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 NO. 0-27436
TITAN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3171940
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
400 OYSTER POINT BLVD., SUITE 505, SOUTH SAN FRANCISCO, CALIFORNIA 94080
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(Address of principal executive offices, including zip code)
(650) 244-4990
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(Registrant's telephone number, including zip code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value
Class A Warrants
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 twelve (12) months (or for such shorter period that
the registrant was required to file such report(s)), and (2) has been subject to
the filing requirements for the past ninety (90) days. YES X NO
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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 the voting stock (excluding preferred stock
convertible into and having voting rights on certain matters equivalent to
606,061 shares of common stock) held by non-affiliates of the registrant was
approximately $64,679,956, based on the last sales price of the common stock as
of March 27, 1998.
As of March 27, 1998, 13,099,738 shares of common stock, $.001 par value, of the
registrant were issued and outstanding.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company.
NAME AGE POSITION
- ---- --- --------
Louis R. Bucalo, M.D.(1) 39 President, Chief Executive Officer and Director
Sunil Bhonsle 48 Executive Vice President and Chief Operating Officer
Richard C. Allen, Ph.D. 55 Executive Vice President
Robert E. Farrell 48 Executive Vice President and Chief Financial Officer
Victor Bauer, Ph.D. 62 Executive Director; Corporate Development and Director
Michael K. Hsu(2) 49 Director
Hubert Huckel, M.D.(3) 66 Director
Marvin E. Jaffe, M.D.(2) 61 Director
Lindsay A. Rosenwald, M.D.(1)(3) 42 Director
Konrad M. Weis, Ph.D.(1) 69 Director
Kenneth J. Widder, M.D.(1)(3) 45 Director
Ernst-Gunter Afting, M.D., Ph.D. 55 Director
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(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
LOUIS R. BUCALO, M.D., is a co-founder of the Company and of each of the
Operating Companies and has served as the Company's President and Chief
Executive Officer since January 1993. Dr. Bucalo has served as a director of
the Company since March 1993. Dr. Bucalo also serves as Chairman of the Board
of each of the Operating Companies and as Chairman and Chief Executive Officer
of ProNeura. From July 1990 to April 1992, Dr. Bucalo was Associate Director of
Clinical Research at Genentech, Inc., a biotechnology company. Dr. Bucalo holds
an M.D. from Stanford University and a B.A. in biochemistry from Harvard
University.
SUNIL BHONSLE joined the Company as Executive Vice President and Chief
Operating Officer in September 1995. Mr. Bhonsle served in various positions,
including Vice President and General Manager, Plasma Supply and Manager,
Inventory and Technical Planning, at Bayer Corporation from July 1975 until
April 1995. Mr. Bhonsle holds an M.B.A. from the University of California at
Berkeley and a B.Tech. in chemical engineering from the Indian Institute of
Technology.
RICHARD C. ALLEN, PH.D., joined the Company in August 1995. He also
currently serves as President and Chief Executive Officer of Theracell, which he
joined in January 1995 and President and Chief Operating Officer of ProNeura.
From June 1991 until December 1994, Dr. Allen was Vice President and General
Manager of the Neuroscience Strategic Business Unit of Hoechst-Roussel
Pharmaceuticals, Inc. Dr. Allen holds a Ph.D. in medicinal chemistry and a B.S.
in pharmacy from the Medical College of Virginia.
ROBERT E. FARRELL joined the Company as Executive Vice President and Chief
Financial Officer in September 1996. Mr. Farrell was employed by Fresenius USA,
Inc. from 1991 until August 1996 where he served in various capacities,
including Vice President Administration, Chief Financial Officer and General
Counsel. His last position was Corporate Group Vice President. Mr. Farrell
holds a B.A. from University of Notre Dame and a J.D. from Hastings College of
Law, University of California.
VICTOR J. BAUER, PH.D., has served as a director since November 1997.
Dr. Bauer joined the Company in February 1997, and currently serves as
Executive Director of Corporate Development. Since April 1996, Dr. Bauer has
served as a Director and Chairman of Theracell. From December 1992 until
February 1997, Dr. Bauer was a self-
employed consultant to companies in the pharmaceutical and biotechnology
industries. Prior to that time, Dr. Bauer was with Hoechst-Roussel
Pharmaceuticals Inc., where he served as President from 1988 through 1992.
MICHAEL K. HSU has served as a director of the Company since March 1993.
Mr. Hsu is President of Biotechnology Venture Capital Representative for the
government of Taiwan. From November 1994 through October 1995, he served as
Director - Corporate Finance of Coleman and Company Securities. Since March
1989, Mr. Hsu has served as President of APS Bioventures Co., which until
November 1994 was an investment banking division of RAS Securities. Mr. Hsu
previously held various executive positions with Steinberg and Lyman Health Care
Company, Ventana Venture Growth Fund, Asian Pacific Venture Group (Thailand) and
D. Blech Company.
HUBERT HUCKEL, M.D. has served as a director of the Company since October
1995. From 1964 until his retirement in December 1992, Dr. Huckel served in
various positions with The Hoechst Group. At the time of his retirement, he was
chairman of the Board of Hoechst-Roussel Pharmaceuticals, Inc., Chairman and
President of Hoechst-Roussel Agri-Vet Company and a member of the Executive
Committee of Hoechst Celanese Corporation. He currently serves on the Board of
Directors of Royce Laboratories, Inc. and Sano Corporation.
MARVIN E. JAFFE, M.D. has served as a director of the Company since October
1995. From 1988 until April 1994, Dr. Jaffe served as President of R.W. Johnson
Pharmaceutical Research Institute where he was responsible for the research and
development activities in support of a number of Johnson & Johnson companies,
including ORTHO-McNeil Pharmaceuticals, ORTHO Biotech and CILAG. From 1970
until 1988, he was Senior Vice President of the Merck Research Laboratories. He
currently serves on the Board of Directors of Chiroscience, plc and
Immunomedics, Inc.
LINDSAY A. ROSENWALD, M.D., is a co-founder of the Company and has served
as a director of the Company since March 1993. Dr. Rosenwald co-founded
Interneuron Pharmaceuticals, Inc. and has served as its Chairman since February
1989. Dr. Rosenwald has been the Chairman and President of The Castle Group,
Ltd., a New York medical venture capital firm ("Castle"), since October 1991 and
the Chairman and President of Paramount Capital, Inc., an investment banking
firm, since February 1992, and the founder, Chairman and President of Paramount
Capital Asset Management, Inc., a money management firm specializing in the life
sciences industry, since June 1994. Dr. Rosenwald also is a director of the
following publicly-traded pharmaceutical biotechnology companies: Avigen, Inc.,
BioCryst Pharmaceuticals, Inc., Neose Technologies, Inc., Sparta
Pharmaceuticals, Inc., and VimRx Pharmaceuticals, Inc. and is a director of a
number of privately-held companies in the biotechnology or pharmaceutical
fields.
KONRAD M. WEIS, PH.D., has served as a director of the Company since March
1993. Dr. Weis is Honorary Chairman and former President and Chief Executive
Officer of Bayer Corporation. Dr. Weis serves as a director of PNC Equity
Management Company, Michael Baker Company, and Dravo Company.
KENNETH J. WIDDER, M.D. has served as a director of the Company since March
1993. Dr. Widder is Chairman and Chief Executive Officer of Molecular
Biosystems, Inc. Dr. Widder serves on the Board of Directors of Wilshire
Technologies, Inc. and Digivision.
ERNST-GUNTER AFTING, M.D., PH.D., has served as a director of the Company
since May 1996. Dr. Afting has served as the President of the GSF-National
Center for Environment and Health, a government research center in Germany since
1995. From 1984 until 1995, he was employed in various capacities by the
Hoechst Group, serving as Divisional Head of the Pharmaceuticals Division of the
Hoechst Group from 1991 to 1993 and as President and Chief Executive Officer of
Roussel Uclaf (a majority stockholder of Hoechst AG) in Paris from 1993 until
1995.
Directors serve until the next annual meeting or until their successors are
elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under contracts of employment. See
"Management - Employment Agreements."
DIRECTOR COMPENSATION
Non-employee directors are entitled to receive $2,000 for each Board and
committee meeting attended, although certain directors forego such fees, and are
reimbursed for their expenses in attending such meetings. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor. In addition, directors are entitled to receive options
("Director Options") pursuant to the Company's 1995 Stock Option Plan. Director
Options are exercisable in four equal annual installments commencing six months
from the date of grant and expire the earlier of 10 years after the date of
grant or 90 days after the termination of the director's service on the Board of
Directors. In January 1996, each of the Company's current directors other than
Dr. Afting and Dr. Bauer received Director Options to purchase 10,000 shares of
common stock at an exercise price of $5.00 per share. Dr. Afting received
Director Options to purchase 10,000 shares of common stock at an exercise price
of $8.50 per share when he joined the Board of Directors in May 1996. Dr. Bauer
received Director Options to purchase 10,000 shares of common stock at an
exercise price of $5.56 when he joined the Board of Directors in November 1997.
In July 1997, each of the directors received Director Options to purchase 2,000
shares at an exercise price of $2.88 per share.
During 1997, Dr. Huckel received $155,000 in consulting fees for services
rendered in connection with the Company's licensing of Iloperidone from HMRI.
See "Item 13. Certain Relationships and Related Transactions."
BOARD COMMITTEES AND DESIGNATED DIRECTORS
The Board of Directors has an Executive Committee, a Compensation Committee
and an Audit Committee. The Executive Committee exercises all the power and
authority of the Board of Directors in the management of the Company between
Board meetings, to the extent permitted by law. The Compensation Committee
makes recommendations to the Board concerning salaries and incentive
compensation for officers and employees of the Company and may administer the
Company's 1995 Stock Option Plan. The Audit Committee reviews the results and
scope of the audit and other accounting related matters.
The Board of Directors met six times during 1997 and also took action by
unanimous written consent. The Executive Committee met two times and also took
action by unanimous written consent, and the Compensation Committee and Audit
Committee each met one time. Each of the current directors of the Company
attended at least 75% of the aggregate of (i) the meetings of the Board of
Directors and (ii) meetings of any Committees of the Board on which such person
served which were held during the time such person served.
The Company has agreed, if requested by D.H. Blair Investment Banking
Corp., the underwriter of the IPO ("Blair"), to nominate a designee of Blair to
the Company's Board of Directors until January 18, 2001.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Such executive officers, directors, and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms filed by such reporting persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and greater than 10% beneficial owners were complied with, with the
exception of Richard Allen who filed a Form 4 two months late and Lindsay
Rosenwald who filed a Form 5 one month late.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In March and April 1993, the Company borrowed an aggregate of $700,000 from
Dr. Lindsay A. Rosenwald, the co-founder and a director of the Company. See
"Item 12. Security Ownership of Certain Beneficial Owners and Management." The
loan was evidenced by 10% promissory notes payable on demand. Dr. Rosenwald
received warrants that are currently exercisable to purchase an aggregate of
20,355 shares of common stock at an exercise price of $4.50 per share. In June
1995, the notes, together with accrued interest, were cancelled in consideration
of the issuance to Dr. Rosenwald of shares of Series A preferred stock which
subsequently converted into 215,135 shares of common stock.
In April and May 1993, Dr. Rosenwald made loans to the Company in the
aggregate principal amount of $1,014,000. Such loans were repaid, together with
accrued interest at the rate of 7% per annum, from the proceeds of the private
placement of Series A preferred stock described below.
In January 1995, the Company agreed to issue warrants to purchase an
aggregate of 7,395 shares of common stock at an exercise price of $3.25 per
share to Ray Dirks Research ("RDR") or its designees for services rendered in
connection with a license transaction. Michael Hsu, a director of the Company,
serves as a consultant to RDR and received one-half of such warrants.
In February 1995, Paramount Capital, Inc. ("Paramount") acted as placement
agent in connection with the Company's private placement of Series B preferred
stock. Paramount received $103,125 in commissions and a $45,375 expense
allowance for services rendered in connection with such private placement. In
addition, designees of Paramount received Series B preferred stock purchase
warrants that currently represent warrants to purchase an aggregate of 46,350
shares of common stock at an exercise price of $3.92 per share. Dr. Rosenwald
serves as the President and Chairman of Paramount and received warrants to
purchase 17,961 of such shares.
Between August and October 1995, The Aries Domestic Fund L.P. and The
Aries Trust loaned the Company an aggregate of $250,000 evidenced by the
promissory notes (the "Investor Notes") which bore interest at the rate of 12%
per annum and were payable on the earlier of the closing of an initial public
offering or one year from the date of issuance. In accordance with their terms,
the principal amount of the Investor Notes was converted into $250,000 principal
amount of 10% promissory notes (the "Bridge Notes") and 125,000 Class A warrants
as part of a bridge financing completed in October 1995. Accrued interest on
the Investor Notes was repaid in January 1996. Repayment of the principal and
accrued interest on the Bridge Notes was made upon completion of the Company's
initial public offering in January 1996. Dr. Rosenwald is the President of the
general partner of The Aries Domestic Fund L.P. and serves as investment manager
for The Aries Trust.
In June and July of 1997, Dr. Hubert Huckel, a director of the Company,
received an aggregate of $155,000 in consulting fees for services rendered in
connection with the Company's consummation of the HMRI Agreement. Dr. Huckel
was paid pursuant to a consulting agreement which provided for the payment of
fees based upon a percentage of the up-front consideration paid by the Company
upon completion of a licensing transaction with Dr. Huckel's assistance. The
consulting agreement expired by its terms in January 1998.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company has adopted a policy that all future
transactions, including loans, between the Company and its officers, directors,
principal shareholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TITAN PHARMACEUTICALS, INC.
Date: May 1, 1998 By: /s/ Robert E. Farrell
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Robert E. Farrell,
Executive Vice President and Chief
Financial Officer (principal financial
and accounting officer)