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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
FEBRUARY 7, 2001
Date of Report (date of earliest event reported)
AURORA BIOSCIENCES CORPORATION
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(Exact name of Registrant as specified in charter)
DELAWARE 0-22669 33-0669859
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
11010 N. TORREYANA ROAD
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
Registrant's telephone number, including area code: (858) 404-6600
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events
This Current Report is filed solely for the purpose of updating the
description of Aurora's business as follows:
AURORA'S BUSINESS
OVERVIEW
We develop and commercialize technologies, products and services to
accelerate the discovery of new medicines. Our core technologies include a broad
portfolio of proprietary fluorescence assays and screening platforms designed to
provide an integrated solution for drug discovery. Our fluorescence assay
technologies include our GeneBLAzer(TM), GenomeScreen(TM), Vivid(TM) and
Phosphorylight(TM) technologies, as well as a broad collection of fluorescent
proteins. Our screening platforms include our ultra-high throughput screening
system, the UHTSS(R) Platform, and our automated master compound store, the
AMCS(TM) Platform, as well as our ion channel screening platform, which includes
our proprietary voltage sensor probes and voltage ion probe reader, the VIPR(TM)
subsystem. We also provide assay development and screening services as part of
our drug discovery collaborations.
We believe that we are a leading provider of proprietary drug discovery
solutions for all major classes of gene targets, including receptors, ion
channels and enzymes. To capture more value from our technologies and drug
discovery capabilities, we are currently launching our Big Biology(TM)
initiative, an internal drug discovery program designed to rapidly identify
promising drug candidates within all major classes of gene targets. Our
technologies and drug discovery capabilities have been commercially validated by
over 20 major life sciences companies and research organizations, including:
- Allergan - Genentech
- American Home Products - The Hereditary Disease Foundation
- Bristol-Myers Squibb - Johnson & Johnson
- The Cystic Fibrosis Foundation - Merck & Co.
- Families of SMA - NV Organon Laboratories
- F.Hoffmann-La Roche - Pfizer
- GlaxoSmithKline - Pharmacia & Upjohn
INDUSTRY BACKGROUND
The process of discovering and developing new medicines can be
time-consuming, expensive and inefficient. It is estimated to take on average as
many as 15 years and $500 million or more using conventional drug discovery
methods to bring a new drug to market. Failure rates remain high, with only 1 in
10 drug candidates actually marketed as a new drug. Pharmaceutical companies
recognize that in order to support their future growth, they must bring more
drugs to market faster and at a lower cost. In addition, we believe the demand
for new products will be increased further by the expiration in coming years of
patents on numerous significant revenue-generating drugs. Many pharmaceutical
companies are hoping that technological advances in the field of genomics will
improve current drug development methods.
DNA, GENES, PROTEINS AND GENOMICS. To understand genomics, the study of
human genes, it is useful to understand how genes play a role in human
development. The human genome is organized into 46 chromosomes, or two sets of
23 chromosomes, one set inherited from each parent. Each chromosome is one
continuous stranded molecule of deoxyribonucleic acid, or DNA. The DNA
contributed by one parent is organized into between 30,000 and 100,000 distinct
genes. Genes are segments of DNA located throughout the chromosomes. Genes
comprise approximately 5% of the DNA in a human cell. Some additional amount is
used to regulate DNA function. More than 90% of the DNA has no known function.
Each DNA molecule contains two complementary strands comprised of four
different types of nucleotide bases, commonly referred to as G, C, A and T. The
order of these letters is called a DNA sequence. The entire DNA content of an
organism is referred to as its genome.
All cells contain that organism's entire genome, but each cell type
expresses only those genes necessary for its specific function. When a gene is
expressed, a copy of its DNA sequence, called messenger RNA, is used as a
template to direct the synthesis of a protein. Proteins are composed of
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20 different constituents called amino acids. Certain fragments of DNA direct
the position and identity of amino acids in a protein.
Basic cellular function is largely the outcome of the actions of proteins.
This process generally involves interactions between proteins, as well as other
molecules, within a cell. Proteins have various roles in the cell, such as
structural building blocks, enzymes that catalyze reactions, and receptors that
sense the environment. A small number of proteins also act as functionally
interconnected networks for the transmission of signals in and between cells.
For a person to be healthy, specific proteins must be produced at the right time
in the appropriate amounts in specific cells. DNA variations can change the
properties of a protein, or where, when or how much of a protein is produced.
Recent advances in genomics have led to the sequencing of the entire human
genome. Knowledge of such sequences has in turn led to the identification of
large numbers of genes encoding potential drug targets. Drug targets are
biological molecules, such as enzymes, receptors, ion channels, other proteins
and nucleic acids, which may play a role in the onset or progression of a
disease. The proliferation of potential new drug targets represents a unique
historical opportunity for drug discovery.
DRUG DISCOVERY PROCESS. To capitalize on the vast amounts of information on
the human genome now available, the pharmaceutical industry is seeking solutions
to bottlenecks at each of the following steps in the drug discovery process.
Target Identification and Validation. Identifying the genes that comprise
the human genome is only the first of many steps required to develop a new drug
candidate. Once the gene is identified, the next challenge is to determine the
function of that gene within a cell, often referred to as target identification.
A gene's function refers to its role in a cell based on its assignment to, or
relationship with, a particular signaling network and the predicted consequence
of modulating its activity. Gene function cannot be inferred directly from its
DNA sequence, nor can it be derived from attributes, such as sequence variation,
similarities to other genes of known function or expression of encoded proteins.
Many recently discovered genes are of unknown function. These genes are often
referred to as "orphan" genes. Once a target has been identified, the next step
is to validate that target. Target validation typically involves determining
which gene, or protein encoded by the gene, is a relevant target for a drug.
More specifically, a target is regarded as validated if a causal link is
established between an intracellular protein target and a cellular response
important in a disease process. Target validation has become a critical
bottleneck in drug discovery because of the abundance of potential targets
stemming from genomics efforts and the lack of definitive methods for linking
genes with disease states.
Assay Development. Once a gene of interest has been selected as a drug
target, a test must be developed to identify compounds that might affect the
target's function and therefore lead to a drug. This test is called an assay.
Ideally, the assay will be compatible with high throughput screening and model
the activity of the target in its natural, functional state. Because it is
currently impractical to conduct screens in the human body, living cells are
often used as hosts for the targets. This is often referred to as a cell-based
assay. However, the development of cell-based assays is difficult and
time-consuming and is therefore a rate-limiting step in the drug discovery
process. Consequently, many companies rely on alternative assay formats, such as
biochemical assays, which do not involve the use of living cells, but as a
result often do not provide the same degree of functional information as
cell-based assays. Typically, assay development for a gene target, whether
cell-based or biochemical, takes between three and six months. Many validated
targets and orphan targets are so difficult to configure into assays that they
are never considered for drug discovery.
Screening. This step involves using assays to test thousands of chemical
compounds for either binding or functional activity on a drug target. A compound
with binding or functional activity against a target is often referred to as a
hit. Advances in assay miniaturization, microfluidics and automation now enable
scientists to screen tens of thousands of compounds per day against one or more
targets, which is commonly referred to as high throughput screening. Screening
over 100,000 compounds per day represents the current best practice and is often
referred to as ultra high throughput screening. As compound libraries continue
to grow, we believe ultra high throughput screening will become an operational
necessity to
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maintain a competitive advantage. Managing and screening large chemical
libraries can be expensive, labor-intensive and time-consuming. In addition,
large-scale screening can utilize large amounts of scarce and expensive
compounds. We believe that very few companies possess the infrastructure to
conduct ultra high throughput screening and manage compound libraries
efficiently.
Lead Optimization and Validation. Lead optimization involves repeated
chemical modification of the hits obtained from primary screening for the
purpose of developing compounds with desired properties and activities.
Additional assays are developed and used in secondary screens to select
compounds with the greatest likelihood of becoming drugs, based on expected
efficacy and selectivity, low toxicity and optimal pharmacological properties.
These modified, or optimized, hits are often referred to as lead compounds. Lead
validation involves testing lead compounds in animal models to determine whether
they have the desired affect against the disease of interest. Using the current
best practice, the vast majority, approximately 90%, of lead compounds fail to
become drugs. New technologies are needed to reduce the attrition rate of
compounds as they move through the drug development process.
AURORA'S SOLUTIONS AND ADVANTAGES
Since our founding, we have focused on the development and
commercialization of technologies, products and services that provide solutions
to bottlenecks in the drug discovery process. These solutions involve the
integration of innovative fluorescence assay technologies, instrumentation and
automation. We believe that our drug discovery systems and technologies provide
an effective bridge between the sequenced human genome and the chemistry needed
to develop the next generation of medicines.
Target Identification and Validation. Several of our proprietary
technologies are used to identify and validate gene targets. Our GenomeScreen
technology enables scientists to rapidly identify genes regulated by a stimulus
of interest. We have identified many novel genes using this method. Fluorescent
proteins are used widely by functional genomics companies to identify potential
therapeutic targets. Several companies involved in target identification and
validation have licensed our patented fluorescent proteins for this purpose.
Assay Development. We have developed proprietary technologies, such as
GeneBLAzer, Phosphorylight, fluorescent proteins and our ion channel screening
platform, to facilitate the rapid development of assays for all major
therapeutic target classes, including receptors, ion channels and enzymes. We
also develop miniaturized cell-based assays, which we believe provide a more
representative measurement of target function than purely biochemical assays.
Our cell-based assays miniaturize functional human biology and enable us to
generate tens to hundreds of millions of data points each year. In addition, our
cell-based assays enable us to screen selected targets that could not otherwise
be screened using conventional biochemical approaches. We believe the
combination of our proprietary fluorescence assay technologies and our expertise
in developing miniaturized cell-based assays enable us to develop assays in a
fraction of the time normally required for this activity. In our discovery
services business, we have developed assays for over 100 drug targets for our
customers, many of which were brought to us because our customers considered the
targets intractable.
Screening. Our UHTSS Platform enables our scientists to screen over 100,000
compounds per day in either cell-based or biochemical formats, which utilize
assay volumes approaching one millionth of a liter, thereby enabling us to
perform more assays with the same amount of material compared to traditional
screening techniques. We have a library of over 500,000 compounds available for
screening. We completed our own UHTSS Platform and delivered the final module of
the UHTSS Platform to Bristol-Myers Squibb in late 2000. We are currently in the
process of delivering the final module of the UHTSS Platform to the other
members of our UHTSS consortium and our AMCS Platform, which facilitates the
storage and management of large compound libraries, to Warner Lambert and
Pfizer. In addition, our ion channel screening platform, which includes our
proprietary voltage sensor probes and VIPR subsystem, facilitates the rapid
development of assays and the high throughput screening of ion channel targets.
Lead Optimization and Validation. We are currently developing a library of
high throughput profiling assays, including our Vivid fluorogenic substrates, to
assess individual compounds or entire libraries of
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compounds for metabolism, safety and other drug-like properties. We believe
these assays will reduce the cost of drug development by identifying compounds
with inappropriate properties earlier in the drug discovery process.
The Integrated Solution: Big Biology. To capture more value from our
technologies and drug discovery capabilities, we are currently launching our Big
Biology initiative. We believe our miniaturized assay formats, ultra high
throughput screening system and integrated approach to assay development,
screening and compound management significantly reduce the time and expense
required to identify suitable drug targets and generate drug candidates. We
intend to use our fluorescence assay technologies, along with our UHTSS
Platform, to rapidly validate targets with high throughput chemical methods,
rather than using low throughput or less definitive techniques. We expect this
approach to identify multiple hit compounds for lead optimization and to
generate better information about potential drug targets earlier in the drug
discovery process. We believe our innovative approach to drug discovery will
generate a larger number of high quality drug candidates than was previously
possible for a company of our size.
OUR STRATEGY
Our goal is to be the leading provider of drug discovery solutions and
high-quality drug candidates to the pharmaceutical industry. The key elements of
our strategy are to:
- Launch Big Biology Initiative. As part of our Big Biology initiative, we
intend to leverage our assay development and automated screening
capabilities to rapidly generate large numbers of high quality lead
compounds and drug candidates across all major drug target classes, such
as ion channels, receptors and enzymes. We intend to commercialize this
program by licensing access to information and lead compounds and by
entering into drug discovery collaborations with companies that develop
and commercialize new medicines.
- Expand Customer Base for Proprietary Technologies and Platforms. We
intend to generate additional revenue by licensing our proprietary
technologies and screening platforms, including intellectual property we
develop as part of our Big Biology initiative. We will continue to
aggressively license our technologies in new fields, such as agriculture,
diagnostic, industrial and environmental applications.
- Establish Additional Drug Discovery Collaborations. We intend to
establish additional drug discovery collaborations and expand our
existing collaborations. Our goal is to offer gene-to-lead drug discovery
programs in a broad range of different therapeutic areas.
- Enhance Our Existing Drug Discovery Capabilities. We intend to enhance
our current drug discovery capabilities through acquisitions, licensing
and/or strategic alliances in the areas of chemistry, informatics, in
vitro ADME/Tox (absorption, digestion, metabolism, excretion and
toxicology), and in vitro and in vivo pharmacology, including animal
models of drug efficacy. We may also acquire expertise in specific
disease or therapeutic areas.
- Support and Enhance Our Screening Platforms. We intend to seek additional
partners for our ion channel screening platform and as many as two
additional collaborative partners for our UHTSS Platform. We will
continue to upgrade, enhance and offer additional services based on our
screening platforms. We believe we will be able to leverage our base of
collaborators by providing new products and services as we expand and
develop enhancements to our screening platforms.
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TECHNOLOGIES, PRODUCTS AND SERVICES
We have developed and commercialized a broad range of technologies and
products to facilitate drug discovery. Our technologies and products assist
scientists by improving their ability to rapidly identify targets, develop
assays and screen compounds to be used as potential new medicines:
TARGET IDENTIFICATION AND ASSAY DEVELOPMENT
- GenomeScreen Technology. We use our patented GenomeScreen technology to
identify and validate targets by scanning the genome of living human
cells and identifying those genes activated or repressed in disease
states. GenomeScreen also facilitates the rapid development of cell-based
assays for endogenously expressed targets, without having to utilize
cloned cDNAs for those targets. We have used this technology to generate
hundreds of cell-based assays. In addition, we have used GenomeScreen to
assist us in mapping gene activation and cell signaling pathways and
characterizing poorly understood cellular processes.
- GeneBLAzer Technology. Our patented GeneBLAzer technology enables
scientists to rapidly develop cell-based assays with
fluorescence-activated cell sorting (FACS). GeneBLAzer is readily adapted
to a broad range of target classes, including G protein-coupled receptors
(GPCRs), chemokine receptors, transcription factors and intracellular
cis-acting proteases. Using GeneBLAzer, we have developed over 80 assays
relating to various therapeutic areas, including inflammation, oncology,
metabolic, infectious and central nervous system diseases, for our
collaborators and ourselves.
- Fluorescent Proteins. Fluorescent proteins are widely used as research
tools, with over 2,300 related publications to date. Drug
discovery-related applications of our patented fluorescent proteins
include various methods of functional genomics, high throughput screening
assays and gene profiling to assess the potential toxicity of compounds.
Our issued patents on fluorescent proteins, which include over 400
claims, are directed toward nucleic acids encoding fluorescent proteins,
the fluorescent proteins themselves, various fusion proteins and methods
of use.
- Universal G-Proteins. Scientists can use our patented universal
G-proteins to measure the activity of different kinds of receptors in
living human cells and to identify the function of receptors without
previously known function.
- Vivid Fluorogenic Substrates. Our patented Vivid fluorogenic substrates
are useful for the rapid assessment of individual compounds and compound
libraries to determine whether they may have potentially unfavorable
interactions with key metabolic enzymes known as cytochrome P450
isozymes. Currently, these unwanted characteristics are identified later
in the drug development process, after significant investment has been
made in chemistry and pharmacology research.
- Phosphorylight Technology. Our Phosphorylight technology facilitates the
development of assays to measure the activity of enzymes controlling
cellular activity. These enzymes are significant therapeutic targets for
a wide range of diseases, including cancer, inflammation, nervous system
conditions and metabolic diseases.
ULTRA HIGH THROUGHPUT SCREENING
- UHTSS Platform. Our patented UHTSS Platform is designed to screen over
100,000 compounds per day. The UHTSS Platform combines compound
management, plate replication, assay preparation, hit identification,
selection and re-tests of the hits, fluorescence detection and data
analysis into one fully-integrated and automated system. The ultra-high
throughput capability is achieved through the use of our NanoWell(R)
Assay Plate, which contains 3,456 wells in a standard microplate
footprint. The NanoWell Assay Plate is specifically designed to fit the
automation of the UHTSS Platform and is engineered to minimize
fluorescence background and evaporation. The combination of assay
miniaturization, microfluidics, fluorescence detection and automation
enables
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scientists to perform assays with a ten-fold increase in efficiency over
conventional high-throughput screening methods and a commensurate
reduction in cost.
- Automated Master Compound Store. Our patented AMCS Platform is a modular
compound storage system designed for long-term storage of chemical
samples under environmental control. The AMCS Platform provides global
compound inventory monitoring systems to track compound location,
utilization, expiration and availability. Other features of the AMCS
Platform include a semi-automated weighing subsystem to handle compounds
in solid or powder form, automated subsystems for handling liquid
samples, as well as an automated storage and retrieval system.
ION CHANNEL ASSAY DEVELOPMENT AND HIGH THROUGHPUT SCREENING. Our patented
ion channel technology platform, which includes our proprietary voltage sensor
probes and voltage ion probe reader, the VIPR subsystem, was first released in
1997. This platform facilitates the rapid generation of screening assays and the
high throughput screening of ion channel targets by optically measuring changes
in membrane potential in live cells in an automated, microtiter plate format. In
late 2000, we began marketing our second-generation voltage ion probe reader,
the VIPR II subsystem, which has increased functionality and higher screening
capacity. The VIPR II subsystem is capable of screening in 96-well and 384-well
microplate formats, with a significant increase in throughput over the original
VIPR subsystem. Because our ion channel technology platform focuses on changes
in membrane potential, it is a universal platform that is independent of the
particular ion being transported by the target channel. It is applicable to the
majority of ion channel families, including voltage-gated and ligand-gated
potassium, sodium, calcium and chloride channels, as well as other types of
channels. Using this patented functional assay and screening technology, we have
developed over 35 assays relating to therapeutic areas, including
cardiovascular, metabolic and nervous system diseases, for our collaborators and
ourselves.
ASSAY DEVELOPMENT AND SCREENING SERVICES. We also provide assay development
and screening services as part of our drug discovery collaborations. Our
performance of these services provides us with valuable experience working with
difficult drug targets, which we can then apply to our own internal Big Biology
initiative. These projects provide us an additional source of revenue and
differentiate us from our competitors who may not possess similar capabilities
or who may not be willing to provide similar services.
CURRENT ALLIANCES AND OTHER AGREEMENTS
DRUG DISCOVERY COLLABORATIONS. Using the technologies and products
described above, our library of over 500,000 compounds, and our scientific
expertise, we are currently engaged in drug discovery collaborations with
several partners, including Allergan, The Cystic Fibrosis Foundation, Families
of Spinal Muscular Atrophy, The Hereditary Disease Foundation and Merck.
- Allergan. In January 2001, we entered into a one-year Collaborative
Research and License Agreement with Allergan focused on ion channel drug
discovery for ophthalmic indications. Under the collaboration, we will
develop primary and secondary functional cell-based assays using our
proprietary voltage sensor probes and VIPR technology to pursue a novel
ion channel target identified by Allergan. We will screen this target
using the assays developed under the collaboration against a diverse
subset of our compound library, as well as a similarly sized library
provided by Allergan. Following primary screening, we will prioritize
hits through secondary screens and assays to evaluate their specificity
and mechanisms of action. We will then provide the screening and
profiling data to Allergan for further optimization of the hits. This
agreement includes an up-front payment to Aurora and additional payments
upon achievement of certain performance milestones. We will receive
milestone payments and royalties on products based on lead compounds
identified using screens generated through the collaboration.
- The Cystic Fibrosis Foundation. In May 2000, we entered into a five-year
Collaborative Research and License Agreement with The Cystic Fibrosis
Foundation to identify drug candidates for the treatment of cystic
fibrosis. We believe that this collaboration represents the largest
contract ever awarded by a voluntary health organization for drug
discovery. Under the terms of our agreement, we will employ our assay
development and screening expertise, chemical library, secondary
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screening and lead optimization capabilities and genomic technologies in
this therapeutic discovery program. The collaboration includes the
development of assays for and screening of the cystic fibrosis
transmembrane conductance regulator, a protein that is defective in
cystic fibrosis patients, among other molecular targets. The Cystic
Fibrosis Foundation will fund this initiative through technology access
fees for non-exclusive access to our assay, screening and chemistry
technologies and fees for ongoing scientific support. In addition, we may
receive performance and clinical milestone payments. We have also agreed
to an arrangement that includes co-commercialization of promising
candidate drugs resulting from the program in the cystic fibrosis and
pulmonary fields, with revenue sharing on any products that arise out of
the collaboration.
- Families of Spinal Muscular Atrophy. In March 2000, we entered into an
18-month Collaborative Research and License Agreement with The Families
of Spinal Muscular Atrophy to identify novel drug candidates for the
treatment of spinal muscular atrophy. The Families of Spinal Muscular
Atrophy is a not-for-profit organization that sponsors research on spinal
muscular atrophy and provides support to families affected by this
disease. Under this collaboration, we will develop cell-based screening
assays mimicking a functional defect in cells in spinal muscular atrophy
patients, and will conduct high-throughput drug screening using our
instrumentation and library of compounds. We will then conduct follow-up
work on the hit compounds identified using these screens to establish
their potency, and collaborate with academic researchers to test any drug
candidates for efficacy in animal models. We receive ongoing research
funding and may receive milestone payments and royalties on products
resulting from the collaboration.
- The Hereditary Disease Foundation. In September 2000, we entered into a
two-year Collaborative Research and License Agreement with The Hereditary
Disease Foundation, a non-profit organization dedicated to the treatment
of genetic disease, to identify novel drug candidates for the treatment
of Huntington's disease. Under the collaboration, we will employ our
proprietary fluorescent proteins and GeneBLAzer technologies to develop
cell-based and biochemical screening assays, conduct ultra-high
throughput drug screening using our proprietary instrumentation and
compound library, pharmacologically profile any hits derived from these
screens, and collaborate with academic researchers to test for efficacy
of any potential drug candidates in animal models. We receive ongoing
research funding and may receive milestone payments and royalties on
products resulting from the collaboration.
- Merck. In November 1999, we entered into two one-year collaborations with
Merck in the area of genomics. Under both collaborations, we are
utilizing our GenomeScreen technology to investigate cell processes and
gene function related to selected Merck therapeutic programs. We granted
a license to Merck to use the data and materials resulting from the
program for basic research and drug discovery. We received up-front
payments from Merck for each collaboration, with the potential for
additional research funding, as well as additional revenues in the event
Merck commercializes compounds identified as a result of the
collaboration. In April 2000, we amended the original collaborative
agreement to provide additional services to Merck on G-protein coupled
receptors. Aurora may receive performance milestone payments and
royalties on compounds identified under the collaboration.
Separately, in September 2000, we entered into a third collaboration with
Merck. Under this collaboration, we will work with Merck to identify
novel chemicals that modulate a particular ion channel target. Merck will
provide us with a specific ion channel target and a selected library of
Merck compounds. We will develop an assay and then screen the compounds
provided by Merck to identify hits. We will receive research payments,
milestones and royalties on marketed products based on compounds
identified by screens generated through the collaboration.
UHTSS AND AMCS COLLABORATIONS. We currently have UHTSS development
agreements with Bristol-Myers Squibb, Merck, Warner Lambert (now part of Pfizer)
and Pfizer, and AMCS development agreements with Warner Lambert and Pfizer. In
general, our UHTSS agreements provide that we will deliver and install three
separate modules of the UHTSS Platform and provide service and support of the
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system for a period following acceptance. In return, our UHTSS collaborators are
obligated to pay us non-refundable access fees, installation payments and
ongoing research and co-development funding. Some of our UHTSS agreements
restrict our UHTSS consortium to six members for a limited period of time.
Frequently, our UHTSS and AMCS collaborators also access other of our
technologies. Provided below are highlights of our arrangements with our UHTSS
and AMCS collaborators.
- Bristol-Myers Squibb. In November 1996, we entered into a Collaborative
Research and License Agreement with Bristol-Myers Squibb for the
development and installation of a UHTSS Platform. The collaboration
includes co-development of high throughput screening assays for use by
Bristol-Myers Squibb in exchange for specified fees. Bristol-Myers Squibb
licensed the right to use our fluorescence assay technologies for
internal research and drug development, including the development of
assays. Bristol-Myers Squibb will make development milestone and royalty
payments to us for compounds that it develops and commercializes which
are identified using a screen developed by Aurora under the
collaboration. In December 2000, we delivered the third and final module
of the UHTSS Platform to Bristol-Myers Squibb, thereby completing
delivery of the first fully validated system to one of our partners.
- Merck. In December 1997, we entered into a Collaborative Research and
License Agreement with Merck for the development and installation of a
UHTSS Platform. The collaboration includes co-development of high
throughput screening assays for use by Merck in exchange for specified
fees. Merck also licensed the right to use our fluorescence assay
technologies for internal research and drug development, including the
development of assays. We amended the Collaborative Research and License
Agreement with Merck in April 2000. Pursuant to the terms of this
amendment, we agreed to develop additional instrumentation and software
enhancements to the UHTSS Platform to expand its functionality.
- Pfizer. In June 1999, we entered into a Collaborative Research and
License Agreement with Pfizer regarding the development and installation
of a UHTSS Platform and an AMCS Platform. The collaboration includes
co-development of high throughput screening assays for use by Pfizer.
Pfizer also licensed the right to use our fluorescence assay technologies
for internal research and drug development, including the development of
assays. We amended the Collaborative Research and License Agreement with
Pfizer in March 2000. Pursuant to this amendment, we agreed to add
additional functionality to the AMCS Platform that we will deliver to
Pfizer. Concurrently with the amendment, Pfizer exercised an option to
license our GenomeScreen technology for use in assay development. In
September 2000, Pfizer licensed the right to use our Vivid fluorogenic
substrates for internal research and drug development, including the
development of assays. In connection with this agreement, we will receive
annual license fees, as well as payments for reagents over several years.
- Warner Lambert. In September 1997, we entered into a Collaborative
Research and License Agreement with Warner Lambert for the development
and installation of a UHTSS Platform. The collaboration includes
co-development of high throughput screening assays for use by Warner
Lambert in exchange for specified fees. Warner Lambert also licensed the
right to use our fluorescence assay technologies for internal research
and drug development, including the development of assays. We amended the
Collaborative Research and License Agreement in January 1999. Pursuant to
the terms of this amendment, we agreed to provide services to Warner
Lambert and granted to Warner Lambert licenses to use our GenomeScreen
technology. Warner Lambert will also make development milestone and
royalty payments to us for selected compounds it develops and
commercializes which were identified using an assay utilizing the
technologies licensed from us. In September 1998, we entered into a
separate agreement with Warner Lambert for the development and
installation of an AMCS Platform. All of our agreements with
Warner-Lambert currently remain in place following the acquisition of
Warner Lambert by Pfizer in June 2000.
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SERVICES, VIPR SUBSYSTEMS, REAGENTS AND LICENSES. We have entered into
agreements for assay development and in some cases screening services, VIPR
subsystems and reagents, and licenses to selected technologies with the
following companies:
- Eli Lilly
- GlaxoSmithKline
- Organon
- Pharmaceutical Division of American Home Products
- R.W. Johnson Pharmaceutical Research Institute and Janssen Research
Foundation
- Senomyx
In general, these companies are obligated to pay us for research funding,
equipment and reagents and license fees. In addition, we are entitled to
milestone payments and royalties on products derived by these third parties from
their use of our licensed technology, services and systems.
In addition, we have successfully completed collaborative research
agreements with Pharmacia & Upjohn, Becton Dickinson, F. Hoffmann-La Roche and
Cytovia (now part of Maxim Pharmaceuticals). While our research under these
agreements is complete, some of these collaborators have ongoing obligations to
pay us milestone payments and royalties on products they develop utilizing our
research or our technology.
LICENSES FOR FLUORESCENT PROTEINS. We have granted Clontech Laboratories,
Inc. the right to sell certain fluorescent proteins to the non-commercial,
academic research market. In return, Clontech pays us a royalty on sales of such
products. In addition, We have licensed certain rights to our fluorescent
proteins to various companies, including:
- Acacia Biosciences
- AntiCancer
- Ceres
- Deltagen
- Exelixis Pharmaceuticals
- Genentech
- Rigel
- Senomyx
- Wyeth-Ayerst
- ZymoGenetics
In general, our licensees are obligated to pay us technology access fees,
annual maintenance fees and in some cases milestone payments and royalties.
COMPETITION
The market for drug discovery products and services is highly competitive.
There are a number of companies who compete with us in various aspects of our
business. For instance, companies such as Cellomics, Discovery Partners
International, Evotec and Molecular Devices develop and commercialize
proprietary research tools, reagents, instruments and systems which compete with
our proprietary screening platforms and reagents. There are also a number of
companies, such as Albany Molecular Research, ArQule, Array Biopharma, Cambridge
Drug Discovery, Discovery Partners International, Oxford Asymmetry, Pharmacopeia
and Tripos, that develop and commercialize compound libraries and use their
chemistry capabilities to test, screen and optimize potential drug candidates.
Other companies, such as 3-Dimensional Pharmaceuticals, Vertex, Millennium, HGSI
and OSI, possess broad drug discovery and development capabilities and may
compete with us for large-scale drug discovery collaborations.
Also, in many cases, our pharmaceutical company customers have internal
departments which provide products and services similar to ours, so these
customers may have limited needs for our products and services. Many of our
competitors listed above have significantly greater financial, operational,
sales and marketing resources than we do. In addition, these competitors and
other companies or research or academic institutions may have developed, or
could in the future develop, new technologies that compete with our products and
services or that could render some or all of our products and services obsolete.
Any of these competitors could also broaden their drug discovery offerings
through acquisition, collaboration or
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internal development to integrate their offerings and/or compete with us in all
phases of drug discovery that we currently serve.
In addition, the success of our current drug discovery collaborations and
our own Big Biology initiative will depend on our ability to discover novel drug
candidates in a timely and cost-effective manner. To accomplish this objective,
we may need to acquire or gain access to medicinal and combinatorial chemistry
capabilities, pharmacology expertise and animal models of diseases. Many of our
potential competitors in these markets, including many biotechnology companies,
large pharmaceutical companies and public and private institutions, have
substantially greater financial, technical and marketing resources than we do.
Our ability to compete successfully will depend on our ability to develop
proprietary products that reach the market in a timely manner and are
technologically superior to and/or are less expensive than other products on the
market. Our technologies and products may be rendered obsolete or uneconomical
by technological advances or entirely different approaches developed by one or
more of our competitors.
MANUFACTURING
We currently manufacture the UHTSS Platform, the AMCS Platform, the sample
distribution system, and the VIPR and VIPR II at our facilities in San Diego,
California, except certain components of the UHTSS Platform and AMCS Platform,
which are purchased from Universal Technologies, Inc., and the enclosures for
the UHTSS Platform and AMCS Platform, which are purchased from Environmental
Specialties, Inc.
In November 2000, we entered into an agreement with Greiner Bio-One, a
leading manufacturer of laboratory disposables. Under the terms of the
agreement, we granted Greiner Bio-One non-exclusive rights to develop,
manufacture, market and distribute microplates and other plastic consumables,
including our 3,456-well NanoWell Assay Plate for use in our UHTSS Platform, and
storage plates, tubes and racks for use in our AMCS Platform. In exchange for
such rights, Greiner Bio-One paid us an up-front technology access fee and is
obligated to pay us royalties on sales of licensed products, including new
products developed under the agreement.
PROPRIETARY RIGHTS
Our intellectual property consists of patents, copyrights, trade secrets
and trademarks. Protection of our intellectual property is a strategic priority
for our business. Our ability to compete effectively depends in large part on
our ability to obtain patents for our technologies and products, maintain trade
secrets and operate without infringing the rights of others, and to prevent
others from infringing our proprietary rights. As of January 1, 2001, we owned
or exclusively licensed 42 issued patents covering our technologies. In
addition, we have received notices of allowance with respect to seven patent
applications and have over 120 patents pending worldwide.
Our patent portfolio covers our UHTSS Platform, NanoWell plates,
ion-channel screening platform, GenomeScreen, GeneBLAzer and Phosphorylight
technologies, fluorescent proteins, Vivid fluorogenic substrates and universal
G-proteins.
EXCLUSIVE LICENSES FROM UNIVERSITIES. Certain aspects of our fluorescent
protein technology and ion channel technology are exclusively licensed from the
Regents of the University of California. Pursuant to the terms of our Exclusive
License Agreement with the Regents of the University of California, we are
obligated to pay to the Regents expenses associated with patent prosecution and
maintenance, license fees and royalties. In addition, certain aspects of our
fluorescent protein technology are exclusively licensed from the University of
Oregon. Under the terms of our License Agreement with the University of Oregon,
we are obligated to pay to the University of Oregon expenses associated with
patent prosecution and maintenance and annual payments. In addition, in 2000 we
issued 5,000 shares of our Common Stock to the University of Oregon and its
designees following the issuance of a patent related to the subject technology.
Finally, certain aspects of our universal G-protein technology are exclusively
licensed from the California Institute of Technology. Pursuant to the terms of
our License Agreement with the California Institute of Technology, we are
obligated to pay to the California Institute of Technology expenses
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associated with patent prosecution and maintenance. In addition, in 1996 we
issued 35,000 shares of our Common Stock to the California Institute of
Technology.
NON-EXCLUSIVE LICENSE FROM SIBIA. We have been granted a non-exclusive
license from SIBIA Neurosciences, Inc., with the right to grant sublicenses,
under patent rights covering transcription-based assay technology for screening.
Pursuant to the terms of our Non-Exclusive Cross-License Agreement with SIBIA,
we have granted to SIBIA a non-exclusive license to certain of our technologies,
and we issued shares of our common stock to SIBIA. We are also obligated to pay
each other royalties. SIBIA was acquired by Merck in September 1999.
NON-EXCLUSIVE LICENSE FROM OSI. We have been granted a non-exclusive
license, including the right to grant sublicenses, from OSI Pharmaceuticals,
Inc. under its issued reporter gene patent and options to OSI's Methods of
Modulation patent, for which the U.S. Patent Office has allowed claims. Pursuant
to the terms of the License Agreement, we issued shares of our common stock to
OSI and made a cash payment to OSI. In addition, OSI will receive revenues from
any sublicenses granted by us to our pharmaceutical partners, plus annual fees,
milestone payments and royalties under pre-agreed terms from any option
exercised by us or our partners to develop small molecule gene transcription
modulators encompassed by the Methods of Modulation patent.
The patent positions of biotechnology companies, including our patent
position, involve complex legal and factual questions and, therefore,
enforceability cannot be predicted with certainty. Patents, if issued, may be
challenged, invalidated or circumvented. We cannot be sure that relevant patents
have not been issued that could block our ability to obtain patents or to
operate our business. Other parties may develop similar technologies as those
developed by us.
The biotechnology industry is characterized by extensive litigation
regarding patents and other intellectual property rights. Many biotechnology
companies have employed intellectual property litigation as a way to gain a
competitive advantage. Other parties may sue us in the future to challenge our
patent rights or claim infringement of their patents. An adverse determination
in litigation or interference proceedings to which we may become a party could
subject us to significant liabilities to third parties, require us to license
disputed rights from third parties or require us to cease using the disputed
technology. We are aware of patents and patent applications relating to aspects
of our technologies filed by, and issued to, other parties. If any of our
competitors have filed patent applications or obtain patents that claim
inventions also claimed by us, we may have to participate in an interference
proceeding declared by the relevant patent regulatory agency to determine
priority of invention and, thus, the right to a patent for these inventions.
Such a proceeding could result in substantial cost to us even if the outcome is
favorable. Even if successful, an interference may result in loss of claims
based on patentability. Although patent and intellectual property disputes in
the biotechnology area are often settled through licensing or similar
arrangements, costs associated with these arrangements may be substantial and
could include ongoing royalties. Furthermore, we cannot be certain that the
necessary licenses would be available to us on satisfactory terms, if at all.
We also rely on trade secrets, proprietary know-how and continuing
invention to remain competitive. We have taken measures to protect our trade
secrets, proprietary know-how, technologies and confidential information. Our
policy is to execute confidentiality agreements with our employees and
consultants upon the commencement of an employment or consulting arrangement
with us. These agreements generally require that all confidential information
developed or made known to the individual by us during the course of the
individual's relationship with us to be kept confidential and not disclosed to
third parties. These agreements also generally provide that inventions conceived
by the individual in the course of rendering services to us shall be our
exclusive property. There can be no assurance that our proprietary information
will not be disclosed to other parties or that other parties will not
independently develop similar proprietary information and techniques or
otherwise gain access to our trade secrets.
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GOVERNMENT REGULATION
We are subject to various federal, state and local laws and regulations
relating to safe working conditions, laboratory and manufacturing practices, the
use and disposal of hazardous or potentially hazardous substances, including
radioactive compounds and infectious disease agents, used in connection with our
research. We have not been required to expend material amounts in connection
with our efforts to comply with such laws and regulations and we do not believe
that compliance with such requirements will have a material adverse effect upon
our capital expenditures, results of operations or competitive position. Because
the requirements imposed by these laws and regulations frequently change, we are
unable to predict the cost of compliance with these requirements in the future,
or the effect of these laws and regulations on our capital expenditures, results
of operations or competitive position.
Any drug candidate that we develop, either independently or under the terms
of a current or future collaboration, or that any of our collaborators develops
using our technology or products will be subject to extensive government
regulation by numerous governmental authorities in the United States and other
countries. Before marketing in the United States, any drug candidate must
undergo rigorous preclinical testing and clinical trials and an extensive
regulatory clearance process administered by the United States Food and Drug
Administration. The regulatory review and approval process is lengthy, expensive
and uncertain. The approval process takes many years, requires the expenditure
of substantial resources and involves post-marketing surveillance. Outside the
United States, the commercialization of any drug candidate will be contingent
upon receiving a marketing authorization from the appropriate foreign regulatory
authorities.
We currently anticipate that we will collaborate with third parties to
conduct clinical development and commercialization activities for any drug
candidates that we develop. Similarly, we do not expect to participate in the
clinical development or commercialization of any drug candidate that any of our
collaborators may identify using our technology or systems. Even if our
collaborators are able to successfully complete clinical testing for any drug
candidates they license from us or develop using our technology or systems, if
our collaborators do not obtain necessary regulatory approvals for those drug
candidates, we may not derive any future milestone or royalty payments under our
current or future collaboration agreements.
EMPLOYEES
As of January 1, 2001, we had 252 full-time employees, 48 of which hold
Ph.D. degrees and 43 of which hold other advanced degrees. In addition to
full-time employees, we use the services of contractors, part-time employees,
temporary staff and student interns. As of January 1, 2001, we had a total of 66
contractors, part-time employees and temporary staff and 15 student interns. Our
future success depends in significant part upon the continued service of our key
scientific, technical and senior management personnel and our ability to attract
and retain highly qualified technical and managerial personnel. None of our
employees are represented by a labor union or covered by a collective bargaining
agreement. We have not experienced any work stoppages and consider our relations
with our employees to be good.
FACILITIES
Our principal research and development, manufacturing and administrative
facilities are currently located in approximately 81,204 square feet of leased
space in San Diego, California. The lease for this space will expire on
September 15, 2008. We also sublease an additional 12,523 square feet of space
for our administrative functions in a nearby facility. The sublease for this
additional space will expire on March 31, 2002, subject to a six-month extension
of the sublease upon the mutual agreement of the parties. We also sublease an
additional 19,670 square feet of space for our manufacturing, purchasing,
inventory management and engineering document control functions under a sublease
that will expire on April 30, 2002, subject to options that we may exercise for
up to two extensions of three months each. To meet our expected growth needs, we
are currently in negotiations for the purchase of a parcel of land
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adjacent to our current headquarters on which we plan to construct a 67,772
square foot engineering and manufacturing facility. We also currently occupy
1,236 square feet of space in Iowa City, Iowa under a lease that expires October
31, 2001, after which the lease converts to a month-to-month arrangement. Our
Iowa facility houses the operations we acquired from Quorum Sciences in 2000.
LEGAL PROCEEDINGS
We are not presently a party to any material legal proceedings.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Any statements about our
expectations, beliefs, plans, objectives, assumptions or future events or
performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
like "anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "the Company believes," "the Company intends,"
"we believe," "we intend" or the negative of those terms and similar words or
phrases. Accordingly, these statements involve estimates, assumptions and
uncertainties which could cause actual results to differ materially from those
expressed in them. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed in this report or incorporated by
reference.
Aurora's actual results could differ materially from those expressed in
any forward-looking statements as a result of various factors, including those
discussed in Aurora's:
- Annual Report on Form 10-K for the year ended December 31, 1999, and
any amendments thereto;
- Quarterly Reports on Form 10-Q for quarters ended March 31, June 30
and September 30, 2000;
- Current Report on Form 8-K filed with the SEC on November 3, 2000, as
amended on December 14, 2000;
- Current Report on Form 8-K filed with the SEC on November 21, 2000;
- Registration Statement on Form S-4 (Registration No. 333-54638),
under the heading "Risk Factors -- Risks Relating to Aurora's
Business"; and
- Future filings with the SEC under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934.
Further, any forward-looking statement speaks only as of the date on
which it is made, and Aurora undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 7, 2001 AURORA BIOSCIENCES CORPORATION
/s/ STUART J.M. COLLINSON
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Stuart J.M. Collinson
President and Chief Executive Officer
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