fair market
value of the amount due. The note will be convertible at the option of Elan
Pharma at any time after two years into shares of Incara Series B convertible
preferred stock at $43.27 per share. If Elan International, however, exercises
its exchange right for an additional 30.1% of Incara Development as discussed
above, Elan International shall either pay Incara or reduce the outstanding note
by 30.1% of the aggregate amount of the development funding for OP2000 plus
interest.
Upon the later of the completion of enrollment of the Phase 2/3 clinical
trial OP201 or December 21, 2001, Elan International will purchase $1,000,000 of
Incara's Series B convertible preferred stock at a per share price that will be
ten times the greater of (a) the average per share price of Incara common stock
for the day prior to the purchase, or (b) a 25% premium to the average daily
price per share of Incara common stock for the 60 trading day period immediately
prior to the purchase, both as reported on the Nasdaq National Market. In
addition, as part of the $1,000,000 payment, Incara will issue to Elan
International a five-year warrant for 20% of the shares of Series B convertible
preferred stock purchased by Elan International. The exercise price of the
Series B convertible preferred stock under this warrant will be equal to twice
the per share purchase price of the Series B convertible preferred stock
purchased on the same date.
As long as Elan International and its affiliates are the beneficial owners
of at least 5% of Incara common stock on a fully diluted basis (assuming
conversion of Incara securities held by Elan International but not of any other
Incara securities), Incara will include the designation of one representative of
Elan International as part of the management recommended slate of directors
presented at any regular or special meeting of the stockholders of Incara at
which directors of Incara are to be elected and Incara will take all necessary
and/or appropriate steps to effect such appointment.
Elan and Incara have agreed that, for Elan International to maintain its
pro rata interest in Incara based on all of the Incara stock owned by Elan
International at the time of any offering of Incara securities, Elan
International will have preemptive rights for four years after December 21, 2000
to participate in any equity, warrant or convertible securities financing Incara
undertakes (with exceptions for non-financing transactions, non-equity
financings and Incara's existing equity financing facility with Torneaux Fund
Ltd.).
Incara has agreed to register with the Securities and Exchange Commission,
upon the one-time demand of Elan International, all of the Incara common stock
which is at any time owned by Elan International or its affiliates and their
transferees, including Incara common stock issuable under the preferred stock,
the note and the warrants. Incara also granted Elan International "piggy-back"
registration rights to join with any other registration of Incara common stock.
Elan International will not have the right to exercise any conversion,
exercise or exchange right for all or any part of Incara Series B convertible
preferred stock, whether exchangeable or not, which would result in Elan
International and its affiliates directly or indirectly owning more than 9.9% of
Incara's outstanding common stock.
As part of the transaction, Elan, Elan Pharma and Incara entered into
license agreements under which Incara will license to Incara Development the
OP2000 compound and Elan Pharma will license to Incara Development its
proprietary MEDIPAD Drug Delivery System technology. Incara Development will
pay Elan $15,000,000 for a fully paid license to the MEDIPAD Drug Delivery
System. Elan, Elan Pharma and Incara are free to develop other products
individually or in cooperation with other entities.
Item 7. Financial Statement and Exhibits
(a) Exhibits
Exhibit 10.55* Securities Purchase Agreement dated as of December 21, 2000,
among Incara Pharmaceuticals Corporation, Elan International Services, Ltd. and
Elan Pharma International Limited.
* Confidential Treatment has been requested.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
INCARA PHARMACEUTICALS CORPORATION
Date: January 29, 2001
/s/ RICHARD W. REICHOW
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Richard W. Reichow, Executive Vice President
and Chief Financial Officer