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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Year Ended December 31, 1996
COMMISSION FILE NO. 0-27352
HYBRIDON, INC.
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(Exact name of registrant as specified in its charter)
Delaware 3072298
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
620 Memorial Drive, Cambridge, Massachusetts 02139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 528-7000
Securities registered pursuant to Section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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. [ ]
On March 14, 1997, the aggregate market value of voting Common Stock held
by nonaffiliates of the registrant was $118,762,093, based on the last reported
sale price of the registrant's Common Stock on the Nasdaq National Market on
March 14, 1997. There were 25,173,502 shares of Common Stock outstanding as of
March 14, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Part of Form 10-K
DOCUMENT INTO WHICH INCORPORATED
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Portions of the Registrant's Proxy Statement Items 10, 11, 12 and 13
with respect to the Annual Meeting of Stockholders of Part III
to be held on May 19, 1997
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PART I
ITEM 1. BUSINESS.
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GENERAL
Hybridon, Inc. ("Hybridon" or the "Company"), established in 1989, is a
leader in the discovery and development of novel genetic medicines based
primarily on antisense technology. Antisense technology involves the use of
synthetic segments of DNA (oligonucleotides) constructed through rational drug
design to interact at the genetic level with target messenger RNA, which codes
for the production of proteins. In contrast to traditional drugs, which are
designed to interact with protein molecules associated with diseases, antisense
drugs work at the genetic level to interrupt the process by which
disease-causing proteins are produced. Drugs based on antisense technology may
have broader applicability, greater efficacy and fewer side effects than
conventional drugs because antisense compounds are designed to intervene early
in the disease process at the genetic level and in a highly specific fashion.
Hybridon has established a leadership position in the antisense field by
developing an integrated antisense technology platform based on a combination of
patented and proprietary medicinal chemistries, synthetic DNA manufacturing
technology and analytical processes. The Company's strategy is to leverage this
technology platform by applying its oligonucleotides against a range of genetic
targets associated with major diseases, by manufacturing oligonucleotides for
its own internal use and on a custom contract basis for sale to third parties
and by extending its medicinal chemistries to additional targets through
collaborations with large pharmaceutical company partners.
Hybridon's first gene expressive modulation ("GEM") drug candidate, GEM 91
for the treatment of HIV-1 infection and AIDS, is in a confirmatory Phase II
clinical trial in advanced AIDS patients. This trial is designed to confirm the
preliminary findings from the Company's Ib/II clinical trials of GEM 91 in the
U.S. in which a significant decrease was observed in the quantities of cell-
associated HIV-1 in circulating blood cells of patients with characteristics of
advanced HIV disease. Hybridon is also conducting clinical trials of GEM 132, an
advanced chemistry antisense compound for the treatment of CMV. The first trial
involves the treatment of CMV retinitis in AIDS patients by intravitreal
injection in the eye; the second trial involves the treatment of systemic CMV by
intravenous administration. Hybridon believes that its clinical trials of GEM 91
were the first human clinical trials involving intravenous or other systemic
administration of an antisense oligonucleotide for the treatment of a viral
disease and that its clinical trials of GEM 132 were the first human clinical
trials involving administration of an advanced chemistry oligonucleotide into
humans.
The Company plans to commence clinical trials of three additional product
candidates in the second half of 1997: GEM 231, an antisense compound being
developed to inhibit the production of protein kinase A, which is associated
with many cancers; GEM 92, an antisense compound being developed for the
treatment of HIV-1 infection and AIDS by oral administration; and GEM 220, an
antisense compound being developed to target vascular endothelial growth factor
for the treatment of various cancers. All three of these compounds are based on
Hybridon's advanced antisense chemistries and, the Company believes, have the
potential for oral administration.
In 1996, Hybridon formed its Hybridon Specialty Products Division to
manufacture highly purified oligonucleotide compounds both for the Company's
internal use and on a custom contract basis for sale to third parties, including
the Company's collaborative partners. The Company is manufacturing
oligonucleotides in compliance with GMP at its 36,000 square foot leased
manufacturing facility, which the Company believes is the first commercial-scale
synthetic DNA production facility with a fully integrated manufacturing
technology platform, including large-scale synthesis, purification
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and proprietary analytical support. The Division first began production of
oligonucleotide compounds for sale to third parties in June 1996 and by the end
of 1996 had achieved sales revenues of approximately $1.1 million. The Division
also has received orders to provide analytical services and plans to expand its
product offerings to include proprietary intermediates used in the manufacture
of oligonucleotides. In order to strengthen the marketing of the Division's
products, the Company has entered into a sales and supply agreement with the
Applied Biosystems Division of the Perkin-Elmer Corporation ("Perkin-Elmer")
under which Perkin-Elmer refers potential customers to the Company.
Because of the broad applicability of Hybridon's antisense technology
platform and its patent estate, the Company's strategy is both to pursue
research and development programs on its own and to form a variety of
collaborations with pharmaceutical and biotechnology companies and academic and
research institutions. These collaborations provide Hybridon with access to
resources and expertise not otherwise available and enable the Company to
conserve its resources while accelerating research and development. To date,
Hybridon has entered into corporate collaborations with G.D. Searle & Co.
("Searle"), a subsidiary of Monsanto Company, in the field of
inflammation/immunomodulation, F. Hoffmann-La Roche Ltd. ("Roche") relating to
human papilloma virus and hepatitis C virus, and Medtronic, Inc. ("Medtronic")
involving the development of a drug delivery device for use in delivering
Hybridon's antisense compounds for the treatment of Alzheimer's disease. The
Company has developed lead compounds for each of the two disease targets in the
Roche collaboration and has received associated milestone payments from Roche.
The Company's accomplishments to date have been based on its integrated
antisense technology platform, which includes:
- Advanced Medicinal Chemistries. Hybridon's scientists have designed and
produced over 20 proprietary families of synthetic antisense
oligonucleotide chemistries. The Company believes that antisense
compounds based on these chemistries will demonstrate a range of
favorable pharmaceutical attributes and provide flexibility in
addressing many biological targets. In particular, the Company believes
that its advanced chemistries provide the potential for enhanced
metabolic stability, which may result in less frequent dosing and
therefore lower costs of therapy. In addition, the Company believes that
its advanced chemistries provide the potential for oral administration.
In this regard, in a preclinical test in which an advanced antisense
oligonucleotide developed by the Company was administered orally to nude
mice in which human colon and breast cancer cells had been implanted, a
significant antisense-specific anti-tumor effect was exhibited.
- Manufacturing Technology. The Company has developed a manufacturing
technology platform which integrates key elements of the manufacturing
process. In 1996, the Company completed development of two separate
commercial scale oligonucleotide synthesizers, one in an internal
program and one in a collaboration with Pharmacia Biotech, Inc.
("Pharmacia"). The synthesizer developed by Hybridon is specifically
designed to produce advanced chemistry antisense oligonucleotides. In
addition, the Company has implemented proprietary purification
processes, which use water in place of chemical solvents, simplifying
environmental compliance and permitting purification of kilogram batches
of oligonucleotides. The advances made by the Company in oligonucleotide
manufacturing technology have enabled the Company to reduce its direct
oligonucleotide unit production costs by approximately 50% annually
since 1991. Because antisense compounds targeted at different diseases
can be manufactured with the same nucleotide building blocks and using
the same manufacturing processes and equipment with minimal adjustments,
the knowledge and experience that the Company obtains in the manufacture
of each compound is substantially applicable to the manufacture of other
oligonucleotide compounds for the treatment of other diseases and
results in significant manufacturing efficiencies.
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- Proprietary Analytical Tools and Processes. Hybridon has developed
proprietary analytical tools and processes that enable the Company to
analyze the chemical purity, base sequencing and composition of its
oligonucleotides with greater speed and accuracy than existing
analytical processes. In particular, the Company has developed
proprietary laser induced fluorescence and physical sequencing mass
spectrometry which enables the Company to directly sequence advanced
chemistry oligonucleotides which is not possible using more traditional
enzymatic and chemical methods. The Company uses the information that it
obtains with its analytical tools and processes to improve production
quality control, to comply with regulatory requirements and to monitor
the pharmacokinetic behavior of its oligonucleotide compounds in
preclinical studies and clinical trials.
Hybridon seeks to establish a comprehensive proprietary position through a
"layered" patent strategy covering the Company's families of oligonucleotide
chemistries, the antisense sequences of the Company's oligonucleotide compounds
and the chemical compositions of these oligonucleotide compounds. The Company
believes that this approach may provide it with at least three independent
levels of protection. Hybridon also seeks to protect its proprietary analytical
and manufacturing processes. Hybridon owns or exclusively licenses 23 issued
U.S. patents, six issued European patents, 31 allowed U.S. patent applications,
eight allowed European patent applications and 168 other U.S. patent
applications. One of the issued U.S. patents and one of the issued European
patents broadly claim antisense oligonucleotides targeted at HIV, four of the
issued U.S. patents and 63 of the U.S. patent applications relate to antisense
oligonucleotides targeted at genes which are implicated in diseases such as
cancer and viral and bacterial infections, seven of the issued U.S. patents and
38 of the U.S. patent applications relate to the Company's medicinal
chemistries, including one issued U.S. patent that broadly claims methods of
orally-administering advanced chemistry oligonucleotides, and six of the issued
U.S. patents and 47 of the U.S. patent applications relate to oligonucleotide
production.
TECHNOLOGY OVERVIEW
Introduction
Proteins play a central role in virtually every aspect of human
metabolism. Almost all human diseases are the result of inappropriate protein
production or performance. Traditional drugs are designed to interact with
protein molecules that support or create diseases. Antisense drugs work at the
genetic level to interrupt the process by which disease-causing proteins are
produced.
The information necessary to produce a specific protein is encoded in a
specific gene. The information required to produce all human proteins is
contained in the human genome and its collection of more than 100,000 genes.
Each gene is made up of DNA, which is a duplex of entwined strands -- a "double
helix." In each duplex, the building blocks of DNA, called nucleotides, are
bound or "paired" with complementary nucleotides on the other strand. The
precise sequence of a nucleotide chain that is the blueprint for the information
that is used during protein production is called the "sense" sequence. The
sequence of a nucleotide chain that is precisely complementary to a given sense
sequence is called its "antisense" sequence.
Protein synthesis or expression typically involves a two-phase process.
First, the information contained in the gene is transcribed from the sense
strand of DNA into one or more molecules of messenger RNA. Second, the
information encoded in the messenger RNA is translated into the sequence of
amino acids that comprise the protein. The information contained in a single
gene is often repeatedly transcribed into multiple copies of messenger RNA,
which in turn are repeatedly translated, giving rise to multiple copies of the
same protein.
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Conventional Drugs
Most drugs are chemicals designed to induce or inhibit the function of a
target molecule, typically a protein, with as few unwanted side effects as
possible. However, conventional drugs are not available for the treatment of
many diseases because of their relatively low level of selectivity. The
selectivity of conventional drugs is usually determined by only a few, generally
two or three, points of interaction at the binding site of the target molecule.
Frequently, sites on other non-target molecules resemble the target binding site
sufficiently to permit the conventional drug to bind to some degree. This lack
of selectivity may result in decreased efficacy, unwanted side effects or a need
to administer the drug in less than optimal dosages due to toxicity concerns. In
addition, the development of conventional drugs is generally time consuming and
expensive, as thousands of compounds must be synthesized to find one with the
right efficacy and side effect profile.
Gene Expression Modulation
In contrast to conventional drugs, which usually interact with
disease-associated proteins after they have been produced, gene expression
modulation technology is intended to regulate the production of
disease-associated proteins, thus targeting an earlier biochemical process.
Advances in genomic science have identified many targets for gene expression
modulation products. Once a gene that codes for a disease-associated protein is
identified, an oligonucleotide based on the complementary sequence for the
selected site can be synthesized and its pharmaceutical properties optimized by
chemical modification. These chemically-modified oligonucleotides may be
composed of DNA, RNA or a combination of the two.
Chemically-modified oligonucleotides can be designed to attack a disease
at the genetic level by binding to messenger RNA or DNA to prevent production of
disease-associated proteins. Binding to messenger RNA generally is used in the
"antisense" and "ribozyme" approaches to gene expression modulation, while
binding to the DNA generally is used in the "triplex" approach to gene
expression modulation.
In the antisense approach to gene expression modulation,
chemically-modified oligonucleotides, which consist of the antisense sequence to
a selected region on a target messenger RNA, are used to inhibit the synthesis
of a particular protein. Because the sequence of nucleic acid bases of a
chemically-modified antisense oligonucleotide is complementary to its target
sequence on a messenger RNA, the antisense oligonucleotide forms a large number
of bonds at the target site, typically in excess of 35, practically assuring
that the oligonucleotide will hybridize (bind) tightly to the selected type of
messenger RNA. Since a single messenger RNA may be translated repeatedly into a
protein, a single chemically-modified antisense oligonucleotide may inhibit the
synthesis of many copies of a protein. Moreover, in vitro tests have shown that
certain chemically-modified antisense oligonucleotides form complexes with their
target messenger RNAs. These complexes activate RNase H, a cellular enzyme, in a
manner that destroys the messenger RNA to which the oligonucleotide is bound,
without destroying the oligonucleotide itself, thus freeing the oligonucleotide
to bind with another identical messenger RNA.
Ribozymes are RNA molecules that have the ability to cleave other RNA
molecules. Ribozymes contain a catalytic core along with an oligonucleotide
sequence complementary to a sequence on the target messenger RNA. As with
enzymes, ribozymes function catalytically when cleaving other RNA molecules and
thus are not themselves permanently affected by the process. As with antisense
oligonucleotides, ribozymes bind selectively with target RNAs. Therefore, a
single ribozyme molecule will cleave a specific target messenger RNA molecule
with which the ribozyme becomes bound. That same ribozyme will then be free to
bind with another identical messenger RNA molecule and repeat the cleaving
function. Because of their catalytic activity, ribozymes may have advantages
over antisense oligonucleotides in situations in which cellular RNase H is not
abundant or
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cannot be activated. Ribozymes have had limited utility as potential drugs
because of their relatively large size, which increases the expense of
synthesizing these molecules; the difficulty in increasing their stability
through chemical modification; and the limited nature of the catalytic activity
of synthetic ribozymes, particularly at magnesium levels present in human cells.
The triplex approach involves the interaction of oligonucleotides directly
with the appropriate region of the double-stranded DNA comprising the target
gene, thus resulting in a triplex structure and physically interfering with the
transcription of DNA into messenger RNA. The triplex approach typically does not
involve the destruction of the region of DNA to which the oligonucleotides are
bound, in contrast with the effects of antisense oligonucleotides and ribozymes
on messenger RNA. Constraining factors to the triplex approach to date have been
the difficulty of obtaining access for oligonucleotides to the DNA, the relative
weakness of the bonding of the oligonucleotides with the DNA and concerns over
compounds that interact directly with the DNA genetic information.
HYBRIDON TECHNOLOGY
Antisense
Hybridon has developed an integrated antisense technology platform based
on proprietary medicinal chemistries, analytical chemistry and manufacturing
technology. The development of Hybridon's antisense technology has been directed
by Dr. Sudhir Agrawal, the Company's Chief Scientific Officer, along with Drs.
John Goodchild and Jin-Yan Tang, two of the Company's principal scientists, and
builds on the pioneering work in the antisense field begun in the 1970s by Dr.
Paul C. Zamecnik, a founder and director of the Company and Chairman of its
Scientific Advisory Board, at the Massachusetts General Hospital ("MGH") and
continued by Dr. Zamecnik at the Worcester Foundation for Biomedical Research,
Inc. (the "Worcester Foundation").
Medicinal Chemistries. Hybridon's scientists have designed and synthesized
over 20 proprietary families of synthetic antisense oligonucleotide chemistries.
The Company believes that antisense compounds based on these chemistries may
demonstrate a range of favorable pharmaceutical attributes, including: reduced
side effects, increased duration of action, increased potency and susceptibility
to lower dosing, less frequent dosing, controlled release formulation and
alternative routes of administration, including oral administration. Hybridon
designed its first generation phosphorothioate oligonucleotides to increase
their resistance to enzymatic degradation and their biological activity and to
act catalytically by triggering RNase H. GEM 91 is such a phosphorothioate-
modified oligonucleotide. Hybridon has used the insights gained by it in the
development and ongoing human clinical trials of GEM 91 in the design of its
more advanced oligonucleotide chemistries.
In addition to developing advanced oligonucleotide chemistries, Hybridon
is developing new formulations of its antisense oligonucleotides to optimize
their pharmaceutical properties. Data from in vivo studies in a rat model of
Hybridon's antisense oligonucleotide formulated with the chemical cyclodextrin
suggest that such compounds would exhibit increased cellular uptake, lower
immunostimulatory effects, a generally enhanced safety profile and improved
stability. In in vitro tests, a formulation of Hybridon's antisense
oligonucleotide with protamine also demonstrated reduced immunostimulatory
effects.
Hybridon has also developed substantial expertise in the selection of
molecular targets for its antisense compounds. The Company's studies of DNA and
messenger RNA from a large number of viruses, other infectious organisms and
cancer cells have yielded an improved understanding by Company scientists of RNA
structure and the importance of particular RNA sequences to the processing of
messenger RNA and the translation of proteins. This knowledge enhances the
Company's ability to select attractive target sites and thereby increases the
efficiency of Hybridon's
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drug development programs. The Company has developed in vitro tests which can
select preferred oligonucleotide binding sequences on messenger RNA. The Company
also employs conventional computer-based rational drug design to select
attractive binding sequences.
Manufacturing Technology. The Company's expertise in the structure, design
and analysis of chemically-modified oligonucleotides has served as the
foundation of its manufacturing technology and know-how. The Company has
developed proprietary technology to increase the purity of oligonucleotide
products, enhance the efficiency of the production process and increase the
scale of production. In 1996, the Company completed development of two separate
commercial scale oligonucleotide synthesizers, one in an internal program and
one in a collaboration with Pharmacia. The synthesizer developed by Hybridon is
specifically designed to produce advanced chemistry antisense oligonucleotides.
In addition, the Company has implemented proprietary purification processes,
which use water in place of chemical solvents, simplifying environmental
compliance and permitting purification of kilogram batches of oligonucleotides.
The Company has also developed proprietary chemical synthesis processes and
novel reagents used in the synthesis process, which the Company believes may
further decrease the cost of production of its modified oligonucleotides.
Proprietary Analytical Tools and Processes. The Company has established
proprietary analytical tools and processes that enable it to analyze
oligonucleotide compounds with greater speed and accuracy when compared to
traditional methods. Hybridon has developed a novel method of determining
antisense purity that is sensitive to a single DNA base difference; this method
is significantly more accurate than traditional chromatography methods. The
Company is also able to sequence and identify short strands of DNA at the
subparts-per-billion level, allowing Hybridon's scientists to trace the compound
through the metabolic pathway and assess the compound's bioavailability. The
Company uses the information that it obtains with its proprietary analytical
tools and processes to improve production quality control, to comply with
regulatory requirements and to monitor the pharmacokinetic behavior of its
oligonucleotide compounds in preclinical studies and clinical trials.
Ribozyme
Hybridon believes that the ribozyme approach of gene expression modulation
is complementary to the Company's antisense technology because the Company's
oligonucleotide drug development, production and analytic and advanced medicinal
chemistry technology are all directly applicable to this approach.
Hybridon's ribozyme research group is working on the development of
ribozymes which may exhibit favorable pharmaceutical attributes, such as
improved catalytic activity and greater resistance to degradation by cellular
enzymes, the development of oligonucleotides with ribonuclease-like activity
that do not contain enzymatic RNA and the development of shorter length
ribozymes which are easier and less expensive to synthesize. The Company has
developed a method of using ribozymes in the presence of antisense
oligonucleotides that bind to a site on the target messenger RNA immediately
adjacent to the site of ribozyme binding. These antisense oligonucleotides act
as facilitators for the binding of ribozymes and, in in vitro tests, have
allowed the use of shorter length ribozymes. Also in in vitro tests, the Company
has shown that the presence of antisense oligonucleotide facilitators increases
the catalytic activity of ribozymes, thereby potentially increasing the potency
of these compounds, and promotes ribozyme activity at concentrations of
magnesium naturally occurring in human cells. Synthetic ribozymes generally
cleave poorly or not at all in such low levels of magnesium. Another ribozyme
approach under research by the Company involves the combination of
oligonucleotides that do not activate RNase H with ribozymes that act in a
catalytic manner, thereby offering the prospect of lower dosing of the
oligonucleotide. The Company is engaged in additional studies to improve the
pharmaceutical properties of ribozymes against various disease targets.
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HYBRIDON DRUG DEVELOPMENT AND DISCOVERY PROGRAMS
Hybridon is focusing its development efforts on products for the treatment
of diseases for which the gene encoding the target protein is well
characterized; that afflict a substantial number of people; for which there are
significant unmet clinical needs, particularly diseases for which there is no
current drug therapy or for which available therapies have unacceptable side
effects; and for which expedited regulatory review processes reasonably may be
expected. Based on these criteria, Hybridon is directing its drug development
efforts at the treatment of HIV-1 infection and AIDS, other viral and infectious
diseases, cancers and certain metabolic disorders.
The following table summarizes Hybridon's principal product development
and discovery programs. All of these programs involve the discovery and
development of chemically-modified oligonucleotides using the antisense approach
to gene expression modulation. This table is qualified in its entirety by
reference to the more detailed descriptions elsewhere in this Annual Report on
Form 10-K.
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Primary Therapeutic
TARGET Indication(s) STATUS(1)
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HIV-1 AND AIDS
HIV-1........................ HIV-1 Infection and AIDS GEM 91 - Phase II Clinical
Trials
HIV-1 Infection and AIDS GEM 92 - Preclinical
(Intravenous and Oral
Formulations)
VIRAL AND INFECTIOUS
DISEASES
Cytomegalovirus.............. CMV Retinitis GEM 132 for Intravitreal
Injection - Phase I/II Clinical
Trials
CMV (Systemic) GEM 132 for Systemic
Injection - Phase II Clinical
Trials
Human Papilloma Virus........ Genital Warts; Cancer Preclinical (2)
Hepatitis C Virus............ Hepatitis; Liver Cancer Lead Compounds (2)
Hepatitis B Virus............ Hepatitis; Liver Cancer Research Compounds
CANCERS
Protein Kinase A............. Cancer GEM 231 - Preclinical
(Intravenous and Oral
Formulations)
Vascular Endothelial Growth
Factor....................... Cancer Angiogenesis GEM 220 - Preclinical
Multiple Drug Resistance..... Cancer Chemotherapy Preclinical
DNA Methyltransferase........ Cancer Lead Compounds (3)
METABOLIC DISORDERS
Vascular Endothelial Growth
Factor....................... Retinopathies Preclinical
Psoriasis Preclinical
Amyloid Precursor Protein.... Alzheimer's Disease Lead Compounds
ApoE-4....................... Alzheimer's Disease Lead Compounds
- ----------------------------- --------------------------- -----------------------------
(1) Preclinical: Compounds are undergoing additional testing and alternative
chemistries are being evaluated in biological assays and/or appropriate
animal models in order to assess efficacy, toxicology and pharmacokinetics
and to select particular chemistries with optimal pharmaceutical
attributes. If these procedures are completed satisfactorily and other
scientific and financial criteria are met, the Company may initiate
investigational new drug ("IND")- enabling Good Laboratory Practices
("GLP") studies and begin preparation of an IND application.
Lead Compounds: One or more antisense compounds have demonstrated
biological activity for a particular gene target in a specific and relevant
biological assay.
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Research Compounds: Appropriate target gene(s) and sequence(s) are being
determined; antisense compounds are being synthesized and screened for
biological activity.
(2) Being developed as part of collaboration with Roche. See "Item 1. Business
-- Corporate Collaborations -- F. Hoffmann-La Roche Ltd."
(3) Technology relating to target has been licensed to and is being developed
by Methylgene Inc., a Canadian company co-founded by the Company and in
which the Company owns a minority interest ("Methylgene"). See "Item 1.
Business -- Financial Collaborations -- Methylgene Inc."
HIV-1 and AIDS
AIDS is caused by infection with HIV and leads to severe, life-threatening
impairment of the immune system. HIV causes immunosuppression by attacking and
destroying T-cells, which coordinate much of the network of normal immune
responses. HIV infection usually leads to AIDS, although progression to
symptomatic disease may take many years. The process of HIV replication involves
the integration of a DNA copy of the viral RNA into the human genome, the
transcription of the DNA copy into messenger RNA ("reverse transcription") and
the synthesis of viral proteins and copies of viral RNA for packaging into new
virus particles that may infect other cells.
As of June 30, 1996, approximately 548,100 cases of AIDS had been reported
to the U.S. Centers for Disease Control and Prevention, and the current
population of surviving AIDS patients in the U.S. was estimated to be
approximately 200,000. As of June 30, 1996, AIDS was the leading cause of death
in the U.S. for men between the ages of 25 and 44 and the third leading cause of
death in the U.S. for women between the ages of 25 and 44. The U.S. Public
Health Service estimates that more than 1,000,000 other people in the U.S. are
infected with HIV. As of June 30, 1996, the World Health Organization (the
"WHO") reported that approximately 1,394,000 AIDS cases had been reported
worldwide, but it estimated that the actual total number of cases was over
7,700,000. The WHO also estimated that, as of June 30, 1996, approximately
21,800,000 individuals were infected with HIV/AIDS worldwide.
Therapies that have received U.S. Food and Drug Administration ("FDA")
marketing approval for the treatment of HIV infection and AIDS include two
classes of products: reverse transcriptase inhibitors and inhibitors of HIV-1
protease, known as protease inhibitors. Both types of drugs are inhibitors of
viral enzymes and have shown efficacy in reducing the concentration of viral RNA
(HIV) in the blood and in prolonging the asymptomatic periods in HIV-positive
individuals, especially when administered in combination. However, not all
patients have benefitted from these drugs, when used in combination or
otherwise, and problems remain with respect to patient compliance regimens and
certain toxic side effects. In addition, it is not known to what extent HIV will
develop resistance over time to these drugs.
GEM 91. The Company is enrolling patients for a Phase II clinical trial of
GEM 91 in the U.S. This trial will involve the administration of GEM 91 in an
open label trial in which GEM 91 will be administered for a two-week period to
up to 24 HIV-positive patients with characteristics of advanced HIV disease.
This trial is designed to confirm the preliminary findings from the Company's
Phase Ib/II clinical trials of GEM 91 in the U.S. in which a decrease was
observed in the quantities of cell-associated HIV-1 in circulating blood cells
of patients with characteristics of advanced HIV disease.
In 1993 and 1994, the Company conducted Phase Ia clinical trials of GEM 91
in the U.S. and in France in conjunction with the Agence Nationale de Recherches
sur le SIDA (the "ANRS"). The Company believes that these trials were the first
human clinical trials involving intravenous or other systemic administration of
an antisense oligonucleotide for the treatment of a viral disease. In these
trials, the Company administered ascending single doses of up to 3.5 mg/kg of
GEM 91 to 72 HIV-
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positive patients, administered by two-hour intravenous infusions. The Company
also conducted additional Phase Ia clinical trials of GEM 91 in Europe involving
27 normal volunteers to study the pharmacokinetic interaction of a combined
treatment of GEM 91 and AZT and to investigate the absolute bioavailability of
subcutaneously and intramuscularly administered GEM 91. GEM 91 was well
tolerated by all patients in the Phase Ia clinical trials without dose-limiting
toxicity or side effects.
In 1995, the Company initiated Phase Ib/II clinical trials of GEM 91 in
the U.S. and in France in conjunction with the ANRS. These trials are designed
to assess the safety and pharmacokinetics of repeated doses of GEM 91 and to
provide preliminary data on the drug's antiviral action in reducing viral load.
In the U.S. trials, daily doses of up to 4.4 mg/kg/day of GEM 91 have been
administered by continuous intravenous infusion for periods of between eight and
14 days. In the French trials, GEM 91 was administered by intermittent two hour
intravenous infusions for periods of up to 27 days at daily doses of up to 3.0
mg/kg/day. Through February 28, 1997, these trials have involved 176
HIV-positive patients. GEM 91 has been well tolerated by all patients in the
Phase Ib/II clinical trials without dose-limiting toxicity or side effects. In
addition, unblinded analysis of the on-going Phase Ib/II trials showed a
significant difference between treated and untreated patients in cellular
viremia (e.g. the quantities of infectious virus in circulating blood cells)
with a more pronounced difference in patients with characteristics of advanced
HIV. The Company is continuing these Phase Ib/II clinical trials in the U.S.
GEM 91 is a phosphorothioate antisense oligonucleotide comprised of 25
nucleotides. In certain specially-designed cell culture tests, GEM 91
demonstrated inhibition of HIV-1 replication at multiple stages in the virus
replication cycle: (i) by binding with surface proteins and inhibiting the
absorption of HIV into cells, (ii) by interfering with the reverse transcription
of viral RNA into DNA, and (iii) by binding with the gag-messenger RNA of HIV-1,
which is common to different viral strains (referred to as a "conserved region")
and which codes for a protein essential to viral replication. The multiple
mechanisms of action exhibited by GEM 91 in these in vitro tests may enhance the
likelihood that GEM 91 may delay the emergence of viral resistance to its
activity.
GEM 91 has demonstrated significant inhibition of the replication of HIV-1
in various cell culture tests of AZT-resistant and other primary human isolates.
In a cell culture model that was monitored for 187 days, GEM 91 inhibited HIV-1
replication without any significant resistance being observed. In a parallel
model that was monitored for 174 days, AZT inhibition of HIV-1 replication was
accompanied by the development of significant AZT resistance in the virus
population. In similar tests of protease inhibitors, significant resistance also
developed in the virus population. In tissue culture assays, GEM 91 suppressed
HIV-1 induced cytopathic effects on CD4 cells, thereby maintaining CD4 cell
population in a dose-dependent fashion. There can be no assurance that
preclinical tests will be predictive of the effect of GEM 91 in humans. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Certain Factors That May Affect Future Results -- Early Stage
of Development; Technological Uncertainty."
GEM 92. Using the insights gained in the development and ongoing clinical
trials of GEM 91 and employing chemistry advances developed by the Company, the
Company is developing GEM 92 for the treatment of HIV-1 infection and AIDS. GEM
92 is based on one of the Company's more advanced oligonucleotide chemistries.
Because GEM 92 also targets the gag messenger RNA, the Company believes that the
various attributes of GEM 91, including the multiple mechanisms of action, may
be equally applicable to GEM 92. GEM 92 has demonstrated significant inhibition
of the replication of HIV-1 in various human cell culture systems. In addition,
based on in vitro tests, the Company believes that GEM 92 may demonstrate
increased stability in comparison with GEM 91 and, as a result, longer duration
of action, thereby potentially permitting lower and less frequent dosing.
Because preclinical tests have demonstrated that other molecules with similar
chemical properties have the potential for oral administration, the Company
plans to systematically evaluate GEM 92 for potential oral use.
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Other Viral and Infectious Diseases
Cytomegalovirus. CMV is widespread in the human population as a persistent
subclinical infection. Approximately 70,000 to 150,000 cases occur each year in
the U.S., of which approximately one-half involve congenitally infected infants.
Infection by CMV is manifested clinically in certain individuals, particularly
in newborns, transplant recipients, cancer patients and AIDS patients. In
approximately 40% of all AIDS patients, clinical CMV may develop as a
progressive destruction of the retina (retinitis), resulting in blindness. In
transplant recipients, CMV may develop as a variety of diseases, including
pneumonitis.
The Company is conducting two clinical trials of GEM 132, its advanced
chemistry compound for the treatment of CMV: a Phase I/II clinical trial of GEM
132 for the treatment of CMV retinitis in AIDS patients by intravitreal
injection in the eye (the "IVT Formulation") and a Phase II clinical trial of
another formulation of GEM 132 for the treatment of systemic CMV by intravenous
administration (the "Systemic Formulation"). The Company's Phase I/II clinical
trials of the IVT Formulation are being conducted in the U.S. and France and
will involve the injection of the IVT Formulation into the vitreous humor of the
affected eye in up to 29 HIV-positive patients with CMV retinitis. These trials
are designed to assess the safety of GEM 132 and to provide preliminary data as
to the ability of GEM 132 to inhibit the progression of CMV retinitis in
individuals with AIDS.
The Company's Phase II clinical trials of the Systemic Formulation are
currently being conducted in France. The Company recently submitted an IND
covering the Systemic Formulation with the FDA and, subject to such IND becoming
effective, expects trials to begin in the U.S. in the second quarter of 1997.
These clinical trials will involve the intravenous administration of the
Systemic Formulation to up to 30 HIV-positive patients with CMV infections and
are designed to study the safety and pharmacokinetics of the Systemic
Formulation and the usefulness of several currently available tests as surrogate
markers to evaluate the efficacy of anti-CMV therapies.
In October 1996, the Company completed a Phase I safety and
pharmacokinetic trial of the Systemic Formulation in healthy, adult male
volunteers in the United Kingdom. In this trial, subjects received doses of the
Systemic Formulation ranging from 0.125 to 0.5 mg/kg in a single two hour
intravenous infusion. Results of this study provided data on safety, drug
distribution and metabolism. GEM 132 was well-tolerated by the subjects without
dose-limiting toxicity or side effects during administration and for the
subsequent 14-day follow-up period.
GEM 132 has demonstrated significant inhibition of the replication of
human cytomegalovirus in tissue culture assays. GEM 132 has demonstrated
activity in cell culture against both clinical isolates and viruses which have
become resistant to current therapies, such as ganciclovir. In addition, in cell
culture studies, GEM 132 has demonstrated significantly more potent anti-viral
activity than the two existing therapies against which it has been tested,
ganciclovir and foscarnet.
Human Papilloma Viruses. Human papilloma viruses are associated with a
variety of warts, including benign genital warts which, if untreated, can lead
to cervical cancer. Human papilloma viruses are found in more than 24,000,000
Americans, with an estimated 500,000 to 1,000,000 new cases each year. Genital
warts currently are among the most prevalent sexually transmitted diseases in
the U.S. Pursuant to its collaboration with Roche, Hybridon has identified
through joint research with Roche specific sequences on the messenger RNA of the
papilloma virus as targets for chemically- modified antisense oligonucleotides
and has synthesized chemically-modified antisense oligonucleotides that inhibit
human papilloma virus gene expression in tissue culture assays. These compounds
also have been shown in an animal model to be active in preventing virus damage
to tissues. Hybridon has achieved the first contractually specified development
milestone, designation of a lead compound, in the human papilloma virus program
under its collaboration with Roche.
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Hepatitis C Virus. There are approximately 3,500,000 people in the U.S.
carrying the hepatitis C virus, and approximately 150,000 individuals in the
U.S. become infected with hepatitis C each year. Approximately 80% of those who
contract the virus each year develop chronic hepatitis C infections and
approximately 30,000 cases each year ultimately result in cirrhosis of the
liver. Chronic infection due to hepatitis C is a significant disease in Japan
and other Pacific Rim countries that has been linked to the development of
primary liver cancer. Pursuant to its collaboration with Roche, Hybridon has
identified through joint research with Roche specific sequences on the messenger
RNA as targets for chemically modified antisense oligonucleotides and has
synthesized chemically-modified antisense oligonucleotides that inhibit
hepatitis C viral gene expression in in vitro and tissue culture assays.
Hybridon has achieved the first contractually specified development milestone,
designation of a lead compound, in the hepatitis C program under its
collaboration with Roche.
Hepatitis B Virus. Hepatitis B is a major health problem throughout the
world, with endemic infection in some less developed countries. Approximately
1,200,000 individuals in the U.S. carry the hepatitis B virus. There are an
estimated 200,000 to 300,000 new hepatitis B infections in the U.S. each year.
Hepatitis B infections can lead to liver cirrhosis and cancer of the liver.
Pursuant to its collaboration with Roche, Hybridon identified through joint
research with Roche specific sequences on the messenger RNA as targets for
chemically-modified antisense oligonucleotides and synthesized
chemically-modified antisense oligonucleotides that inhibit the expression of
hepatitis B virus in cell cultures. Although Roche has since determined not to
pursue this program, the Company is continuing its development efforts. All
rights relating to the Roche-sponsored research with respect to hepatitis B have
reverted to the Company.
Cancer
Approximately 1,380,000 new cancer cases are reported in the U.S.
annually. Cancers of all types result in approximately 560,000 deaths in the
U.S. each year, making cancer the second leading cause of death in the U.S. In
addition to surgery and radiotherapy, there are nearly 50 FDA-approved drug
therapies for the treatment of a variety of cancers, although many of these
therapies suffer from severe adverse side effects.
Protein Kinase A. Protein Kinase A ("PKA") is a protein that has been
shown to be expressed in human cancer cell lines and in primary tumors after
cells have been transformed with various oncogenes or after stimulation of cell
growth with cell growth stimulating factors. Based on cell culture studies, the
Company believes that overexpression of PKA may be associated with colon,
breast, ovarian and lung cancer. Hybridon has identified specific sequences on
the PKA gene as targets for chemically-modified antisense oligonucleotides and
has synthesized an advanced chemically-modified antisense compound, GEM 231,
that has demonstrated inhibition of the expression of PKA and tumor growth in
animal model studies. In these studies, repeated daily doses of Hybridon's
oligonucleotide compound administered either intraperitoneally or orally
resulted in reduction of PKA, with suppression of tumor growth for seven days.
The Company plans to commence clinical trials of GEM 231 in the second half of
1997.
Vascular Endothelial Growth Factor -- Cancer Angiogenesis. Vascular
Endothelial Growth Factor ("VEGF") is a growth factor that stimulates
angiogenesis, the process of new blood vessel formation. Angiogenesis plays a
major role in wound healing and organ regeneration and also is involved in
certain pathological processes, such as tumor growth and metastasis. VEGF has
been shown to be overexpressed in developing tumors and is believed to be a key
factor in providing new blood supply to feed developing tumors. Hybridon has
identified specific sequences on the VEGF messenger RNA as targets for
chemically-modified antisense oligonucleotides and has synthesized an advanced
chemically-modified antisense oligonucleotide, GEM 220, that has inhibited the
expression of the VEGF gene in in vitro and tissue culture assays. In an animal
model for solid tumor growth, this compound
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demonstrated tumor growth suppression. The Company plans to commence clinical
trials of GEM 220 in the second half of 1997.
Multiple Drug Resistance. Approximately 500,000 (or one-half) of the new
cancer cases reported each year are not curable by any conventional treatment.
In approximately one-half of these incurable cases, Multiple Drug Resistance
("MDR-1") gene expression is thought to play a predominant role in the cancers'
resistance to chemotherapy. Hybridon has identified specific sequences on the
messenger RNA as targets for chemically-modified antisense oligonucleotides and
has synthesized chemically- modified antisense oligonucleotides that inhibit the
expression of the MDR-1 gene in drug-resistant human cancer cells in tissue
culture assays and increase their sensitivity to anti-cancer drugs in such
assays. These compounds also have decreased MDR-1 expression in human tumors in
a mouse model and have shown activity in a murine leukemia model. In addition,
in in vitro and in vivo tests, these compounds sensitized formerly resistant
cancer cells to chemotherapeutic agents.
DNA Methyltransferase. DNA methyltransferase is a regulatory protein that
has been implicated in the processes of cell growth and differentiation and has
been shown to be overexpressed in some tumors, such as small cell lung cancer,
colon cancer and breast cancer. Hybridon has identified specific sequences on
the messenger RNA as targets for chemically-modified antisense oligonucleotides
and has synthesized chemically-modified antisense oligonucleotides that alter
DNA methylation of cultured human cancer cells and inhibit the ability of such
cells to grow in cell culture and their ability to form tumors in mice. The
Company has licensed the technology relating to the development of this compound
to Methylgene, which is currently developing this technology. See "Item 1.
Business -- Financial Collaborations -- Methylgene Inc."
Metabolic Disorders
Vascular Endothelial Growth Factor -- Retinopathies. Overexpression of
VEGF has been implicated in four major causes of blindness: late stage,
age-related macular degeneration, which currently afflicts approximately 500,000
people in the U.S.; proliferative diabetic retinopathy, the major cause of
blindness in diabetics which currently affects approximately 250,000 people in
the U.S.; central retinal vein occlusion, which currently afflicts approximately
200,000 people in the U.S.; and retinopathy of prematurity, which affects
approximately 10,000 premature newborns annually in the U.S. Hybridon has
identified specific sequences on the VEGF messenger RNA as targets for
chemically-modified antisense oligonucleotides and is synthesizing
chemically-modified antisense oligonucleotides designed to inhibit the
expression of the VEGF gene in retinal cells. These oligonucleotides have been
shown in an animal model of retinopathy to inhibit vascular proliferation and
prevent aberrant angiogenesis in the retinas of mice in a model for retinopathy
of prematurity. Hybridon's antisense oligonucleotides have also been shown to
inhibit neovascularization in a primate animal model of neovascularization.
Vascular Endothelial Growth Factor--Psoriasis. VEGF, in association with
its role in angiogenesis, has recently been implicated in psoriasis, which
currently afflicts more than 6,000,000 people in the U.S. with between 150,000
and 260,000 new cases in the U.S. each year. Hybridon has identified specific
sequences on the VEGF messenger RNA as targets for chemically-modified antisense
oligonucleotides and has synthesized chemically-modified antisense
oligonucleotides that have inhibited the expression of the VEGF gene in in vitro
and tissue culture assays. The Company is currently investigating optimal forms
of topical delivery to the basal layers of the epidermis, where VEGF has been
found to be overexpressed in psoriasis.
Amyloid Precursor Protein. Alzheimer's disease is a neurodegenerative
disease which is the most common cause of dementia in the elderly. It is
estimated to affect approximately 4,000,000 individuals in the U.S. The presence
of amyloid precursor protein ("APP") in the brain at abnormal sites and in
abnormal amounts has been reported to be associated with Alzheimer's disease.
Hybridon has identified specific sequences on the messenger RNA as targets for
chemically-modified antisense
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oligonucleotides and has synthesized chemically-modified antisense
oligonucleotides that inhibit APP production in tissue culture assays. In
addition, the Company is continuing to conduct studies of APP regulation in
rats.
ApoE-4. Apolipoprotein E4 ("ApoE-4") is a plasma protein involved in
cholesterol transport and is associated with Alzheimer's disease. The two gene
products from the APP and ApoE-4 locus appear to interact and provide a
strategic site for therapeutic intervention in Alzheimer's disease. Hybridon and
has identified specific sequences on the messenger RNA as targets for
chemically- modified antisense oligonucleotides and is continuing to conduct
preclinical studies of ApoE-4. The Company is a party to a collaboration with
Medtronic involving the testing of a drug delivery device which could be used to
deliver Hybridon's antisense oligonucleotides targeting Alzheimer's disease and
other neurodegenerative diseases. See "Item 1. Business -- Corporate
Collaborations -- Medtronic, Inc."
CORPORATE COLLABORATIONS
An important part of Hybridon's business strategy is to enter into
research and development collaborations, licensing agreements or other strategic
alliances with third parties, primarily biotechnology and pharmaceutical
corporations, for the development and commercialization of certain products. As
of the date hereof, the Company had entered into corporate collaborations with
Searle, Roche and Medtronic, all as summarized below. The Company intends to
retain manufacturing rights for many of the products it may license pursuant to
these collaborations.
G.D. Searle & Co.
In January 1996, the Company and Searle entered into a collaboration
relating to research and development of therapeutic antisense compounds directed
at up to eight molecular targets in the field of inflammation/immunomodulation
(the "Searle Field").
Pursuant to the collaboration, the parties are conducting research and
development relating to a compound directed at a molecular target in the Searle
Field designated by Searle. In this project, Searle is funding certain research
and development efforts by Hybridon, and each of Searle and Hybridon have
committed certain of its own personnel to the collaboration. The initial phase
of research and development activities relating to the initial target will be
conducted through the earlier of (i) the achievement of certain product
candidate milestones and (ii) 36 months after commencement of the collaboration,
subject to early termination by Searle (although in any event Searle is required
to pay 18 months of research and development funding). The parties may extend
the initial collaboration by mutual agreement, including agreement as to
additional research funding by Searle.
In addition, under the collaboration Searle has the right, at its option,
to designate up to six additional molecular targets in the Searle Field (the
"Additional Targets") for collaborative research and development with Hybridon
on terms substantially consistent with the terms of the collaboration applicable
to the initial molecular target. This right is exercisable by Searle with
respect to each of the Additional Targets upon the payment by Searle of certain
research payments (beyond the project specific payments relating to the
particular Additional Target) and the purchase of additional Common Stock from
the Company by Searle (at the then fair market value). The aggregate amount to
be paid by Searle for such research payments and equity investment in order to
designate each of the Additional Targets is $10,000,000 per Additional Target.
In the event that Searle designates all of the Additional Targets, the aggregate
amount to be paid by Searle for research payments will be $24,000,000 and the
aggregate amount to be paid by Searle in equity investment will be $36,000,000.
If Searle has not designated all of the Additional Targets by the time it
advances the product candidate for the initial molecular target to certain
stages of preclinical development, Searle will be required to purchase an
additional $10,000,000 of Common Stock (at the then fair market value) on
specified dates in order to maintain its right to designate any of the
Additional Targets that it has not yet designated.
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The payment for any such Common Stock will be creditable against the equity
investment portion of the payments to be made by Searle with respect to the
designation of any of the Additional Targets that Searle has not yet designated.
Searle also has the right, at its option, to designate a molecular target
in the Searle Field to develop a therapeutic agent for cancer that acts through
immunomodulation (the "Searle Cancer Target") for collaborative research and
development with Hybridon on terms substantially consistent with the terms of
the collaboration applicable to the initial molecular target. At the time of
such designation, Searle will be required to make certain research payments to
Hybridon and purchase additional Common Stock from the Company (at the then fair
market value). The aggregate amount to be paid by Searle for such research
payments and equity investment will range from $12,000,000 (comprised of
$5,000,000 in research payments and $7,000,000 in equity investment) if the
Searle Cancer Target is designated in 1997 to $26,000,000 (comprised of
$21,000,000 in research payments and $5,000,000 in equity investment) if the
Searle Cancer Target is designated in 2000.
Searle has exclusive rights to commercialize any products resulting from
the collaboration. If Searle determines, in its sole discretion, to
commercialize a product, Searle will fund and perform preclinical tests and
clinical trials of the product candidate and will be responsible for regulatory
approvals for and marketing of the product. In certain instances and for
specified periods of time, Hybridon has agreed to perform research and
development work in the Searle Field exclusively with Searle. In addition, as to
each product candidate, Hybridon will be entitled to milestone payments from
Searle totalling up to an aggregate of $10,000,000 upon the achievement of
certain development benchmarks. Hybridon also will be entitled to royalties from
net sales of products resulting from the collaboration. Subject to satisfying
certain conditions relating to its manufacturing capacities and capabilities,
Hybridon will retain manufacturing rights, and Searle will be required to
purchase its requirements of products from Hybridon on an exclusive basis at
specified transfer prices. Upon a change in control of the Company, Searle would
have the right to terminate Hybridon's manufacturing rights, although the
royalty payable in respect of net sales would be increased in such event.
Under the collaboration, in the event that Searle designates (and makes
the required payments and equity investments for) all of the Additional Targets
or in certain other instances relating to Hybridon's failure to satisfy certain
requirements relating to its manufacturing capacities and capabilities, Searle
will have the right, exercisable in its sole discretion, to require Hybridon to
form a joint venture with Searle for the development of products in the Searle
Field (other than products relating to molecular targets that have already been
designated by Searle) to which each party will contribute $50,000,000 in cash,
although Hybridon's cash contribution would be reduced by the value of the
technology and other rights contributed by Hybridon to the joint venture.
Hybridon and Searle would each own 50% of the joint venture, although Searle's
ownership interest in the joint venture would increase based upon a formula to
up to a maximum of 75% if the joint venture is established in certain instances
relating to Hybridon's failure to satisfy certain requirements relating to its
manufacturing capacities and capabilities.
Under the collaboration, Searle also purchased 1,000,000 shares of Common
Stock in the Company's initial public offering.
F. Hoffmann-La Roche Ltd.
In December 1992, the Company and Roche entered into a collaboration
involving the application of Hybridon's antisense oligonucleotide chemistry to
the development of compounds for the treatment of hepatitis B, hepatitis C and
human papilloma virus. See "Item 1. Business -- Hybridon Drug Development and
Discovery Programs." Under this collaboration, Roche funded research and
development efforts relating to the collaboration and committed personnel of its
own to the collaboration. In 1995, Roche notified the Company that it had
selected an antisense
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oligonucleotide directed at hepatitis C as a lead compound for further
development and made a milestone payment to Hybridon in connection with such
designation. In the third quarter of 1996, Roche notified the Company that it
had selected an antisense oligonucleotide directed at human papilloma virus as a
lead compound for further development, and in the fourth quarter of 1996, made a
milestone payment to the Company in connection with such designation. At such
time, Roche also notified the Company that Roche had elected not to continue the
hepatitis B program under the research and development collaboration. As a
result, in light of the selection by Roche of lead compounds directed at
hepatitis C and human papilloma virus for further development and its
determination to discontinue the hepatitis B program, Roche notified the Company
that Roche was exercising its option to terminate the research phase of the
collaboration as of March 31, 1997. The Company and Roche are engaged in ongoing
discussions as to the manner in which they will collaborate in connection with
the further development of the two antisense oligonucleotides that have been
selected by Roche as lead compounds. All rights relating to the hepatitis B
program have reverted to the Company.
The Company has licensed to Roche any products resulting from the
collaboration on a royalty-bearing, worldwide exclusive basis. Subject to
compliance with certain production cost requirements, Roche is required to
purchase from Hybridon, and Hybridon is required to supply to Roche, Roche's
requirements of products at specified transfer prices.
As part of this collaboration, Roche purchased 551,724 shares of the
Company's Series E Convertible Preferred Stock and 200,000 shares of the
Company's Series F Convertible Preferred Stock, which shares were automatically
converted into an aggregate of 818,390 shares of Common Stock upon the Company's
initial public offering. In addition, the Company issued Roche a five-year
(subject to earlier expiration in certain circumstances) warrant to purchase
551,724 shares of Common Stock, which has a current exercise price of $17.97 per
share.
Medtronic, Inc.
In May 1994, the Company and Medtronic entered into a collaboration
involving the testing of a drug delivery device for use in delivering Hybridon's
antisense oligonucleotides for the treatment of Alzheimer's disease. See "Item
1. Business -- Hybridon Drug Development and Discovery Programs -- Metabolic
Disorders -- Amyloid Precursor Protein and Beta-amyloid Protein." Hybridon will
be responsible for the development of, and hold all rights to, any drug
developed pursuant to this collaboration, and Medtronic will be responsible for
the development of, and hold all rights to, any delivery system developed
pursuant to this collaboration. The parties may extend this collaboration by
mutual agreement to other neurodegenerative disease targets. The research and
development to be conducted is determined and supervised by a committee
comprised of an equal number of designees of the Company and Medtronic.
As part of the collaboration, Medtronic purchased 400,000 shares of the
Company's Series F Convertible Preferred Stock and 125,000 preferred stock units
of the Company (each unit consisting of one share of Series G Convertible
Preferred Stock and one warrant to purchase one-half of one share of the
Company's Common Stock). Upon the closing of the Company's initial public
offering, the shares of Series F Convertible Preferred Stock and Series G
Convertible Preferred Stock purchased by Medtronic automatically converted into
an aggregate of 658,333 shares of the Company's Common Stock. In addition, the
Company issued to Medtronic a warrant expiring on May 10, 1997 to purchase
53,333 shares of the Company's Common Stock at an exercise price equal to $7.50
per share (subject to increase under certain circumstances).
FINANCIAL COLLABORATIONS
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In order to maintain financial flexibility, Hybridon considers innovative
arrangements to finance certain applications of its GEM technology, particularly
applications that it would not develop in the near term without external
funding. The Company has entered into one such arrangement and has executed a
letter of intent with respect to a second. These arrangements are summarized
below.
Methylgene Inc.
The Company and certain Canadian institutional investors have formed a
Quebec company, Methylgene, to develop and market (i) antisense compounds to
inhibit DNA methyltransferase for the treatment of cancers, (ii) other methods
of inhibiting DNA methyltransferase for the treatment of any indications and
(iii) antisense compounds to inhibit a second molecular target other than DNA
methyltransferase for the treatment of cancers, to be agreed upon by Hybridon
and Methylgene (such three product areas being referred to herein as the
"Methylgene Fields").
Hybridon acquired a 49% minority interest in Methylgene for approximately
CDN$1,000,000, and the Canadian investors acquired a majority interest in
Methylgene for a total of approximately CDN$7,500,000. It is anticipated that
Methylgene will issue stock and stock options to certain key employees of and
consultants to Methylgene, including certain directors and officers of the
Company.
The Canadian investors have the right to exchange all (but not less than
all) of their shares of stock in Methylgene for shares of Common Stock of
Hybridon on the basis of 7.5 Methylgene shares (for which they paid
approximately US $11.25) for one share of Hybridon Common Stock (subject to
adjustment for stock splits, stock dividends and the like). This option is
exercisable only during a 90- day period commencing on the earlier of the date
five years after the closing of the Canadian investors' investment in Methylgene
or the date on which Methylgene ceases operations, and terminates sooner if
Methylgene satisfies certain conditions.
Hybridon has granted to Methylgene exclusive worldwide licenses and
sublicenses in respect of certain technology relating to the Methylgene Fields.
In addition, Hybridon and Methylgene have entered into a supply agreement
pursuant to which Methylgene is obligated to purchase from Hybridon all required
formulated bulk oligonucleotides at specified transfer prices.
It is anticipated that Methylgene will qualify to receive certain Canadian
tax benefits with respect to the research and development activities which it
carries on in Canada.
Symbiotech, Inc.
Hybridon and Symbiotech, Inc., a development stage biotechnology company
("Symbiotech"), have entered into a letter of intent to form a new company for
the development of quantitative in vitro diagnostic, detection and biological
amplification products using certain of the Company's antisense oligonucleotides
and Symbiotech's phage technology. The letter of intent provides for each of
Hybridon and Symbiotech to grant the new company exclusive worldwide
royalty-free licenses of certain of their respective technologies for the
development of these products. The letter of intent also has been signed by
Medical Science Partners, L.P. ("MSP") and Pillar S.A., which have indicated an
intention initially to invest a total of $250,000 in the new company. It is
anticipated that each of Hybridon and Symbiotech initially will own
approximately one-third of the equity in the new company, with the balance held
by MSP, Pillar S.A. and certain key employees or consultants, including certain
officers and directors of the Company. The majority of the capital stock of
Symbiotech is owned by MSP.
Because a definitive agreement relating to this transaction has not yet
been executed by the parties, it is possible that the final terms of this
arrangement may differ from those summarized above, possibly materially, or that
this transaction will not be consummated.
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MANUFACTURING TECHNOLOGY AND THE HYBRIDON SPECIALTY PRODUCTS DIVISION
The Company has developed a manufacturing technology platform which
integrates key elements of the manufacturing process to increase the purity of
oligonucleotide products, enhance the efficiency of the production process and
increase the scale of production. The Company has developed two separate
commercial scale oligonucleotide synthesizers. One of these machines was
developed in an internal program and the other in a collaboration with
Pharmacia. Both machines are designed with a capacity of up to 100 millimoles
(approximately 300 grams per batch), although the Company believes that these
machines may be able to exceed such capacity. Pharmacia has retained the right
to sell the machine developed under the collaboration to third parties, subject
to an obligation to pay Hybridon royalties on such third party sales. The
Company believes that its machine is the first commercial scale synthesizer
designed for more advanced chemistries. In addition, the Company has implemented
proprietary purification processes, which use water in place of chemical
solvents, simplifying environmental compliance and permitting purification of
kilogram batches of oligonucleotides. The Company has also developed proprietary
chemical synthesis processes and novel reagents used in the synthesis process,
which the Company believes will further decrease the cost of production of
advanced oligonucleotides.
In 1996, Hybridon formed the Hybridon Specialty Products Division to
capitalize on this technology and know-how and manufacture highly purified
oligonucleotide compounds both for Hybridon's internal use and for sale to third
parties, including the Company's collaborative partners, on a custom contract
basis. The Company is manufacturing oligonucleotides at its 36,000 square foot
leased manufacturing facility, which the Company believes is the first
commercial-scale synthetic DNA production facility with a fully integrated
manufacturing technology platform, including large-scale synthesis, purification
and proprietary analytical support. The Company first began production of
oligonucleotide compounds for sale to third parties in June 1996 and by the end
of 1996 had achieved sales revenues of approximately $1.1 million. The Company
also has received orders to provide analytical services and plans to expand its
product offerings to include proprietary intermediates used in the manufacture
of oligonucleotides.
In order to strengthen the marketing of the Division's products, in 1996
the Company entered into a four-year sales and supply agreement with the Applied
Biosystems Division of Perkin-Elmer. Under the agreement, Perkin-Elmer agreed to
refer potential customers for the custom contract manufacture of
oligonucleotides to Hybridon, and Hybridon agreed to purchase amidites from
Perkin- Elmer for the manufacture of oligonucleotides sold to such customers and
to pay Perkin-Elmer a percentage of the sales price paid by such customers. In
addition, Perkin-Elmer licensed to Hybridon its oligonucleotide synthesis
patents and agreed to discuss a future collaboration with respect to the
development, marketing and distribution of Hybridon's proprietary intermediates.
The production of antisense compounds is similar to the chemical synthesis
used in the production of conventional pharmaceuticals, and in contrast with
typical biopharmaceuticals, does not involve any fermentation processes or
living cells. Moreover, unlike many conventional drugs, antisense compounds
targeted at different diseases can be manufactured with the same nucleotide
building blocks and using the same manufacturing processes and equipment with
minimal adjustments. As a result, the knowledge and experience that the Company
obtains in the manufacture of one compound is substantially applicable to the
manufacture of other oligonucleotide compounds for the treatment of other
diseases and results in other manufacturing efficiencies.
The Company will need to further increase its manufacturing capacity
through the purchase or construction of additional large-scale oligonucleotide
synthesizers in order to satisfy its anticipated future requirements for GEM 91
and the Company's other product candidates and in order to manufacture
oligonucleotides on a custom contract basis for sale to third parties. In
addition, in order to successfully commercialize its product candidates or
achieve satisfactory margins on sales, the
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Company may be required to reduce further the cost of production of its
oligonucleotide compounds. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - - Certain Factors That May
Affect Future Results -- Limited Manufacturing Capability."
The Company believes that it is currently manufacturing oligonucleotides
in substantial compliance with FDA requirements for manufacturing in compliance
with GMP, although its facility and procedures have not been formally inspected
by the FDA and the procedures and documentation followed may have to be enhanced
in the future as the Company expands its oligonucleotide production activities.
Failure to establish to the FDA's satisfaction compliance with GMP can result in
the FDA denying authorization to initiate or continue clinical trials, to
receive approval of a product or to begin or to continue commercial marketing.
In addition, the Company's manufacturing processes are subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of certain materials and waste products.
MARKETING STRATEGY
Hybridon plans to market the pharmaceutical products it is developing
either directly or through co-marketing, licensing, distribution or other
arrangements with pharmaceutical and biotechnology companies. Hybridon's current
strategy with respect to these products in development is to build a
hospital-targeted direct sales group for products for HIV-1 infection and AIDS
and other market areas that can be accessed with a small to medium size sales
force. Implementation of this strategy will depend on many factors, including
the market potential of any such products the Company develops as well as on the
Company's financial resources. The Company does not expect to establish a direct
sales capability with respect to such products until such time as one or more of
such products approach marketing approval. To market those products that will
serve a large, geographically diverse patient population, the Company expects to
enter into licensing, distribution or partnering agreements with pharmaceutical
and biotechnology companies that have large, established sales organizations. To
the extent the Company enters into marketing arrangements with third parties,
any revenues received by the Company will be dependent on the efforts of such
third parties, and there can be no assurance that such efforts will be
successful. While the Company has developed general marketing strategies, it has
not begun the implementation of any of these strategies with respect to any of
these potential products.
ACADEMIC AND RESEARCH COLLABORATIONS
Hybridon has entered into over 50 collaborative research agreements
relating to specific disease targets and other research activities in order to
augment its internal research capabilities and to obtain access to the
specialized knowledge or expertise of its collaborative partners. With respect
to certain of the Company's drug development programs, the Company relies
primarily upon outside collaborators. Accordingly, termination of the Company's
collaborative research agreements with any of these collaborators could result
in the termination of the related research program.
In general, the Company's collaborative research agreements require the
payment by Hybridon of various amounts in support of the research to be
conducted. The Company usually provides the collaborator with selected
oligonucleotides, which the collaborator then tests in his or her assay systems.
If the collaborator creates any invention during the course of his or her
efforts, solely or jointly with the Company, Hybridon generally has an option to
negotiate an exclusive, worldwide, royalty-bearing license of the collaborator's
rights in the invention for the purpose of commercializing any product
incorporating such invention. Inventions developed solely by Hybridon's
scientists as part of the collaboration generally are owned exclusively by
Hybridon. Most of these collaborative agreements are non-exclusive and can be
cancelled on relatively short notice.
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PATENTS, TRADE SECRETS AND LICENSES
Proprietary protection for the Company's product candidates, processes and
know-how is important to Hybridon's business. Thus, the Company plans to
prosecute and enforce aggressively its patents and proprietary technology. The
Company's policy is to file patent applications to protect technology,
inventions and improvements that are considered important to the development of
its business. Hybridon seeks to establish a comprehensive proprietary position
through a "layered" patent strategy covering the Company's families of
oligonucleotide chemistries, the antisense sequences of the Company's
oligonucleotide compounds and the overall chemical compositions of these
oligonucleotide compounds. The Company believes that this approach may provide
it with at least three independent levels of protection. Hybridon also seeks to
protect its proprietary analytical and manufacturing processes. The patents and
patent applications owned or exclusively licensed by the Company also are
directed to many aspects of the Company's proprietary oligonucleotide production
and analysis technology and ribozyme technology. The Company also relies upon
trade secrets, know-how, continuing technological innovation and licensing
opportunities to develop and maintain its competitive position.
As of February 28, 1997, Hybridon owned or exclusively licensed 23 issued
U.S. patents, six issued European patents, 31 allowed U.S. patent applications,
eight allowed European applications and 168 other U.S. patent applications. Of
these, the Company owned (as opposed to licensed) nine issued U.S. patents, 22
allowed U.S. patent applications and 159 other U.S. patent applications along
with corresponding patent applications in many cases in other major industrial
countries. The patents and applications owned by the Company cover various
chemically advanced oligonucleotides, proprietary target sequences, specific
preferred oligonucleotide products, methods for making and purifying
oligonucleotides, analytical methods and methods for oligonucleotide-based
therapeutic treatment of various diseases. The U.S. patents owned or exclusively
licensed by Hybridon expire at various dates ranging from 2006 to 2014.
Under the terms of a license agreement with the Worcester Foundation (the
"Foundation License"), Hybridon is the worldwide, exclusive licensee under
twelve issued U.S. patents, four issued European patents, six allowed U.S.
patent applications, two allowed European patent applications and six other U.S.
patent applications owned by the Worcester Foundation relating to
oligonucleotides and their production and use, as well as certain
ribozyme-related technology. Many of these patents and patent applications have
corresponding applications on file in other major industrial countries.
One of the issued U.S. patents (the "HIV Patent") and one of the issued
European patents licensed from the Worcester Foundation broadly claim antisense
oligonucleotides as new compositions of matter for inhibiting the replication of
HIV. The other issued U.S. patents include claims covering composition and uses
of oligonucleotides based on the Company's advanced chemistries, methods of
oligonucleotide synthesis that are potentially applicable to large-scale
commercial production, compositions of certain modified oligonucleotides that
are useful for diagnostic tests or assays and methods of purifying full-length
oligonucleotides after synthesis. The earliest expiration of the patents
licensed to the Company by the Worcester Foundation is 2006, when the HIV Patent
expires.
The Company also is the exclusive licensee under various other U.S. and
foreign patents and patent applications, including one U.S. patent, one allowed
U.S. patent application and one U.S. patent applications jointly owned by the
Worcester Foundation and the Mount Sinai Medical Center of New York claiming the
use of antisense oligonucleotides for the inhibition of influenza viruses and
two U.S. patent applications owned by McGill University relating to
oligonucleotides and DNA methyltransferase. The Company and MGH jointly own
three patent applications and one allowed U.S. patent application directed to
compositions and use of antisense applied to Alzheimer's disease. The Company
holds an exclusive license to MGH's interests under such patent applications.
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The Company is a non-exclusive licensee of certain patents held by the NIH
relating to oligonucleotide phosphorothioates and a non-exclusive licensee of an
NIH patent covering the phosphorothiolation of oligonucleotides. The field of
each of these licenses extends to a wide variety of genetic targets. If certain
of the claims of the NIH patents non-exclusively licensed to Hybridon are valid,
GEM 91 and certain of the Company's other products in development would infringe
these patents in the absence of the license.
The U.S. PTO has informed Hybridon that certain otherwise allowable patent
applications exclusively licensed by the Company from Worcester Foundation have
been submitted to the Board of Patent Appeals and Interferences to determine
whether an interference should be declared with issued U.S. patents held by the
NIH relating to oligonucleotide phosphorothioates. Banner & Witcoff, the
Company's U.S. patent counsel, is of the opinion that the Worcester Foundation
patent application has a prima-facie case for priority against the NIH for an
invention that includes phosphorothioate-modified oligonucleotides. However,
there can be no assurance an interference can be declared, or if declared, as to
the outcome thereof. In addition, Hybridon has filed an opposition to the NIH
oligonucleotide phosphorothioate patent in Europe. There can be no assurance as
to the outcome of the opposition. An adverse outcome in either the interference
or the European opposition would not affect the non-exclusive license from the
NIH to Hybridon of the NIH phosphorothioate patents.
Under the licenses to which it is a party, the Company is obligated to pay
royalties on net sales by the Company of products or processes covered by a
valid claim of a patent or patent application licensed to it. The Company also
is required in some cases to pay a specified percentage of any sublicense income
that the Company may receive. These licenses impose various commercialization,
sublicensing, insurance and other obligations on the Company. Failure of the
Company to comply with these requirements could result in termination of the
license. The Foundation License also grants the Company a right of first refusal
to certain technology developed by the Worcester Foundation.
The patent positions of pharmaceutical and biotechnology firms, including
Hybridon, are generally uncertain and involve complex legal and factual
questions. Consequently, even though Hybridon and its licensors are currently
prosecuting their respective patent applications with the U.S. Patent and
Trademark Office and certain foreign patent authorities, the Company does not
know whether any of its applications or those of third parties under which the
Company has or may obtain a license will result in the issuance of any patents
or, if any patents are issued, whether they will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in
the U.S. are maintained in secrecy until patents issue, and since publication of
discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months, Hybridon cannot be certain that it, or any
licensor of patents to it, as the case may be, was the first creator of
inventions claimed by pending patent applications or that Hybridon or any
licensor, as the case may be, was the first to file patent applications for such
inventions. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Certain Factors That May Affect Future
Results -- Patents and Proprietary Rights."
Competitors of the Company and other third parties hold issued patents and
pending patent applications relating to antisense and other gene expression
modulation technologies, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees or cease certain activities. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results -- Patents and Proprietary." In particular, the
Company is aware of a European patent granted to a third party relating to
certain types of stabilized synthetic oligonucleotides for use as therapeutic
agents for selectively blocking the translation of a messenger RNA into a
targeted protein by binding with a portion of the messenger RNA to which the
stabilized synthetic oligonucleotide is substantially
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complementary. This European patent was revoked in entirety in an opposition
proceeding before the European Patent Office in September 1995. The holder of
this patent has appealed such decision.
The Company is also aware of various issued U.S. patents and patent
applications owned by third parties that claim various uses of ribozymes,
including their use to modulate gene expression, particular ribozymes of
specific molecular sequences and methods of ribozyme production. Foreign
counterparts of certain of these patents and patent applications have been filed
in other major industrialized countries. There can be no assurance that the
Company will be successful in designing or producing ribozymes that fall outside
the valid scope of these patents and patent applications or that any license
that may be required for the Company to exploit ribozyme products, if any, will
be available on acceptable terms or at all. None of the Company's antisense
oligonucleotides infringe any of these patents. In addition, Banner & Witcoff is
of the opinion that the Company's finderons, oligonucleotides with
ribonuclease-like activity that do not contain enzymatic RNA, do not infringe
the claims of these patents and patent applications.
Hybridon's practice is to require its employees, consultants, members of
its Scientific and Clinical Advisory Boards, outside scientific collaborators
and sponsored researchers and other advisors to execute confidentiality
agreements upon the commencement of employment or consulting relationships with
the Company. These agreements provide that all confidential information
developed or made known to the individual during the course of the individual's
relationship with Hybridon is to be kept confidential and not disclosed to third
parties, subject to a right to publish certain information in the scientific
literature in certain circumstances and subject to other specific exceptions. In
the case of employees, the agreements provide that all inventions conceived by
the individual shall be the exclusive property of the Company. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's trade secrets or adequate remedies in the event of unauthorized
use or disclosure of such information.
Hybridon engages in collaborations and sponsored research agreements and
enters into preclinical and clinical testing agreements with academic and
research institutions and U.S. government agencies, such as the NIH, to take
advantage of their technical expertise and staff and to gain access to clinical
evaluation models, patients, and related technology. Consistent with
pharmaceutical industry and academic standards, and the rules and regulations
under the Federal Technology Transfer Act of 1986, these agreements may provide
that developments and results will be freely published, that information or
materials supplied by Hybridon will not be treated as confidential and that
Hybridon may be required to negotiate a license to any such developments and
results in order to commercialize products incorporating them. There can be no
assurance that the Company will be able successfully to obtain any such license
at a reasonable cost or that such developments and results will not be made
available to competitors of the Company on an exclusive or nonexclusive basis.
See "Item 1. Business -- Academic and Research Collaborations."
GOVERNMENT REGULATION
The production and marketing of the Company's products and its research
and development activities are subject to regulation for safety, effectiveness
and quality by numerous governmental authorities in the U.S. and other
countries. The Company believes that it is in material compliance with all
federal, state and foreign legal and regulatory requirements under which it
operates. However, there can be no assurance that such legal or regulatory
requirements will not be amended or that new legal or regulatory requirements
will not be adopted, any one of which could have a material adverse effect on
the Company's business or results of operations.
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FDA Approval
In the U.S., pharmaceutical products intended for therapeutic or
diagnostic use in humans are subject to rigorous FDA regulation. The process of
completing clinical trials and obtaining FDA approvals for a new drug is likely
to take a number of years and requires the expenditure of substantial resources.
There can be no assurance that any product will receive such approval on a
timely basis, if at all. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Factors That May Affect
Future Results -- No Assurance of Regulatory Approval; Government Regulation."
The steps required before a new oligonucleotide-based pharmaceutical
product for use in humans may be marketed in the U.S. include (i) preclinical
tests, (ii) submission to the FDA of an IND application, which must become
effective before human clinical trials commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and effectiveness
of the product, (iv) submission of a New Drug Application ("NDA") to the FDA,
and (v) FDA approval of the NDA prior to any commercial sale or shipment of the
product.
Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies, to assess the potential safety and
effectiveness of the product. Compounds must be manufactured according to GMP
and preclinical safety tests must be conducted by laboratories that comply with
FDA regulations regarding GLP. See "Item 1. Business -- Manufacturing." The
results of the preclinical tests are submitted to the FDA as part of an IND and
are reviewed by the FDA prior to the commencement of human clinical trials.
Unless the FDA objects to, or makes comments or raises questions concerning, an
IND, the IND will become effective 30 days following its receipt by the FDA.
There can be no assurance that submission of an IND will result in FDA
authorization to commence clinical trials.
Clinical trials involve the administration of the investigational new drug
to healthy volunteers and to patients, under the supervision of a qualified
principal investigator. Clinical trials are conducted in accordance with Good
Clinical Practices under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical study must be conducted under the auspices of an
independent Institutional Review Board (an "IRB"). The IRB will consider, among
other things, ethical factors, the safety of human subjects and the possible
liability of the institution.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. In Phase I, the investigational new drug
usually is administered to healthy human subjects and is tested for safety
(adverse effects), dosage, tolerance, metabolism, distribution, excretion and
pharmacodynamics (clinical pharmacology). Phase II involves studies in a limited
patient population to (i) determine the effectiveness of the investigational new
drug for specific indications, (ii) determine dosage tolerance and optimal
dosage, and (iii) identify possible adverse effects and safety risks. When an
investigational new drug is found to be effective and to have an acceptable
safety profile in Phase II evaluation, Phase III trials are undertaken to
further evaluate clinical effectiveness and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.
There can be no assurance that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products subject to such testing. Furthermore, the
Company, an IRB or the FDA may suspend clinical trials at any time if it is felt
that the participants are being exposed to an unacceptable health risk.
The results of the pharmaceutical development, preclinical studies and
clinical studies are submitted to the FDA in the form of an NDA for approval of
the marketing and commercial shipment of the product. The FDA may require
additional testing or information before approving the NDA. In
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any event, the FDA may deny an NDA if applicable regulatory criteria are not
satisfied. Moreover, if regulatory approval of a product is granted, such
approval may require postmarketing testing and surveillance to monitor the
safety of the product or may entail limitations on the indicated uses for which
it may be marketed. Finally, product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing.
In addition to product approval, the Company may be required to obtain a
satisfactory inspection by the FDA covering the Company's manufacturing
facilities before a product manufactured by the Company can be marketed in the
U.S. The FDA will review the Company's manufacturing procedures and inspect its
facilities and equipment for compliance with GMP and other applicable rules and
regulations. Any material change by the Company in its manufacturing process,
equipment or location would necessitate additional FDA review and approval.
Foreign Regulatory Approval
Whether or not FDA approval has been obtained, approval of a
pharmaceutical product by comparable governmental regulatory authorities in
foreign countries must be obtained prior to the commencement of clinical trials
and subsequent marketing of such product in such countries. The approval
procedure varies from country to country, and the time required may be longer or
shorter than that required for FDA approval.
Under European Community ("EC") law, either of two approval procedures may
apply to the Company's products: a centralized procedure, administered by the
EMEA (the European Medicines Evaluation Agency); or a decentralized procedure,
which requires approval by the medicines agency in each EC Member State where
the Company's products will be marketed. The centralized procedure is mandatory
for certain biotechnology products and available at the applicant's option for
certain other products. Whichever procedure is used, the safety, efficacy and
quality of the Company's products must be demonstrated according to demanding
criteria under EC law and extensive nonclinical tests and clinical trials are
likely to be required. In addition to premarket approval requirements, national
laws in EC Member States will govern clinical trials of the Company's products,
adherence to good manufacturing practice, advertising and promotion and other
matters. In certain EC Member States, pricing or reimbursement approval may be a
legal or practical precondition to marketing.
At present, pharmaceutical products generally may not be exported from the
U.S. for other than research purposes until the FDA has approved the product for
marketing in the U.S. However, a company may apply to the FDA for permission to
export finished products or partially processed products to a limited number of
countries prior to obtaining FDA approval for marketing in the U.S.
The Company has FDA permission for the export of GEM 91 to France.
Other Regulation
In addition to regulations enforced by the FDA, the Company also is
subject to regulation under the Occupational Safety and Health Act and other
present and potential future federal, state or local regulations. Furthermore,
because the Company's research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds, the
Company's operations are subject to U.S. Department of Transportation and
Environmental Protection Agency requirements and other federal, state and
foreign laws and regulations regarding hazardous waste disposal, air emissions
and wastewater discharge, including without limitation the Environmental
Protection Act, the Toxic Substances Control Act and the Resource Conservation
and Recovery Act. Although the Company believes that its procedures for handling
and disposing of such materials comply with the standards prescribed by
applicable regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
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accident, the Company could be held liable for any damages that result and any
such liability could have a material adverse effect on the Company.
COMPETITION
The Company's products under development are expected to address several
different markets defined by the potential indications for which such products
are developed and ultimately approved by regulatory authorities. For several of
these indications, the Company's proposed products will be competing with
products and therapies either currently existing or expected to be developed,
including antisense oligonucleotides developed by third parties. Competition
among these products will be based, among other things, on product efficacy,
safety, reliability, availability, price and patent position. An important
factor will be the timing of market introduction of the Company's or competitive
products. Accordingly, the relative speed with which Hybridon can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend upon its ability to attract and retain qualified personnel, to obtain
patent protection or otherwise develop proprietary products or processes, and to
secure sufficient capital resources for the often substantial period between
technological conception and commercial sales.
There are a number of companies, both privately and publicly held, that
are conducting research and development activities on technologies and products
aimed at therapeutic modulation of gene expression. The Company believes that
the industry-wide interest in these technologies and products will continue and
will accelerate as the techniques which permit their application to drug
development become more widely understood. There can be no assurance that the
Company's competitors will not succeed in developing products based on
oligonucleotides or other novel technologies that are more effective than any
which are being developed by the Company or which would render the Company's
technology and products obsolete and noncompetitive prior to recovery by the
Company of the research, development and commercialization expenses incurred
with respect to those products. Furthermore, because of the fundamental
differences between gene expression modulation and other technologies, there may
be indications for which such other technologies are superior to gene expression
modulation. The development by others of new treatment methods not based on gene
expression modulation technology for those indications for which the Company is
developing compounds could render the Company's compounds noncompetitive or
obsolete.
Competitors of the Company engaged in all areas of drug discovery in the
U.S. and other countries are numerous and include, among others, major
pharmaceutical and chemical companies, biotechnology firms, universities and
other research institutions. Many of these competitors have substantially
greater financial, technical and human resources than the Company. In addition,
many of these competitors have significantly greater experience than the Company
in undertaking preclinical studies and human clinical trials of new
pharmaceutical products and obtaining FDA and other regulatory approvals of
products for use in health care. Accordingly, the Company's competitors may
succeed in obtaining FDA or other regulatory approvals for products more rapidly
than the Company. Furthermore, if the Company is permitted to commence
commercial sales of products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has
limited or no experience. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Factors That May Affect
Future Results -- Competition."
EMPLOYEES
As of February 28, 1997, Hybridon employed 206 individuals full-time, of
whom 99 held advanced degrees. 165 of these employees are engaged in research
and development activities and 31 are employed in finance, corporate development
and legal and general administrative activities. In addition, 90 of these
employees are employees of the Hybridon Specialty Products Division, of whom
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35 are employed in analytical research and quality control. Many of the
Company's management and professional employees have had prior experience with
pharmaceutical, biotechnology or medical products companies. None of the
Company's employees is covered by collective bargaining agreements, and
management considers relations with its employees to be good.
SCIENTIFIC ADVISORY BOARD
The Company's Scientific Advisory Board consists of individuals with
recognized expertise in gene expression modulation technology, antisense
oligonucleotides, oligonucleotide biochemistry, human genetics, medicine and
related fields who advise the Company about current and long-term scientific
planning, research and development. The Scientific Advisory Board holds
approximately three or four formal meetings annually. All members of the
Scientific Advisory Board are employed by employers other than the Company,
primarily academic institutions, and may have commitments to or consulting or
advisory agreements with other entities that may limit their availability to the
Company. These companies may also be competitors of Hybridon. Several members of
the Scientific Advisory Board have, from time to time, devoted significant time
and energy to the affairs of the Company. However, except for Drs. Zamecnik and
Wyngaarden, who are parties to consulting agreements with the Company, no
members are regularly expected to devote more than a small portion of their time
to Hybridon.
The following persons are members of the Scientific Advisory Board:
Paul C. Zamecnik, M.D. (Chairman) is a founder of Hybridon and serves as a
director of the Company. Dr. Zamecnik has served as a Principal Scientist of the
Worcester Foundation and as the Collis P. Huntington Professor of Oncologic
Medicine Emeritus at the Harvard Medical School since 1979.
Daniel M. Brown, Sc.D., F.R.S. has been a Fellow of King's College,
University of Cambridge, since 1953, and currently serves as Vice-Provost of
King's College and as an Attached Scientific Worker in the Medical Research
Council Laboratory of Molecular Biology at the University of Cambridge. Dr.
Brown is also an Emeritus Reader in Organic Chemistry at the University of
Cambridge and became a Fellow of the Royal Society in 1982.
Edgar Haber, M.D. has served as the Elkan R. Blout Professor of Health
Science and Director of the Division of Biological Sciences at the Harvard
School of Public Health and as a Clinical Professor of Medicine at Harvard
Medical School since 1991. From 1990 to 1991, Dr. Haber served as President of
the Bristol-Myers Squibb Pharmaceutical Research Institute, and from 1988 to
1990, he was President of the Squibb Institute for Medical Research.
Har Gobind Khorana, Ph.D. has served as a Sloan Professor in the
Departments of Biology and Chemistry at the Massachusetts Institute of
Technology since 1970. Dr. Khorana has been awarded numerous prestigious honors,
including the Nobel Prize in Medicine or Physiology in 1968 and the National
Medal of Science in 1987.
Roger E. Monier, Ph.D. has served as Director of Molecular Oncology at the
Institute Gustave Roussy in Paris since 1985. From 1980 to 1985, Dr. Monier
served as the Director of Life Sciences at the Centre Nationale de Recherches
Scientifiques in Paris. Dr. Monier was elected to the French Academy of Science
in 1992.
Peter Palese, Ph.D. has served as a Professor in the Department of
Microbiology at Mount Sinai School of Medicine in New York since 1978 and has
served as Chairman of the Department of Microbiology since 1987.
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Thoru Pederson, Ph.D. is a Principal Scientist of Cell Biology at the
Worcester Foundation and has served as its President and Director since 1985.
From February 1990 to November 1993, Dr. Pederson served as a director of the
Company.
Jerry A. Weisbach, Ph.D. a director of the Company, is an independent
consultant to biotechnology and pharmaceutical companies. Dr. Weisbach served as
Director of Technology Transfer and as an Adjunct Professor at The Rockefeller
University from 1988 to 1994. Dr. Weisbach served as Corporate Vice President of
Warner-Lambert Company, an international pharmaceutical company, from 1981 to
1987 and President of the Parke-Davis Pharmaceutical Research Division of
Warner-Lambert Company from 1979 to 1987.
James B. Wyngaarden, M.D. a director of the Company, served as the Foreign
Secretary of the National Academy of Sciences and the Institute of Medicine of
the National Academy of Sciences from 1990 to 1994. Dr. Wyngaarden also served
as the Director of the NIH from 1982 to 1989 and as a council member of the
Human Genome Organization from 1990 to 1993 and as its Director from 1990 to
1991.
Members of the Company's Scientific Advisory Board are paid $2,500 per
calendar quarter for their services in such capacity and are reimbursed for
their expenses incurred in connection with attendance at its meetings. Members
of the Scientific Advisory Board also have received options to purchase Common
Stock of the Company under the Company's stock option plans.
CLINICAL ADVISORY BOARD
The Company's Clinical Advisory Board was formally established in November
1993 to advise the Company with respect to clinical trials of the Company's
product candidates. The Clinical Advisory Board holds approximately three or
four formal meetings annually. The Clinical Advisory Board consists of
individuals with recognized expertise in the conduct of clinical trials and the
regulatory approval process. All members of the Clinical Advisory Board are
employed by employers other than the Company, primarily academic institutions,
and may have commitments to or consulting or advisory agreements with other
entities that may limit their availability to the Company. These companies may
also be competitors of Hybridon. Several members of the Clinical Advisory Board
have, from time to time, devoted significant time and energy to the affairs of
the Company. However, except for Drs. Wyngaarden and Weisbach, who are directors
of and consultants to the Company, and Dr. Groopman, who is a consultant to the
Company, no members are regularly expected to devote more than a small portion
of their time to Hybridon.
The following persons are members of the Clinical Advisory Board:
Dr. Wyngaarden's (Chairman) background and experience are described above
under "Item 1. Business -- Scientific Advisory Board."
Robert M. Chanock, M.D. has served as an infectious disease epidemiologist
and laboratory virologist at the NIH since 1957. Prior to that Dr. Chanock held
academic appointments at the University of Cincinnati College of Medicine and
the Johns Hopkins University School of Hygiene and Public Health. Dr. Chanock
has been awarded numerous prestigious honors, including the ICN International
Prize in Virology in 1990, the Bristol-Myers Squibb Award for Distinguished
Achievement in Infectious Diseases Research in 1993 and the Albert B. Sabin
Foundation award.
Vincent T. DeVita, Jr., M.D. has served as Director of the Yale Cancer
Center since 1993. Dr. DeVita served as an attending physician and member of the
Program of Molecular Pharmacology and Therapeutics from 1988 to 1993, and as
Physician-in-Chief from 1988 to 1991, at Memorial Sloan Kettering Cancer Center.
From 1980 to 1988, Dr. DeVita served as Director of the National Cancer
Institute, NIH. In 1995, he was honored with the City of Medicine Award.
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Jerome Groopman, M.D. has served as Chief of the Division of
Hematology/Oncology at the New England Deaconess Hospital since 1985. He has
also served as a Professor of Medicine at Harvard Medical School since 1993. Dr.
Groopman is a member of the AIDS Advisory Committee, the Biologics Committee of
the FDA, the AIDS Clinical Trials Group of the NIH and the AIDS Basic Science
Research Study Section A, NIAID.
Paul Meier, Ph.D. has served as Professor and Chairman of the Department of
Statistics and Division of Biological Sciences at Columbia University since
1985. Dr. Meier has served as an advisor to the FDA on the statistical analysis
of clinical trials since 1991.
Dr. Weisbach's background and experience are described under "Item 1.
Business -- Scientific Advisory Board."
Members of the Company's Clinical Advisory Board are paid $2,500 per
calendar quarter for their services in such capacity and are reimbursed for
their expenses incurred in connection with attendance at its meetings.
ITEM 2. PROPERTIES.
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The Company's executive, administrative and research and development
facilities, comprising approximately 90,000 square fee, currently are located in
Cambridge, Massachusetts. These facilities are held under a lease which expires
in 2007, but may be extended at Hybridon's option for three additional five-year
terms. The lease provides for an annual rent of approximately $38.00 per square
foot for the first five years and approximately $42.00 per square foot for the
second five years.
The Company leases its 36,000 square foot manufacturing facility in
Milford, Massachusetts under a lease which expires in 2004. The term of the
lease may be extended at Hybridon's option for two additional five-year terms.
In addition to its manufacturing operations, the Company conducts process and
analytical chemistry operations at this facility.
The Company also leases approximately 1,800 square feet of space in Paris,
France under a lease expiring on May 1, 2003 for administrative offices for its
European operations.
For a description of various arrangements relating to the Cambridge
facility and the Paris facility, see "Certain Transactions -- Transactions with
Pillar S.A. and Certain Affiliates" in the Company's 1997 Proxy Statement (as
defined in "Item 10. Directors and Executive Officers of the Registrant").
ITEM 3. LEGAL PROCEEDINGS.
-----------------
The Company is not a party to any litigation that it believes could have a
material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
--------------------------------------------------
No matters were submitted to a vote of securityholders of the Company,
through solicitation of proxies or otherwise, during the last quarter of the
year ended December 31, 1996.
29
30
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES OF THE COMPANY
- -----------------------------------------------------------
The executive officers and significant employees of the Company and their
ages as of March 15, 1997 are as follows:
NAME AGE POSITION
---- --- --------
Executive Officers
E. Andrews Grinstead, III......... 51 Chairman of the Board of Directors,
President and Chief Executive Officer
Sudhir Agrawal, D. Phil........... 43 Senior Vice President of Discovery,
Chief Scientific Officer and Director
Anthony J. Payne.................. 50 Senior Vice President of Finance and
Administration, International
Operations, Chief Financial Officer,
Treasurer and Secretary
Significant Employees
Robert G. Andersen . . . . . . . . .46 Vice.President of Systems Engineering
and Management Information Systems
Aharon Cohen, Ph.D. . . . . . . . . 52 Vice President of Analytical Research
and Chief Analytical Scientist
Jose E. Gonzalez, Ph.D. . . . . . . 50 Vice President of Manufacturing
John Goodchild, Ph.D. . . . . . . . 52 Vice President of Applied Chemistry
and Ribozyme Research
J. Michael Grindel, Ph.D. . . . . . 50 Vice President of Pre-Clinical
Development
Philippe Guinot, M.D., Ph.D. . . . .47 Vice President of Drug Development and
General Manager, Hybridon Europe
Charles R. Hogen, Jr. . . . . . . . 49 Vice President of Corporate