-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KB/gM9bqZx086l2xMVq5HoC/maprWzubX6mHKFwl8+sWE3XXFJXW6v7cuJE9YPtN aYjnvu5yOyLSn1IoVoH3LA== 0000950127-02-000575.txt : 20020509 0000950127-02-000575.hdr.sgml : 20020509 ACCESSION NUMBER: 0000950127-02-000575 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APHTON CORP CENTRAL INDEX KEY: 0000840319 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 953640931 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19122 FILM NUMBER: 02639192 BUSINESS ADDRESS: STREET 1: PO BOX 1049 STREET 2: STE 51-507 CITY: WOODLAND STATE: CA ZIP: 95776 BUSINESS PHONE: 5306616077 MAIL ADDRESS: STREET 1: PO BOX 1049 STREET 2: STE 51-507 CITY: WOODLAND STATE: CA ZIP: 95776 10-Q 1 a893565_10q.txt FORM 10Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter ended March 31, 2002 Commission File Number 0-19122 APHTON CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-3640931 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 80 SW Eighth Street, Suite 2160 33130 Miami, Florida (Zip Code) (address of principal executive offices) Registrant's telephone number, including area code (305) 374-7338 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 ---- --- The number of shares of Common Stock outstanding as of the close of business on April 30, 2002: Class Number of Shares outstanding Common Stock, $0.001 par value 20,101,639 APHTON CORPORATION Index Page Part I - Financial Information 3 Item 1. Financial Statements: Balance Sheets - March 31, 2002 and December 31, 2001 4 Statements of Operations - Three months ended March 31, 2002 and 2001 5 Statements of Cash Flows - Three months ended March 31, 2002 and 2001 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk 8 Part II - Other Information Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signature 10 -2- Part I - Financial Information Forward-Looking Statements This Form 10-Q contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "continue", "predict", "estimated", "potential", or the negative of such terms or other comparable terminology. We have based these forward-looking statements on our current expectations and projections about future events. These statements include, but are not limited to information about: o Our business outlook and future financial performance; o Anticipated profitability, revenues, expenses and capital expenditures; o Anticipated research, development, clinical, regulatory and reimbursement progress; o Future funding and expectations as to any future events; and o Other statements that are not historical fact and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. When considering such forward-looking statements, you should keep in mind the risk factors and other cautionary statements in our publicly available filings with the Securities and Exchange Commission, including our most recent Registration Statement on Form S-3 filed on February 7, 2002, our Transitional Report on Form 10-K for the eleven months ended December 31, 2001 and this Form 10-Q. These risks and uncertainties could cause our actual results to differ materially from future results expressed or implied by the forward-looking statements. Many of these factors are beyond our ability to control or predict. You should not put undue reliance on any forward-looking statements. We undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws. Item 1. Financial Statements The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the financial statements include all adjustments necessary to present fairly the financial position of the Company as of March 31, 2002 and December 31, 2001 and the results of its operations for the three months ended March 31, 2002 and 2001; and its cash flows for the three months ended March 31, 2002 and 2001. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Critical Accounting Policies The Company's significant accounting policies are described in Note 2 to the consolidated financial statements included in our Transitional Report on Form 10-K for the eleven months ended December 31, 2001, filed with the SEC on April 1, 2002. The Company believes that its most critical accounting policies include the use of estimates. The impact of these estimates on results of operations in 2002 and 2001 are not significant. The Company's management periodically reviews these policies and estimates, the effect of which is reflected as a component of net loss in the period in which the change is known. Such changes to these estimates have not been material to the Company's results of operations during the three months ended March 31, 2002. -3- APHTON CORPORATION Financial Statement Overview The following highlighted information is also contained in Management's discussion and Analysis of Financial Condition and Results of Operations. During the quarter ended March 31, 2002, Aphton received approximately $27.7 million for approximately 2.7 million shares of its common stock. Total costs were reduced from $13.1 million in the quarter ending December 31, 2001 to $10.4 million in the quarter ended March 31, 2002. This decrease is primarily due to the completion of recruitment for two of the Company's clinical trials. We expect our total costs to continue to decrease in the remaining three quarters of the year 2002. The Company is planning to initiate two clinical trials in the fourth quarter. Most of the costs relating to these trials will be incurred during the fiscal year ended December 31, 2003.
APHTON CORPORATION Balance Sheets Assets March 31, December 31, 2002 2001 (Unaudited) Current Assets: Cash and current investments: Cash and short-term cash investments $15,339,250 $3,176,717 Investment securities-trading 1,156,172 1,147,417 Investment securities-held-to-maturity 6,989,301 1,999,006 ------------- -------------- Total cash and current investments 23,484,723 6,323,140 Other assets (including current portion of unconditional supply commitment) 626,223 595,390 -------------- ----------- Total current assets 24,110,945 6,918,530 Equipment and improvements, net 179,752 188,597 Unconditional supply commitment 6,625,515 6,875,515 ------------ ------------- Total assets $30,916,213 $13,982,642 =========== ============ Liabilities and Stockholders' Equity Liabilities: Current liabilities: Accounts payable and other $10,083,883 $10,715,430 ------------ ------------ Total current liabilities 10,083,883 10,715,430 Deferred revenue 10,000,000 10,000,000 ------------- ---------- Total liabilities 20,083,883 20,715,430 ------------ ---------- Commitments Stockholders' (Deficit) Equity: Preferred stock, $0.001 par value - Authorized: 2,000,000 shares Issued and outstanding: none - - Common stock, $0.001 par value - Authorized: 30,000,000 shares Issued and outstanding: 20,101,639 shares at March 31, 2002 and 17,386,996 shares at December 31, 2001 20,102 17,387 Additional paid in capital 121,215,753 93,566,314 Purchase warrants 298,900 298,900 Accumulated deficit (110,702,425) (100,615,389) ------------- ------------- Total stockholders' equity 10,832,330 (6,732,788) ------------- --------------- Total liabilities and stockholders' equity $30,916,213 $13,982,642 =========== =============
-4-
APHTON CORPORATION Statements of Operations (Unaudited) For the three months ended March 31, 2002 and 2001 Three months ended Three months ended March 31, 2002 March 31, 2001 $ - $ - -------------- ------------- Revenue: Costs and expenses: General and administrative 389,432 372,690 Research and development 9,690,247 4,927,519 ------------- ------------ Total costs and expenses 10,079,679 5,300,209 ------------- ------------ Loss from operations 10,079,679 5,300,209 ------------- ------------ Other income (expense): Dividend and interest income 22,288 229,965 Unrealized losses from investments (29,645) (968,964) -------- --------- Net loss $(10,087,036) $(6,039,208) ============= +=========== Per share data: Basic and fully diluted loss per common share $(0.54) $(0.37) ======= ======= Weighted average number of common shares outstanding 18,740,210 16,199,493 ============= =============
The net loss for the three months ended March 31, 2002 and 2001 was the comprehensive loss for those periods. For all periods presented potential common shares, consisting of approximately 2.7 million purchase warrants, were excluded from the computation of net loss per share because their effect was anti-dilutive.
APHTON CORPORATION Statements of Cash Flows (Unaudited) For the three months ended March 31, 2002 and 2001 2002 2001 Cash flows from operating activities: Cash paid to suppliers and employees $(10,490,271) $(4,360,767) ------------- ------------ Net cash used in operating activities (10,490,271) (4,360,767) Cash flows from investing activities: Purchase of held to maturity securities (6,990,295) (12,433,154) Proceeds from maturity of held to maturity securities 2,000,000 11,013,000 Capital expenditures (9,055) (62,411) ------------- ----------- Net cash used in investing activities (4,999,350) (1,482,565) ------------- ----------- Cash flows from financing activities: Sales of stock 27,652,154 - ------------- ----------- Cash received from financing activities 27,652,154 - ------------- ----------- Net increase (decrease) in cash and short-term cash investments 12,162,533 (2,878,202) Cash and short-term cash investments: Beginning of period 3,176,717 10,144,849 ------------- ----------- End of period $15,339,250 $7,266,647 ============= ============ Reconciliation of net loss to net cash used in operating activities Net loss $(10,087,036) $(6,039,208) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 17,900 19,104 Net (increase) decrease in investment securities-trading (8,755) 922,664 Unrealized losses from investments 29,645 968,964 Decrease in accrued employee benefits (29,645) (968,964) Changes in - Other assets - including current portion of supply commitment (30,833) (5,651) Unconditional supply commitment - long term portion 250,000 - Accounts payable and other (631,547) 742,324 ------------- ------------ Net cash used in operating activities: $(10,490,271) $(4,360,767) ============= ============
-5- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three months ended March 31, 2002 General Aphton Corporation is a biopharmaceutical company in one phase III and three phase II clinical trials. We apply our innovative technology-platform to develop products for neutralizing, and removing from circulation, hormones and other molecules that participate in gastrointestinal system and reproductive system cancer and non-cancer diseases. We have strategic alliances with Aventis Pasteur (NYSE: AVE), GlaxoSmithKline (NYSE: GSK) and others. Aphton's anti-gastrin targeted therapy induces antibodies in patients that bind to both gastrin 17 and gly-gastrin and remove them from circulation before they can initiate cell growth. Gastrin 17 and gly-gastrin are believed to be central growth factors, or the initiating signals, for cell growth and cell proliferation and metastasis (spread) in colon, pancreatic, stomach, esophageal and other gastrointestinal system cancers. This is accomplished by gastrin binding to the large numbers of gastrin receptors on the tumor cell surface. Interrupting this process by immunizing the patient with Aphton's anti-gastrin immunogen is a precisely "targeted" immunotherapy. This specificity of targeting only cancer cells occurs because gastrin is not normally secreted and gastrin receptors are not normally found on "healthy" cells in the GI system, unless they are malignant, or on the path to malignancy (except for cells involved with normal acid secretion). Recent findings have shown that inhibiting gastrin not only inhibits cell growth, proliferation and metastasis directly, but also "unblocks" a central pathway leading to cell-suicide (apoptosis). This tilts the balance, from cell growth, to cell suicide. This effect was amplified synergistically when Aphton's drug was given together with a chemotherapeutic. Gastrin also stimulates the secretion and expression of other important growth factors and receptors within and on the surface of the cancer cell involved in tumor growth. Hence, inhibiting gastrin inhibits all of the foregoing factors contributing to tumor growth and spread, while simultaneously opening a central pathway to cell suicide. Clinical Results The most important clinical result during the quarter was in our phase II clinical trial for patients with metastatic gastric cancer. An interim analysis of the first 30 patients on whom results were available showed that no side effects were attributed to the immunogen, and 50% had a tumor shrinkage of 50% or greater, including a complete response (no detectable residual tumor). These response rates compare favorably with the response rates of chemotherapy with cisplatin plus 5FU as reported in the medical literature for well-controlled trials, the FDA's standard requirement. The only MEDLINE referenced phase III and II trials of substantial and statistically significant size for patients with metastatic gastric cancer, were performed by the European Organization for Research & Treatment of Cancer (EORTC) and the US South West Oncology Group (SWOG). They showed response rates of 20% and 10%, respectively. Aphton has completed recruitment for its phase II clinical trial for patients with metastatic stomach cancer and is following the patients while awaiting additional interim results which will be followed by final analysis of the data. Aphton's anti-gastrin targeted therapy adds a biological dimension to the treatment of gastrointestinal cancers, without adding toxicity. Results of Operations During the quarter ended March 31, 2002, Aphton received approximately $27.7 million for approximately 2.7 million shares of its common stock. Total costs were reduced from $13,197,503 in the quarter ending December 31, 2001 to $10,087,036 in the quarter ended March 31, 2002. This decrease is primarily due to the completion of recruitment for two of the Company's clinical trials. We expect our total costs to continue to decrease in the remaining three quarters of the year 2002. The Company is planning to initiate two clinical trials in the fourth quarter. Most of the costs relating to these trials will be incurred during the fiscal year ended December 31, 2003. During this period the Company had no contract revenues. The investment earnings on cash and current investments for the three months ended March 31, 2002 was $22,288, compared to $229,965 for the quarter ended March 31, 2001. This decrease was due to lower average cash balances and interest rates. Total -6- research and development expenditures increased $4,762,728 to $9,790,247 in the three months ended March 31, 2002 over the three months ended March 31, 2002. These costs included the costs of establishing centers where patients are treated and monitored. This 97% increase was a result of the increased clinical trial costs associated with the development of the Company's products and the reduction of research and development costs by $969,000 in the quarter ended March 31, 2001. Research and development expenses were reduced by approximately $30,000 in the quarter ended March 31, 2002. This reduction corresponds with an adjustment of the same amount for unrealized loss on investment securities. The Company allows certain employees to defer a portion of compensation, and the Company transfers this amount into an investment account such that the employee is able to direct the investment of the funds. The related investment securities are held by the Company, and are subject to the general creditors of the Company. These employees direct the investment of the funds, and the changes in value in these investments are recognized as unrealized gains and losses in the statement of operations with a corresponding increase or decrease to the carrying value of the investment account. The same amount is used to adjust research and development expense and the corresponding liability for employees' wages and benefits payable. Unrealized holding losses on trading securities and the corresponding decrease in research and development expense totaled approximately $30,000 in the three month period ending March 31, 2002 and approximately $969,000 for the three months ended March 31, 2001. The Company does not accumulate cost information by major development product. Many costs are applicable to more than one product. We receive reimbursements from our strategic partners for some of our research and development expenses and these expenses are not included in our costs. We estimate that 93% of our research and development costs are spent on gastrointestinal and reproductive system cancers. There are no payment or penalty milestones associated with any of the projects, all of which are in Phase II or III clinical trials. The Company does not speculate on the timing of approvals by regulatory authorities. Other In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations," which the Company adopted in July 2001 and No. 142, "Goodwill and Other Intangible Assets," which was adopted in January 2002, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The adoption of these statements did not have an impact on the Company's financial position or results from operations. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144), which the Company adopted on January 1, 2002. SFAS 144 superseded Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. SFAS No. 144 also amended Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The adoption of these statements did not have an impact on the Company's financial position or results from operations. Inflation and changing prices have not had a significant effect on continuing operations and are not expected to have any material effect in the foreseeable future. Interest and other income were primarily derived from money-market accounts. Liquidity and Capital Resources The Company has financed its operations since inception through the sale of its equity securities and, to a lesser extent, operating revenues from R&D limited partnerships to conduct research and development. -7- These funds provided the Company with the resources to acquire staff, construct its research and development facility, acquire capital equipment and to finance technology and product development, manufacturing and clinical trials. On March 21, 2002, the Company sold 1,200,000 shares of registered common stock at $10.50 per share and received net proceeds of $11.8 million. On February 7, 2002, the Company sold 1,345,000 shares of registered common stock at $12.70 per share and received net proceeds of $16.1 million. During the eleven months ended December 31, 2001, the Company received proceeds of approximately $13.3 million net of approximately $1.0 million offering costs from the closing of a private financing with several funds. The Company issued 1,187,503 shares of common stock and there were no warrants or options included with this private placement. Approximately 170,000 additional shares were issued subsequent to December 31, 2001 due to an anti-dilution provision for the sale of securities at less than $12.00 per share prior to October 2002. The Company anticipates that its existing capital resources which are composed primarily of cash and short-term cash investments, including the proceeds of its private placements and interest thereon, would enable it to maintain its currently planned operations through the year ending December 31, 2002. The Company's working capital and capital requirements will depend upon numerous factors, including the following: the progress of the Company's research and development program, preclinical testing and clinical trials; the timing and cost of obtaining regulatory approvals; the levels of resources that the Company devotes to product development, manufacturing and marketing capabilities; technological advances; competition; and collaborative arrangements or strategic alliances with other drug companies, including the further development, manufacturing and marketing of certain of the Company's products and the ability of the Company to obtain funds from such strategic alliances or from other sources. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company has no material changes to the disclosure on this matter made under Item 7A of its Transitional Report on Form 10-K for the eleven month period ended December 31, 2001. -8- Part II - Other Information Item 1. Legal Proceedings. Not applicable. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Report on Form 8-K. (a) Exhibits 10.1D* Amendment No. 3 dated March 25, 2002 to the Collaboration and License Agreement by and between Aphton Corporation and SmithKline Beecham PLC dated as of June 12, 1998, as amended through Amendment No. 1 dated May 10, 2000 and Amendment No. 2 dated July 2, 2001. (b) Reports on Form 8-K During the three months ended March 31, 2002, the Company filed the following current reports on Form 8-K: - on January 23, 2002, announcing the completion of patient recruitment for the Company's gastric cancer clinical trial; - on January 31, 2002, announcing the effectiveness of a registration statement on Form S-3 to sell 1,500,000 shares of the Company's common stock; - on February 5, 2002, disclosing the signing of an underwriting agreement among the Company, UBS Warburg LLC and Morgan Keegan & Co., Inc.; - on February 5, 2002, announcing the sale of 1,345,000 shares of the Company's common stock; - on February 7, 2002, announcing the closing of the offer and sale of 1,345,000 shares of the Company's common stock; - on February 11, 2002, disclosing that a scientific collaborator of the Company had announced interim results of a gastric cancer Phase II clinical trial at the 12th International Congress in Paris on anti-cancer treatment; - on March 18, 2002, disclosing certain preliminary unaudited summary financial information of the Company for the period ended December 31, 2001; - on March 18, 2002, disclosing the signing of an underwriting agreement between the Company and Morgan Keegan & Co., Inc.; - on March 21, 2002, announcing the closing of the offer and sale of 1,200,000 shares of the Company's common stock. * A portion of the exhibit has been omitted pursuant to a request for confidential treatment. -9- Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. Aphton Corporation Date: May 9, 2002 By: /s/ Frederick W. Jacobs ------------------------------------------- Frederick W. Jacobs Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer -10- EX-10.1 3 exh10_1.txt THIRD AMENDMENT TO COLLABORATION AND LIC AGRMT Exhibit 10.1 D THIRD AMENDMENT TO COLLABORATION AND LICENSE AGREEMENT Third amendment, dated March 25, 2002, (this "Amendment"), to the Collaboration and License Agreement and the Subscription Agreement dated June 12, 1998, each as amended through Amendment No. 1 dated May 10, 2000 and through Amendment No. 2 dated July 2, 2001, and each by and between Aphton Corporation, a company organized under the laws of Delaware with its principal executive offices at the World Trade Center, 80 SW Eight Street, Suite 2160, Miami, Florida (hereinafter "Aphton"), and SmithKline Beecham PLC, having a place of business at New Horizon Court, Great West Road, Brentford, Middlesex TW8 9EP, United Kingdom (hereinafter "SB"). All capitalized terms used herein but not otherwise defined herein shall have the respective meanings given to such terms in the Collaboration and License Agreement. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Aphton and SB are parties to a Collaboration and License Agreement and a Subscription Agreement dated June 12, 1998, amended through Amendment No. 1 to the Collaboration and License Agreement and the Subscription Agreement dated May 10, 2000 (hereinafter "Amendment No. 1") and through Amendment No. 2 to the Collaboration and License Agreement and the Subscription Agreement dated July 2, 2001; and WHEREAS, Aphton and SB wish to amend certain provisions of the Collaboration and License Agreement (the "Agreement") as amended through Amendments No. 1 and No. 2, as herein provided. NOW, THEREFORE, it is agreed: 1. Section 3.1 (i) of the Agreement, as previously revised through Amendment No. 1 shall be further amended to read as follows: 3.1.(i) Before end of April 2002, Aphton undertakes to deliver to SB a full and detailed report describing preclinical and clinical activities performed and results obtained so far as well as an Updated Development Plan to be accepted by the Steering Committee. The Steering Committee shall either accept or reject Aphton's proposed Updated Development Plan within thirty (30) days of submission by Aphton to the Steering Committee. If the Steering Committee rejects Aphton's proposed Updated Development Plan, it will provide to Aphton the reasons for such rejection and Aphton shall be entitled to submit a revised Updated Development Plan to the Steering Committee within thirty (30) days thereof. If the Steering Committee rejects such revised Updated Development Plan, SB shall be entitled to terminate forthwith the Agreement by giving Aphton a written notice of its election to do so. Upon acceptance of the Updated Development Plan, SB shall provide the Conjugate (being defined in Amendment No. 1 as anti-GnRH conjugate manufactured under contract for SB) at no expense to Aphton for its clinical use while stocks of GMP lot DD1DTP002 last. After such stock has run out, SB shall not provide any more Conjugate to Aphton. After April 1st, 2002, Aphton shall be responsible -1- for verifying at its expense adequate stability of the Conjugate before formulation into clinical lots, will provide SB with documented evidence of such stability and will bear all liability related to any lack of stability of Conjugate supplied after April 1st, 2002. The parties agree to replace the Development Plan contained in schedule B of the Agreement and amended by Amendment No. 1 with the New Development Plan, as approved by the Steering Committee. The Development Program Term shall be amended accordingly. 2. The sixth sentence of Section 3.1 (ii) of the Agreement, as previously revised through Amendment No. 1 and Amendment No. 2, shall be further amended to read as follows: "In no event shall the Presentation Date be later than [ Redacted]*." 3. The first sentence of Section 13.3.1 of the Agreement, as previously revised through Amendment No. 1 and Amendment No. 2, shall be further amended to read as follows: "Prior to the Acceptance Date, SB shall have the right to terminate this Agreement by serving notice of no less than 30 days to Aphton which will be effective as from September 30, 2003." 4. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Collaboration and License Agreement and the Subscription Agreement dated June 12, 1998, as amended through Amendment No. 1 dated May 10, 2000 and through Amendment No. 2 dated July 2, 2001. 5. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 6. This Amendment and the rights of the parties hereunder shall be governed by, and interpreted in accordance with, the laws of the State of New York, without giving effect to the principles of conflict of law thereunder. 7. This Amendment shall become effective on the date (the "Amendment Effective Date") when each of the Parties shall have signed a counterpart hereof (whether the same or different counterparts). 8. From and after the Amendment Effective Date, all references in the Agreement shall be deemed to be references to the Agreement as amended by this Amendment, Amendment No. 1 and Amendment No. 2. - ---------------------------- * The redacted portion of this document has been omitted pursuant to a request for confidential treatment and such redacted portion has been filed separately with the Securities and Exchange Commission. -2- IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the date and year first above written. APHTON CORPORATION /s/ Philip C. Gevas -------------------------------------------- Name: Philip C. Gevas Title: Chairman, President and Chief Executive Officer SMITHKLINE BEECHAM PLC /s/ Jean Stephenne -------------------------------------------- Name: Jean Stephenne Title: Attorney- in-fact -3- -----END PRIVACY-ENHANCED MESSAGE-----