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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of Registrant as Specified in Its Charter)
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DELAWARE 8731 04-3177038
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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75 SIDNEY STREET
CAMBRIDGE, MA 02139
(617) 679-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
MARK J. LEVIN
CHIEF EXECUTIVE OFFICER
MILLENNIUM PHARMACEUTICALS, INC.
75 SIDNEY STREET
CAMBRIDGE, MA 02139
(617) 679-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
Of Agent for Service)
------------------------------
With copies to:
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DAVID E. REDLICK, ESQ. JOHN B. DOUGLAS III, ESQ.
KENNETH A. HOXSIE, ESQ. GENERAL COUNSEL
HALE AND DORR LLP MILLENNIUM PHARMACEUTICALS, INC.
60 STATE STREET 75 SIDNEY STEET
BOSTON, MA 02109 CAMBRIDGE, MA 02139
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and upon the
effective time of the merger (the "Merger") of Millennium BioTherapeutics, Inc.
with and into the Registrant, which is expected to occur on the twentieth
business day following the mailing of the prospectus included in this
Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
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Common Stock, $0.001 par value..... 700,000 $0.001 $4,268 $1.20
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(1) Represents the number of shares of common stock of the Registrant that may
be issued to former stockholders of Millennium BioTherapeutics pursuant to
the Merger.
(2) Pursuant to Rule 457(f)(2), because there is no public trading market for
Millennium BioTherapeutics common stock and Millennium BioTherapeutics has
an accumulated capital deficit, the registration fee was calculated on the
basis of one-third of the total par value of Millennium BioTherapeutics
common and preferred stock of $12,804.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1999
MILLENNIUM BIOTHERAPEUTICS, INC.
INFORMATION STATEMENT
------------------------
MILLENNIUM PHARMACEUTICALS, INC.
PROSPECTUS
We are sending you this information statement/prospectus to describe the
proposed merger between Millennium BioTherapeutics, Inc. and Millennium
Pharmaceuticals, Inc. If we complete this merger, Millennium BioTherapeutics
will merge with and into Millennium Pharmaceuticals and unless you seek to
exercise your appraisal rights, your shares of Millennium BioTherapeutics
Class B common stock will be converted into shares of Millennium Pharmaceuticals
common stock. For each of your shares of Millennium BioTherapeutics Class B
common stock, you will receive a number of shares of Millennium Pharmaceuticals
common stock equal to the average of (1) $15.00 divided by $62.536 and
(2) $15.00 divided by the average of the last reported sale prices per share of
Millennium Pharmaceuticals common stock over the 20 trading days ending on the
second trading day before the effective date of the merger. We will round the
total number of shares of Millennium Pharmaceuticals common stock you receive
down to the nearest whole number of shares, and you will receive a cash payment
for any remaining fraction of a share.
The board of directors of Millennium Pharmaceuticals has voted to merge
Millennium BioTherapeutics into Millennium Pharmaceuticals. Because Millennium
Pharmaceuticals owns all of the voting stock, and approximately 88.9% of all
outstanding shares of stock, of Millennium BioTherapeutics, no further action by
Millennium BioTherapeutics stockholders is necessary to complete the merger. WE
ARE NOT ASKING YOU FOR A PROXY TO VOTE YOUR SHARES AND YOU ARE REQUESTED NOT TO
SEND US A PROXY TO VOTE YOUR SHARES. We expect the merger will be completed on
the 20(th) business day following the mailing of this prospectus.
The board of directors of Millennium BioTherapeutics, based on a
recommendation of a special committee consisting of a disinterested director,
has approved the merger agreement between Millennium BioTherapeutics and
Millennium Pharmaceuticals. The special committee received an opinion from JSB
Partners L.P. as to the fairness, from a financial point of view, of the
consideration to be paid to you.
This information statement/prospectus is also Millennium Pharmaceuticals'
prospectus for the shares of Millennium Pharmaceuticals common stock that it
will issue to Millennium BioTherapeutics stockholders in the merger. Millennium
Pharmaceuticals common stock is listed on the Nasdaq Stock Market under the
symbol "MLNM".
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER OR THE SECURITIES TO BE
ISSUED UNDER THIS INFORMATION STATEMENT/ PROSPECTUS OR DETERMINED IF THIS
INFORMATION STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This information statement/prospectus is dated [ ], 1999, and was
first mailed to stockholders of Millennium BioTherapeutics on or about
[ ], 1999.
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TABLE OF CONTENTS
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Questions And Answers About The Merger...................... 1
Summary..................................................... 3
The Companies............................................. 3
Reasons for the Merger.................................... 4
No Stockholder Approval Required; Millennium
Pharmaceuticals Board Approval.......................... 4
The Merger................................................ 4
The Merger Agreement.................................... 4
What You Will Receive in the Merger..................... 4
Regulatory Approvals.................................... 5
Background of the Merger................................ 5
Opinion of Financial Advisor to Millennium
BioTherapeutics........................................ 5
Certain Federal Income Tax Consequences................. 5
Accounting Treatment.................................... 5
Appraisal Rights of Dissenting Stockholders of
Millennium BioTherapeutics............................. 6
What Is Needed to Complete the Merger................... 6
Termination of the Merger Agreement..................... 6
Amendment and Waiver of the Merger Agreement............ 6
Interests of Millennium BioTherapeutics' and Millennium
Pharmaceuticals' Directors and Officers in the
Merger................................................. 6
Comparison of Stockholder Rights........................ 7
Risk Factors................................................ 8
Risks Relating to Our Industry, Business and Strategy..... 8
Risks Relating to Financing............................... 10
Risks Relating to Development of Technology and
Products................................................ 11
Risks Relating to Strategic Alliance Partners............. 12
Risks Relating to Intellectual Property................... 13
Risks Relating to Preclinical Testing and Clinical
Trials.................................................. 15
Regulatory Risks.......................................... 15
Risks Relating to Product Manufacturing, Marketing and
Sales................................................... 17
Risks Relating to Ongoing Operations...................... 19
Selected Financial Data..................................... 20
Millennium BioTherapeutics Selected Financial Data........ 20
Millennium Pharmaceuticals Selected Financial Data........ 21
Comparative Per Share Data................................ 22
Market Price And Dividend Data.............................. 23
Special Note Regarding Forward-looking Statements........... 24
The Merger.................................................. 25
General................................................... 25
Millennium Pharmaceuticals' Reasons for the Merger........ 25
Millennium BioTherapeutics' Reasons for the Merger........ 25
Background of the Merger.................................. 26
Opinion of Financial Advisor to Millennium
BioTherapeutics......................................... 29
Interests of Millennium BioTherapeutics' and Millennium
Pharmaceuticals' Directors and Officers in the Merger... 31
Effective Time of the Merger.............................. 32
Certain Federal Income Tax Consequences................... 32
Accounting Treatment...................................... 33
Listing of Shares of Millennium Pharmaceuticals Common
Stock on the Nasdaq Stock Market........................ 33
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Resale Restrictions and Lockup Agreements................. 34
Appraisal Rights of Dissenting Stockholders of Millennium
BioTherapeutics......................................... 34
The Merger Agreement........................................ 38
The Merger................................................ 38
Consideration to Be Received in The Merger................ 38
Procedures For Surrender of Millennium BioTherapeutics
Certificates; Fractional Shares......................... 38
Effect on the Millennium BioTherapeutics 1997 Equity
Incentive Plan.......................................... 39
Representations And Warranties............................ 40
Covenants................................................. 40
Conditions................................................ 41
Termination............................................... 42
Amendments and Waivers.................................... 42
Information Concerning Millennium Pharmaceuticals........... 43
Recent Transactions....................................... 43
Additional Information.................................... 44
Information Concerning Millennium BioTherapeutics........... 44
Business.................................................. 44
Outstanding Stock; No Public Trading Market............... 48
Dividend Policy........................................... 49
Quantitative and Qualitative Disclosures About Market
Risk.................................................... 49
Other Matters............................................. 49
Millennium BioTherapeutics, Inc. Management's Discussion And
Analysis of Financial Condition and Results of
Operations................................................ 50
Overview.................................................. 50
Results of Operations..................................... 50
Liquidity and Capital Resources........................... 51
New Accounting Pronouncement.............................. 52
Impact of Year 2000....................................... 52
Executive Officers And Directors of Millennium
BioTherapeutics........................................... 55
Security Ownership of Directors, Executive Officers and
Principal Stockholders of Millennium BioTherapeutics...... 56
Comparison of Stockholder Rights............................ 57
Millennium Pharmaceuticals Unaudited Pro Forma Combined
Financial Information--Millennium BioTherapeutics......... 63
Unaudited Pro Forma Combined Balance Sheets as of
September 30, 1999...................................... 64
Unaudited Pro Forma Combined Statements of Operations for
the Nine Months Ended September 30, 1999................ 65
Unaudited Pro Forma Combined Statements of Operations for
the Year Ended December 31, 1998........................ 66
Notes to Unaudited Pro Forma Combined Financial
Statements.............................................. 67
Millennium Pharmaceuticals Unaudited Pro Forma Combined
Financial Information--LeukoSite, Inc. Acquisition........ 68
Unaudited Pro Forma Combined Balance Sheets as of
September 30, 1999...................................... 69
Unaudited Pro Forma Combined Statements of Operations for
the Nine Months Ended September 30, 1999................ 70
Unaudited Pro Forma Combined Statements of Operations for
the Year Ended December 31, 1998........................ 71
Notes to Unaudited Pro Forma Combined Financial
Statements.............................................. 72
Experts..................................................... 75
Legal Matters............................................... 75
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ii
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PAGE
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Where You Can Find More Information......................... 75
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This document incorporates important business and financial information
about Millennium Pharmaceuticals that is neither included in nor delivered with
this document. Millennium Pharmaceuticals will provide you with copies of this
information, without charge, upon written or oral request to:
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
(617) 679-7000
Attention: Corporate Secretary
IN ORDER TO OBTAIN TIMELY DELIVERY OF THIS INFORMATION, YOU MUST REQUEST
SUCH INFORMATION NO LATER THAN , 1999.
iii
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A. The proposed transaction is a merger of Millennium BioTherapeutics with and
into Millennium Pharmaceuticals. As a result, Millennium BioTherapeutics
will cease to exist as a separate company and Millennium BioTherapeutics
stockholders will have their shares of Millennium BioTherapeutics Class B
common stock converted into shares of Millennium Pharmaceuticals common
stock.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. Each share of Millennium BioTherapeutics Class B common stock that you own
will be converted into a number of shares of Millennium Pharmaceuticals
common stock equal to the average of (1) $15.00 divided by $62.536 and
(2) $15.00 divided by the average of the last reported sale prices per share
of Millennium Pharmaceuticals common stock on the Nasdaq Stock Market over
the 20 consecutive trading days ending on the trading day that is two
trading days prior to the day the merger becomes effective. You will receive
a cash payment in place of any fractional share of Millennium
Pharmaceuticals common stock you would have otherwise received.
For example, if you own 1,000 shares of Millennium BioTherapeutics Class B
common stock and the average of the last reported sale prices per share of
Millennium Pharmaceuticals common stock on the Nasdaq Stock Market over the
20 consecutive trading days ending two trading days prior to the day the
merger becomes effective is $70.688, which was the closing price on
November 3, 1999, you will receive 226 shares of Millennium Pharmaceuticals
common stock plus cash in the amount of $2.06. The total value of the shares
of Millennium Pharmaceuticals common stock Millennium Pharmaceuticals will
issue in this transaction, based on the closing price per share of
Millennium Pharmaceuticals common stock of $70.688 on November 3, 1999, is
about $28.8 million.
Q. WILL THE EXCHANGE RATIO AND THE VALUE OF THE SHARES I WILL RECEIVE CHANGE
BETWEEN NOW AND THE TIME THE MERGER IS COMPLETED?
A. In all likelihood they will. The exchange ratio (which affects the number of
shares you will receive) and the value of the shares you will receive may
fluctuate between the date of this information statement/prospectus and the
completion of the merger, based upon changes in the market price for
Millennium Pharmaceuticals common stock. The exchange ratio will depend on
the average closing price of Millennium Pharmaceuticals common stock over
the 20 trading days ending on the second trading day prior to the effective
date of the merger. In addition, any fluctuation in the market price of
Millennium Pharmaceuticals common stock will change the value of the shares
of Millennium Pharmaceuticals common stock that you will receive.
Q. WHY IS THERE NO STOCKHOLDER VOTE?
A. Millennium Pharmaceuticals owns all of the outstanding voting stock of
Millennium BioTherapeutics. The board of directors of Millennium
Pharmaceuticals has voted to merge with Millennium BioTherapeutics and
assume its obligations. This vote of Millennium Pharmaceuticals directors
meets the requirements for a merger under Delaware law, the Millennium
BioTherapeutics restated certificate of incorporation and the Millennium
BioTherapeutics bylaws, so no stockholder vote is necessary.
Q. AM I ENTITLED TO APPRAISAL RIGHTS?
A. Yes. Under Delaware law, which governs the merger, you have the right to seek
appraisal of your Millennium BioTherapeutics stock. See "Appraisal Rights of
Dissenting Stockholders of Millennium BioTherapeutics."
1
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Q. WHAT DO I NEED TO DO NOW?
A. Nothing, unless you intend to seek appraisal rights. After the merger is
completed, if you do not seek appraisal rights, you will receive written
instructions and a letter of transmittal for converting your shares of
Millennium BioTherapeutics Class B common stock into shares of Millennium
Pharmaceuticals common stock and receiving your cash payment in place of any
fraction of a share of Millennium Pharmaceuticals common stock. Please do
not send your share certificates until you receive the instructions and
letter of transmittal.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. As soon as practicable after the merger is completed, Millennium
Pharmaceuticals will send Millennium BioTherapeutics stockholders written
instructions for converting their share certificates, together with a letter
of transmittal for such certificates.
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We expect to complete the merger on the 20(th) business day after the date
this information statement/prospectus is mailed to the Millennium
BioTherapeutics stockholders. We expect that this will occur in ,
1999.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT MILLENNIUM PHARMACEUTICALS?
A. More information about Millennium Pharmaceuticals is available from various
sources described under "Where You Can Find More Information."
2
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To better understand
the merger and the issuance of shares of Millennium Pharmaceuticals common
stock, you should read carefully this entire document and the documents to which
we have referred you. See "Incorporation of Certain Documents by Reference." We
have sometimes included page references or section references to direct you to
more complete descriptions of the topics presented in this summary.
THE COMPANIES
MILLENNIUM BIOTHERAPEUTICS, INC.
640 Memorial Drive
Cambridge, MA 02139
(617) 679-7000
Millennium BioTherapeutics has engaged in protein and antibody product
discovery efforts. Millennium BioTherapeutics' protein discovery efforts have
included a genomics-based program and programs for identification of therapeutic
protein opportunities, both on its own behalf and with Eli Lilly and Company,
with whom Millennium BioTherapeutics has a collaboration agreement. Millennium
BioTherapeutics has focused its antibody discovery efforts in the fields of
inflammation and oncology. Millennium Pharmaceuticals owns all of the voting
stock of Millennium BioTherapeutics and approximately 88.9% of all outstanding
shares of stock.
MILLENNIUM PHARMACEUTICALS, INC.
75 Sidney Street
Cambridge, MA 02139
(617) 679-7000
Millennium Pharmaceuticals seeks to discover and develop proprietary
therapeutic and diagnostic human healthcare products and services based on the
discovery and understanding of the medical usefulness of genes. Millennium
Pharmaceuticals employs genetics and genetic analysis, also called genomics, and
uses computer-based information systems to assist in the identification,
analysis and elucidation of the biological function of genes. Millennium
Pharmaceuticals applies its technology across the entire healthcare sector, from
gene identification through patient management.
Millennium Pharmaceuticals is pursuing business opportunities in small
molecule drugs and predictive medicine through operating divisions and its
subsidiaries, Millennium BioTherapeutics and Millennium Predictive
Medicine, Inc. As part of its strategy, it has formed strategic alliances with
major companies in the pharmaceutical and life science industries. To date,
Millennium Pharmaceuticals has formed eleven alliances, nine by Millennium
Pharmaceuticals itself, one by Millennium BioTherapeutics and one by Millennium
Predictive Medicine.
On October 14, 1999, the following occurred:
- Millennium Pharmaceuticals and Millennium BioTherapeutics entered into a
merger agreement.
- Millennium Pharmaceuticals acquired all of the shares in Millennium
BioTherapeutics owned by Eli Lilly and Company.
- Millennium Pharmaceuticals and Millennium BioTherapeutics amended a rights
exchange agreement which had allocated research opportunities to
Millennium BioTherapeutics and a technology transfer and license agreement
which provided for the mutual transfer of technology and granting of
licenses.
3
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- Millennium BioTherapeutics amended its strategic alliance with Eli Lilly
in the field of therapeutic proteins.
- Millennium Pharmaceuticals entered into a merger agreement to acquire
LeukoSite, Inc.
Millennium Pharmaceuticals was organized as a Delaware corporation in 1993.
Millennium Pharmaceuticals' World Wide Web site address is www.mlnm.com. The
information in our web site is not incorporated by reference into this
prospectus.
REASONS FOR THE MERGER
Millennium Pharmaceuticals expects to benefit from the merger in two
principal ways. First, Millennium Pharmaceuticals believes that it can achieve
economies of scale by more fully integrating its operations with those of
Millennium BioTherapeutics. Second, Millennium Pharmaceuticals believes that it
will have increased flexibility to engage in transactions such as the pending
LeukoSite acquisition by eliminating the potential for conflicts of interest
with the minority stockholders of Millennium BioTherapeutics.
The board of directors of Millennium BioTherapeutics, based on a
recommendation of its special committee, believes that the merger is fair to,
and in the best interests of, the Millennium BioTherapeutics Class B common
stockholders. The special committee received an opinion from JSB Partners, L.P.
as to the fairness, from a financial point of view, of the consideration to be
paid in the merger. The board of directors and the special committee based their
determination on, among other factors, the amount of the merger consideration
and the fact that Millennium BioTherapeutics Class B common stock, which is
illiquid and non-voting, will be converted into a voting security tradeable on
the Nasdaq Stock Market.
NO STOCKHOLDER APPROVAL REQUIRED; MILLENNIUM PHARMACEUTICALS BOARD APPROVAL
We are not asking you to vote on the merger. At a meeting held on
October 14, 1999, the board of directors of Millennium Pharmaceuticals resolved
to merge Millennium BioTherapeutics into Millennium Pharmaceuticals. The
resolution provides that the merger will be effective on the filing of a
certificate of ownership and merger in Delaware, which is expected to occur on
the 20(th) business day following the mailing of this information
statement/prospectus. Because Millennium Pharmaceuticals owns all of the
outstanding voting stock of Millennium BioTherapeutics, this resolution was
sufficient to authorize the merger under Delaware law, the Millennium
BioTherapeutics restated certificate of incorporation and the Millennium
BioTherapeutics bylaws.
THE MERGER
THE MERGER AGREEMENT (SEE PAGE 38)
Millennium Pharmaceuticals and Millennium BioTherapeutics have entered into
a merger agreement which provides that Millennium BioTherapeutics will merge
with and into Millennium Pharmaceuticals and Millennium Pharmaceuticals will be
the surviving company.
THE MERGER AGREEMENT IS INCLUDED AS APPENDIX A TO THIS INFORMATION
STATEMENT/PROSPECTUS. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 38)
Unless you exercise your appraisal rights, each share of Millennium
BioTherapeutics Class B common stock that you own will be converted into a
number of shares of Millennium Pharmaceuticals common stock equal to the average
of (1) $15.00 divided by $62.536 and (2) $15.00 divided by the average of the
last reported sale prices per share of Millennium Pharmaceuticals common stock
on the
4
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Nasdaq Stock Market over the 20 consecutive trading days ending on the trading
day that is two trading days prior to the day the merger becomes effective.
Millennium Pharmaceuticals will not issue any fractional shares. Instead, each
Millennium BioTherapeutics stockholder who would otherwise have been entitled to
receive a fractional share of Millennium Pharmaceuticals common stock will
receive cash in place of that fractional share.
REGULATORY APPROVALS
Except for filing a certificate of ownership and merger in Delaware and
except for compliance with federal and state securities laws, neither Millennium
Pharmaceuticals nor Millennium BioTherapeutics is aware of any material United
States federal or state or foreign governmental regulatory requirement necessary
to be complied with, or approval that must be obtained, in connection with the
Merger.
BACKGROUND OF THE MERGER (SEE PAGE 26)
In June 1999, Millennium Pharmaceuticals and Millennium BioTherapeutics
began discussions regarding a possible merger between them. The board of
directors of Millennium BioTherapeutics later created a special committee,
consisting of a single disinterested director, to negotiate terms with
Millennium Pharmaceuticals and to make a recommendation to the board regarding
any proposed transaction. The special committee was advised by its own financial
advisor and legal counsel. Negotiations continued through early October 1999. On
October 14, 1999, the special committee recommended to the board of directors of
Millennium BioTherapeutics that it approve the merger agreement. At meetings
held on October 14, 1999, the board of directors of Millennium Pharmaceuticals
and Millennium BioTherapeutics each approved the merger agreement.
OPINION OF FINANCIAL ADVISOR TO MILLENNIUM BIOTHERAPEUTICS (SEE PAGE 29)
On October 14, 1999, JSB Partners, L.P. rendered its oral and written
opinion, to the special committee of the board of directors of Millennium
BioTherapeutics that, as of that date, the consideration of $15.00 per share,
payable in shares of Millennium Pharmaceuticals common stock, that Millennium
Pharmaceuticals proposed to pay in the merger was fair, from a financial point
of view, to the holders of Class B common stock of Millennium BioTherapeutics.
THE FULL TEXT OF THE WRITTEN OPINION OF JSB PARTNERS DATED OCTOBER 14, 1999,
WHICH SETS FORTH THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, AND MATTERS
CONSIDERED, IS ATTACHED AS APPENDIX B TO THIS INFORMATION STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF MILLENNIUM
BIOTHERAPEUTICS SHOULD READ THE OPINION OF JSB PARTNERS IN ITS ENTIRETY.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 32)
Millennium Pharmaceuticals and Millennium BioTherapeutics expect the merger
to be tax free to Millennium BioTherapeutics stockholders (except for tax
payable on cash received by Millennium BioTherapeutics stockholders instead of
fractional shares of Millennium Pharmaceuticals common stock). Millennium
Pharmaceuticals will receive an opinion of legal counsel that the merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
ACCOUNTING TREATMENT (SEE PAGE 33)
The merger, if completed, will be accounted for as an exchange of shares
between companies under common control and will result in the combination of the
recorded book values of the assets, liabilities and shareholders' equity of
Millennium Pharmaceuticals and Millennium BioTherapeutics.
5
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APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS OF MILLENNIUM BIOTHERAPEUTICS (SEE
PAGE 34)
IF YOU OBJECT TO THE MERGER, DELAWARE LAW PERMITS YOU TO SEEK RELIEF AS A
DISSENTING STOCKHOLDER AND HAVE THE "FAIR VALUE" OF YOUR SHARES OF MILLENNIUM
BIOTHERAPEUTICS CLASS B COMMON STOCK DETERMINED BY A COURT AND PAID TO YOU IN
CASH.
This information statement/prospectus constitutes a notice of appraisal
rights. If you are a Millennium BioTherapeutics stockholder and wish to dissent,
you must deliver to Millennium Pharmaceuticals within 20 days from the date of
mailing of this information statement/prospectus a written demand for appraisal
of your shares.
The relevant provisions of Delaware law are technical in nature and complex.
If you wish to exercise appraisal rights and obtain appraisal of the fair value
of your shares, you may wish to consult with legal counsel because the failure
to comply strictly with these provisions may result in waiver or forfeiture of
your appraisal rights.
A COPY OF THE RELEVANT SECTION OF DELAWARE LAW GOVERNING THIS PROCESS IS
ATTACHED AS APPENDIX C TO THIS INFORMATION STATEMENT/PROSPECTUS.
WHAT IS NEEDED TO COMPLETE THE MERGER (SEE PAGE 41)
A few limited conditions must be satisfied before the merger will be
completed. These include:
- receipt by Millennium Pharmaceuticals of an opinion of its tax counsel
that for U.S. federal income tax purposes, the merger will constitute a
reorganization under Section 368(a) of the Internal Revenue Code; and
- other customary contractual conditions specified in the merger agreement.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 42)
Millennium Pharmaceuticals and Millennium BioTherapeutics may agree to
terminate the merger agreement without completing the merger. In addition,
either party may terminate the merger agreement if the other party has breached
the agreement and not cured its breach or if the merger has not been completed
by December 31, 2000.
AMENDMENT AND WAIVER OF THE MERGER AGREEMENT (SEE PAGE 42)
Millennium Pharmaceuticals and Millennium BioTherapeutics may agree to amend
the merger agreement prior to the time the merger becomes effective, subject to
applicable law. Either of us can waive our right to require the other party to
adhere to the terms and conditions of the merger agreement, if the law allows,
at any time prior to the time the merger becomes effective. In order for
Millennium BioTherapeutics to amend, or waive any of its rights under, the
merger agreement, the special committee of Millennium BioTherapeutics' board of
directors must recommend such amendment or waiver and the Millennium
BioTherapeutics' board of directors must approve such amendment or waiver.
INTERESTS OF MILLENNIUM BIOTHERAPEUTICS' AND MILLENNIUM PHARMACEUTICALS'
DIRECTORS AND OFFICERS IN THE MERGER (SEE PAGE 31)
Some of the interests which executive officers and directors of Millennium
BioTherapeutics and Millennium Pharmaceuticals have in the merger are different
from your and their interests as stockholders. These involve primarily ownership
by those persons of common stock and options to purchase common stock of
Millennium BioTherapeutics and Millennium Pharmaceuticals.
6
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In addition, Millennium Pharmaceuticals owns approximately 88.9% of the
outstanding shares of stock in Millennium BioTherapeutics and is a party to a
rights exchange agreement and technology transfer and licensing agreement with
Millennium BioTherapeutics. Each of those agreements was amended in connection
with signing the merger agreement between Millennium Pharmaceuticals and
Millennium BioTherapeutics.
As of September 30, 1999, Millennium Pharmaceuticals had advanced an
aggregate of approximately $13.9 million to Millennium BioTherapeutics. Under
the merger agreement, Millennium Pharmaceuticals has agreed to make additional
advances in reasonable amounts as and when requested by Millennium
BioTherapeutics. Millennium Pharmaceuticals has agreed not to demand payment of
any past or future advances until March 31, 2000.
COMPARISON OF STOCKHOLDER RIGHTS (SEE PAGE 57)
If you own Millennium BioTherapeutics Class B common stock, unless you
exercise your appraisal rights, you will become a stockholder of Millennium
Pharmaceuticals upon completion of the merger. Your rights will then be governed
by Millennium Pharmaceuticals' certificate of incorporation and bylaws, rather
than Millennium BioTherapeutics' certificate of incorporation and bylaws. Your
rights as a stockholder of Millennium Pharmaceuticals will differ from your
rights as a stockholder of Millennium BioTherapeutics.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS, ALONG WITH THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS INFORMATION
STATEMENT/PROSPECTUS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES AFFECTING MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS.
ADDITIONAL RISKS AND UNCERTAINTIES MAY ALSO ADVERSELY AFFECT MILLENNIUM
PHARMACEUTICALS' AND MILLENNIUM BIOTHERAPEUTICS' BUSINESS AND OPERATIONS. IF ANY
OF THE FOLLOWING EVENTS ACTUALLY OCCURS, MILLENNIUM PHARMACEUTICALS' AND/OR
MILLENNIUM BIOTHERAPEUTICS' BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS WOULD LIKELY SUFFER, POSSIBLY MATERIALLY. THE TERMS "WE," "OUR" AND
"US" WHEN USED IN THIS SECTION CAPTIONED "RISK FACTORS" MEAN MILLENNIUM
PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS.
RISKS RELATING TO OUR INDUSTRY, BUSINESS AND STRATEGY
THE GENOMICS INDUSTRY IS NEW; MILLENNIUM PHARMACEUTICALS AND MILLENNIUM
BIOTHERAPEUTICS HAVE NOT DEVELOPED OR COMMERCIALIZED ANY PRODUCTS
The genomics industry is new and evolving rapidly. To date, neither
Millennium Pharmaceuticals nor Millennium BioTherapeutics has developed or
commercialized any products based on our genomics and related technologies. In
addition, relatively few products based on gene discoveries have been developed
and commercialized by others. Rapid technological development by either company
or others may result in compounds, products or processes becoming obsolete
before we recover our development expenses.
The products that Millennium Pharmaceuticals and Millennium BioTherapeutics
are developing will require additional research and development, extensive
preclinical studies and clinical trials and regulatory approval prior to any
commercial sales. Millennium Pharmaceuticals and Millennium BioTherapeutics may
need to successfully address a number of technological challenges in order to
complete development of any of our products. Moreover, these products may not be
effective in treating any disease or may prove to have undesirable or unintended
side effects, toxicities or other characteristics that may prevent or limit
commercial use.
MILLENNIUM PHARMACEUTICALS PLANS TO EXPAND RAPIDLY; IF MILLENNIUM
PHARMACEUTICALS CANNOT MANAGE ITS GROWTH SUCCESSFULLY, ITS GROWTH MAY SLOW OR
STOP
Millennium Pharmaceuticals has rapidly expanded its operations and expects
to continue to expand. Millennium Pharmaceuticals' growth has placed, and will
continue to place, a significant strain on its management, operating and
financial systems. If Millennium Pharmaceuticals cannot manage its expanding
operations, it may not be able to continue to grow or it may grow at a slower
pace. Furthermore, Millennium Pharmaceuticals' operating costs may escalate
faster than planned. In order to manage its growth successfully, Millennium
Pharmaceuticals must:
- Maintain close coordination among its executive, finance, operations,
research and development organizations;
- Improve its operating, financial and accounting systems, procedures and
controls;
- Expand, train and manage its employee base effectively; and
- Acquire and lease significant additional equipment and facilities.
ANY ACQUISITIONS MILLENNIUM PHARMACEUTICALS MAKES MAY NOT BE SCIENTIFICALLY OR
COMMERCIALLY SUCCESSFUL
Millennium Pharmaceuticals plans to effect acquisitions to obtain additional
businesses, products, technologies, capabilities and personnel. If Millennium
Pharmaceuticals makes one or more significant acquisitions in which the
consideration includes stock or other securities, such as the pending
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LeukoSite acquisition, your equity in Millennium Pharmaceuticals may be
significantly diluted. If Millennium Pharmaceuticals makes one or more
significant acquisitions in which the consideration includes cash, Millennium
Pharmaceuticals may be required to use a substantial portion of its available
cash.
Acquisitions involve a number of operational risks, including:
- Difficulty and expense of assimilating the operations, technology and
personnel of the acquired business;
- Inability to retain the management, key personnel and other employees of
the acquired business;
- Inability to maintain the acquired company's relationships with key third
parties, such as alliance partners;
- Exposure to legal claims for activities of the acquired business prior to
acquisition;
- Diversion of management attention; and
- Amortization of substantial goodwill and write-off of in-process research
and development costs, adversely affecting Millennium Pharmaceuticals'
reported results of operations.
MILLENNIUM PHARMACEUTICALS' AND MILLENNIUM BIOTHERAPEUTICS' GROWTH COULD BE
LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL
Millennium Pharmaceuticals' and Millennium BioTherapeutics' success is
substantially dependent on the ability, experience and performance of our senior
management and other key personnel. If we lose one or more of the members of our
senior management or other key employees, our business and operating results
could be seriously harmed. None of the members of Millennium Pharmaceuticals' or
Millennium BioTherapeutics' senior management or other key employees is bound by
a long-term employment agreement with either company.
In addition, Millennium Pharmaceuticals' and Millennium BioTherapeutics'
future success will depend heavily on our ability to continue to hire, train,
retain and motivate additional skilled managerial and scientific personnel. The
pool of personnel with the skills that we require is limited. Competition to
hire from this limited pool is intense.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS FACE SUBSTANTIAL
COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING, DEVELOPING OR
COMMERCIALIZING PRODUCTS AND SERVICES BEFORE OR MORE SUCCESSFULLY THAN WE DO
The fields of genomics and pharmaceuticals are highly competitive.
Millennium Pharmaceuticals and Millennium BioTherapeutics will not succeed if we
cannot compete effectively in these fields. Many of Millennium Pharmaceuticals'
and Millennium BioTherapeutics' competitors are substantially larger than we are
and have substantially greater capital resources, research and development
staffs and facilities than we have. Furthermore, many of Millennium
Pharmaceuticals' and Millennium BioTherapeutics' competitors are more
experienced than we are in drug discovery, development and commercialization,
obtaining regulatory approvals and product manufacturing. As a result,
Millennium Pharmaceuticals' and Millennium BioTherapeutics' competitors may
identify genes associated with diseases or discover, develop and commercialize
products or services for such genes before we do. In addition, Millennium
Pharmaceuticals' and Millennium BioTherapeutics' competitors may discover,
develop and commercialize products or services which render non-competitive or
obsolete the products or services that we or our strategic alliance partners are
seeking to develop and commercialize.
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RISKS RELATING TO FINANCING
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS HAVE INCURRED
SUBSTANTIAL LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES AND WE WILL NOT BE
SUCCESSFUL UNLESS WE REVERSE THIS TREND
Millennium Pharmaceuticals has incurred losses in three of the last five
years and Millennium BioTherapeutics has incurred losses in each year since its
founding. We expect to continue to incur operating losses in future periods.
To date, substantially all of Millennium Pharmaceuticals' and Millennium
BioTherapeutics' revenues have resulted from payments from strategic partners.
We have not received any revenues from the sale of products.
Millennium Pharmaceuticals and Millennium BioTherapeutics expect to increase
our spending significantly as we continue to expand our infrastructure, research
and development programs and commercialization activities. As a result, we will
need to generate significant revenues to achieve profitability. Millennium
Pharmaceuticals and Millennium BioTherapeutics cannot be certain whether or when
this will occur because of the significant uncertainties that affect our
business.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY NEED ADDITIONAL
FINANCING, WHICH MAY BE DIFFICULT TO OBTAIN AND MAY DILUTE YOUR OWNERSHIP
INTEREST IN US
Millennium Pharmaceuticals and Millennium BioTherapeutics will require
substantial funds to conduct research and development, including preclinical
testing and clinical trials of our potential products, meet our obligations to
our strategic alliance partners and manufacture and market any products and
services that are approved for commercial sale. Millennium Pharmaceuticals and
Millennium BioTherapeutics future capital requirements will depend on many
factors, including the following:
- Continued progress in our discovery and development programs;
- The number and scope of our discovery and development programs;
- The progress of the development efforts of our strategic partners;
- The scope and results of clinical trials initiated by us;
- The time and costs involved in obtaining regulatory approvals;
- The cost of acquisitions of businesses, products and technologies;
- The cost of manufacturing and commercialization activities;
- The cost of continuing to build our infrastructure, including our
additional facilities requirements and costs of recruiting personnel;
- The timing, receipt, and amount of milestones and other payments from our
alliance partners;
- Our ability to establish and maintain strategic alliances;
- The timing, receipt and amount of sales and royalties from our potential
products and services in the market;
- The costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims and other patent-related costs, including
litigation costs and the costs of obtaining any required licenses to
technologies; and
- Competing technological and market developments.
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Both Millennium Pharmaceuticals and Millennium BioTherapeutics expect that
we will require significant additional financing in the future. We may seek to
raise such financing through public or private equity offerings, debt financings
or additional strategic alliance and licensing arrangements and other financing
vehicles. Such additional financing may not be available when Millennium
Pharmaceuticals and Millennium BioTherapeutics need it or may not be available
on terms that are favorable to the company seeking it.
If Millennium Pharmaceuticals or Millennium BioTherapeutics raises
additional funds by issuing equity securities, further dilution to its then
existing stockholders will result. In addition, the terms of the financing may
adversely affect the holdings or the rights of such stockholders. If Millennium
Pharmaceuticals or Millennium BioTherapeutics is unable to obtain adequate
funding on a timely basis, it may be required to significantly curtail one or
more of its discovery or development programs. Millennium Pharmaceuticals or
Millennium BioTherapeutics also could be required to seek funds through
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of our technologies, product candidates or products
which we would otherwise pursue on our own.
RISKS RELATING TO DEVELOPMENT OF TECHNOLOGY AND PRODUCTS
IF MILLENNIUM PHARMACEUTICALS' AND MILLENNIUM BIOTHERAPEUTICS' TECHNOLOGICAL
APPROACHES ARE NOT SUCCESSFUL, WE WILL NOT BE ABLE TO DEVELOP AND COMMERCIALIZE
ANY PRODUCTS AND SERVICES
Millennium Pharmaceuticals and Millennium BioTherapeutics have directed our
lead programs and development focus primarily to diseases that may be linked to
several or many genes working in combination. Both we and the general scientific
and medical communities have a limited understanding relating to the role of
genes in these diseases. Millennium Pharmaceuticals' and Millennium
BioTherapeutics' technological approaches to gene identification and target
validation may not enable us to successfully identify and characterize genes
that predispose individuals to diseases. If we do not identify such genes, we
will not be able to successfully develop and commercialize any products or
services. Even if we do identify such genes, we will have to do substantial
additional work to translate these discoveries into products.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY NOT BE ABLE TO
OBTAIN DNA SAMPLES OF FAMILIES AND POPULATIONS REQUIRED FOR OUR GENETIC STUDIES
Millennium Pharmaceuticals' and Millennium BioTherapeutics' gene
identification strategy includes genetic studies of families and populations
prone to particular diseases. These studies require the collection of large
numbers of DNA samples from affected individuals, their families and other
suitable populations. The availability of DNA samples is important to our
ability to discover the genes responsible for human diseases through human
genetic approaches. Competition for these resources is intense, and access to
suitable populations could be limited by forces beyond Millennium
Pharmaceuticals' and Millennium BioTherapeutics' control, including governmental
actions. Millennium Pharmaceuticals' and Millennium BioTherapeutics' competitors
may have obtained access to significantly more family and population resources
than we have obtained. As a result, Millennium Pharmaceuticals and Millennium
BioTherapeutics may not be able to obtain access to DNA samples necessary to
support our human gene discovery programs.
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RISKS RELATING TO STRATEGIC ALLIANCE PARTNERS
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS DEPEND ON STRATEGIC
ALLIANCE PARTNERS; OUR BUSINESS WILL SUFFER IF ANY OF OUR STRATEGIC ALLIANCE
PARTNERS BREACHES ITS AGREEMENT OR FAILS TO SUPPORT OR TERMINATES ITS ALLIANCE
WITH US
Millennium Pharmaceuticals and Millennium BioTherapeutics conduct most of
our discovery and development activities through strategic alliances. The
success of these programs is heavily dependent on the efforts and activities of
Millennium Pharmaceuticals' and Millennium BioTherapeutics' strategic alliance
partners. Millennium Pharmaceutical's and Millennium BioTherapeutics' agreements
with our alliance partners allow them significant discretion in determining the
efforts and resources that they will apply to the alliance. Millennium
Pharmaceuticals' and Millennium BioTherapeutics' existing and any future
alliances may not be scientifically or commercially successful.
The risks that Millennium Pharmaceuticals and Millennium BioTherapeutics
face in connection with these alliances include:
- If any of our alliance partners were to breach or terminate an agreement
with either of us, reduce its funding or otherwise fail to conduct its
collaborative activities successfully, we could be required to devote
additional internal resources to the program that is the subject of the
alliance, scale back or terminate the program or seek an alternative
partner.
- All of our strategic alliance agreements are subject to termination under
various circumstances, including in many cases on short notice without
cause. Some of our alliance agreements provide that if we fail to meet
specified performance criteria, our alliance partner may terminate the
agreement while maintaining rights and licenses to certain of our
discoveries. If an alliance partner terminates its alliance with either of
us, it may adversely affect the perception of us in the business and
financial communities.
- In our alliance agreements, we generally agree not to conduct certain
research and development in the field that is the subject of the alliance.
These agreements may have the effect of limiting the areas of research and
development we may pursue, either alone or in collaboration with third
parties.
- Our alliance partners may develop and commercialize, either alone or with
others, products and services that are similar to or competitive with the
products and services that are the subject of the alliance with us. Such
competing products and services may result in our alliance partner
withdrawing financial and related support for our product and service
candidates.
- Reductions in marketing or sales efforts or a discontinuation of marketing
or sales efforts of our products or services by our alliance partners
would reduce our revenues, which in many cases will be based on a
percentage of net sales by our alliance partner.
- Our alliance partners may change the focus of their development and
commercialization efforts. Pharmaceutical and biotechnology companies
historically have re-evaluated their priorities following mergers and
consolidations, which have been common in recent years in these
industries.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY NOT BE SUCCESSFUL
IN ESTABLISHING ADDITIONAL STRATEGIC ALLIANCES
An important element of Millennium Pharmaceuticals' and Millennium
BioTherapeutics' business strategy is entering into strategic alliances for the
development and commercialization of products and services based on our gene
discoveries. We face significant competitors in seeking appropriate alliance
partners. Millennium Pharmaceuticals or Millennium BioTherapeutics may not be
successful in our efforts to establish additional strategic alliances or other
alternative arrangements. The terms of any
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additional strategic alliances or other arrangements that we establish may not
be favorable to us. Moreover, such strategic alliances or other arrangements may
not be successful.
CONFLICTS MAY ARISE BETWEEN MILLENNIUM PHARMACEUTICALS AND ITS SUBSIDIARIES
Millennium Pharmaceuticals has two subsidiaries, including Millennium
BioTherapeutics, in which it has sold minority equity interests to third
parties. Millennium Pharmaceuticals may establish additional subsidiaries in the
future in which it sells minority equity interests to third parties. Conflicts
may arise between Millennium Pharmaceuticals and such subsidiaries, including
with respect to:
- the allocation of business opportunities;
- the sharing of rights, technologies, facilities, personnel and other
resources; and
- the fiduciary duties owed by officers and directors who provide services
to both Millennium Pharmaceuticals and one or more of these subsidiaries.
RISKS RELATING TO INTELLECTUAL PROPERTY
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY NOT BE ABLE TO
OBTAIN PATENT PROTECTION FOR OUR DISCOVERIES AND WE MAY INFRINGE PATENT RIGHTS
OF THIRD PARTIES
The patent positions of pharmaceutical and biotechnology companies,
including us, are generally uncertain and involve complex legal, scientific and
factual questions.
Millennium Pharmaceuticals' and Millennium BioTherapeutics' success depends
in significant part on our ability to:
- Obtain patents;
- Protect trade secrets;
- Operate without infringing upon the proprietary rights of others; and
- Prevent others from infringing on our proprietary rights.
The validity and permissible scope of claims covered in genomics patents
involve important unresolved legal principles. For example, there is significant
uncertainty regarding the patentability of partial gene sequences and
full-length genes in the absence of functional data and as to the scope of
patent protection available for full-length genes and partial gene sequences.
Moreover, certain groups have made certain gene sequences available in publicly
accessible databases. These and other similar disclosures may adversely affect
our ability to obtain patent protection for full-length genes claimed by us in
patent applications that we file subsequent to such disclosures. Finally, there
is substantial uncertainty as to whether human clinical data will be required
for issuance of patents for human therapeutics. If such data are required,
Millennium Pharmaceuticals' and Millennium BioTherapeutics' ability to obtain
patent protection could be delayed or otherwise adversely affected.
Patents may not issue from any patent applications that Millennium
Pharmaceuticals or Millennium BioTherapeutics own or license. If patents do
issue, the claims allowed may not be sufficiently broad to protect our
technology. In addition, issued patents that we own or license may be
challenged, invalidated or circumvented. Millennium Pharmaceuticals' and
Millennium BioTherapeutics' patents also may not afford us protection against
competitors with similar technology. Because patent applications in the United
States are maintained in secrecy until patents issue, third parties may have
filed or maintained patent applications for technology used by Millennium
Pharmaceuticals or Millennium BioTherapeutics or covered by our pending patent
applications without our being aware of these applications.
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Millennium Pharmaceuticals or Millennium BioTherapeutics may not hold
proprietary rights to certain patents related to our proposed products or
services. In some cases, these patents may be owned or controlled by third
parties. As a result, Millennium Pharmaceuticals or Millennium BioTherapeutics
or our alliance partners may be required to obtain licenses under third party
patents to market certain of our proposed products or services. If licenses are
not available to Millennium Pharmaceuticals or Millennium BioTherapeutics on
acceptable terms, we or our alliance partners will not be able to market these
products or services.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY NOT BE ABLE TO
KEEP OUR TRADE SECRETS CONFIDENTIAL
Millennium Pharmaceuticals and Millennium BioTherapeutics also rely
significantly upon unpatented proprietary technology, information, processes and
know how, including proprietary software and databases of proprietary gene
sequences and biological information. Millennium Pharmaceuticals and Millennium
BioTherapeutics seek to protect this information by confidentiality agreements
with our respective employees, consultants and other third party contractors as
well as through other security measures. These confidentiality agreements may be
breached, and we may not have adequate remedies for any such breach. In
addition, our trade secrets may otherwise become known or be independently
developed by competitors.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS MAY BECOME INVOLVED IN
EXPENSIVE PATENT LITIGATION OR OTHER INTELLECTUAL PROPERTY PROCEEDINGS WHICH
COULD RESULT IN LIABILITY FOR DAMAGES OR STOP OUR DEVELOPMENT AND
COMMERCIALIZATION EFFORTS
There has been substantial litigation and other proceedings regarding the
complex patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. Millennium Pharmaceuticals or Millennium
BioTherapeutics may become a party to patent litigation or other proceedings
regarding intellectual property rights. For example, we believe that certain of
our patent applications cover genes that are also claimed in patent applications
filed by others. Interference proceedings before the United States Patent and
Trademark Office may be necessary to establish which party was the first to
discover these genes.
Other types of situations in which Millennium Pharmaceuticals and Millennium
BioTherapeutics may become involved in patent litigation or other intellectual
property proceedings include:
- We may initiate litigation or other proceedings against third parties to
enforce our respective patent rights.
- We may initiate litigation or other proceedings against third parties to
seek to invalidate the patents held by such third parties or to obtain a
judgment that our respective products or services do not infringe such
third parties' patents.
- If our competitors file patent applications that claim technology also
claimed by us, we may participate in interference or opposition
proceedings to determine the priority of invention.
- If third parties initiate litigation claiming that our processes or
products infringe their patent or other intellectual property rights, we
will need to defend against such claims.
The cost to Millennium Pharmaceuticals or Millennium BioTherapeutics of any
patent litigation or other proceeding, even if resolved in our favor, could be
substantial. Some of our competitors may be able to sustain the cost of such
litigation or proceedings more effectively than we can because of their
substantially greater financial resources. If a patent litigation or other
intellectual property proceeding is resolved unfavorably to Millennium
Pharmaceuticals or Millennium BioTherapeutics, we or our alliance partners may
be enjoined from manufacturing or selling our products and services without a
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license from the other party and be held liable for significant damages. We may
not be able to obtain any required license on commercially acceptable terms or
at all.
Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on
Millennium Pharmaceuticals' or Millennium BioTherapeutics' ability to compete in
the marketplace. Patent litigation and other proceedings may also absorb
significant management time.
MILLENNIUM PHARMACEUTICALS OR MILLENNIUM BIOTHERAPEUTICS COULD LOSE IMPORTANT
LICENSE RIGHTS IN CERTAIN CIRCUMSTANCES
Millennium Pharmaceuticals and Millennium BioTherapeutics are parties to a
number of technology in-licenses that are important to our business and expect
to enter into additional licenses in the future. These licenses impose various
commercialization, sublicensing, royalty, insurance and other obligations on
Millennium Pharmaceuticals and Millennium BioTherapeutics. If we fail to comply
with these requirements, the licensor will have the right to terminate the
license.
RISKS RELATING TO PRECLINICAL TESTING AND CLINICAL TRIALS
CLINICAL TRIALS OF MILLENNIUM PHARMACEUTICALS' OR MILLENNIUM BIOTHERAPEUTICS'
PRODUCT CANDIDATES MAY NOT BE SUCCESSFUL
In order to obtain regulatory approvals for the commercial sale of
Millennium Pharmaceuticals' and Millennium BioTherapeutics' future products, we
or our alliance partners will be required to demonstrate through preclinical
testing and clinical trials that the product is safe and efficacious. Neither
Millennium Pharmaceuticals nor Millennium BioTherapeutics nor any of our
alliance partners has initiated human clinical trials with respect to any
product or service based upon our discoveries or filed an investigational new
drug application with the FDA to do so.
The results from preclinical testing of a product that is under development
may not be predictive of results that will be obtained in human clinical trials.
In addition, the results of early human clinical trials may not be predictive of
results that will be obtained in larger scale, advanced stage clinical trials.
Furthermore, Millennium Pharmaceuticals, Millennium BioTherapeutics, our
collaborators or the FDA may suspend clinical trials at any time if the subjects
or patients participating in such trials are being exposed to unacceptable
health risks or for other reasons.
The rate of completion of any clinical trials that Millennium
Pharmaceuticals or Millennium BioTherapeutics conduct will be dependent on the
rate of patient enrollment. Patient enrollment is a function of many factors,
including the size of the patient population, the nature of the protocol, the
availability of alternative treatments, the proximity of patients to clinical
sites and the eligibility criteria for the study. Delays in planned patient
enrollment may cause Millennium Pharmaceuticals or Millennium BioTherapeutics to
incur increased costs and program delays.
Millennium Pharmaceuticals and Millennium BioTherapeutics expect to rely on
our strategic alliance partners and other third parties to conduct clinical
trials of our products in most circumstances. We will have less control over
such clinical trials than if we were conducting the trials directly. As a
result, these trials may not begin or be completed as planned.
REGULATORY RISKS
MILLENNIUM PHARMACEUTICALS OR MILLENNIUM BIOTHERAPEUTICS MAY NOT OBTAIN
REGULATORY APPROVALS; THE APPROVAL PROCESS IS COSTLY AND LENGTHY
Millennium Pharmaceuticals and Millennium BioTherapeutics must obtain
regulatory approval for our ongoing development activities and before marketing
or selling any of our future products or
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services. Millennium Pharmaceuticals or Millennium BioTherapeutics may not
receive regulatory approvals to conduct clinical trials of our products or to
manufacture or market our products and services. In addition, regulatory
agencies may not grant such approvals on a timely basis or may revoke previously
granted approvals.
The process of obtaining United States Food and Drug Administration, or FDA,
and other required regulatory approvals is lengthy and expensive. The time
required for FDA and other clearances or approvals is uncertain and typically
takes a number of years, depending on the complexity and novelty of the product.
Any delay in obtaining or failure to obtain required clearance or approvals
could materially adversely affect Millennium Pharmaceuticals' or Millennium
BioTherapeutics' ability to generate revenues from the affected product or
service. Millennium Pharmaceuticals and Millennium BioTherapeutics have only
limited experience in filing and prosecuting applications necessary to gain
regulatory approvals.
Certain of the products that are likely to result from Millennium
Pharmaceuticals' or Millennium BioTherapeutics' research and development
programs may be based on new technologies and new therapeutic approaches that
have not been extensively tested in humans. One example of such a technology is
gene therapy. The regulatory requirements governing these types of products may
be more rigorous than for conventional products. As a result, we may experience
a longer regulatory process in connection with any products that we develop
based on these new technologies or new therapeutic approaches.
Millennium Pharmaceuticals' and Millennium BioTherapeutics' analysis of data
obtained from preclinical and clinical activities is subject to confirmation and
interpretation by regulatory authorities, which could delay, limit or prevent
regulatory approval. Any regulatory approval to market a product may be subject
to limitations on the indicated uses for which we may market the product. These
limitations may limit the size of the market for the product.
Millennium Pharmaceuticals and Millennium BioTherapeutics also are subject
to numerous and varying foreign regulatory requirements governing the design and
conduct of clinical trials and the manufacturing and marketing of our future
products and services. The approval procedure varies among countries. The time
required to obtain foreign approvals often differs from that required to obtain
FDA approval. Approval by the FDA does not ensure approval by regulatory
authorities in other countries.
All of these regulatory risks also are applicable to development,
manufacturing and marketing undertaken by our alliance partners or other
collaborators.
EVEN IF MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS OBTAIN
MARKETING APPROVAL, OUR PRODUCTS WILL BE SUBJECT TO ONGOING REGULATORY REVIEW
The manufacturer of products for which Millennium Pharmaceuticals or
Millennium BioTherapeutics obtain marketing approval and the manufacturing
facilities used to make such products will be subject to continual review and
periodic inspections by the FDA. The subsequent discovery of previously unknown
problems with the product, manufacturer or facility may result in restrictions
on the product or manufacturer, including withdrawal of the product from the
market.
If Millennium Pharmaceuticals or Millennium BioTherapeutics fail to comply
with applicable regulatory requirements, we may be subject to fines, suspension
or withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecutions.
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RISKS RELATING TO PRODUCT MANUFACTURING, MARKETING AND SALES
THE MARKET MAY NOT BE RECEPTIVE TO MILLENNIUM PHARMACEUTICALS' OR MILLENNIUM
BIOTHERAPEUTICS' PRODUCTS AND SERVICES UPON THEIR INTRODUCTION
The commercial success of Millennium Pharmaceuticals' or Millennium
BioTherapeutics' products and services that are approved for marketing will
depend upon their acceptance by the medical community and third party payors as
clinically useful, cost effective and safe. Many of the products and services
that we are developing are based upon new technologies or therapeutic
approaches. As a result, it may be more difficult for us to achieve market
acceptance of our products and services, particularly the first products and
services that we introduce to the market based on new technologies and
therapeutic approaches.
Other factors that Millennium Pharmaceuticals and Millennium BioTherapeutics
believe will materially affect market acceptance of our products and services
include:
- The timing of receipt of marketing approvals and the countries in which
such approvals are obtained;
- The safety, efficacy and ease of administration of the product; and
- The success of physician education programs.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS HAVE NO SALES AND
MARKETING EXPERIENCE AND CAPABILITIES
Millennium Pharmaceuticals and Millennium BioTherapeutics have no sales,
marketing and distribution experience and capabilities. We plan to rely
significantly on sales, marketing and distribution arrangements with our
strategic alliance partners and other third parties for the products and
services that we are developing. The terms of these arrangements may not be
favorable to us. In addition, we may have limited or no control over the sales,
marketing and distribution activities of these third parties. Millennium
Pharmaceuticals' or Millennium BioTherapeutics' future revenues will be
materially dependent upon the success of the efforts of these third parties.
If in the future Millennium Pharmaceuticals or Millennium BioTherapeutics
determine to perform sales, marketing and distribution functions ourselves, we
would face a number of additional risks, including:
- We may not be able to attract and build a sufficient marketing staff or
sales force;
- The cost of establishing a marketing staff or sales force may not be
justifiable in light of any product or service revenues; and
- Our direct sales and marketing efforts may not be successful.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS HAVE LIMITED
MANUFACTURING CAPABILITIES AND WILL BE DEPENDENT ON THIRD PARTY MANUFACTURERS
Millennium Pharmaceuticals and Millennium BioTherapeutics have limited
manufacturing experience and no commercial or pilot scale manufacturing
capabilities. In order to continue to develop products and services, apply for
regulatory approvals and, ultimately, commercialize any products and services,
we will need to develop, contract for, or otherwise arrange for the necessary
manufacturing capabilities.
Millennium Pharmaceuticals and Millennium BioTherapeutics currently rely
upon third parties to produce material for preclinical testing purposes and
expect to continue to do so in the future. We also expect to rely upon third
parties, including our strategic alliance partners, to produce materials
17
<PAGE>
required for clinical trials and for the commercial production of certain of our
products if we succeed in obtaining necessary regulatory approvals. There are a
limited number of manufacturers that operate under the FDA's good manufacturing
practices regulations capable of manufacturing for us. If Millennium
Pharmaceuticals or Millennium BioTherapeutics are unable to arrange for third
party manufacturing of our respective products, or to do so on commercially
reasonable terms, we may not be able to complete development of our products or
market them.
To the extent that Millennium Pharmaceuticals or Millennium BioTherapeutics
enters into manufacturing arrangements with third parties, we will be dependent
upon these third parties to perform their obligations in a timely manner. If
such third party suppliers fail to perform their obligations, we may be
adversely affected in a number of ways, including:
- We may not be able to meet commercial demands for our products;
- We may not be able to initiate or continue clinical trials of products
that are under development; and
- We may be delayed in submitting applications for regulatory approvals for
our products.
Millennium Pharmaceuticals or Millennium BioTherapeutics may in the future
determine to manufacture certain of our products in our own manufacturing
facilities. We will require substantial additional funds and need to recruit
qualified personnel in order to build or lease and operate any manufacturing
facilities. We may not be able to successfully develop our own manufacturing
capabilities. Moreover, it may be very costly and time consuming for us to
develop such capabilities.
The manufacture of products by us and our alliance partners and suppliers is
subject to regulation by the FDA and comparable agencies in foreign countries.
Delay in complying or failure to comply with such manufacturing requirements
could materially adversely affect the marketing of our products.
IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR FUTURE PRODUCTS
OR SERVICES BY THIRD PARTY PAYORS, THERE MAY BE NO COMMERCIALLY VIABLE MARKETS
FOR OUR PRODUCTS OR SERVICES
The availability of reimbursement by governmental and other third party
payors affects the market for any pharmaceutical product or service. These third
party payors continually attempt to contain or reduce the costs of healthcare by
challenging the prices charged for medical products and services. In certain
foreign countries, particularly the countries of the European Union, the pricing
of prescription pharmaceuticals is subject to governmental control. We may not
be able to sell our products profitably if reimbursement is unavailable or
limited in scope or amount.
In both the United States and certain foreign jurisdictions, there have been
a number of legislative and regulatory proposals to change the healthcare
system. Further proposals are likely. The potential for adoption of these
proposals affects or will affect our ability to raise capital, obtain additional
collaborative partners and market our products.
If we or our collaborators obtain marketing approvals for our products, we
expect to experience pricing pressure due to the trend toward managed health
care, the increasing influence of health maintenance organizations and
additional legislative proposals.
ETHICAL, LEGAL AND SOCIAL ISSUED RELATED TO GENETIC TESTING MAY CAUSE MILLENNIUM
PHARMACEUTICALS' OR MILLENNIUM BIOTHERAPEUTICS' DIAGNOSTIC PRODUCTS TO BE
REJECTED BY CUSTOMERS OR PROHIBITED OR CURTAILED BY GOVERNMENTAL AUTHORITIES
Diagnostic tests that evaluate genetic predisposition to disease raise
issues regarding the use and confidentiality of the information provided by such
tests. Insurance carriers and employers might discriminate on the basis of such
information, resulting in a significant barrier to the acceptance of such
18
<PAGE>
tests by customers. Such discrimination could cause governmental authorities to
prohibit or limit the use of such tests.
RISKS RELATING TO ONGOING OPERATIONS
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS WILL BE EXPOSED TO
PRODUCT LIABILITY CLAIMS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE PRODUCT
LIABILITY INSURANCE
Millennium Pharmaceuticals' and Millennium BioTherapeutics' business exposes
each of us to potential product liability risks which are inherent in the
testing, manufacturing, marketing and sale of human therapeutic and diagnostic
products. Product liability claims or product recalls, regardless of the
ultimate outcome, could require us to spend significant time and money in
litigation and to pay significant damages. Neither of us currently has product
liability insurance coverage. We may not be able to obtain such product
liability insurance at a reasonable cost or in sufficient amounts to protect us
against losses due to liability claims.
MILLENNIUM PHARMACEUTICALS AND MILLENNIUM BIOTHERAPEUTICS COULD INCUR
LIABILITIES RELATING TO HAZARDOUS MATERIALS THAT WE USE IN OUR RESEARCH AND
DEVELOPMENT ACTIVITIES
Millennium Pharmaceuticals' and Millennium BioTherapeutics' research and
development activities involve the controlled use of hazardous materials,
chemicals and various radioactive materials. There is a risk of accidental
contamination or injury from these materials. In the event of such an accident,
we could be held liable for any damages that result. This type of liability
could exceed our resources.
MILLENNIUM PHARMACEUTICALS' STOCK PRICE COULD BE VOLATILE, WHICH COULD CAUSE YOU
TO LOSE PART OR ALL OF YOUR INVESTMENT
The trading price of Millennium Pharmaceuticals' common stock is likely to
be volatile. The stock market in general, and the market for biotechnology
companies in particular, has experienced extreme volatility. This volatility has
often been unrelated to the operating performance of particular companies.
Prices for Millennium Pharmaceuticals' common stock will be determined in the
marketplace and may be influenced by many factors, including variations in
Millennium Pharmaceuticals' financial results, investors' perceptions of
Millennium Pharmaceuticals and general economic, industry and market conditions.
MILLENNIUM PHARMACEUTICALS HAS ANTITAKEOVER DEFENSES THAT COULD DELAY OR PREVENT
AN ACQUISITION AND COULD ADVERSELY AFFECT THE PRICE OF MILLENNIUM
PHARMACEUTICALS' COMMON STOCK
Provisions of Millennium Pharmaceuticals' certificate of incorporation and
bylaws and provisions of Delaware law could delay, defer or prevent an
acquisition or change of control of Millennium Pharmaceuticals or otherwise
adversely affect the price of Millennium Pharmaceuticals' common stock. For
example, Millennium Pharmaceuticals' board of directors is staggered in three
classes, so that only one-third of the directors can be replaced at any annual
meeting. Additionally, Millennium Pharmaceuticals' bylaws limit the ability of
stockholders to call a special meeting. Millennium Pharmaceuticals' certificate
of incorporation also permits its board to issue shares of preferred stock
without stockholder approval. In addition to delaying or preventing an
acquisition, the issuance of a substantial number of preferred shares could
adversely affect the price of Millennium Pharmaceuticals' common stock.
19
<PAGE>
SELECTED FINANCIAL DATA
The following tables show selected financial data, audited and unaudited,
for Millennium Pharmaceuticals and Millennium BioTherapeutics.
MILLENNIUM BIOTHERAPEUTICS SELECTED FINANCIAL DATA
The following selected financial data for the period May 27, 1997 to
December 31, 1997 and the year ended December 31, 1998 are derived from the
audited financial statements of Millennium BioTherapeutics. The financial data
for the nine month periods ended September 30, 1998 and 1999 are derived from
unaudited financial statements. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1999. The data should be read
in conjunction with the financial statements, related notes, and other financial
information included herein.
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
INCEPTION, YEAR ENDED SEPTEMBER 30,
MAY 27, 1997 TO DECEMBER 31, ---------------------
DECEMBER 31, 1997 1998 1998 1999
----------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Statement of Operations Data:
(in thousands, except per share amounts)
Revenue under strategic alliance........... $ 5,514 $ 9,300 $ 6,880 $ 7,205
Costs and expenses:
Research and development................... 8,117 20,429 13,980 16,625
General and administrative................. 1,340 3,797 3,024 2,837
---------- -------- -------- --------
9,457 24,226 17,004 19,462
---------- -------- -------- --------
Loss from operations....................... (3,943) (14,926) (10,124) (12,257)
Interest income (expense), net............. 533 747 620 259
---------- -------- -------- --------
Net loss................................... $ (3,410) $(14,179) $ (9,504) $(11,998)
========== ======== ======== ========
Basic and diluted net loss per share....... $(3,410.00) $(177.73) $(249.45) $ (31.48)
========== ======== ======== ========
Shares used in computing basic and diluted
net loss per share....................... 1 80 38 381
========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Balance Sheet Data: (in thousands)
Cash, cash equivalents and marketable securities............ $16,940 $ 7,628 $ 5,591
Total assets................................................ 18,133 9,075 7,560
Capital lease obligation, net of current portion............ -- 528 453
Redeemable convertible preferred stock...................... 20,000 20,000 20,000
Stockholders' deficit....................................... (3,404) (17,485) (29,283)
</TABLE>
20
<PAGE>
MILLENNIUM PHARMACEUTICALS SELECTED FINANCIAL DATA
The following selected financial data for the five year period ended
December 31, 1998 are derived from the audited consolidated financial statements
of Millennium Pharmaceuticals. The financial data for the nine month periods
ended September 30, 1998 and 1999 are derived from unaudited financial
statements. Operating results for the nine months ended September 30, 1999 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1999. The data should be read in conjunction with the
financial statements, related notes, and other financial information included or
incorporated by reference herein. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
(in thousands, except per share
amounts)
Revenue under strategic
alliances...................... $ 7,963 $22,880 $ 31,764 $ 89,933 $133,682 $ 75,719 $128,581
Costs and expenses:
Research and development......... 10,990 17,838 34,803 74,828 114,190 80,479 113,276
General and administrative....... 3,240 3,292 7,973 16,517 24,419 17,928 23,907
Acquired in-process R&D.......... 83,800
Amortization of intangible
asset.......................... 2,397 2,702 2,027 2,027
------- ------- -------- -------- -------- -------- --------
14,230 21,130 42,776 177,542 141,311 100,434 139,210
------- ------- -------- -------- -------- -------- --------
Income (loss) from operations.... (6,267) 1,750 (11,012) (87,609) (7,629) (24,715) (10,629)
Interest income (expense), net... (105) (466) 2,244 2,977 3,788 2,371 7,032
Minority interest................ 3,410 14,179 9,504 2,204
------- ------- -------- -------- -------- -------- --------
Net income (loss)................ $(6,372) $ 1,284 $ (8,768) $(81,222) $ 10,338 $(12,840) $ (1,393)
======= ======= ======== ======== ======== ======== ========
Basic net income (loss) per share
(pro forma in 1995 and 1996)... $ 0.09 $ (0.40) $ (2.87) $ 0.34 $ (0.44) $ (0.04)
======= ======== ======== ======== ======== ========
Shares used in computing basic
net income (loss) per share.... 13,852 21,697 28,323 30,319 29,434 35,817
======= ======== ======== ======== ======== ========
Diluted net income (loss) per
share (pro forma in 1995 and
1996).......................... $ 0.07 $ (0.40) $ (2.87) $ 0.33 $ (0.44) $ (0.04)
======= ======== ======== ======== ======== ========
Shares used in computing diluted
net income (loss) per share.... 17,854 21,697 28,323 31,508 29,434 35,817
======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
(in thousands)
Cash, cash equivalents and
marketable securities........... $ 6,105 $17,847 $63,848 $ 96,557 $190,964 $225,180
Total assets...................... 10,101 25,105 87,744 144,513 257,954 308,873
Long-term debt, net of current
portion......................... 3,067 1,467
Capital lease obligation, net of
current portion................. 2,359 2,499 9,308 19,809 24,827 25,984
Stockholders' equity.............. 1,559 13,096 66,639 91,755 206,362 229,202
</TABLE>
21
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are earnings and book value per share data for Millennium
Pharmaceuticals and Millennium BioTherapeutics on both historical and pro forma
combined bases and on a per share equivalent pro forma basis for Millennium
BioTherapeutics.
- Pro forma combined earnings per share are derived from the Unaudited Pro
Forma Combined Financial Information presented elsewhere in this
information statement/prospectus, which gives effect to the merger under
the exchange of shares between companies under common control method of
accounting.
- Book value per share for the pro forma combined presentation is based upon
outstanding shares of Millennium Pharmaceuticals common stock, adjusted to
include shares of Millennium Pharmaceuticals common stock assumed to be
issued in the merger for outstanding shares of Millennium BioTherapeutics
Class B common stock.
- The per share equivalent pro forma combined data for shares of Millennium
BioTherapeutics Class B common stock is based on the assumed conversion of
each share of Millennium BioTherapeutics Class B common stock into .2399
of a share of Millennium Pharmaceuticals common stock, based on an assumed
average sale price of Millennium Pharmaceuticals common stock of $62.536.
- The information set forth below should be read in conjunction with the
historical financial statements of Millennium Pharmaceuticals incorporated
by reference in this information statement/prospectus and the historical
financial statements of Millennium BioTherapeutics and the "Unaudited Pro
Forma Combined Financial Information" and the notes to each of them
presented elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
<S> <C> <C>
Millennium Pharmaceuticals--Historical
Income (loss) per common share:
Basic................................................... $ 0.34 $ (0.04)
Diluted................................................. $ 0.33 $ (0.04)
Book value per share at period end........................ $ 5.91 $ 6.25
Millennium BioTherapeutics--Historical
Loss per common share:
Basic................................................... $(177.73) $ (31.48)
Diluted................................................. $(177.73) $ (31.48)
Book value per share at period end........................ $ (18.63) $ (22.97)
Millennium Pharmaceuticals/Millennium BioTherapeutics--
Pro Forma Combined
Income (loss) per common share:
Basic................................................... $ (1.51) $ (1.39)
Diluted................................................. $ (1.51) $ (1.39)
Book value per share at period end........................ $ 10.29
Equivalent Pro Forma
Per share data imputed to existing stockholders
Income (loss) per common share:
Basic................................................... $(746.26) $(131.85)
Diluted................................................. $(746.26) $(131.85)
Book value per share at period end........................ $ (77.71) $ (95.70)
</TABLE>
22
<PAGE>
MARKET PRICE AND DIVIDEND DATA
The following table reflects the range of the reported high and low last
sale prices of shares of Millennium Pharmaceuticals common stock on the Nasdaq
National Market tier of the Nasdaq Stock Market.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
1997:
First quarter............................................. $21.50 $13.63
Second quarter............................................ 17.50 13.00
Third quarter............................................. 21.13 12.50
Fourth quarter............................................ 21.25 16.75
1998:
First quarter............................................. 22.38 17.75
Second quarter............................................ 19.00 14.13
Third quarter............................................. 18.69 10.57
Fourth quarter............................................ 25.88 14.75
1999:
First quarter............................................. 38.13 25.44
Second quarter............................................ 40.38 30.00
Third quarter............................................. 77.41 36.75
Fourth quarter (through November 3, 1999)................. 86.00 62.25
</TABLE>
Millennium Pharmaceuticals common stock is listed on the Nasdaq Stock Market
under the symbol "MLNM." The common stock of Millennium Pharmaceuticals has been
listed on the Nasdaq Stock Market since May 6, 1996. Prior to May 6, 1996,
Millennium Pharmaceuticals' common stock was not publicly traded. On
October 14, 1999, the last full trading day prior to the announcement of the
merger, the closing price per share of Millennium Pharmaceuticals common stock
was $83.469, as reported on the Nasdaq Stock Market. On , 1999, the
most recent practicable date prior to the mailing of this information
statement/prospectus, the closing price per share of Millennium Pharmaceuticals
common stock was $ , as reported on the Nasdaq Stock Market.
Millennium Pharmaceuticals will apply for the listing on the Nasdaq Stock
Market of the shares of Millennium Pharmaceuticals common stock to be issued in
the merger.
Millennium Pharmaceuticals has never paid any cash dividends on its common
stock and does not anticipate paying any cash dividends in the foreseeable
future. Payment of future dividends, if any, will be at the discretion of
Millennium Pharmaceuticals' board of directors.
There is no established public trading market for shares of Millennium
BioTherapeutics stock.
23
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This information statement/prospectus contains forward-looking statements
that involve substantial risks and uncertainties. In some case you can identify
these statements by forward-looking words such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "should," "will," and "would" or
similar words. You should read statements that contain these words carefully
because, with respect to both Millennium Pharmaceuticals and Millennium
BioTherapeutics, they discuss future expectations, contain projections of future
results of operations or of financial position or state other "forward-looking"
information. The important factors listed above in the section captioned "Risk
Factors," as well as any cautionary language in this information
statement/prospectus, provide examples of risks, uncertainties and events that
may cause the actual results of either company to differ materially from the
expectations described in these forward-looking statements. You should be aware
that the occurrence of the events described in these risk factors and elsewhere
in this information statement/prospectus could have an adverse effect on the
business, results of operations and financial position of Millennium
Pharmaceuticals or Millennium BioTherapeutics.
Any forward-looking statements in this information statement/prospectus are
not guarantees of future performances, and actual results, developments and
business decisions may differ from those envisaged by such forward-looking
statements, possibly materially. Millennium Pharmaceuticals and Millennium
BioTherapeutics disclaim any duty to update any forward-looking statements, all
of which are expressly qualified by the statements in this section.
24
<PAGE>
THE MERGER
GENERAL
We are furnishing this information statement/prospectus to you in connection
with the proposed merger of Millennium BioTherapeutics with and into Millennium
Pharmaceuticals.
In the merger, each outstanding share of Millennium BioTherapeutics Class B
common stock will be converted into a number of shares of Millennium
Pharmaceuticals common stock equal to the average of (1) $15.00 divided by
$62.536 and (2) $15.00 divided by the average of the last reported sale prices
per share of Millennium Pharmaceuticals common stock on the Nasdaq Stock Market
over the 20 consecutive trading days ending on the trading day that is two
trading days prior to the day the merger becomes effective. If the shares of
Millennium Pharmaceuticals common stock that you would receive in the merger
includes a fraction of a share of Millennium Pharmaceuticals common stock,
Millennium Pharmaceuticals will instead pay you an amount in cash equal to that
fractional interest rather than give you a fractional share of Millennium
Pharmaceuticals common stock.
This information statement/prospectus is to inform you of the merger. Your
vote is not required for the merger because Millennium Pharmaceuticals owns all
of the voting stock of Millennium BioTherapeutics. Delaware law, which governs
the merger, provides that in this situation, the merger may be effected by a
resolution of the board of directors of Millennium Pharmaceuticals. As a result,
no meeting, approval or consent of stockholders of Millennium BioTherapeutics is
necessary to effect the merger. The merger will become effective no earlier than
20 business days after this information statement/prospectus is mailed to
Millennium BioTherapeutics stockholders.
This information statement/prospectus also constitutes a prospectus of
Millennium Pharmaceuticals, which is a part of the registration statement on
Form S-4 filed by Millennium Pharmaceuticals with the Securities and Exchange
Commission under the Securities Act of 1933 in order to register the shares of
Millennium Pharmaceuticals common stock to be issued to Millennium
BioTherapeutics stockholders. The total aggregate amount of consideration to be
received by Millennium BioTherapeutics' stockholders in the merger based on the
closing price per share of Millennium Pharmaceuticals common stock on
November 3, 1999 of $70.688, is approximately $28.8 million.
MILLENNIUM PHARMACEUTICALS' REASONS FOR THE MERGER
Millennium Pharmaceuticals expects to benefit from the merger in two
principal ways. First, Millennium Pharmaceuticals believes that it can achieve
economies of scale by more fully integrating its operations with those of
Millennium BioTherapeutics. Second, Millennium Pharmaceuticals believes that it
will have increased flexibility to engage in transactions such as the pending
LeukoSite acquisition by eliminating the potential for conflicts of interest
with the minority stockholders of Millennium BioTherapeutics.
MILLENNIUM BIOTHERAPEUTICS' REASONS FOR THE MERGER
Based on the recommendation of its special committee, the board of directors
of Millennium BioTherapeutics believes that the terms of the merger agreement
and the transactions contemplated by the merger agreement are fair to, and in
the best interest of, Millennium BioTherapeutics and its Class B common
stockholders. Accordingly, the board of directors of Millennium BioTherapeutics
approved the merger agreement. In reaching their respective determinations, the
special committee and the board of directors consulted with the management of
Millennium BioTherapeutics, as well as the
25
<PAGE>
legal counsel retained by the special committee and JSB Partners, L.P., who
acted as financial advisor to the special committee, and considered a number of
factors, including the following:
- The merger consideration and recent trading prices for Millennium
Pharmaceuticals common stock;
- The financial presentation and the opinion of JSB Partners to the effect
that the merger consideration was fair to the holders of Millennium
BioTherapeutics Class B common stock from a financial point of view;
- The fact that Millennium BioTherapeutics Class B common stock, which is
illiquid, will be converted into a security which is tradeable on the
Nasdaq Stock Market;
- The opportunities for economies of scale and operating efficiencies that
are anticipated to result from the merger;
- The terms and conditions of the merger agreement, including the price, the
scope of the parties' representations, warranties, covenants and
agreements and the limited number of conditions to the obligations of
Millennium Pharmaceuticals;
- Millennium BioTherapeutics' strategic alternatives, including remaining a
separate company; and
- Millennium Pharmaceuticals' ownership of all of the voting stock of
Millennium BioTherapeutics, as well as Millennium Pharmaceuticals' stated
desire not to consider offers to sell its position in Millennium
BioTherapeutics, making it impracticable to solicit any third-party bidder
for Millennium BioTherapeutics.
In reaching their determinations regarding the merger agreement, the special
committee and the board of directors did not view any single reason as
determinative. The special committee and the board of directors did not find it
necessary or practicable to assign relative and specific weights to the reasons
considered. Furthermore, individual directors may have given different weights
to different reasons.
BACKGROUND OF THE MERGER
In June 1999, John Maraganore, the General Manager of Millennium
BioTherapeutics, and executive officers of Millennium Pharmaceuticals, including
Mark Levin, Nicholas Galakatos, Steven Holtzman, Kevin Starr and John B. Douglas
III, held preliminary discussions concerning a possible merger between the two
companies.
On June 11, 1999, the board of directors of Millennium BioTherapeutics
authorized its management to engage in further negotiations regarding a proposed
merger. On June 23, 1999, the board of directors of Millennium Pharmaceuticals
authorized its management to engage in further negotiations regarding such a
transaction.
On July 1, 1999, representatives of Millennium Pharmaceuticals met with
representatives of Eli Lilly to discuss the purchase of Eli Lilly's stock in
Millennium BioTherapeutics. Such a purchase would give Millennium
Pharmaceuticals ownership of all of the voting stock of Millennium
BioTherapeutics, thus enabling Millennium Pharmaceuticals to effect a merger of
the two companies without a vote of the stockholders of Millennium
BioTherapeutics. These discussions led to a later exchange of letters and
telephone conversations, culminating in a telephone conference on August 12,
1999 during which the parties reached preliminary agreement on a purchase price
for Eli Lilly's shares in Millennium BioTherapeutics of $15.00 per share,
payable in Millennium Pharmaceuticals common stock.
In early July 1999, Dr. Maraganore retained JSB Partners to provide
financial advice to Millennium BioTherapeutics in connection with the potential
merger and retained Goodwin, Proctor & Hoar LLP to provide legal advice, in each
case subject to the approval by the board of directors of
26
<PAGE>
Millennium BioTherapeutics or a committee thereof. On July 28, 1999, the board
of directors of Millennium BioTherapeutics held a meeting at which
representatives of Goodwin, Proctor & Hoar LLP were present. The board of
directors determined that all of the directors except David Martin were
interested parties to the proposed transaction. Accordingly, the board of
directors created a special committee, consisting of Mr. Martin, to negotiate
the terms of the merger with Millennium Pharmaceuticals and to make a
recommendation to the board of directors regarding any proposed transaction. The
board awarded Mr. Martin compensation of $15,000 for his services on the special
committee. Mr. Martin holds options to purchase 50,000 shares of Millennium
BioTherapeutics Class B common stock.
Counsel to Millennium BioTherapeutics informed Mr. Martin that he had the
right to make his own choices for counsel and financial advisor to the special
committee. After discussions with each of them regarding their experience,
qualifications and independence, Mr. Martin decided to continue to retain JSB
Partners and Goodwin, Procter & Hoar LLP as financial advisor and counsel,
respectively.
On August 6, 1999, the board of directors of Millennium Pharmaceuticals met
to consider the proposed acquisition of shares from Eli Lilly and the proposed
merger with Millennium BioTherapeutics. The Millennium Pharmaceuticals board
created a special committee, consisting of Grant Heidrich and Eric Lander, to
recommend to the full board the amount of consideration to be paid in the
proposed transaction. The Millennium Pharmaceuticals special committee met on
August 26, 1999 to consider the terms of the proposed merger. Following the
meeting, the Millennium Pharmaceuticals special committee proposed to
Dr. Maraganore that the merger be consummated at a price of $15.00 per share of
Millennium BioTherapeutics Class B common stock, payable in shares of Millennium
Pharmaceuticals common stock.
On August 27, 1999, the Board of Directors of Millennium BioTherapeutics,
including its special committee and the special committee's financial advisor
and counsel, met regarding Millennium Pharmaceuticals' offer of $15.00 per share
of Millennium BioTherapeutics Class B common stock, payable in shares of
Millennium Pharmaceuticals common stock. Representatives of JSB Partners made a
presentation regarding the methodology which would be used to evaluate the
proposal including a list of comparable public and private companies. The
Millennium BioTherapeutics special committee agreed to consider the proposal
and, if appropriate, to negotiate its terms with Millennium Pharmaceuticals.
On August 31, 1999, the board of directors of Millennium BioTherapeutics met
with the special committee's financial advisor and counsel. Representatives of
JSB Partners presented a financial analysis of the proposed transaction and
stated that their preliminary conclusion was that a price of $15.00, payable in
shares of Millennium Pharmaceuticals common stock, was fair. Over the period
from August 29, 1999 through September 3, 1999, Mr. Martin had numerous
conversations with the financial advisor and counsel to the special committee
concerning the fairness of the financial and other terms of the proposed
transaction. On September 3, 1999, Mr. Martin telephoned Mr. Douglas, the
general counsel for Millennium Pharmaceuticals, and stated that the special
committee was prepared to recommend the $15.00 per share proposal, subject to
negotiation of certain other terms, including negotiation of a definitive merger
agreement.
On September 8, 1999, the board of directors of Millennium Pharmaceuticals
met to discuss the terms of the proposed merger. The special committee of the
Millennium Pharmaceuticals board reported that it had determined that the
financial terms of the proposed merger were fair to Millennium Pharmaceuticals.
During the period from September 20, 1999 through September 24, 1999,
Dr. Maraganore negotiated with Mr. Douglas concerning certain additional terms
of the proposed merger. Dr. Maraganore proposed that the number of Millennium
Pharmaceuticals shares to be issued be calculated by using the average of the
20-day trailing average of Millennium Pharmaceuticals stock
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price as of September 3, 1999, the date Mr. Martin had agreed to the price of
$15.00 per share, and the 20-day trading average as of two days prior to the
closing of the merger. Mr. Douglas and Dr. Maraganore also discussed, in
connection with the proposed signing of a merger agreement, amending the rights
exchange agreement and the technology transfer and license agreement between the
two companies. The proposed amendments would delete the obligations of
Millennium Pharmaceuticals to transfer specified investment opportunities and
development rights and to grant specified licenses to Millennium
BioTherapeutics. Mr. Douglas and Dr. Maraganore also discussed a proposal for
Millennium Pharmaceuticals to commit itself to provide reasonable additional
advances to Millennium BioTherapeutics through the effective date of the merger.
Based on the recommendation of Mr. Douglas, the special committee of the board
of directors of Millennium Pharmaceutical accepted these proposals.
During September and early October of 1999, representatives of Millennium
Pharmaceuticals and Eli Lilly continued to negotiate the details of the purchase
of Eli Lilly's stock in Millennium BioTherapeutics. They agreed that the $15.00
per share purchase price would be payable at the closing, based on the average
sale price of Millennium Pharmaceuticals common stock over the five trading days
ending the day before the closing. They further agreed that an adjustment to the
purchase price would be made following the effectiveness of the resale
registration statement related to the shares of Millennium Pharmaceuticals to be
issued to Eli Lilly. In connection with the adjustment, Millennium
Pharmaceuticals would issue additional shares to Eli Lilly or Eli Lilly would
return shares to Millennium Pharmaceuticals depending on whether the average
sale price of Millennium Pharmaecuticals common stock over the 20 trading days
ending on the day the registration rights agreement is declared effective, is
lower or higher than the price used to calculate the number of shares issued at
the closing.
During the period from September to early October, 1999, counsel for the
Millennium BioTherapeutics special committee negotiated the terms of the merger
agreement with counsel for Millennium Pharmaceuticals.
On October 12, 1999, the board of directors of Millennium Pharmaceuticals
met to consider the terms of the proposed merger. On October 13, 1999, the board
of directors of Millennium Pharmaceuticals again met and reviewed the terms and
conditions of the proposed transaction. Mr. Douglas advised the board on the
final terms of the definitive merger agreement and the responsibilities of the
board. The board of directors preliminarily approved the merger agreement.
On October 14, 1999, the board of directors of Millennium BioTherapeutics
met and reviewed the final terms and conditions of the proposed transactions
including the amendments to the rights exchange agreement and the technology
transfer agreement and the commitment of Millennium Pharmaceuticals to provide
reasonable additional advances. Representatives of JSB Partners made a financial
presentation regarding the proposed merger and delivered the opinion of JSB
Partners to the special committee that the consideration to be received by the
holders of Class B common stock in the merger was fair from a financial point of
view. The special committee then recommended to the board of directors the
approval of the merger agreement. After discussion, the board of directors
unanimously approved the terms of the merger agreement presented to it and
authorized its execution and the execution of the amendments to the rights
exchange agreement and the technology transfer agreement.
On that same day, the board of directors of Millennium Pharmaceuticals gave
final approval of the merger with Millennium BioTherapeutics.
The definitive merger agreement was signed that day, and the merger was
announced following the close of business on October 14, 1999.
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OPINION OF FINANCIAL ADVISOR TO MILLENNIUM BIOTHERAPEUTICS
The special committee of the board of Millennium BioTherapeutics retained
JSB Partners, L.P. in the summer of 1999 to act as its financial advisor and to
render an opinion to the special committee as to the fairness, from a financial
point of view, of the consideration to be received by holders of Millennium
BioTherapeutics Class B common stock pursuant to the proposed transaction with
Millennium Pharmaceuticals. The special committee selected JSB Partners because
of its reputation and experience in the field of biotechnology and
pharmaceuticals generally, and in relation to transactions of the size and
nature of the proposed transaction specifically. JSB Partners is a private firm
engaged in providing advisory and investment banking services to biotechnology
and pharmaceutical companies, including private placements, mergers and
acquisitions, and corporate alliances.
JSB Partners made a presentation to the board of directors and the special
committee on August 27, 1999 describing the methodologies which it would use and
the specific factors which it would take into account in determining the
fairness of the proposed transaction. The special committee asked that JSB
Partners assist in the negotiation of the specific terms of the transaction. On
October 14, 1999, JSB Partners rendered to the special committee its oral and
written opinion to the effect that, as of that date, and based on and subject to
various considerations and assumptions stated at such time, the consideration
that Millennium Pharmaceuticals proposed to pay in the merger in the form of
Millennium Pharmaceuticals common stock, based on the conversion ratios in the
merger agreement, was fair, from a financial point of view, to the non-voting
common stockholders of Millennium BioTherapeutics.
THE FULL TEXT OF THE WRITTEN OPINION OF JSB PARTNERS DATED OCTOBER 14, 1999,
WHICH SETS FORTH THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, AND MATTERS
CONSIDERED, IS ATTACHED AS APPENDIX B TO THIS INFORMATION STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. THE JSB PARTNERS OPINION IS DIRECTED TO
THE SPECIAL COMMITTEE AND PERTAINS ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT
OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF MILLENNIUM
BIOTHERAPEUTICS OTHER THAN MILLENNIUM PHARMACEUTICALS PURSUANT TO THE PROPOSED
MERGER. THE SUMMARY OF THE OPINION OF JSB PARTNERS SET FORTH IN THIS INFORMATION
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. STOCKHOLDERS OF MILLENNIUM BIOTHERAPEUTICS SHOULD READ THE
OPINION OF JSB PARTNERS IN ITS ENTIRETY.
In conducting its investigation and analysis and in arriving at its opinion,
JSB Partners reviewed publicly available information and information provided by
Millennium BioTherapeutics which is not publicly available relating to the
business, financial and operations of Millennium BioTherapeutics and Millennium
Pharmaceuticals that JSB Partners deemed relevant and material. In arriving at
its opinion, JSB Partners:
- reviewed the merger agreement in the form presented to the special
committee;
- reviewed internal business plans and financial forecasts of Millennium
BioTherapeutics, as prepared by senior management of Millennium
BioTherapeutics;
- held discussions with members of Millennium BioTherapeutics' senior
management concerning Millennium BioTherapeutics' historical and current
financial condition and operating results, as well as the future prospects
of Millennium BioTherapeutics;
- compared the financial position, resources and operating performance of
Millennium BioTherapeutics with publicly traded companies and
privately-held companies;
- analyzed the historical market prices and valuation of public and
privately-held companies that JSB Partners deemed relevant; and
- compared the historical market price and trading activity of Millennium
Pharmaceuticals with those of other publicly traded companies that JSB
Partners deemed relevant.
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In addition, JSB Partners reviewed industry market research studies, company
market research reports and conducted analyses as it deemed appropriate.
The following is a brief summary of the material financial analyses JSB
Partners used in connection with rendering its opinion.
PUBLICLY TRADED MARKET COMPARABLES. JSB Partners noted that the profile of
Millennium BioTherapeutics is unique within the fields of biopharmaceuticals and
biotechnology. JSB Partners reviewed publicly available information and stock
market information for a number of publicly traded companies that JSB Partners
deemed relevant to the valuation of Millennium BioTherapeutics. For each
comparable company, JSB Partners compared its financial and operating
characteristics with those of Millennium BioTherapeutics, noting that there are
differences in valuations of publicly traded companies and non-publicly traded
companies such as Millennium BioTherapeutics.
NON-PUBLICLY TRADED MARKET COMPARABLES. JSB Partners reviewed available
information on the operations, financial results and valuations of a range of
private companies that JSB Partners deemed relevant to the valuation of
Millennium BioTherapeutics. These analyses took into account a number of factors
of the companies, including their financial positions, technology platforms, R&D
spending, staffing levels, corporate alliances and operating results.
COMPANY PERFORMANCE. JSB Partners analyzed the financial and operating
performance of Millennium BioTherapeutics since its inception in 1997, for the
purpose of quantifying elements contributing to a change in value of Millennium
BioTherapeutics. This included reviewing budgets, strategic and operating plans
and detailed projections of future financial results. JSB Partners reviewed
publicly available information about Millennium Pharmaceuticals' stock market
performance, including certain analysts' commentaries, to determine the impact,
if any, of Millennium BioTherapeutics' performance on the stock price of
Millennium Pharmaceuticals.
OTHER ANALYSES. JSB Partners reviewed the history of stock price movements
of Millennium Pharmaceuticals for the purpose of determining whether it believed
the current trading price levels of Millennium Pharmaceuticals stock fairly
reflected the value of the shares that are being exchanged in the transaction.
In preparing its opinion, JSB Partners assumed and relied on the accuracy
and completeness of all information provided to JSB Partners by Millennium
BioTherapeutics and assumed no responsibility for independently verifying such
information or undertaking an independent evaluation or appraisal of any of the
assets or liabilities of Millennium BioTherapeutics and was not furnished with
any such evaluations or appraisals. JSB Partners' opinion did not predict or
take into account any possible economic, monetary or other changes which may
occur, or information which may become available, after the date of its written
opinion.
The foregoing does not purport to be a complete description of the analyses
performed by JSB Partners. The preparation of a fairness opinion is not
susceptible to partial analysis or summary description. JSB Partners believes
that its analyses must be considered as a whole, and that selecting portions of
that analysis without considering all analyses and factors, would create an
incomplete view of the processes underlying its opinion. JSB Partners may have
given various analyses more or less weight than others. Any estimates contained
in JSB Partners' analyses are not necessarily indicative of actual values and
estimates of values of companies do not purport to be appraisals or necessarily
to reflect the prices at which companies may be sold.
Pursuant to the terms of JSB Partners' engagement letter with the special
committee, Millennium BioTherapeutics paid JSB Partners a fee of $150,000,
$75,000 of which was paid upon the execution of the engagement letter and the
remaining $75,000 that was paid on the delivery of JSB Partners' opinion to the
special committee. In addition, Millennium BioTherapeutics has also agreed to
reimburse JSB
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Partners for its out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel, arising in connection with its engagement, and to
indemnify JSB Partners, its affiliates and their respective directors, officers,
employees and agents against certain liabilities, including certain liabilities
arising under the federal securities laws. Other than in connection with the
foregoing, JSB Partners has provided no investment banking services to
Millennium BioTherapeutics or Millennium Pharmaceuticals for which it has
received any compensation. Kenneth M. Bate, a partner in JSB Partners, served as
a member of the Millennium BioTherapeutics board of directors from January 30,
1998 to April 6, 1998.
INTERESTS OF MILLENNIUM BIOTHERAPEUTICS' AND MILLENNIUM PHARMACEUTICALS'
DIRECTORS AND OFFICERS IN THE MERGER
You should be aware that certain officers and directors of Millennium
BioTherapeutics and Millennium Pharmaceuticals may have certain interests in the
merger that are different from, or in addition to, the interests of Millennium
BioTherapeutics stockholders generally. These interests are summarized below.
Mark Levin, a member of the board of directors and president of Millennium
BioTherapeutics, is Chairman of the board of directors and Chief Executive
Officer of Millennium Pharmaceuticals. Mr. Levin holds options for the purchase
of 10,100 shares of common stock of Millennium BioTherapeutics. Mr. Levin owns
938,322 shares of common stock of Millennium Pharmaceuticals.
Steven Holtzman, a member of the board of directors of Millennium
BioTherapeutics, is Chief Business Officer of Millennium Pharmaceuticals.
Mr. Holtzman holds options for the purchase of 100 shares of common stock of
Millennium BioTherapeutics and options for the purchase of 153,230 shares of
common stock of Millennium Pharmaceuticals. Mr. Holtzman owns 146,500 shares of
common stock of Millennium Pharmaceuticals.
John Maraganore, Vice President and General Manager and a member of the
board of directors of Millennium BioTherapeutics, will serve as a Vice President
of Millennium Pharmaceuticals following the merger. Dr. Maraganone owns 579
shares of common stock of Millennium Pharmaceuticals and holds options for the
purchase of 18,640 shares of Millennium Pharmaceuticals.
Ronald Lindsay, Vice President of Development of Millennium BioTherapeutics,
will serve as a Vice President of Millennium Pharmaceuticals following the
merger. Mr. Lindsay holds options for the purchase of 25,100 shares of common
stock of Millennium Pharmaceuticals. Mr. Lindsay owns 445 shares of common stock
of Millennium Pharmaceuticals.
Nicholas Galakatos, a member of the board of directors of Millennium
BioTherapeutics, is Vice President of New Business of Millennium
Pharmaceuticals. Mr. Galakatos holds options for the purchase of 100 shares of
common stock of Millennium BioTherapeutics and options for the purchase of
86,390 shares of common stock of Millennium Pharmaceuticals.
MILLENNIUM BIOTHERAPEUTICS STOCK OPTIONS. Upon completion of the merger,
Millennium Pharmaceuticals will assume Millennium BioTherapeutics' stock option
plan and each of the outstanding options issued under the plan. Each option so
assumed will continue to have the same terms and conditions it currently has
except that it will be exercisable for the number of shares of Millennium
Pharmaceuticals common stock that the holder would have received in the merger
if the holder had exercised the option in full immediately prior to the closing
of the merger and the exercise price will be adjusted appropriately. At
September 30, 1999, executive officers and directors of Millennium
BioTherapeutics and their affiliates collectively had options to acquire an
aggregate of 100,310 shares of Millennium BioTherapeutics Class B common stock.
ADVANCES TO MILLENNIUM BIOTHERAPEUTICS. As of September 30, 1999,
Millennium Pharmaceuticals had advanced approximately $13.9 million to
Millennium BioTherapeutics. Under the merger
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agreement, Millennium Pharmaceuticals has agreed not to demand payment of such
advances or any future advances until March 31, 2000.
EFFECTIVE TIME OF THE MERGER
The merger will occur as soon as practicable on or after the 20(th) business
day following the date this information statement/prospectus is mailed to the
stockholders of Millennium BioTherapeutics. The merger will become effective
upon filing of the certificate of ownership and merger with the Secretary of
State of the State of Delaware or on such later date and time as may be
specified in the certificate of ownership and merger. The time at which the
merger becomes effective is referred to in this document as the "effective time
of the merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the merger that are applicable to holders of
Millennium BioTherapeutics Class B common stock. This discussion is based on
currently existing provisions of the Internal Revenue Code, existing Treasury
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to Millennium Pharmaceuticals,
Millennium BioTherapeutics or the holders of Millennium BioTherapeutics Class B
common stock as described in this section.
The holders of Millennium BioTherapeutics Class B common stock should be
aware that this discussion does not deal with all federal income tax
considerations that may be relevant to particular stockholders in light of their
particular circumstances, such as:
- stockholders who are dealers in securities,
- who are insurance companies or financial institutions,
- who are foreign persons or entities, who do not hold their Millennium
BioTherapeutics Class B common stock as capital assets, or
- who acquired their shares in connection with stock option or stock
purchase plans or in other compensatory transactions.
In addition, the following discussion does not address the tax consequences
of the merger under foreign, state or local tax laws. ACCORDINGLY, HOLDERS OF
MILLENNIUM BIOTHERAPEUTICS CLASS B COMMON STOCK ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER.
The consummation of the merger is conditioned upon Hale and Dorr LLP
delivering a tax opinion at the closing of the merger to Millennium
BioTherapeutics that the merger will be treated as a "reorganization" within the
meaning of Section 368(a) of the Code. The tax opinion will be subject to
certain assumptions, limitations and qualifications, and is based upon certain
factual representations of Millennium Pharmaceuticals and Millennium
BioTherapeutics. The form of tax opinion has been filed as an exhibit to the
registration statement of which this information statement/prospectus is a part.
Assuming the merger is a reorganization, then, subject to the assumptions,
limitations and qualifications referred to herein and in the tax opinion, the
merger should result in the following federal income tax consequences:
- No gain or loss will be recognized by holders of Millennium
BioTherapeutics Class B common stock solely upon their receipt in the
merger of Millennium Pharmaceuticals common stock in exchange therefor
(except to the extent of cash received in lieu of a fractional share of
Millennium Pharmaceuticals common stock).
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- The aggregate tax basis of the Millennium Pharmaceuticals common stock
received by holders of Millennium BioTherapeutics Class B common stock in
the merger (including any fractional share of Millennium Pharmaceuticals
common stock not actually received) will be the same as the aggregate tax
basis of the Millennium BioTherapeutics Class B common stock surrendered
in exchange therefor.
- The holding period of the Millennium Pharmaceuticals common stock received
by each holder of Millennium BioTherapeutics Class B common stock in the
merger will include the period for which the Millennium BioTherapeutics
Class B common stock surrendered in exchange therefor was held, provided
that the Millennium BioTherapeutics Class B common stock so surrendered is
held as a capital asset at the time of the merger.
- Cash payments received by holder of Millennium BioTherapeutics Class B
common stock in lieu of a fractional share will be treated as if such
fractional share of Millennium Pharmaceuticals common stock had been
issued in the merger and then redeemed by the combined company. A
Millennium BioTherapeutics stockholder receiving such cash will recognize
gain or loss, upon such payment, measured by the difference (if any)
between the amount of cash received and the basis in such fractional
share.
- Neither Millennium Pharmaceuticals nor Millennium BioTherapeutics will
recognize gain or loss directly as a result of the merger.
The parties will not request a ruling from the Internal Revenue Service in
connection with the merger. Holders of Millennium BioTherapeutics Class B common
stock should be aware that the tax opinion will not bind the Internal Revenue
Service. In addition, the tax opinion is subject to certain assumptions,
limitations and qualifications, including but not limited to the truth and
accuracy of certain representations made by Millennium Pharmaceuticals and
Millennium BioTherapeutics.
A successful challenge by the Internal Revenue Service to the reorganization
status of the merger would result in the holders of Millennium BioTherapeutics
Class B common stock recognizing taxable gain or loss with respect to each share
of Millennium BioTherapeutics Class B common stock surrendered. The amount of
gain or loss would be equal to the difference between the stockholder's basis in
such share and the fair market value, as of the effective time of the merger, of
the Millennium Pharmaceuticals common stock received in exchange therefor. In
such event, a stockholder's aggregate basis in the Millennium Pharmaceuticals
common stock so received would equal its fair market value as of the effective
time of the merger, and the stockholder's holding period for such stock would
begin the day after the merger.
ACCOUNTING TREATMENT
The merger will be accounted for as an exchange of shares between companies
under common control in accordance with generally accepted accounting
principles. Under this method of accounting, the recorded book values of the
assets, liabilities and shareholders' equity of Millennium Pharmaceuticals and
Millennium BioTherapeutics will be combined.
LISTING OF SHARES OF MILLENNIUM PHARMACEUTICALS COMMON STOCK ON THE NASDAQ STOCK
MARKET
Millennium Pharmaceuticals will file a listing application with the Nasdaq
Stock Market to cause the shares of Millennium Pharmaceuticals common stock
which are to be issued in the merger and upon exercise of options granted to
employees of Millennium BioTherapeutics to be listed for trading on the Nasdaq
Stock Market.
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RESALE RESTRICTIONS AND LOCKUP AGREEMENTS
Millennium Pharmaceuticals common stock issued in the merger will not be
subject to any restrictions on transfer arising under the Securities Act of
1933, except for shares issued to any Millennium BioTherapeutics stockholder who
may be deemed to be an "affiliate" of Millennium BioTherapeutics or Millennium
Pharmaceuticals for purposes of Rule 145 under the Securities Act. Under the
merger agreement, Millennium BioTherapeutics has agreed to use its best efforts
to obtain the agreement of each such affiliate receiving Millennium
Pharmaceuticals shares in the merger not to transfer any Millennium
Pharmaceuticals common stock received in the merger except in compliance with
the resale provisions of Rule 144 or 145 under the Securities Act or as
otherwise permitted under the Securities Act. This information
statement/prospectus does not cover resales of Millennium Pharmaceuticals common
stock received by any person upon completion of the merger, and no person is
authorized to make any use of this information statement/prospectus in
connection with any such resale.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS OF MILLENNIUM BIOTHERAPEUTICS
If the merger is consummated, a holder of record of Millennium
BioTherapeutics stock on the date of making a demand for appraisal, as described
below, will be entitled to have those shares appraised by the Delaware Court of
Chancery under Section 262 of the Delaware corporation statute and to receive
payment for the "fair value" of those shares instead of the consideration
provided for in the merger agreement. In order to be eligible to receive this
payment, however, a stockholder must (1) continue to hold his or her shares
through the time of the merger and (2) strictly comply with the procedures
discussed under Section 262.
This information statement/prospectus is being sent to all holders of record
of Millennium BioTherapeutics stock and constitutes notice pursuant to
Section 262(d)(2) of the appraisal rights available to those holders under
Section 262. THE STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION 262 REQUIRES
STRICT COMPLIANCE WITH THE PROCEDURES IN SECTION 262. FAILURE TO FOLLOW ANY OF
THESE PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS
UNDER SECTION 262. THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL PROVISIONS OF
SECTION 262. The following summary is not a complete statement of Section 262 of
the Delaware corporation statute, and is qualified in its entirety by reference
to Section 262, which is incorporated herein by reference, together with any
amendments to the laws that may be adopted after the date of this information
statement/prospectus. A copy of Section 262 is attached as Appendix C to this
information statement/prospectus.
NOTICE REQUIREMENTS. Under Section 262, where a merger is accomplished
pursuant to Section 253 of the Delaware General Corporation Law, either before
or within 10 days after the effective date of the merger, Millennium
Pharmaceuticals must notify each stockholder of Millennium BioTherapeutics
entitled to appraisal rights of the merger and that appraisal rights are
available to the stockholder and include in each notice a copy of Section 262.
This information statement/prospectus constitutes the notice of appraisal rights
to the record holders of Class B common stock.
DEMAND FOR APPRAISAL. Only a record holder of shares of Millennium
BioTherapeutics stock on the date of making a written demand for appraisal who
continuously holds those shares through the time of the merger is entitled to
seek appraisal. Demand for appraisal must be executed by or for the holder of
record, fully and correctly, as that holder's name appears on the holder's stock
certificates representing shares of Millennium BioTherapeutics stock. If
Millennium BioTherapeutics stock is owned of record in a fiduciary capacity by a
trustee, guardian or custodian, the demand should be made in that capacity. If
Millennium BioTherapeutics stock is owned of record by more than one person, as
in a joint tenancy or tenancy in common, the demand should be made by or for all
owners of record.
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An authorized agent, including an agent for one or more joint owners, may
execute the demand for appraisal for a holder of record; that agent, however,
must identify the record owner or owners and expressly disclose in the demand
that the agent is acting as agent for the record owner or owners of the shares.
If a stockholder holds shares of Millennium BioTherapeutics Stock through a
broker who in turn holds the shares through a central securities depository
nominee such as Cede & Co., a demand for appraisal of such shares must be made
by or on behalf of the depository nominee and must identify the depository
nominee as record holder.
A record holder such as a broker, fiduciary, depository or other nominee who
holds shares of Millennium BioTherapeutics stock as a nominee for more than one
beneficial owner, some of whom desire to demand appraisal, may exercise
appraisal rights on behalf of those beneficial owners with respect to the shares
of Millennium BioTherapeutics stock, held for those beneficial owners. In that
case, the written demand for appraisal should state the number of shares of
Millennium BioTherapeutics stock covered by it. Unless a demand for appraisal
specifies a number of shares, the demand will be presumed to cover all shares of
Millennium BioTherapeutics stock held in the name of the record owner.
In order to exercise appraisal rights, a stockholder must, within twenty
days after the date of mailing of this information statement/prospectus, demand
in writing from Millennium Pharmaceuticals, as the surviving corporation, an
appraisal of his, her or its shares of Millennium BioTherapeutics Class B common
stock. Such demand will be sufficient if it reasonably informs Millennium
Pharmaceuticals of the identity of the stockholder and that the stockholder
intends to demand an appraisal of the fair value of his, her or its shares of
Millennium BioTherapeutics Class B common stock. Failure to make such demand on
or before the expiration of such twenty day period will foreclose a
stockholder's rights to appraisal. Stockholders should not expect to receive any
additional notice with respect to the deadline for demanding appraisal rights.
All demands should be delivered to Millennium Pharmaceuticals, Attention: John
B. Douglas III, 75 Sidney Street, Cambridge, Massachusetts 02139, telephone
(617) 679-7000.
BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY
REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS WITHIN TWENTY DAYS
OF THE MAILING OF THE NOTICE.
FILING OF PETITION. Within 120 days after the effective date of the merger,
any stockholder who has complied with the applicable provisions of Section 262
will be entitled, upon written request, to receive from Millennium
BioTherapeutics a statement setting forth the aggregate number of shares of
common stock not voting in favor of the merger and with respect to which demands
for appraisal were received by Millennium BioTherapeutics and the number of
holders of such shares. Millennium BioTherapeutics must mail this statement
within 10 days after it receives the written request or within 10 days after the
expiration of the period for the delivery of demands as described above,
whichever is later.
Within 120 days after the effective date of the merger, the surviving
corporation or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares of Millennium BioTherapeutics
stock held by all stockholders seeking appraisal. A dissenting stockholder must
serve a copy of the petition on Millennium Pharmaceuticals. If no petition is
filed by either Millennium Pharmaceuticals or any dissenting shareholder within
the 120-day period, the rights of all dissenting stockholders to appraisal will
cease.
Stockholders seeking to exercise appraisal rights should not assume that the
surviving corporation will file a petition with respect to the appraisal of the
fair value of their shares or that the surviving corporation will initiate any
negotiations with respect to the fair value of those shares. The surviving
corporation is under no obligation to, and has no present intention to, take any
action in this regard. Accordingly, stockholders who wish to seek appraisal of
their shares should initiate all necessary action
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with respect to the perfection of their appraisal rights within the time periods
and in the manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A
TIMELY BASIS WILL CAUSE THE STOCKHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.
HEARING IN CHANCERY COURT. If a petition for an appraisal is filed in a
timely manner, at the hearing on the petition, the Delaware Court of Chancery
will determine which stockholders are entitled to appraisal rights and will
appraise the shares of Millennium BioTherapeutics stock owned by those
stockholders. The Delaware Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Delaware Court may dismiss the
proceedings as to such stockholder. The court will determine the fair value of
those shares, exclusive of any element of value arising from the accomplishment
or expectation of the merger, together with a fair rate of interest, to be paid,
if any, upon the fair value. The Court of Chancery may determine the cost of the
appraisal proceeding and assess it against the parties as the Court deems
equitable.
Although Millennium BioTherapeutics believes that the consideration to be
received by its stockholders for their shares of Millennium BioTherapeutics
common stock is fair, no representation is made as to the outcome of the
appraisal of fair value as determined by the court and stockholders should
recognize that such an appraisal could result in a determination of a value that
is higher or lower than, or the same as, the merger consideration. Moreover,
Millennium Pharmaceuticals does not anticipate offering more than the merger
consideration to any stockholder exercising appraisal rights and reserves the
right to assert, in any appraisal proceeding, that, for purposes of
Section 262, the "fair value" of a share of Millennium BioTherapeutics common
stock is less than the merger consideration.
DETERMINATION OF FAIR VALUE. In determining "fair value," the Delaware
Court is required to take into account all relevant factors. In WEINBERGER V.
UOP, INC., the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered and that "[f]air price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
has stated that in making this determination of fair value the court must
consider market value, asset value, dividends, earnings prospects, the nature of
the enterprise and any other facts which could be ascertained as of the date of
the merger which throw any light on future prospects of the merged corporation.
Section 262 provides that fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." In CEDE &
CO. V. TECHNICOLOR, INC., the Delaware Supreme Court stated that such exclusion
is a "narrow exclusion [that] does not encompass known elements of value," but
which rather applies only to the speculative elements of value arising from such
accomplishment or expectation. In WEINBERGER, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered."
EXPENSES. Each dissenting stockholder is responsible for his or her
attorneys' and expert witness expenses, although upon application of a
dissenting stockholder, the Court may order that all or a portion of the
expenses incurred by any dissenting stockholder in connection with the appraisal
proceeding (including, without limitation, reasonable attorney's fees and the
fees and expenses of experts) be charged pro rata against the value of all
shares of Millennium BioTherapeutics stock entitled to appraisal. In the absence
of a court determination or assessment, each party bears its own expenses.
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NO RIGHT TO VOTE OR RECEIVE DIVIDENDS. Any stockholder who has demanded
appraisal in compliance with Section 262 will not, after the merger, be entitled
to vote such stock for any purpose or receive payment of dividends or other
distributions, if any, on the Millennium BioTherapeutics stock, except for
dividends or distributions, if any, payable to stockholders of record at a date
prior to the merger.
WITHDRAWAL. A stockholder may withdraw a demand for appraisal and accept
the Millennium Pharmaceuticals common stock at any time within 60 days after the
effective date of the merger, or thereafter may withdraw a demand for appraisal
with the written approval of Millennium Pharmaceuticals. Notwithstanding the
foregoing, if an appraisal proceeding is properly instituted, it may not be
dismissed as to any stockholder without the approval of the Delaware Court of
Chancery, and any such approval may be conditioned on the Court of Chancery's
deeming the terms to be just. If, after the merger, a holder of Millennium
BioTherapeutics stock who had demanded appraisal for his shares fails to perfect
or loses his right to appraisal, those shares will be treated as if they were
converted into Millennium Pharmaceuticals common stock at the time of the
merger.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE CORPORATE LAW,
ANY MILLENNIUM BIOTHERAPEUTICS STOCKHOLDER WHO IS CONSIDERING EXERCISING
APPRAISAL RIGHTS SHOULD CONSULT A LEGAL ADVISOR.
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THE MERGER AGREEMENT
In this section of the information statement/prospectus, we describe the
material provisions of the merger agreement. We have attached a copy of the
merger agreement as Appendix A to this information statement/prospectus and
incorporate the merger agreement into this information statement/prospectus by
reference. The summary of the merger agreement we provide below is qualified in
its entirety by reference to the merger agreement. We encourage you to read the
merger agreement because it is the legal document that governs the merger.
THE MERGER
Under the terms and subject to the conditions set forth in the merger
agreement, Millennium BioTherapeutics will merge with and into Millennium
Pharmaceuticals, with Millennium Pharmaceuticals continuing as the surviving
corporation.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time of the merger, each outstanding share of Millennium
BioTherapeutics common stock will be converted into the right to receive a
number of shares of Millennium Pharmaceuticals common stock equal to the average
of (1) $15.00 divided by $62.536 and (2) $15.00 divided by the average of the
last reported sale prices per share of Millennium Pharmaceuticals common stock
on the Nasdaq Stock Market over the 20 consecutive trading days ending on the
trading day that is two trading days prior to the day the merger becomes
effective.
Each share of Millennium BioTherapeutics stock owned by Millennium
BioTherapeutics as treasury stock or by Millennium Pharmaceuticals will be
automatically canceled and retired in the merger and will cease to exist, and no
securities of Millennium Pharmaceuticals or other consideration will be
delivered in exchange for those shares.
PROCEDURES FOR SURRENDER OF MILLENNIUM BIOTHERAPEUTICS CERTIFICATES; FRACTIONAL
SHARES
SURRENDER OF MILLENNIUM BIOTHERAPEUTICS CERTIFICATES. As soon as reasonably
practicable after the effective time of the merger, EquiServe, the exchange
agent for the merger, will send a letter of transmittal and instructions with
respect to the surrender by Millennium BioTherapeutics stockholders of their
Millennium BioTherapeutics stock certificates to each former Millennium
BioTherapeutics stockholder.
Upon compliance with the transmittal letter, Millennium BioTherapeutics
stockholder will be entitled to receive a stock certificate representing whole
shares of Millennium Pharmaceuticals common stock which such holder has the
right to receive pursuant to the merger agreement, together with a cash payment
in lieu of fractional shares, if any.
After the merger, until surrendered to the exchange agent, each certificate
that previously represented shares of Millennium BioTherapeutics stock will
represent only the right to receive upon surrender a certificate evidencing
whole shares of Millennium Pharmaceuticals common stock into which such shares
of Millennium BioTherapeutics stock were converted in the merger and cash in
lieu of fractional shares of Millennium Pharmaceuticals common stock, if any, as
described below.
Holders of certificates previously representing shares of Millennium
BioTherapeutics stock will not be paid dividends or other distributions payable
to holders of record of shares of Millennium Pharmaceuticals common stock as of
any record date after the effective time of the merger, until their certificates
are surrendered to the exchange agent. When their certificates are surrendered,
any unpaid dividends with a record date after the effective time of the merger
but prior to such surrender with respect to whole shares of Millennium
Pharmaceuticals common stock and any cash in lieu of fractional
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shares of Millennium Pharmaceuticals common stock payable as described below
will be paid without interest.
We will close Millennium BioTherapeutics's stock transfer books at the
effective time of the merger, and no further transfers of shares of Millennium
BioTherapeutics stock will be recorded on its stock transfer books. If a
transfer of ownership of Millennium BioTherapeutics stock that is not registered
in the transfer records of Millennium BioTherapeutics has occurred, a
certificate representing the proper number of shares of Millennium
Pharmaceuticals common stock will be issued to a person other than the person in
whose name the certificate so surrendered is registered, together with a cash
payment in lieu of fractional shares, if any, and payment of dividends or
distributions, if any, so long as:
- The Millennium BioTherapeutics stock certificates are accompanied by all
documents required to evidence and effect the transfer; and
- The person requesting such payment pays any transfer or other taxes
required by reason of the issuance of shares of Millennium Pharmaceuticals
common stock or the person requesting payment establishes to Millennium
Pharmaceuticals' satisfaction that all such taxes have been paid.
FRACTIONAL SHARES. No fractional share of Millennium Pharmaceuticals common
stock will be issued to any Millennium BioTherapeutics stockholder upon
surrender of certificates previously representing Millennium BioTherapeutics
stock. Instead, the exchange agent will pay to each of those stockholders an
amount in cash determined by multiplying the fractional share interest to which
the holder would otherwise be entitled by the average of $62.536 and the average
of the last reported sale price of a share of Millennium Pharmaceuticals common
stock on the Nasdaq Stock Market over the 20 consecutive trading days ending on
the second trading day prior to the effective time of the merger.
EFFECT ON THE MILLENNIUM BIOTHERAPEUTICS 1997 EQUITY INCENTIVE PLAN
At the effective time of the merger, Millennium Pharmaceuticals will assume
the Millennium BioTherapeutics' 1997 Equity Incentive Plan and each option
granted under the plan that is outstanding and unexercised immediately prior to
the effective time of the merger. Each option so assumed will continue to have
the same terms and conditions, including vesting terms, it currently has except
that it will be exercisable for shares of Millennium Pharmaceuticals common
stock. The number of shares subject to the option and the exercise price will be
adjusted as described below.
The number of shares of Millennium Pharmaceuticals common stock subject to
the option after its assumption will be equal to the number of shares of
Millennium BioTherapeutics Class B common stock subject to the Millennium
BioTherapeutics option multiplied by the average of (1) $15.00 divided by
$62.536 and (2) $15.00 divided by the average of the last reported sale prices
per share of Millennium Pharmaceuticals common stock on the Nasdaq Stock Market
over the 20 consecutive trading days ending on the trading day that is two
trading days prior to the day the merger becomes effective (and rounding any
fractional shares down to the nearest whole share).
The exercise price per share of Millennium Pharmaceuticals common stock will
be equal to the exercise price for the shares of Millennium BioTherapeutics
Class B common stock subject to the Millennium BioTherapeutics option divided by
the average of (1) $15.00 divided by $62.536 and (2) $15.00 divided by the
average of the last reported sale prices per share of Millennium Pharmaceuticals
common stock on the Nasdaq Stock Market over the 20 consecutive trading days
ending on the trading day that is two trading days prior to the day the merger
becomes effective (rounded up to the nearest whole cent).
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REPRESENTATIONS AND WARRANTIES
Millennium Pharmaceuticals and Millennium BioTherapeutics have made
representations and warranties in the merger agreement relating to, among other
things:
- Their corporate organization, qualification, standing and power;
- Their capital structures;
- The authorization, execution, delivery, and enforceability of the merger
agreement and related matters;
- Required consents, approvals, orders and authorizations of governmental
authorities relating to, and non-contravention of certain agreements as a
result of, the merger agreement;
- Documents filed by Millennium Pharmaceuticals with the SEC and the
accuracy of the information contained in such documents;
- Absence of certain adverse material changes or events with respect to
Millennium Pharmaceuticals since September 30, 1999; and
- Litigation with respect to Millennium Pharmaceuticals.
The merger agreement also contains a representation and warranty of
Millennium BioTherapeutics relating to the opinion of its financial advisor.
The representations and warranties made by the parties to the merger
agreement will not survive the effective time of the merger, but they form the
basis of a condition to the obligations of Millennium Pharmaceuticals and
Millennium BioTherapeutics to complete the merger.
COVENANTS
CLOSING EFFORTS. Each party has agreed to use its reasonable best efforts
to take all actions and do all things necessary, proper or advisable to complete
the merger and other transactions contemplated in the merger agreement
including:
- Ensuring that its representations and warranties remain true and correct
in all material respects through the closing of the merger; and
- Ensuring that the conditions to the obligations of the other party to
consummate the merger are satisfied.
NO STOCKHOLDER VOTE. Each party has agreed to take all necessary and
appropriate action for the merger to become effective without a vote of the
stockholders of Millennium BioTherapeutics in accordance with the provisions of
Section 253 of the Delaware General Corporation Law.
INFORMATION STATEMENT/PROSPECTUS AND REGISTRATION STATEMENT. Millennium
Pharmaceuticals has agreed in the merger agreement to prepare and file with the
SEC this information statement/prospectus and the related registration statement
on Form S-4 and use its reasonable best efforts to have the registration
statement declared effective as promptly as practicable.
OPERATION OF BUSINESS. Millennium BioTherapeutics has agreed in the merger
agreement that during the period from the date of the merger agreement and
continuing until the effective time of the merger, Millennium BioTherapeutics
will carry on its businesses in the ordinary course and in compliance with all
applicable laws and regulations and use its reasonable best efforts to preserve
intact its current business organization, keep its physical assets in good
working condition, keep available the services of their current officers and
employees and preserve its relationships with customers, suppliers and others
with whom it has business dealings.
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LISTING OF MILLENNIUM PHARMACEUTICALS COMMON STOCK. Millennium
Pharmaceuticals has agreed in the merger agreement to list the shares of its
common stock to be issued in the merger on the Nasdaq Stock Market.
FUNDING OBLIGATIONS. Millennium Pharmaceuticals has agreed in the merger
agreement that:
- Until March 31, 2000, it will not demand any payments of intercompany
advances it has made or will make to Millennium BioTherapeutics; and
- Until the effective time of the merger, it will make reasonable additional
advances of money to Millennium BioTherapeutics, as and when requested by
Millennium BioTherapeutics.
INSURANCE AND INDEMNIFICATION. After the merger, Millennium Pharmaceuticals
has agreed that it will indemnify each present and former director and officer
of Millennium BioTherapeutics against any claims, losses and liabilities,
including related costs and expenses, pertaining to matters occurring prior to
the effective time of the merger. For three years after the merger, Millennium
Pharmaceuticals will maintain in effect directors' and officers' liability
insurance covering acts or omissions occurring prior to and as of the effective
time of the merger. Millennium Pharmaceuticals and its subsidiaries will not,
however, be required to pay, in total, an annual premium for the insurance
described in this paragraph in excess of 150% of the current annual premium paid
by Millennium BioTherapeutics for its existing coverage prior to the merger.
CONDITIONS
The obligations of each party to the merger agreement to complete the merger
are subject to the satisfaction or waiver of various conditions on or before the
effective time of the merger, which include, in addition to other customary
closing conditions, the following:
- Millennium Pharmaceuticals shall have received an opinion of Hale and Dorr
LLP to the effect that the merger will qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code;
- No litigation brought by any governmental entity seeking to enjoin
completion of the merger, and no order, executive order, stay, decree,
judgment or injunction or statute, rule or regulation shall be in effect
that prohibits the completion of the merger;
- The registration statement on Form S-4 of which this information
statement/prospectus is a part shall have been declared effective and
shall not be the subject of any stop order, and any proceedings shall not
have been brought or threatened by the SEC for that purpose; and
- All waivers, permits, consents, approvals or other authorizations required
to be obtained, and all registrations, filings and notices required to be
made, by Millennium Pharmaceuticals and Millennium BioTherapeutics prior
to the completion of the merger and the related transactions shall have
been obtained from, and made with, all required governmental entities
except for those whose failure to obtain or effect would not have a
material adverse effect, at or after the effective time of the merger, on
Millennium BioTherapeutics or Millennium Pharmaceuticals.
The obligation of Millennium BioTherapeutics to effect the merger is also
subject to the satisfaction of the following conditions:
- The representations and warranties of Millennium Pharmaceuticals in the
merger agreement (when read to exclude any qualification or exception as
to materiality or material adverse effect) shall be true and correct as of
the closing date of the merger, provided that those representations and
warranties that address matters only as of a particular date shall remain
true and correct in all material respects as of such particular date; and
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- Millennium Pharmaceuticals shall have performed in all material respects
all agreements and covenants required to be performed or complied with
under the merger agreement at or prior to the closing date of the merger.
The obligation of Millennium Pharmaceuticals to effect the merger is also
subject to the satisfaction of the following conditions:
- The representations and warranties of Millennium BioTherapeutics in the
merger agreement (when read to exclude any qualification or exception as
to materiality or material adverse effect) shall be true and correct as of
the closing date of the merger, provided that those representations and
warranties which address matters only as of a particular date shall remain
true and correct in all material respects as of such particular date;
- Millennium BioTherapeutics shall have performed in all material respects
all agreements and covenants required to be performed or complied with
under the merger agreement at or prior to the closing date of the merger;
and
- Millennium BioTherapeutics shall have obtained any necessary consent or
approval of any third party except where the failure to obtain such
consent or approval could not reasonably be expected to result in a
material adverse effect on Millennium BioTherapeutics.
TERMINATION
The merger agreement provides that prior to the effective time of the
merger, the merger agreement may be terminated:
- by mutual written consent of Millennium Pharmaceuticals and Millennium
BioTherapeutics;
- by either Millennium Pharmaceuticals or Millennium BioTherapeutics if:
(1) we do not complete the merger on or before December 31, 2000, except
that a party may not terminate the merger agreement for this reason
if its failure to fulfill its obligations is the cause of a merger
not being completed by December 31, 2000; or
(2) the other party is in breach of any representation, warranty or
covenant in the merger agreement and such breach is not cured within
20 days following delivery of a written notice of such breach.
AMENDMENTS AND WAIVERS
The parties to the merger agreement may mutually amend the merger agreement.
Any amendment must be in writing and signed by both parties. The merger
agreement permits Millennium BioTherapeutics and Millennium Pharmaceuticals to
mutually waive any inaccuracies in the representations of the other party and
waive compliance with any of the agreements or conditions contained in the
merger agreement. Millennium BioTherapeutics may only agree to amend the merger
agreement, or to grant a waiver, if the special merger committee of the
Millennium BioTherapeutics board of directors recommends such amendment or
waiver and the board of directors of Millennium BioTherapeutics approves such
amendment or waiver.
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INFORMATION CONCERNING MILLENNIUM PHARMACEUTICALS
Millennium Pharmaceuticals seeks to discover and develop proprietary
therapeutic and diagnostic human healthcare products and services based on the
discovery and understanding of the medical usefulness of genes. Millennium
Pharmaceuticals employs genetics and genetic analysis, also called genomics, and
uses computer-based information systems to assist in the identification of
analysis and elucidation of the biological function of genes. Millennium
Pharmaceuticals applies its technology across the entire healthcare sector, from
gene identification through patient management.
Millennium Pharmaceuticals was organized as a Delaware corporation in 1993.
Its principal executive offices are located at 75 Sidney Street, Cambridge,
Massachusetts 02139, and its telephone number is 617 679-7000. Its World Wide
Web site address is WWW.MLNM.COM. The information in its website is not
incorporated by reference into this information statement/prospectus.
RECENT TRANSACTIONS
PURCHASE OF ELI LILLY SHARES. On October 14, 1999, Millennium
Pharmaceuticals purchased all of the shares of Millennium BioTherapeutics
Series B preferred stock owned by Eli Lily and Company. Millennium
Pharmaceuticals issued Eli Lilly 360,198 shares of Millennium Pharmaceuticals
common stock in exchange for all shares of Millennium BioTherapeutics Series B
preferred stock owned by Eli Lilly.
Millennium Pharmaceuticals agreed to register the shares it issued for
resale by Eli Lilly under the Securities Act. When such a registration statement
becomes effective, Millennium Pharmaceuticals will issue additional shares of
stock to Eli Lilly or Eli Lilly will return some shares of stock to Millennium
Pharmaceuticals. Which of these adjustments is made will depend on the average
sale price of Millennium Pharmaceuticals common stock during the five trading
days ending on the first trading day before the resale registration statement is
declared effective. If the product of:
- 2,000,000, times
- $15.00 divided by such average sale price
is less than the number of shares issued to Eli Lilly, Millennium
Pharmaceuticals will issue a number of additional shares equal to the
difference. If the product exceeds the number of shares issued to Eli Lilly,
Eli Lilly will return a number of shares to Millennium Pharmaceuticals equal to
the excess.
ACQUISITION OF LEUKOSITE, INC. On October 14, 1999, Millennium
Pharmaceuticals signed a merger agreement with LeukoSite, Inc. If this merger is
completed, LeukoSite will become a wholly-owned subsidiary of Millennium
Pharmaceuticals. Under the terms of the merger agreement, LeukoSite shareholders
will receive 0.4296 shares of Millennium Pharmaceuticals common stock in
exchange for each LeukoSite share. In connection with this transaction,
Millennium Pharmaceuticals expects to issue approximately 6,577,110 shares of
Millennium Pharmaceuticals common stock, and approximately 986,911 shares of
Millennium Pharmaceuticals common stock issuable upon exercise of LeukoSite
options and warrants.
LeukoSite is a biotechnology company developing proprietary monoclonal
antibody and small molecule drugs to treat patients with cancer and
inflammatory, autoimmune and viral diseases. LeukoSite is preparing to complete
the filing of the biologics license application for its lead drug, the
CAMPATH-Registered Trademark- monoclonal antibody. LeukoSite is a party to a
joint venture with ILEX Oncology, Inc. for CAMPATH-Registered Trademark-, and
Schering AG and its U.S. affiliate, Berlex Laboratories, expect to market,
distribute and sell CAMPATH-Registered Trademark- in Europe and the United
States. Including CAMPATH-Registered Trademark-, LeukoSite has six drug
candidates in clinical development and nine partnered small molecule research
and development programs. LeukoSite's collaborators include Schering AG,
Warner-Lambert Company,
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Roche Bioscience, Kyowa Hakko Kogyo Co., Ltd., Genentech, Inc., Hoechst Marion
Roussel, ILEX Oncology, Inc., MorphoSys AG and Medarex, Inc.
The principal conditions to closing the LeukoSite acquisition are:
- Approval by the stockholders of LeukoSite;
- Termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976;
- The registration statement registering the shares of Millennium
Pharmaceuticals common stock to be issued to the stockholders of LeukoSite
must become effective under the Securities Act of 1933 and must not be
subject to any stop order or proceedings seeking a stop order.
ADDITIONAL INFORMATION
A detailed description of Millennium Pharmaceuticals' business, executive
compensation, various benefit plans, including stock option plans, voting
securities and the principal holders thereof, certain relationships and related
transactions, financial statements and other matters related to Millennium
Pharmaceuticals is incorporated by reference from filings made by Millennium
Pharmaceuticals with the SEC. See "Where You Can Find More Information."
INFORMATION CONCERNING MILLENNIUM BIOTHERAPEUTICS
BUSINESS
OVERVIEW. Millennium BioTherapeutics was organized as a Delaware
corporation in May 1997. Millennium BioTherapeutics has engaged in discovering
and developing biotherapeutics products to treat human diseases. The term
"biotherapeutics" refers to proteins or nucleic acids which are administered to
patients for therapeutic benefits. We have based our discovery and development
programs on identifying and understanding the genes which are responsible for
these diseases. We have employed a number of technologies in these efforts,
including several approaches to identifying genes and the use of high capacity,
high speed automated processes to analyze the functions of these genes. When
used in this section, the terms "we," "us" and "our," refer to Millennium
BioTherapeutics.
We have sought to discover and develop products based upon our genetic
technologies in the five core fields of biotherapeutics, the most important of
which are therapeutic proteins and therapeutic antibodies:
- THERAPEUTIC PROTEINS. Therapeutic proteins fall into two main categories:
- The first category, replacement therapies, consists of proteins which
are administered to a patient to supplement or replace proteins whose
absence or deficiency is an underlying cause of the patient's disease.
- The second category, pharmacologic therapies, consists of proteins which
are administered to a patient to stimulate natural processes within the
body to produce a therapeutic effect, but whose absence is not an
underlying cause of the patient's disease.
- THERAPEUTIC ANTIBODIES. Therapeutic antibodies are a type of protein which
neutralize foreign proteins and other compounds or processes in the body
to prevent adverse health effects. For example, the therapeutic antibody
ReoPro-Registered Trademark-, developed and owned by an unrelated
pharmaceutical company, blocks the undesired aggregation, or clumping, of
platelets, a specific type of blood cell. By blocking platelet
aggregation, ReoPro-Registered Trademark- prevents the dangerous clotting
of blood after angioplasty, a common cardiac procedure. In other cases, a
therapeutic antibody binds to the surface of unwanted cells, such as tumor
cells, and initiates the destruction of these cells by the body.
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- GENE THERAPY. Genes carry encoded information which instructs human cells
how to make specific proteins that are used in the body. In gene therapy,
the medical provider administers to the patient the gene that encodes a
specific therapeutic protein, rather than administering the therapeutic
protein itself. Gene therapy may have potential advantages over
administering therapeutic proteins in situations in which there is a need
for prolonged administration of therapeutic proteins or for their delivery
only to defined sites within the body. For example, a protein that is
chronically deficient in a particular disease might be provided by
relatively infrequent administration of the gene encoding that protein,
rather than by frequent administration of the deficient protein.
Similarly, localized administration of a specific protein to a particular
organ system may be the best treatment for a disease. Localized
administration is difficult to achieve with injectable proteins but
expected to be achievable by gene therapy.
- ANTISENSE THERAPY. Antisense therapy reverses the approach of gene
therapy. Instead of providing a gene that encodes a protein with a
beneficial effect, antisense therapy blocks the activity of a gene that
encodes a protein with a harmful effect.
- VACCINES. A vaccine is a drug preparation that resembles a microorganism
or other disease-causing agent, referred to as a pathogen. When
administered to a patient, the vaccine provokes the body to build up
resistance to the pathogen without actually causing the patient to develop
the disease. Upon subsequent exposure to the pathogen, the patient's
immune system will mount a defense against the pathogen, preventing
development or progression of the disease that the pathogen causes.
In the field of therapeutic proteins, we have been engaged in discovery and
development programs, including a program financed in part by Millennium
Pharmaceuticals. We also have been engaged in discovery and development programs
to identify other medical applications for therapeutic proteins. To date, we
have discovered and are engaged in research on several hundred therapeutic
protein candidates. These proteins are in various stages of preclinical
development.
In the field of therapeutic antibodies, we have been focused on programs to
discover new therapeutic antibody drugs in the disease areas of inflammation and
oncology. To date, we have identified several potential drug targets for
therapeutic antibodies.
If these programs are successful, one or more of these proteins and/or drug
targets may result in products that Millennium Pharmaceuticals could
commercialize following completion of the merger.
TECHNOLOGY. We have used a number of genetic and related automated
technologies in our biotherapeutics product discovery programs. These
technologies have included:
- High-capacity, automated processes for identifying, analyzing and storing
genetic information.
- Genetic mapping techniques, which involve studying how humans inherit
specific genes that cause diseases.
- Transcriptional profiling, which is a technique used to identify the genes
which are associated with a particular disease.
- Expression cloning, which involves techniques to identify unknown genes
through detailed knowledge of the proteins they encode.
- The use of selectively-bred, proprietary mice which have genes and
diseases which are closely similar to human genes and diseases.
- High-capacity processes for conducting genetic studies of microbes, such
as bacteria and yeast, which may provide information that is useful for
developing antimicrobial drugs and which may provide information about
human genes which are similar to microbial genes.
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AGREEMENTS WITH MILLENNIUM PHARMACEUTICALS. When we were organized in
May 1997, we entered into several agreements with Millennium Pharmaceuticals
which relate to the transfer and licensing of technology and trademarks,
collaborating with respect to aspects of our research and the purchasing of
services from Millennium Pharmaceuticals. On October 14, 1999, in connection
with the agreement and plan of merger between us and Millennium Pharmaceuticals,
we entered into an amendment with Millennium Pharmaceuticals that amended the
two agreements relating to the transfer and licensing of technology. The
agreements and the amendments are summarized below.
- RIGHTS EXCHANGE AGREEMENT. The Rights Exchange Agreement provided that we
and Millennium Pharmaceuticals would transfer and assign to each other
existing and future rights for use in our respective core fields. In
particular, we and Millennium Pharmaceuticals agreed:
- To transfer and assign to us the retained rights under Millennium
Pharmaceuticals' existing collaboration agreements that are in our core
field;
- To transfer, assign and/or license to each other all future product
development opportunities and technology rights developed or acquired
during the agreement term to the extent applicable to each of our core
fields; and
- To use reasonable efforts when negotiating third party collaboration
agreements to limit the licenses and rights granted to the third party
in the core field of the other party, except when the limitation would
have a material impact on either the willingness of the third party to
enter into the collaboration agreement or on the financial terms of the
collaboration agreement.
The agreement has a term which ends on the later of May 31, 2002 or the
date on which we cease to be an affiliate of Millennium Pharmaceuticals.
In the October 14, 1999 amendment to this agreement, we agreed, effective
immediately, that Millennium Pharmaceuticals will no longer be obligated
to transfer future product development opportunities or other technology
rights that come into existence or under the control of Millennium
Pharmaceuticals subsequent to the date of the amendment and that it will
no longer be required to use reasonable efforts when negotiating third
party collaboration agreements to limit the licenses and rights granted
to the third party in our core field. In addition, should the proposed
merger not have closed by December 31, 2000, then we and Millennium
Pharmaceuticals agreed to execute on that date an amended and restated
Rights Exchange Agreement which would reinstate Millennium
Pharmaceuticals obligations as outlined above.
- TECHNOLOGY TRANSFER AGREEMENT. The Technology Transfer and License
Agreement provided that we and Millennium Pharmaceuticals would transfer
technology and grant licenses to each other for use in our respective core
fields. In particular, we and Millennium Pharmaceuticals agreed:
- To transfer to each other product specific development opportunities and
technology rights, including, opportunities and rights that arise under
collaboration agreements with third parties,
- To grant to each other a royalty-free, non-exclusive license to
technology relating to the research and development of genes and
proteins in our respective core fields, and
- To grant to each other a royalty-free, exclusive license to technology
relating to the development, manufacture and/or commercialization of
products in our respective core fields.
The agreement has a term which ends on the later of May 31, 2002 or the
date on which we cease to be an affiliate of Millennium Pharmaceuticals.
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In the October 14, 1999 amendment to this agreement, we agreed, effective
immediately, that Millennium Pharmaceuticals will no longer be obligated
to grant to us a royalty-free, exclusive license to technology relating
to the development, manufacture and/or commercialization of products in
our core field that come into existence subsequent to the date of the
amendment. In addition, should the proposed agreement and plan of merger
have not closed by December 31, 2000, then we and Millennium
Pharmaceuticals agreed to execute on that date an amended and restated
Technology Transfer and License Agreement which would reinstate this
obligation of Millennium Pharmaceuticals and would include a new
obligation for us to share in the costs associated with licensing or
acquisition of product technology that has application to our core field
and that was licensed or acquired from third parties subsequent to
October 14, 1999.
- ADMINISTRATIVE SERVICES AGREEMENT. The Administrative Services Agreement
provides for us to reimburse Millennium Pharmaceuticals on a monthly basis
for the actual direct and indirect cost of certain services provided to us
by Millennium Pharmaceuticals. These services include accounting and
bookkeeping, payroll, human resources support services, data processing
development and implementation, legal services, and public and investor
relations services. The agreement may be renewed for successive terms of
one year if we both agree. The agreement terminates if we consummate an
initial public offering of our common stock with aggregate proceeds to us
of at least $15,000,000. In addition, we may discontinue any service
provided under the agreement at any time on 120 days' notice to Millennium
Pharmaceuticals and either of us can terminate at any time if there is a
breach of the agreement.
- RESEARCH SERVICES AND COLLABORATION AGREEMENT. Under the Research Services
and Collaboration Agreement we and Millennium Pharmaceuticals have agreed
to provide specified research services to each other. We and Millennium
Pharmaceuticals will reimburse each other for all direct and indirect
actual costs of the services provided. Neither we nor Millennium
Pharmaceuticals is obligated to provide services to the other if it would
result in an unreasonable burden on the party performing the service. We
and Millennium Pharmaceuticals also have agreed to engage in mutually
agreed upon collaborative research activities, including in the areas of
developing automated research tools and other computer-based research
programs. The agreement may be renewed for successive renewal terms of one
year if we mutually agree and either of us can terminate at any time if
there is a breach of the agreement.
- BIOINFORMATICS ACCESS AND LICENSE AGREEMENT. The Bioinformatics Access and
License Agreement grants to us a non-exclusive, royalty-free, fully
paid-up, nontransferable license to use internally Millennium
Pharmaceuticals' software tools for the automated processing of genetic
data. The agreement expires on the later of May 31, 2002 and the date on
which we are no longer considered an affiliate of Millennium
Pharmaceuticals, unless earlier terminated if either of us breaches the
agreement.
- TRADEMARK LICENSE AGREEMENT. The Trademark License Agreement provides for
the grant by Millennium Pharmaceutics to us of a co-exclusive license to
use the trademarks "Millennium" and "Millennium BioTherapeutics." When we
are no longer an affiliate of Millennium Pharmaceuticals, Millennium
Pharmaceuticals can terminate the license on 90 days' written notice.
However, the license can be terminated earlier if we become insolvent or
fail to meet quality standards which have been imposed by Millennium
Pharmaceuticals with respect to the trademarks.
- TAX SHARING AGREEMENT. The Tax Sharing Agreement provides for the
allocation, payment and reimbursement of taxes between us and Millennium
Pharmaceuticals on a consolidated basis.
STRATEGIC ALLIANCE AND OTHER AGREEMENTS. We are engaged in agreements with
third parties relating to our discovery programs. These agreements include the
following:
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<PAGE>
- ELI LILLY AND COMPANY. In May 1997, we formed a strategic alliance with
Eli Lilly in the field of therapeutic proteins. As part of the formation
of this alliance, Eli Lilly made an equity investment in our capital stock
of $20 million, for which it received approximately 18% of our voting
stock.
This strategic alliance was amended in October 1999, concurrently with the
purchase by Millennium Pharmaceuticals of all our stock held by Eli Lilly.
Under the amendment, the research program was refocused from the discovery
of new therapeutic proteins to the further development of the therapeutic
proteins which had been identified in the course of the research program.
The research program will now end in May 2000, and Eli Lilly's funding
obligations under the refocused research program were waived. In addition,
Eli Lilly's non-exclusive license to use the genes and proteins from the
jointly funded program in their small molecule drug discovery programs was
amended to be a non-royalty bearing license.
As part of the October 1999 amendment and in accordance with the original
terms of this alliance, Eli Lilly received royalty-bearing worldwide
exclusive rights to develop and commercialize 25% of the therapeutic
proteins discovered under the research program. Millennium BioTherapeutics
received non-royalty bearing, worldwide exclusive rights to develop and
commercialize 75% of the therapeutic proteins discovered under the
research program.
In the event that Eli Lilly achieves product development and regulatory
milestones in its development of the therapeutic proteins exclusively
licensed to it from the alliance, Eli Lilly will be obligated to make
milestone payments to us.
In conjunction with the October 1999 amendment, Millennium Pharmaceuticals
purchased all of Eli Lilly's shares of our voting stock. Millennium
Pharmaceuticals has also agreed to now provide the research funding for
the further development of the identified therapeutic proteins which was
previously provided by Eli Lilly.
- ABGENIX, INC. We have entered into a development and commercialization
agreement with Abgenix, Inc., an antibody technology company, that
provides us access to Xenomouse-TM- technology for two therapeutic
antibody targets. Xenomouse-TM- technology involves the use of a
genetically engineered mouse that, when exposed to a substance which is
foreign to the human body, such as a pathogen, produces human antibodies
in response. The genes encoding these human antibodies can be deciphered
and used to produce therapeutic antibodies for human use. Under the
agreement, we maintain all commercial rights to human therapeutic
antibodies generated from the Xenomouse-TM- and we have agreed to pay
Abgenix certain development milestones as well as royalties upon product
commercialization.
- OTHER AGREEMENTS. We have also entered into a number of consulting,
materials transfer and collaboration agreements with academic
investigators and institutions. In addition, we have entered into several
technology acquisition and research collaboration agreements to gain
access to additional technologies which are useful to our discovery and
development programs.
OUTSTANDING STOCK; NO PUBLIC TRADING MARKET
There is currently no public trading market for shares of Millennium
BioTherapeutics' stock. As of October 27, 1999, there were a total of 9,000,000
shares of Series A convertible preferred stock and 2,000,000 shares of Series B
convertible preferred stock of Millennium BioTherapeutics outstanding, all of
which shares are owned by Millennium Pharmaceuticals. As of October 27, 1999,
there were a total of 1,376,568 shares of Class B common stock and 1,000 shares
of Class A common stock of Millennium BioTherapeutics outstanding. As of
October 27, 1999, there were approximately 124 holders of Class B common stock
of Millennium BioTherapeutics. As of October 27, 1999 there were options to
purchase a total of 425,654 shares of Class B common stock outstanding.
48
<PAGE>
DIVIDEND POLICY
Millennium BioTherapeutics has never paid or declared any cash dividends on
its common stock or other securities and does not anticipate paying cash
dividends in the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Millennium BioTherapeutics maintains an investment portfolio in accordance
with its investment policy. The primary objectives of this investment policy are
to preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. Millennium BioTherapeutics' investment policy specifies credit
quality standards for Millennium BioTherapeutics' investments and limits the
amount of credit exposure to any single issue, issuer or type of investment.
Millennium BioTherapeutics does not believe that it has any material market
risk exposure with respect to derivative or other financial instruments.
OTHER MATTERS
PATENTS. We hold approximately 285 foreign and United States patent
applications and three issued United States patents. These patent applications
and patents generally relate to genes which encode soluble or cell surface
proteins.
COMPETITION.
We experience intense competition in our industry. Some of our competitors
may have better funding and more resources than we have. We believe that the
primary factors relating to the products that we are developing include safety,
efficacy, reliability and financial stability.
GOVERNMENT REGULATION.
The Food and Drug Administration extensively regulates our industry. We
believe that the FDA will regulate most of our products as biologics. Biologics
require the submission of a Biologics License Application and FDA approval prior
to being marketed in the United States. Marketing our products outside the U.S.
will likely require the approval of foreign governmental regulating agencies.
These factors are discussed in the filings made by Millennium Pharmaceuticals
with the SEC. See "Where You Can Find More Information."
FACILITIES.
We have the right to use a total of approximately 31,200 square feet of
laboratory and office space in Millennium Pharmaceuticals' buildings in
Cambridge, Massachusetts.
EMPLOYEES.
As of September 30, 1999, we had approximately 84 full-time employees and
had obtained the services of approximately 21 additional full-time qualified
employees from other units within Millennium Pharmaceuticals.
49
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements and related notes of Millennium BioTherapeutics appearing elsewhere
in this information statement/prospectus. This information statement/prospectus
contains forward-looking statements that involve risks and uncertainties. There
are a number of important factors that could cause Millennium BioTherapeutics'
actual results to differ materially from those indicated by such forward-looking
statements. See "Cautionary Statement Concerning Forward-Looking Statements."
When used in this management's discussion and analysis, the words "we,"
"our" and "us" mean Millennium BioTherapeutics.
OVERVIEW
Millennium BioTherapeutics was formed in May 1997 to focus on opportunities
in therapeutic proteins and antibodies, vaccines, gene therapy and antisense
products. Eli Lilly made a $20.0 million equity investment in Millennium
BioTherapeutics in exchange for approximately 18% of the issued and outstanding
shares. Millennium Pharmaceuticals retained approximately an 82% ownership
interest.
Coincident with Eli Lilly's equity investment, we and Eli Lilly entered into
a multi-year collaborative program for the discovery, development and
commercialization of novel therapeutic protein products. We have recently
amended the Eli Lilly agreement. See "Information Concerning Millennium
BioTherapeutics--Business--Strategic Alliances and Other Agreements."
As of September 30, 1999, Millennium Pharmaceuticals had advanced to us an
aggregate of approximately $13.9 million. We have used those funds for
operations. Under the merger agreement, Millennium Pharmaceuticals has agreed
not to demand payment of those advances, or any other advances Millennium
Pharmaceuticals makes to us, until March 31, 2000.
To date, most of our revenue has resulted from payments under the Eli Lilly
agreement. We have not received any revenue from the sale of products. If
maintained as a going concern, we would expect to incur increasing expenses and
may incur increasing operating losses.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
LOSS. For the nine months ended September 30, 1999, we had a net loss of
$11.9 million as compared to a net loss of $9.5 million for the nine months
ended September 30, 1998.
REVENUES. Revenue under strategic alliance arrangements increased to
$7.2 million for the nine months ended September 30, 1999 from $6.9 million for
the nine months ended September 30, 1998. Revenue is primarily from the Eli
Lilly agreement for both nine-month periods. We do not expect revenues under the
Eli Lilly agreement to continue beyond 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $16.6 million for the nine months ended September 30, 1999 from
$14.0 million for the nine months ended September 30, 1998. The costs of
additional personnel, increased patent costs and the funding of additional
collaborations with universities and other institutions accounted for most of
this increase. We expect research and development expenses for the remainder of
1999 to continue at the current rate of spending.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased to $2.8 million for the nine months ended September 30, 1999 from
$3.0 million for the nine months
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<PAGE>
ended September 30, 1998. The decrease was attributable primarily to decreased
personnel expenses and the reduction of management and administrative personnel.
We expect general and administrative expenses for the remainder of 1999 to
continue at the current rate of spending.
INTEREST INCOME. Interest income decreased to $0.3 million for the nine
months ended September 30, 1999 from $0.6 million for the nine months ended
September 30, 1998. The decrease was primarily attributable to a lower level of
invested funds.
YEAR ENDED 1998 AND THE PERIOD MAY 27, 1997 (DATE OF INCEPTION) TO DECEMBER 31,
1997
LOSS. For the year ended December 31, 1998, we had a net loss of
$14.2 million as compared to a net loss of $3.4 million for the period May 27,
1997 (date of inception) to December 31, 1997.
REVENUES. Revenue under strategic alliance arrangements increased to
$9.3 million for the year ended December 31, 1998 from $5.5 million for the
period ended December 31, 1997. Revenue is primarily from the Eli Lilly
agreement for both periods.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased to $20.4 million for the year ended December 31, 1998 from
$8.1 million for the period ended December 31, 1997. That increase was
attributable primarily to:
- 1997 including expenses only since May 27;
- increased personnel expenses as we hired additional research and
development personnel; and
- increases in facilities expenses, lab supplies and patent costs and the
funding of additional collaborations with universities and other
institutions.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased to $3.8 million for the year ended December 31, 1998 from
$1.3 million for the period ended December 31, 1997. The increase was
attributable primarily to:
- 1997 including expenses only since May 27;
- increased personnel expenses as we hired additional management and
administrative personnel; and
- increases in facilities expenses, legal costs and travel expenses.
INTEREST INCOME. Interest income increased to $0.7 million for the year
ended December 31, 1998 from $0.5 million for the period ended December 31,
1997. Though levels of invested funds were higher in the 1997 Period, funds
could only be invested since the inception date, May 27, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, we had approximately $5.6 million in cash and cash
equivalents, a net decrease of $2.0 million since December 31, 1998. The
decrease in cash and cash equivalents is primarily attributable to $1.8 million
used in operations, $0.5 million invested in property and equipment offset by
proceeds of $0.3 million from the exercise of stock options.
We have financed our operations since inception primarily through the sale
of our Series B convertible preferred stock to Eli Lilly for $20.0 million,
advances from Millennium Pharmaceuticals and capital lease financings.
We believe that existing cash and investment securities, and anticipated
cash flow from our current strategic alliances, would not be sufficient to
support our existing operations beyond 1999. In order for
51
<PAGE>
us to remain a going concern we will require funding from another source or
sources. Our actual future cash requirements, however, will depend on many
factors, including:
- progress of our research programs, the number and breadth of these
programs;
- achievement of milestones under strategic alliance arrangements;
- acquisitions;
- our ability to establish and maintain additional strategic alliance and
licensing arrangements; and
- the progress of the development efforts of our strategic partners.
We expect that we would require significant additional financing in the
future, which we would seek to raise through equity offerings, debt financings,
additional strategic alliances or other financing vehicles. However, additional
financing, strategic alliances or licensing arrangements may not be available
when needed or, if available, may not be on favorable terms. Our forecast of the
period of time through which our financial resources would be adequate to
support our operations is forward-looking information, and, as such, actual
results may vary.
Under the merger agreement, Millennium Pharmaceuticals has agreed to make
advances in reasonable amounts to us as and when we request such advances and
not to demand repayment of such advances until March 31, 2000.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which is effective for fiscal years beginning after
June 15, 2000. We believe the adoption of this new accounting standard will not
have a significant effect on our financial statements because our investment
policies prohibit the use of derivatives.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs that were written
using two digits rather than four to define the applicable year. Any computer
program that has date-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. It is possible that an incorrect
recognition of dates could cause system failures or miscalculations of data. The
following describes our efforts to address this issue, the related costs, the
potential ramifications of a Year 2000 problem and the contingencies we are
implementing to address problems that may arise despite our Year 2000 efforts.
STATE OF READINESS. We and Millenium Pharmaceuticals have determined that
we have Year 2000 exposure in the following areas:
- Software and hardware contained in or integrated with our automated
processes and our infrastructure, including our networks, data processing
systems and financial and administrative systems;
- Embedded technology in our facilities and laboratory equipment; and
- The Year 2000 readiness of third party vendors and suppliers of goods,
services and systems as it relates to the foregoing areas.
We are using both internal and external resources to identify potential
issues, costs and solutions to address Year 2000 concerns. For this effort, we
are using procedures outlined in the Government Accounting Office's Y2K Guide.
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We have completed an inventory and assessment of software and hardware
contained in or integrated with our automated processes and our infrastructure.
Our assessment included researching available vendor Year 2000 compliance
statements as well as contacting certain vendors to obtain Year 2000 compliance
certifications and/or remediation recommendations for these systems and
equipment. We have identified critical systems on which we have focused our
remediation and testing efforts. To date, we have identified aspects of the
computer hardware, network infrastructure and business systems that we purchase
from third party vendors which are not Year 2000 compliant. We have obtained and
implemented vendor recommendations for correcting deficiencies in critical
systems and have established a process to monitor and implement any additional
vendor recommendations for correcting these Year 2000 deficiencies in our
critical systems. We expect to have implemented any necessary Year 2000 upgrades
to critical systems provided to us by third party vendors or to have developed a
contingency plan for critical systems by the end of the fourth quarter.
In addition, we have identified aspects of our own internally developed
software applications that are not Year 2000 compliant. We are conducting
remediation and testing for critical software applications. We will continue to
perform remediation and testing efforts throughout the fourth quarter including
testing of specific critical applications to simulate their operation in the
Year 2000. We expect to complete any necessary remediation of critical
internally developed systems or, where remediation is not feasible, to have
developed a contingency plan for such critical systems, by the end of the fourth
quarter.
We are also conducting an inventory and assessment of hardware and software
embedded in our facilities and laboratory equipment. We completed an inventory
and risk assessment of critical laboratory and facilities equipment and systems
during the first half of 1999 and have scheduled a review and follow-up
inventory in the fourth quarter. Our assessment included researching available
vendor Year 2000 statements as well as contacting certain vendors to obtain Year
2000 compliance certifications and/or remediation recommendations for these
systems and equipment. We have conducted a remediation of such systems and
equipment based upon these recommendations and have established a process for
identifying and implementing any additional vendor recommendations. We expect to
complete all corrective actions on critical laboratory and facilities or, where
correction is not feasible, will have developed a contingency plan for such
critical facilities or laboratory equipment, by the end of the fourth quarter.
We have also made inquiries of the Year 2000 readiness of a limited number
of our important vendors, suppliers and other third party companies with whom we
do business.
COSTS. Our costs to date associated with assessment, remediation and
testing activities concerning the Year 2000 problem have not been material. We
do not expect that we will incur material additional costs in connection with
identifying, evaluating and addressing Year 2000 compliance issues.
WORST CASE SCENARIO. Our reasonably likely worst case Year 2000 scenario
would be that the failure of any computer hardware and software systems or a
failure of any facilities or laboratory equipment could result in a disruption
in the integrity of the data produced in our research and development programs
and/or cause material delays in our ability to provide such data to our
strategic alliance partners, either of which could have a material adverse
effect on our business and operating results.
CONTINGENCY PLAN. We are developing contingency plans for critical aspects
of our systems and operations to address Year 2000 problems that may arise
despite our Year 2000 compliance efforts. Currently, these plans focus on the
development of procedures for:
- Employee safety;
- Protecting valuable lab materials including tissues and clones;
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- Data preservation;
- Animal facility system failures;
- Handling equipment malfunction;
- Arranging for alternative power sources in the event of power outages in
critical facilities;
- Methodical testing of critical systems during the weekend of January 1,
2000; and
- Making key personnel "on call" during the weekend of January 1, 2000 to
promptly identify and begin remediating any Year 2000 related system
failures.
We continue to engage in ongoing assessment, remediation and testing
activities and our internal results, as well as the responses we receive from
third parties, will be taken into account in determining the nature and extent
of any further contingency plans, if necessary. However, we may not be able to
modify our systems and equipment or find alternative vendors in a timely and
successful manner to comply with Year 2000 requirements, which could have a
material adverse effect on our business and operating results.
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EXECUTIVE OFFICERS AND
DIRECTORS OF MILLENNIUM BIOTHERAPEUTICS
The following table sets forth the names, ages and positions of executive
officers, directors and key employees of Millennium BioTherapeutics who will
serve as executive officers, directors or key employees of Millennium
Pharmaceuticals following the merger. The information provided is current as of
November 3, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Mark J. Levin 49 Director
Steven H. Holtzman 45 Director
John Maraganore Vice President, General Manager and
37 Director
Ronald Lindsay 51 Vice President of Development
Nicholas Galakatos 41 Director
</TABLE>
MARK J. LEVIN has served as a director of Millennium BioTherapeutics since
its founding in 1997. Mr. Levin has served as a director of Millennium
Pharmaceuticals since 1993, Chairman of the board of directors of Millennium
Pharmaceuticals since March 1996 and Chief Executive Officer of Millennium
Pharmaceuticals since November 1994. From 1987 to 1994, Mr. Levin was a partner
at Mayfield Fund, a venture capital firm, and co-director of its Life Science
Group. While employed with Mayfield, Mr. Levin was the founding Chief Executive
Officer of several biotechnology and biomedical companies, including Cell
Genesys Inc., CytoTherapeutics Inc., Tularik Inc. and Focal, Inc. Mr. Levin
holds an M.S. in Chemical and Biomedical Engineering from Washington University.
Mr. Levin also serves on the Board of Directors of CytoTherapeutics Inc. and
Focal, Inc.
STEVEN H. HOLTZMAN has served as a director of Millennium BioTherapeutics
since its founding in 1997. Mr. Holtzman has served as Chief Business Officer of
Millennium Pharmaceuticals since May 1994. From 1986 to 1993, Mr. Holtzman was
with DNX Corporation, a biomedical company, and its subsidiaries. He was a
founder and the first employee of DNX, served as a member of the Board of
Directors, and held several senior management positions including, from 1992 to
1993, President of DNX BioTherapeutics, Inc., a subsidiary of DNX, and from 1990
to 1993, Executive Vice President of DNX. Mr. Holtzman received his graduate B.
Phil. degree in Philosophy from Oxford University, which he attended as a Rhodes
Scholar. Mr. Holtzman currently serves as co-chairperson of the Biotechnology
Industry Organization's Bioethics Committee and is a member of the National
Bioethics Advisory Commission.
DR. NICHOLAS GALAKATOS has served as a director of Millennium
BioTherapeutics since July 1997. Dr. Galakatos joined Millennium Pharmaceuticals
in April 1997 as Vice President of New Business. Prior to that, he was a member
of the venture capital firm Venrock Associates, where from 1993 until 1997 he
was involved in forming early stage life science companies, including Caliper
Technologies and IDUN Pharmaceuticals. Prior to his work with Venrock, he spent
five years at Ciba-Geigy, where his positions included Project Team Leader in
Inflammation Research and Venture Manager in Corporate Planning. Dr. Galakatos
earned his Ph.D. in Organic Chemistry from the Massachusetts Institute of
Technology and performed his post-doctoral work with Professor Christopher Walsh
at Harvard Medical School.
RONALD LINDSAY, PH.D., has served as Vice President of Pre-Clinical Research
and Development at Millennium BioTherapeutics since January 1998. Prior to
joining Millennium BioTherapeutics Dr. Lindsay was employed for almost 16 years
in the bio-pharmaceutical industry. Immediately prior to joining Millennium
BioTherapeutics, Dr. Lindsay was at Regeneron Pharmaceuticals, Inc. from 1988
until 1998, where he was a founding scientist. At Regeneron he was responsible
for much of the pre-clinical research on neurotrophic growth factors. Previous
posts include Head of Cell Biology at the
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Sandoz Institute for Medical Research and Staff Scientist at the National
Institute for Medical Research, both in London, UK. Dr. Lindsay received his
Ph.D. from the University of Calgary, Canada.
JOHN MARAGANORE, PH.D., has served as a director of Millennium
BioTherapeutics since July 1997 and as Vice President and General Manager of
Millennium BioTherapeutics since its founding in 1997. Prior to joining
Millennium BioTherapeutics, Dr. Maraganore had 14 years of experience in the
biotechnology industry. He has held both scientific and senior management
positions at Pharmacia and Upjohn, Zymogenetics, a subsidiary of Novo Nordisk,
and most recently at Biogen, Inc. In his ten years with Biogen,
Dr. Maraganore's positions included Director of Biological Research and most
recently, Director of Marketing and Business Development. Dr. Maraganore was
Program Executive, Hirulog Research and Development. He was responsible for the
invention and management of drug development activities for Hirulog-TM- and led
Biogen's efforts in filling its pipeline through the in-licensing of clinical
drug candidates. Dr. Maraganore received his Ph.D. from the University of
Chicago.
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
OF MILLENNIUM BIOTHERAPEUTICS
The following table sets forth, as of October 27, 1999, the security
ownership of the directors, executive officers and principal stockholders of
Millennium BioTherapeutics. Unless otherwise indicated, each person's address is
in care of Millennium BioTherapeutics, Inc., 640 Memorial Drive, Cambridge,
Massachusetts 02139. To the knowledge of Millennium BioTherapeutics, the persons
named in the table have sole voting and investment power with respect to all
shares of Millennium BioTherapeutics stock shown as beneficially owned by them,
subject to the information contained in the footnotes to the table. Beneficial
ownership is determined according to the rules of the SEC. Shares of Millennium
BioTherapeutics Class B common stock subject to options currently exercisable or
exercisable within sixty days from the date of this table are deemed outstanding
when determining the number of shares and percentage ownership by the person
holding these options.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B SERIES A SERIES B
COMMON PERCENT OF COMMON PERCENT OF PREFERRED PERCENT OF PREFERRED
STOCK CLASS A STOCK CLASS B STOCK SERIES A STOCK
BENEFICIALLY COMMON BENEFICIALLY COMMON BENEFICIALLY PREFERRED BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED STOCK OWNED STOCK(1) OWNED STOCK(2) OWNED
- -------------------------------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Millennium Pharmaceuticals, 1,000 100% 0 0% 9,000,000 100% 2,000,000
Inc...........................
75 Sidney Street
Cambridge, MA 02139
Nicholas Galakatos.............. 0 0% 32,450(4) 2.36% 0 0% 0
Steven Holtzman................. 0 0% 29,100(5) 2.11% 0 0% 0
Mark Levin...................... 0 0% 35,100(6) 2.55% 0 0% 0
John Maraganore................. 0 0% 295,180 21.44% 0 0% 0
David Martin.................... 0 0% 50,000(7) 3.63% 0 0% 0
<CAPTION>
PERCENT OF PERCENTAGE
SERIES B AGGREGATE
PREFERRED VOTING
NAME OF BENEFICIAL OWNER STOCK(3) POWER
- -------------------------------- ---------- ----------
<S> <C> <C>
Millennium Pharmaceuticals, 100% 100%
Inc...........................
75 Sidney Street
Cambridge, MA 02139
Nicholas Galakatos.............. 0% 0%
Steven Holtzman................. 0% 0%
Mark Levin...................... 0% 0%
John Maraganore................. 0% 0%
David Martin.................... 0% 0%
</TABLE>
- ----------------------------------
* Less than one percent
(1) Based on 1,376,568 shares outstanding as of or issuable within sixty days
of, October 27, 1999.
(2) Based on 9,000,000 shares outstanding as of October 27, 1999.
(3) Based on 2,000,000 shares repurchased from Lilly effective October 14, 1999.
(4) Includes 100 shares issuable within sixty days of October 27, 1999 upon the
exercise of stock options.
(5) Includes 100 shares issuable within sixty days of October 27, 1999 upon the
exercise of stock options.
(6) Includes 10,100 shares issuable within sixty days of October 27, 1999 upon
the exercise of stock options.
(7) Consists of 50,000 shares issuable within sixty days of October 27, 1999
upon the exercise of stock options.
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<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
Both Millennium BioTherapeutics and Millennium Pharmaceuticals are Delaware
corporations and are governed by Delaware law. In addition, the rights of
Millennium BioTherapeutics stockholders are currently governed by the Millennium
BioTherapeutics certificate of incorporation, as amended, and the Millennium
BioTherapeutics bylaws, and the rights of Millennium Pharmaceuticals
stockholders are governed by the Millennium Pharmaceuticals restated certificate
of incorporation and the Millennium Pharmaceuticals bylaws.
After the effective time of the merger, the rights of holders of Millennium
BioTherapeutics Class B common stock who become holders of Millennium
Pharmaceuticals common stock will be governed by the Millennium Pharmaceuticals
restated certificate of incorporation, the Millennium Pharmaceuticals bylaws and
Delaware law. In most respects, the rights of holders of Millennium
BioTherapeutics Class B common stock (which is distinguished from Millennium
BioTherapeutics Class A common stock by the absence of voting rights) are
similar to the rights of holders of Millennium Pharmaceuticals common stock.
The following is a summary of the material differences between such rights.
This summary does not purport to be a complete discussion of, and is qualified
in its entirety by reference to, Delaware law as well as to the Millennium
BioTherapeutics certificate of incorporation, the Millennium BioTherapeutics
bylaws, the Millennium Pharmaceuticals restated certificate of incorporation and
the Millennium Pharmaceuticals bylaws, copies of which are on file with the SEC.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS
OF MILLENNIUM BIOTHERAPEUTICS STOCKHOLDERS AND RIGHTS THOSE STOCKHOLDERS WILL
HAVE
AS MILLENNIUM PHARMACEUTICALS STOCKHOLDERS FOLLOWING THE MERGER
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
Authorized Capital Stock: The authorized capital stock of The authorized capital stock of
Millennium BioTherapeutics Millennium Pharmaceuticals
consists of 23.5 million shares consists of 100 million shares
of Class A common stock, three of common stock and five
million shares of Class B million shares of preferred
common stock, nine million stock.
shares of Series A preferred
stock, two million shares of
Series B preferred stock and
four million shares of
undesignated preferred stock.
Number of Directors: The Millennium BioTherapeutics The Millennium Pharmaceuticals
certificate of incorporation restated certificate of
and bylaws require Millennium incorporation requires no less
BioTherapeutics to have no less than three directors, and the
than one director, and provide Millennium Pharmaceuticals
for the Millennium bylaws provide that the total
BioTherapeutics stockholders or number of directors may be
Board to have the power to determined by the Millennium
determine the total number. The Pharmaceuticals Board. The
Millennium BioTherapeutics Millennium Pharmaceuticals
Board currently consists of six Board currently consists of six
directors. directors.
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
Classification of Board of Millennium BioTherapeutics does The Millennium Pharmaceuticals
Directors: not have a classified board. Board is divided into three
The Millennium BioTherapeutics classes, with each class
bylaws require that all serving a staggered three year
directors be elected for a one term. There are currently two
year term and until his or her classes with three directors,
successor is elected and and one class with no
qualified. directors.
Removal of Directors: Pursuant to the Millennium The Millennium Pharmaceuticals
BioTherapeutics bylaws, any restated certificate of
director or the entire incorporation provides that
Millennium BioTherapeutics directors may be removed only
Board may be removed, either for cause by the affirmative
for or without cause, at any vote of the holders of at least
time by the affirmative vote of two-thirds of all outstanding
the holders of a majority of shares of Millennium
all outstanding shares of Pharmaceuticals stock entitled
Millennium BioTherapeutics to vote.
stock entitled to vote, except
that a director elected by the
holders of a particular class
or series of stock may be
removed without cause only by a
vote of the holders of a
majority of the outstanding
shares of such class or series.
Amendment of Corporate Charter: The Millennium BioTherapeutics The Millennium Pharmaceuticals
certificate of incorporation restated certificate of
may be amended by board incorporation may be amended by
resolution and an affirmative the affirmative vote of holders
vote by holders of a majority of a majority of Millennium
of the Millennium Pharmaceuticals common stock
BioTherapeutics stock entitled outstanding, except with
to vote, except, so long as at respect to proposals amending
least five million shares of the Millennium Pharmaceuticals
Series A and Series B preferred certificate of incorporation to
stock remain outstanding, with change the provisions related
respect to: to the Millennium
- amending the provision Pharmaceuticals Board of
described in "Business Directors, stockholder voting
Combination Prohibitions" by written consent and special
below, which requires the meetings of stockholders, in
affirmative vote of more than each such case the affirmative
fifty percent of the vote of the holders of 75% of
outstanding Millennium the shares of Millennium
BioTherapeutics Series A and Pharmaceuticals stock entitled
Series B preferred stock to vote is required.
voting together as a single
class;
- amendments to the
certificate of
incorporation
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
that alter or change the
powers, preferences or
special rights of the
Series A and Series B
preferred stock so as to
adversely affect them or
proposals to take any
action which would result
in the taxation of
holders of the Series A
and Series B preferred
stock, in each such case
the vote of more than
fifty percent of holders
of Millennium
BioTherapeutics Series A
and Series B preferred
stock voting as a single
class;
- proposals to increase the
number of authorized
shares of either
Millennium
BioTherapeutics common
stock or Millennium
BioTherapeutics preferred
stock, in which case the
affirmative vote of the
holders of more than
fifty percent of the
outstanding Millennium
BioTherapeutics Series A
and Series B preferred
stock voting together as
a single class is
required; and
- proposals to create any
new class or series of
stock having any powers,
preferences or special
rights superior to the
Series A or Series B
preferred stock as to
dividends or
distributions of assets
upon liquidation of
Millennium
BioTherapeutics or to pay
or declare any dividend
on shares of Millennium
BioTherapeutics' stock
require the affirmative
vote
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
of 85% of the outstanding
Millennium
BioTherapeutics Series A
and Series B preferred
stock voting as a single
class.
Amendment of Bylaws: The Millennium BioTherapeutics Except as provided below, the
bylaws may be altered or Millennium Pharmaceuticals
repealed by the holders of restated bylaws may be amended,
Millennium BioTherapeutics and new bylaws may be adopted,
voting stock or by the by Millennium Pharmaceuticals
Millennium BioTherapeutics stockholders or the Millennium
Board. The Millennium Pharmaceuticals Board. The
BioTherapeutics bylaws state Millennium Pharmaceuticals
that any alteration of the restated bylaws state that all
Millennium BioTherapeutics such amendments voted on by the
bylaws by holders of Millennium Millennium Pharmaceuticals
BioTherapeutics voting stock stockholders must be approved
requires the affirmative vote by holders of a majority of all
of at least a majority of the outstanding Millennium
voting power of all outstanding Pharmaceuticals stock.
stock entitled to vote.
Provisions of the Millennium
Pharmaceuticals bylaws
regarding the powers and
election of directors and
amendments to the bylaws
require the affirmative vote of
75% of the voting power of all
outstanding stock entitled to
vote in order to be amended by
a vote of stockholders.
Voting Stock: The outstanding Millennium The outstanding Millennium
BioTherapeutics voting stock Pharmaceuticals voting stock
consists of Millennium consists solely of Millennium
BioTherapeutics Series A and Pharmaceuticals common stock.
Series B preferred stock.
Indemnification and Exculpation Pursuant to its certificate of The Millennium Pharmaceuticals
of Directors and Officers: incorporation, Millennium restated certificate of
BioTherapeutics will indemnify incorporation provides that
any director or officer of Millennium Pharmaceuticals will
Millennium BioTherapeutics (or indemnify to the fullest extent
any director, officer, employee permitted by law any person
or agent of another entity if made, or threatened to be made,
serving at the request of party to an action or
Millennium BioTherapeutics) to proceeding by reason of the
the fullest extent permitted by fact that he is or was a
Delaware law, provided that, if director or officer of
the person seeks Millennium Pharmaceuticals or
indemnification in connection that such director or officer
with was
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
a proceeding that he or she serving any other entity in any
initiated, the Millennium capacity at the request of
BioTherapeutics Board approved Millennium Pharmaceuticals. The
the proceeding. Millennium Pharmaceuticals
certificate of incorporation
further provides that no
director shall be personally
liable to Millennium
Pharmaceuticals or its
stockholders for monetary
damages for any breach of
fiduciary duty.
Business Combination The Millennium BioTherapeutics The Millennium Pharmaceuticals
Prohibitions: certificate of incorporation restated certificate authorizes
contains two articles that the board of directors to issue
could inhibit certain business "blank check" preferred stock
combinations. The first without any need for action by
provision requires the Millennium Pharmaceuticals'
affirmative vote of the holders stockholders.
of more than fifty percent of
Millennium BioTherapeutics
Series A and Series B preferred
stock voting together as a
single class to approve (1) a
merger of Millennium
BioTherapeutics with another
company or (2) the sale of
substantially all the assets of
Millennium BioTherapeutics.
This requirement does not apply
if there are less than five
million shares of Series A and
Series B preferred stock
outstanding.
The second provision provides
that a merger, consolidation or
sale of all or substantially
all of the assets of Millennium
BioTherapeutics will constitute
a liquidation requiring the
payment to the holders of
Series A and Series B preferred
stock of $10.00 for each share
of Series A or Series B
preferred stock owned by such
stockholder.
Special Meetings of Special meetings of Millennium The Millennium Pharmaceuticals
Stockholders: BioTherapeutics stockholders restated bylaws provide that
may only be called by the the chairman, the chief
President or by the executive officer or the
BioTherapeutics Board. Millennium Pharmaceuticals
Board may call a special
meeting.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
MILLENNIUM BIOTHERAPEUTICS MILLENNIUM PHARMACEUTICALS
STOCKHOLDER RIGHTS STOCKHOLDER RIGHTS
------------------------------- -------------------------------
<S> <C> <C>
Action of Stockholders Without Any action required or The Millennium Pharmaceuticals
a Meeting: permitted to be taken at an restated bylaws provide that
annual or special meeting of the stockholders of Millennium
Millennium BioTherapeutics Pharmaceuticals may not take
stockholders may be taken any action by written consent
without a meeting if a written in lieu of a meeting.
consent to the action is signed
by a number of stockholders
having at least as many votes
as would be required to
authorize the action at a
meeting.
</TABLE>
62
<PAGE>
MILLENNIUM PHARMACEUTICALS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION--
MILLENNIUM BIOTHERAPEUTICS
The following unaudited combined pro forma financial statements of
Millennium Pharmaceuticals and the related notes are presented to give effect to
the merger of Millennium BioTherapeutics with and into Millennium
Pharmaceuticals (as described in Note 1). Pro forma combined statements of
operations have been presented for Millennium Pharmaceuticals assuming that the
merger occurred as of January 1, 1998, accounted for as an exchange of shares
between companies under common control in accordance with generally accepted
accounting principles. A pro forma combined balance sheet has been presented for
Millennium Pharmaceuticals assuming that the merger occurred as of
September 30, 1999.
The unaudited pro forma combined financial statements are based on the
historical consolidated financial statements for Millennium Pharmaceuticals, as
adjusted, and Millennium BioTherapeutics and the assumptions and adjustments
described in the accompanying notes. The historical financial statements of
Millennium Pharmaceuticals included herein have been adjusted on a pro forma
basis to reflect the planned acquisition of LeukoSite, which was announced on
October 14, 1999. Information with respect to the Historical Millennium
Pharmaceuticals Financial Statements Assuming the LeukoSite Acquisition is
derived from and can be found in the section "Millennium Pharmaceuticals
Unaudited Pro Forma Combined Financial Information--Leukosite, Inc. Acquisition"
included in this information statement/prospectus.
The unaudited pro forma combined financial statements do not purport to
represent what Millennium Pharmaceuticals' results of operations and financial
condition actually would have been if the merger had occurred as of the dates
indicated or what such results and financial condition will be for any future
periods. The unaudited pro forma combined financial statements are based upon
assumptions that Millennium Pharmaceuticals believes are reasonable and should
be read in conjunction with the Consolidated Financial Statements and
accompanying notes thereto of Millennium Pharmaceuticals and Millennium
BioTherapeutics incorporated herein by reference and included elsewhere in this
information statement/prospectus, respectively.
63
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
MILLENNIUM
PHARMACEUTICALS, HISTORICAL PRO FORMA
INC. ASSUMING MILLENNIUM MILLENNIUM
LEUKOSITE, INC. BIOTHERAPEUTICS, PRO FORMA PHARMACEUTICALS,
ACQUISITION INC. ADJUSTMENTS INC.
---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............ $ 89,981 $ 5,591 $ (5,591)(B) $ 89,981
Marketable securities................ 157,580 157,580
Due from strategic partners.......... 9,547 397 (397) 9,547
Prepaid expenses and other current
assets............................. 13,646 119 (119)(B) 13,646
---------- -------- -------- ---------
Total current assets................... 270,754 6,107 (6,107) 270,754
---------- -------- -------- ---------
Property and equipment, net............ 55,693 1,239 (1,239)(B) 55,693
Restricted cash and other assets....... 17,855 214 (214)(B) 17,855
Intangible assets, net................. 200,758 200,758
---------- -------- -------- ---------
Total assets........................... $ 545,060 $ 7,560 $ (7,560) $ 545,060
========== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 13,914 $ 1,542 $ (1,542)(B) $ 13,914
Accrued expenses..................... 20,725 869 (869)(B) 20,725
Due to affiliates.................... 13,889 (13,889)(B)
Deferred revenue..................... 9,911 9,911
Current portion of capital lease
obligations........................ 9,795 90 (90)(B) 9,795
---------- -------- -------- ---------
Total current liabilities.............. 54,345 16,390 (16,390) 54,345
---------- -------- -------- ---------
Capital lease obligations, net of
current portion...................... 26,959 453 (453)(B) 26,959
Minority interest...................... 15,564 15,564
Redeemable convertible preferred
stock................................ 20,000 (20,000)(B)
Commitments and contingencies
Stockholders' equity:
Preferred stock...................... 9 (9)(B)
Common stock......................... 43 1 -- (A)(B) 44
Additional paid-in capital........... 868,126 2,243 (2,244)(A)(B) 868,125
Deferred compensation................ (1,370) (1,009) 1,009 (B) (1,370)
Notes receivable from officers....... (29) (942) 942 (B) (29)
Other comprehensive income (loss).... (539) 2 (2)(B) (539)
Accumulated deficit.................. (418,039) (29,587) 29,587 (B) (418,039)
---------- -------- -------- ---------
Total stockholders' equity............. 448,192 (29,283) 29,283 448,192
---------- -------- -------- ---------
Total liabilities and stockholders'
equity............................... $ 545,060 $ 7,560 $ (7,560) $ 545,060
========== ======== ======== =========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
64
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
MILLENNIUM
PHARMACEUTICALS, HISTORICAL PRO FORMA
INC. ASSUMING MILLENNIUM MILLENNIUM
LEUKOSITE, INC. BIOTHERAPEUTICS, PRO FORMA PHARMACEUTICALS,
ACQUISITION INC. ADJUSTMENTS INC.
---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances................. $ 128,581 $ 7,205 $ (7,205)(B) $ 128,581
Corporate collaborations and
grants............................ 8,267 8,267
Joint venture revenue............... 2,662 2,662
--------- -------- -------- ---------
139,510 7,205 (7,205) 139,510
--------- -------- -------- ---------
Costs and expenses:
Research and development............ 136,827 16,625 (16,625)(B) 136,827
General and administrative.......... 26,474 2,837 (2,837)(B) 26,474
Acquired in-process research &
development....................... 2,661 2,661
Amortization of intangible assets... 38,978 38,978
--------- -------- -------- ---------
204,940 19,462 (19,462) 204,940
--------- -------- -------- ---------
Loss from operations.................. (65,430) (12,257) 12,257 (65,430)
Interest income....................... 10,230 301 (301)(B) 10,230
Interest expense...................... (2,308) (42) 42 (B) (2,308)
Minority interest..................... 2,204 2,204
Equity in operations of joint
venture............................. (3,900) (3,900)
--------- -------- -------- ---------
Net loss.............................. $ (59,204) $(11,998) $ 11,998 $ (59,204)
========= ======== ======== =========
Basic and diluted net loss per
share............................... $ (1.40) $ (31.48) $ (1.39)
========= ======== =========
Shares Used In Calculating:
Basic and diluted net loss per (381)(B)
share............................. 42,394 381 330 (C) 42,724
========= ======== =========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
65
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
MILLENNIUM
PHARMACEUTICALS, HISTORICAL PRO FORMA
INC. ASSUMING MILLENNIUM MILLENNIUM
LEUKOSITE, INC. BIOTHERAPEUTICS, PRO FORMA PHARMACEUTICALS,
ACQUISITION INC. ADJUSTMENTS INC.
---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances................. $ 133,682 $ 9,300 $ (9,300)(B) $ 133,682
Corporate collaborations and
grants............................ 12,324 12,324
Joint venture revenue............... 1,260 1,260
--------- -------- -------- ---------
147,266 9,300 (9,300) 147,266
--------- -------- -------- ---------
Costs and expenses:
Research and development............ 138,725 20,429 (20,429)(B) 138,725
General and administrative.......... 28,563 3,797 (3,797)(B) 28,563
Amortization of intangible assets... 51,971 51,971
--------- -------- -------- ---------
219,259 24,226 (24,226) 219,259
--------- -------- -------- ---------
Loss from operations.................. (71,993) (14,926) 14,926 (71,993)
Interest income....................... 7,987 752 (752)(B) 7,987
Interest expense...................... (2,581) (5) 5 (B) (2,581)
Minority interest..................... 14,179 14,179
Equity in operations of joint
venture............................. (3,858) (3,858)
--------- -------- -------- ---------
Net loss.............................. $ (56,266) $(14,179) $ 14,179 $ (56,266)
========= ======== ======== =========
Basic and diluted net loss per
share............................... $ (1.52) $(177.73) $ (1.51)
========= ======== =========
Shares Used In Calculating:
Basic and diluted net loss per (80)(B)
share............................... 36,896 80 330 (C) 37,226
========= ======== =========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
66
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) THE MERGER
Millennium Pharmaceuticals entered into a merger agreement dated
October 14, 1999 which provides that Millennium BioTherapeutics will merge with
and into Millennium Pharmaceuticals and Millennium Pharmaceuticals will be the
surviving company. Pursuant to the merger agreement, each outstanding share of
Millennium BioTherapeutics Class B common stock and option to purchase shares of
Millennium BioTherapeutics Class B common stock will be converted into a number
of shares of Millennium Pharmaceuticals common stock equal to the average of:
(1) $15.00 divided by $62.536 and (2) $15.00 divided by the average of the last
reported sale prices per share of Millennium Pharmaceuticals common stock over
the 20 trading days ending on the second trading day before the effective date
of the merger. The merger agreement also provides for the assumption by
Millennium Pharmaceuticals of the Millennium BioTherapeutics stock option plan
and the options granted under it.
The historical financial statements of Millennium Pharmaceuticals included
herein have been adjusted on a pro forma basis to reflect the planned
acquisition of LeukoSite, Inc., which was announced on October 14, 1999.
Information with respect to the Historical Millennium Pharmaceuticals Financial
Statements Assuming the LeukoSite Acquisition is derived from and can be found
in the section "Millennium Pharmaceuticals Unaudited Pro Forma Combined
Financial Information--LeukoSite, Inc. Acquisition" included in this information
statement/prospectus.
(2) PRO FORMA ADJUSTMENTS RELATED TO THE MERGER
(A) EXCHANGE OF SHARES
The unaudited pro forma combined financial statements assume that Millennium
Pharmaceuticals will issue 330,000 shares of its $.001 par value common stock in
exchange for all of the outstanding Class B common stock of Millennium
BioTherapeutics. The actual number of shares Millennium Pharmaceuticals will
issue will depend on the average last reported sale prices of the stock over the
20 trading days ending on the second trading day before the date the merger
becomes effective. Because the transaction represents the exchange of shares
between companies under common control, Millennium Pharmaceuticals common stock
and additional paid-in capital has been credited for the historical value of
Millennium BioTherapeutics Class B common stock and the Millennium
BioTherapeutics common stock and additional paid-in capital balances have been
eliminated.
(B) ELIMINATING ENTRIES
As a majority owned subsidiary, the historical financial statements of
Millennium BioTherapeutics are already included in the historical consolidated
financial statements of Millennium Pharmaceuticals. Accordingly, all Millennium
BioTherapeutics balances have been eliminated.
(C) SHARES USED IN CALCULATING BASIC AND DILUTED EARNINGS PER SHARE
The outstanding common shares for the year ended December 31, 1998 and the
nine months ended September 30, 1999 has been increased to reflect the assumed
issuance of 330,000 shares of Millennium Pharmaceuticals common stock.
67
<PAGE>
MILLENNIUM PHARMACEUTICALS
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION--
LEUKOSITE, INC. ACQUISITION
The following unaudited pro forma combined financial statements have been
prepared to give effect to the acquisition of LeukoSite by Millennium
Pharmaceuticals using the purchase method of accounting.
The unaudited pro forma combined balance sheet as of September 30, 1999
gives effect to the acquisition as if it had occurred on such date, and reflects
the allocation of the purchase price to the LeukoSite assets acquired, including
in-process research and development, and liabilities assumed. The unaudited pro
forma combined statements of operations combine the historical statements of
operations of Millennium Pharmaceuticals and LeukoSite as if the merger had
occurred at January 1, 1998. The historical financial statements of LeukoSite
included herein have been adjusted on a pro forma basis to reflect the February
1999 acquisition of CytoMed, Inc. by LeukoSite, as if such acquisition had
occurred on January 1, 1998 ("Historical LeukoSite Financial Statements Assuming
the CytoMed Acquisition"). Information with respect to the 1998 Historical
LeukoSite Financial Statements Assuming the CytoMed Acquisition is derived from
and can be found in LeukoSite's Form 8-K/A filed on April 27, 1997 in
conjunction with the CytoMed acquisition and incorporated by reference herein.
The unaudited pro forma combined statement of operations for the nine-month
period ended September 30, 1999 combines the historical unaudited statements of
operations of Millennium Pharmaceuticals and LeukoSite, as adjusted, for such
period. It is expected that following the merger, Millennium Pharmaceuticals
will incur additional costs, which are not expected to be significant to the
combined results of operations, in connection with integrating the operations of
the two companies. Integration-related costs are not included in the
accompanying unaudited pro forma combined financial statements.
The Millennium Pharmaceuticals statement of operations for the period in
which the merger occurs will include a significant charge for acquired
in-process research and development, currently estimated to be approximately
$327.6 million, or 59.2% of the purchase price. This amount represents the
values determined by management, using a discounted cash flow methodology, to be
attributable to the in-process research and development programs of LeukoSite
based on a preliminary valuation of such programs. Such amount is subject to
significant change pending completion of the final independent valuation
analysis. The charge relates to specific on-going research and development
programs and preclinical projects. Assuming each of these research programs
continues through all stages of clinical development, the projected future
research and development expenditures related to these programs, excluding the
cost of research and development which may be performed by corporate
collaborators, is approximatetely $139.3 million. The programs are forecasted to
be completed at various times between 2000-2006. If Millennium Pharmaceuticals
would have allocated less of the purchase price to these programs, the value
would have been recorded as goodwill on the balance sheet and amortized over the
expected benefit period, resulting in increased amortization expense during that
period. Millennium Pharmaceuticals believes that the allocation of the purchase
price to these programs is appropriate given the future potential of these
programs to contribute to the operations of Millennium Pharmaceuticals.
Unaudited pro forma combined financial information is presented for
illustrative purposes only and is not necessarily indicative of the financial
position or results of operations that would have actually been reported had the
merger occurred at the beginning of the periods presented, nor is it necessarily
indicative of future financial position or results of operations. These
unaudited pro forma combined financial statements are based upon the respective
historical financial statements of Millennium Pharmaceuticals and LeukoSite, as
adjusted, and do not incorporate, nor do they assume, any benefits from cost
savings or synergies of operations of the combined company.
68
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL LEUKOSITE
HISTORICAL FINANCIAL STATEMENTS PRO FORMA
MILLENNIUM ASSUMING THE PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. CYTOMED ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- -------------------- ----------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents.............. $ 81,960 $ 8,021 $ 89,981
Marketable securities...... 143,220 14,360 157,580
Due from strategic
partners................. 9,547 9,547
Prepaid expenses and other
current assets........... 6,746 6,900 13,646
-------- -------- -------- --------
Total current assets......... 241,473 29,281 270,754
-------- -------- -------- --------
Property and equipment,
net........................ 51,152 4,541 55,693
Restricted cash and other
assets..................... 12,564 5,291 17,855
Intangible assets, net....... 3,684 208 $ 43,072 (B) 200,758
2,920 (C)
151,082 (D)
(208)(F)
-------- -------- -------- --------
Total assets................. $308,873 $ 39,321 $196,866 $545,060
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........... $ 13,450 $ 464 $ 13,914
Accrued expenses........... 8,466 5,259 $ 7,000 (E) 20,725
Deferred revenue........... 7,371 2,540 9,911
Current portion of capital
lease obligations........ 8,836 959 9,795
-------- -------- -------- --------
Total current liabilities.... 38,123 9,222 7,000 54,345
-------- -------- -------- --------
Capital lease obligations,
net of current portion..... 25,984 975 26,959
Minority interest............ 15,564 15,564
Commitments and contingencies
Stockholders' equity:
Preferred stock............
Common stock............... 36 147 (147)(G) 43
7 (H)
Additional paid-in 321,525 97,594 (97,594)(G) 868,126
capital.................. 546,601 (H)
Deferred compensation...... (1,370) (1,370)
Notes receivable from
officers................. (29) (29)
Other comprehensive loss... (539) (539)
Accumulated deficit........ (90,421) (68,617) (327,618)(A) (418,039)
68,617 (G)
-------- -------- -------- --------
Total stockholders' equity... 229,202 29,124 189,866 448,192
-------- -------- -------- --------
Total liabilities and
stockholders' equity....... $308,873 $ 39,321 $196,866 $545,060
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma financial statements.
69
<PAGE>
MILLENIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
LEUKOSITE
FINANCIAL
STATEMENTS PRO
HISTORICAL ASSUMING THE FORMA
MILLENNIUM CYTOMED PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances............. $128,581 $ 128,581
Corporate collaborations and
grants........................ $ 8,267 8,267
Joint venture revenue........... 2,662 2,662
-------- -------- --------- ---------
128,581 10,929 139,510
-------- -------- --------- ---------
Costs and expenses:
Research and development........ 113,276 23,551 136,827
General and administrative...... 23,907 2,567 26,474
Acquired in-process research and
development................... 2,661 2,661
Amortization of intangible
assets........................ 2,027 $ 36,951 (I) 38,978
-------- -------- --------- ---------
139,210 28,779 36,951 204,940
-------- -------- --------- ---------
Loss from operations.............. (10,629) (17,850) (36,951) (65,430)
Interest income................... 9,209 1,021 10,230
Interest expense.................. (2,177) (131) (2,308)
Minority interest................. 2,204 2,204
Equity in operations of joint
venture......................... (3,900) (3,900)
-------- -------- --------- ---------
Net loss.......................... $ (1,393) $(20,860) $ (36,951) $ (59,204)
======== ======== ========= =========
Basic and diluted net loss per
share........................... $ (0.04) $ (1.49) ($ 1.40)
======== ======== =========
Shares Used In Calculating:
Basic and diluted net loss per
share........................... 35,817 13,988 (13,988)(J) 42,394
6,577 (K)
======== ======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
70
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
LEUKOSITE
FINANCIAL
STATEMENTS PRO
HISTORICAL ASSUMING THE FORMA
MILLENNIUM CYTOMED PRO FORMA MILLENNIUM
PHARMACEUTICALS, INC. ACQUISITION ADJUSTMENTS PHARMACEUTICALS, INC.
--------------------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C>
Revenues:
Strategic alliances............. $133,682 $ 133,682
Corporate collaborations and
grants........................ $ 12,324 12,324
Joint venture revenue........... 1,260 1,260
-------- -------- --------- ---------
133,682 13,584 147,266
-------- -------- --------- ---------
Costs and expenses:
Research and development........ 114,190 24,535 138,725
General and administrative...... 24,419 4,144 28,563
Amortization of intangible
assets........................ 2,702 $ 49,269 (I) 51,971
-------- -------- --------- ---------
141,311 28,679 49,269 219,259
-------- -------- --------- ---------
Loss from operations.............. (7,629) (15,095) (49,269) (71,993)
Interest income................... 6,198 1,789 7,987
Interest expense.................. (2,410) (171) (2,581)
Minority interest................. 14,179 14,179
Equity in operations of joint
venture......................... (3,858) (3,858)
-------- -------- --------- ---------
Net income (loss)................. $ 10,338 $(17,335) $ (49,269) $ (56,266)
======== ======== ========= =========
Basic net income (loss) per
share........................... $ 0.34 $ (1.39) $ (1.52)
======== ======== =========
Diluted net income (loss) per
share........................... $ 0.33 $ (1.39) $ (1.52)
======== ======== =========
Shares Used In Calculating:
Basic net income (loss) per (12,462)(J)
share........................... 30,319 12,462 6,577 (K) 36,896
======== ======== =========
Diluted net income (loss) per
share........................... 31,508 12,462 36,896
======== ======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
71
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1
The unaudited pro forma combined financial statements reflect the conversion
of all of the outstanding shares of LeukoSite common stock into approximately
6,577,110 shares of Millennium common stock pursuant to the merger. This
calculation is based on LeukoSite's outstanding capitalization at September 30,
1999 using the conversion ratio of 0.4296 of a share of Millennium common stock
for each share of outstanding LeukoSite common stock. Options and warrants to
purchase approximately 2,297,246 shares of LeukoSite common stock with a
weighted average exercise price of $9.17 will be assumed by Millennium pursuant
to the merger and converted into options and warrants to purchase 986,911 shares
of Millennium common stock. The total cost of the proposed merger is estimated
to be approximately $553.6 million, determined as follows (in thousands):
<TABLE>
<S> <C>
Fair value of Millennium shares (calculated using $74.52 per
share fair value at the date of the merger agreement)..... $490,100
Value of LeukoSite options and warrants assumed............. 56,508
Millennium transaction costs, consisting primarily of
financial advisory, legal and accounting fees............. 7,000
--------
$553,608
========
</TABLE>
Based upon a preliminary valuation of tangible and intangible assets
acquired and liabilities assumed, Millennium has allocated the total cost of the
merger to the net assets of LeukoSite as follows (in thousands):
<TABLE>
<S> <C>
Tangible assets acquired.................................... $ 39,113
In-process research and development......................... 327,618
Intangible assets (assembled workforce, core technology and
goodwill)................................................. 197,074
Liabilities assumed......................................... (10,197)
--------
$553,608
========
</TABLE>
LeukoSite is engaged in the discovery and development of a new class of
pharmaceutical products for the treatment or prevention of serious diseases.
LeukoSite's business focus is in the development of medicines for treating
cancer and inflammatory, autoimmune and viral diseases. LeukoSite's research and
development programs in these areas are in various stages from pre-clinical
development to late stage clinical trials. LeukoSite's strategy has been to
develop and commercialize its products through alliances with major
pharmaceutical and biotechnology companies. No products utilizing LeukoSite's
proprietary technologies have been approved for marketing to date. The LeukoSite
research and development programs currently in process were valued as follows:
<TABLE>
<S> <C>
CAMPATH-Registered Trademark-............................... $ 38,922
LDP-01...................................................... 20,155
LDP-02...................................................... 24,482
LDP-341..................................................... 139,149
LDP-977..................................................... 17,334
Preclinical projects........................................ 87,576
--------
$327,618
========
</TABLE>
72
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 (CONTINUED)
The in-process research and development has been written off against the
combined retained earnings. Because the charge is nonrecurring, it has not been
reflected in the pro forma combined statements of operations. Such charge will
be included in the Millennium statement of operations in the quarter in which
the merger is completed. The intangible assets will be amortized over their
estimated useful lives of 4 years.
NOTE 2
The pro forma combined balance sheet includes the adjustments necessary to
give effect to the merger as if it had occurred on September 30, 1999 and to
reflect the allocation of the acquisition cost to the fair value of tangible and
intangible assets acquired and liabilities assumed as noted above, including a
charge to retained earnings for acquired in-process research and development and
the elimination of LeukoSite's equity accounts. Adjustments included in the pro
forma combined balance sheet are summarized as follows (in thousands except per
share amounts):
(A) The charge to operations for in-process research and development of
$327,618.
(B) The valuation of $43,072 for LeukoSite core technology.
(C) The valuation of $2,920 for the LeukoSite workforce.
(D) The valuation of $151,082 for the LeukoSite goodwill.
(E) The accrual of the estimated acquisition costs of $7,000.
(F) To eliminate LeukoSite historical goodwill of $208.
(G) To eliminate LeukoSite historical stockholders' equity amounts:
<TABLE>
<S> <C>
Common stock................................................ $ 147
Additional paid-in capital.................................. 97,594
Accumulated deficit......................................... 68,617
</TABLE>
(H) Issuance of 6,577,110 shares of Millennium $.001 par value common stock
to acquire all of the outstanding common stock of LeukoSite and
assumption of options and warrants to purchase common stock, as discussed
in Note 1. Common stock credited for $7 and additional paid-in capital
credited for $546,601, including an adjustment of $56,508 to reflect the
fair value of stock options and warrants issued by Millennium
Pharmaceuticals in exchange for the LeukoSite stock options and warrants.
NOTE 3
The Historical LeukoSite Financial Statements Assuming the CytoMed
Acquisition, for the nine months ended September 30, 1999, have been adjusted on
a pro forma basis to reflect the February 1999 acquisition of CytoMed, Inc. by
LeukoSite as if such acquisition had occurred on January 1, 1998. Such pro forma
adjustments include the addition of $744 of Research and Development Costs,
incurred by CytoMed in 1999 prior to the acquisition, and the reversal of the
$1,588 Acquired In-Process Research and Development charge, associated with the
CytoMed acquisition, due to its non-recurring nature.
73
<PAGE>
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 (CONTINUED)
The Historical LeukoSite Financial Statements Assuming the CytoMed
Acquisition for the year ended December 31, 1998 are derived from and can be
found in the LeukoSite Form 8-K filed on April 27, 1999 in conjunction with the
CytoMed acquisition.
NOTE 4
The pro forma combined statements of operations include the adjustments
necessary to give effect to the merger as if it had occurred on January 1, 1998.
(I) Adjustments consist of the amortization of acquired intangible assets
using the following estimated useful lives:
<TABLE>
<S> <C>
Assembled workforce......................................... 4 years
Core technology............................................. 4 years
Goodwill.................................................... 4 years
</TABLE>
NOTE 5
(J) To eliminate LeukoSite weighted average shares outstanding.
(K) Pro forma basic and diluted net loss per share amounts for the year
ended December 31, 1998 and the nine-month period ended September 30,
1999, are based upon the historical weighted-average number of Millennium
common stock outstanding adjusted to reflect the issuance, as of
January 1, 1998, of approximately 6,577,110 shares of Millennium common
stock.
(L) The impact of outstanding options and warrants, including LeukoSite
options and warrants assumed, has been excluded from the calculation of
diluted net loss per share as the effect would be antidilutive.
74
<PAGE>
EXPERTS
The financial statements of Millennium BioTherapeutics at December 31, 1998
and 1997, and for the year ended December 31, 1998 and for the period May 27,
1997 (date of inception) to December 31, 1997, appearing in this information
statement/prospectus and registration statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph describing conditions that raise substantial
doubt about Millennium BioTherapeutics' ability to continue as a going concern
as described in Note 1 to the financial statements) appearing elsewhere herein,
and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
The consolidated financial statements of Millennium Pharmaceuticals
incorporated by reference to Millennium Pharmaceuticals' Annual Report
(Form 10-K) for the year ended December 31, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Millennium Pharmaceuticals common stock to be
issued in the merger will be passed upon for Millennium Pharmaceuticals by Hale
and Dorr LLP, Boston, Massachusetts, counsel to Millennium Pharmaceuticals.
Certain legal matters with respect to the federal income tax consequences of the
merger will be passed upon for Millennium Pharmaceuticals by Hale and Dorr LLP,
Boston, Massachusetts.
WHERE YOU CAN FIND MORE INFORMATION
Millennium Pharmaceuticals files annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information that we have filed at the SEC's public
reference rooms. Please call the SEC at 1-800-SEC-0330 for information on the
public reference rooms or visit the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, 7 World Trade Center Citicorp Center
N.W. Suite 1300 500 West Madison Street
Room 1024 New York, New York 10048 Suite 1400
Washington, DC 20549 Chicago, Illinois
60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Millennium Pharmaceuticals' SEC filings are
also available to the public from commercial document retrieval services and at
the web site maintained by the SEC at http://www.sec.gov.
Millennium Pharmaceuticals filed a registration statement on Form S-4 to
register with the SEC Millennium Pharmaceuticals common stock that may be issued
to Millennium BioTherapeutics stockholders in the merger. This information
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Millennium Pharmaceuticals in addition to being an information
statement of Millennium BioTherapeutics. As allowed by SEC rules, this
information statement/prospectus does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The SEC allows Millennium Pharmaceuticals to "incorporate by reference"
information into this information statement/prospectus, which means important
information may be disclosed to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this information statement/prospectus, except for any information
75
<PAGE>
superseded by information in (or incorporated by reference in) this
statement/prospectus. This information statement/prospectus incorporates by
reference the documents set forth below that have been previously filed with the
SEC. These documents contain important information about Millennium
Pharmaceuticals and its financial condition.
<TABLE>
<CAPTION>
MILLENNIUM PHARMACEUTICALS SEC
FILINGS (FILE NO. 0-28494) DATE OR PERIOD COVERED
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999, June 30, 1999
and September 30, 1999
Current Reports on Form 8-K and Form 8-K/A Dated March 11, 1999, October 21, 1999 and
October 29, 1999
Form 8-A Dated April 26, 1996
<CAPTION>
LEUKOSITE SEC
FILING (FILE NO. 0-22769) DATE
- --------------------------------------------- ---------------------------------------------
Pages 22-27 of Form 8-K/A April 27, 1999
<S> <C>
</TABLE>
Millennium Pharmaceuticals is also incorporating by reference additional
documents that it may file with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 between the date of this
information statement/prospectus and the effective time of the merger. These
include periodic reports, such as annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
Millennium Pharmaceuticals has supplied all information contained or
incorporated by reference in this information statement/prospectus relating to
Millennium Pharmaceuticals, and Millennium BioTherapeutics has supplied all
information contained in this information statement/prospectus relating to
Millennium BioTherapeutics.
You can obtain any of the documents incorporated by reference through us,
the SEC, or the SEC Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this information statement/prospectus. Stockholders may obtain documents
incorporated by reference in this information statement/prospectus by requesting
them in writing or by telephone from us at the following address:
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Tel.: (617) 679-7000
Attention: Corporate Secretary
website: http://www.mlmn.com
If you would like to request documents from us, please do so by
, 1999 to receive them before the effective time of the merger. If
you request any incorporated documents from us, we will mail them to you by
first class mail, or another equally prompt means, within one business day after
we receive your request.
We have authorized no one to give you any information or to make any
representation about the proposed merger involving our companies that differs
from or adds to the information contained in this information
statement/prospectus or in the documents our companies have publicly filed with
the SEC. Therefore, if anyone should give you any different or additional
information, you should not rely on it.
If you live in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
information statement/prospectus, or to ask for proxies, or, if you are a person
to whom it is unlawful to direct such activities, then the offer presented by
this information statement/prospectus does not extend to you.
The information contained in this document speaks only as of the date
indicated on the cover of this document unless the information specifically
indicates that another date applies.
76
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets at December 31, 1997, December 31, 1998 and
September 30, 1999 (unaudited)............................ F-3
Statements of Operations for the Period from May 27, 1997
(date of inception) to December 31, 1997, the Year Ended
December 31, 1998 and the Nine Months Ended September 30,
1998 (unaudited) and September 30, 1999 (unaudited)....... F-4
Statements of Redeemable Convertible Preferred Stock and
Stockholders' Deficit for the Period from May 27, 1997
(date of inception) to December 31, 1997, the Year Ended
December 31, 1998 and the Nine Months Ended
September 30, 1999 (unaudited)............................ F-5
Statements of Cash Flows for the Period from May 27, 1997
(date of inception) to December 31, 1997, the Year Ended
December 31, 1998 and the Nine Months Ended September 30,
1998 (unaudited) and September 30, 1999 (unaudited)....... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Millennium BioTherapeutics, Inc.
We have audited the accompanying balance sheets of Millennium
BioTherapeutics, Inc. (the Company) as of December 31, 1998 and 1997, and the
related statements of operations, redeemable convertible preferred stock and
stockholders' deficit, and cash flows for the year ended December 31, 1998 and
the period from May 27, 1997 (date of inception) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Millennium
BioTherapeutics, Inc. at December 31, 1998 and 1997, and the results of its
operations, redeemable convertible preferred stock and stockholders' deficit,
and cash flows for the year ended December 31, 1998 and the period from May 27,
1997 (date of inception) to December 31, 1997 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company's recurring
losses from operations raise substantial doubt about its ability to continue as
a going concern. Management's plans as to these matters are described in
Note 1. The 1998 financial statements do not include any adjustment that might
result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 12, 1999
F-2
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
SEPTEMBER 30, --------------------------
1999 1998 1997
------------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 5,591,000 $ 3,625,000 $ 6,837,000
Marketable securities.............................. -- 4,003,000 10,103,000
Due from strategic partner......................... 397,000 37,000 130,000
Prepaid expenses and other current assets.......... 119,000 116,000 347,000
------------ ------------ -----------
Total current assets................................. 6,107,000 7,781,000 17,417,000
Property and equipment, net.......................... 1,239,000 1,080,000 713,000
Other assets......................................... 214,000 214,000 3,000
------------ ------------ -----------
Total assets......................................... $ 7,560,000 $ 9,075,000 $18,133,000
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................... $ 1,542,000 $ 525,000 $ 556,000
Accrued expenses................................... 869,000 676,000 242,000
Due to parent company.............................. 13,889,000 4,747,000 739,000
Current portion of capital lease obligations....... 90,000 84,000 --
------------ ------------ -----------
Total current liabilities............................ 16,390,000 6,032,000 1,537,000
Capital lease obligations, net of current portion.... 453,000 528,000 --
Redeemable convertible preferred stock--Series B,
$0.001 par value; 6,000,000 shares authorized;
2,000,000 issued and outstanding................... 20,000,000 20,000,000 20,000,000
Commitments and contingencies
Stockholders' deficit:
Convertible preferred stock--Series A, $0.001 par
value; 9,000,000 shares authorized, issued and
outstanding (preference in liquidation of
$90,000,000)..................................... 9,000 9,000 9,000
Common stock--Class A, $0.001 par value; 23,500,000
shares authorized; 1,000 issued and
outstanding...................................... -- -- --
Common stock--Class B, $0.001 par value; 1,500,000
shares authorized: 1,274,073 and 937,319 shares
in 1999 and 1998, respectively and no shares in
1997 issued and outstanding...................... 1,000 1,000 --
Additional paid-in capital......................... 2,243,000 843,000 --
Deferred compensation.............................. (1,009,000) -- --
Notes receivable................................... (942,000) (751,000) --
Other comprehensive income (loss).................. 2,000 2,000 (3,000)
Accumulated deficit................................ (29,587,000) (17,589,000) (3,410,000)
------------ ------------ -----------
Total stockholders' deficit.......................... (29,283,000) (17,485,000) (3,404,000)
------------ ------------ -----------
Total liabilities and stockholders' deficit.......... $ 7,560,000 $ 9,075,000 $18,133,000
============ ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1997
NINE MONTHS ENDED (DATE OF
SEPTEMBER 30, YEAR ENDED INCEPTION) TO
--------------------------- DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue under strategic alliance........ $ 7,205,000 $ 6,880,000 $ 9,300,000 $ 5,514,000
Costs and expenses:
Research and development.............. 16,625,000 13,980,000 20,429,000 8,117,000
General and administrative............ 2,837,000 3,024,000 3,797,000 1,340,000
------------ ------------ ------------ -----------
19,462,000 17,004,000 24,226,000 9,457,000
------------ ------------ ------------ -----------
Loss from operations.................... (12,257,000) (10,124,000) (14,926,000) (3,943,000)
Interest income......................... 301,000 620,000 752,000 533,000
Interest expense........................ (42,000) -- (5,000) --
------------ ------------ ------------ -----------
Net loss................................ $(11,998,000) $ (9,504,000) $(14,179,000) $(3,410,000)
============ ============ ============ ===========
Basic and diluted net loss per share.... $ (31.48) $ (249.45) $ (177.73) $ (3410.00)
============ ============ ============ ===========
Shares used in computing basic and
diluted net loss per share............ 381,165 38,100 79,780 1,000
============ ============ ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES B SERIES A
REDEEMABLE CONVERTIBLE CONVERTIBLE
PREFERRED CLASS A CLASS B
PREFERRED STOCK STOCK COMMON STOCK COMMON STOCK
----------------------- -------------------- ------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -------- -------- -------- --------- --------
Issuance of Series A:
Convertible Preferred Stock.... 9,000,000 $9,000
Issuance of Series B:
Redeemable Convertible
Preferred Stock.............. 2,000,000 $20,000,000
Sale of Common Stock............. 1,000 --
Net loss.........................
Unrealized loss on marketable
securities.....................
Comprehensive loss...............
--------- ----------- --------- ------ ----- --- --------- ------
Balance at December 31, 1997..... 2,000,000 20,000,000 9,000,000 9,000 1,000 --
Exercise of employee stock
options........................ 947,589 $1,000
Repurchase of Common Stock....... (10,270) --
Net loss.........................
Unrealized gain on marketable
securities.....................
Comprehensive loss...............
--------- ----------- --------- ------ ----- --- --------- ------
Balance at December 31, 1998..... 2,000,000 20,000,000 9,000,000 9,000 1,000 -- 937,319 1,000
Exercise of employee stock
options (unaudited)............ 337,615 --
Repurchase of Common Stock
(unaudited).................... (861) --
Deferred compensation
(unaudited)....................
Stock compensation expense
(unaudited)....................
Net loss (unaudited).............
Unrealized gain (loss) on
marketable securities
(unaudited)....................
Comprehensive loss (unaudited)...
--------- ----------- --------- ------ ----- --- --------- ------
BALANCE AT SEPTEMBER 30, 1999
(UNAUDITED).................... 2,000,000 $20,000,000 9,000,000 $9,000 1,000 -- 1,274,073 $1,000
========= =========== ========= ====== ===== === ========= ======
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OTHER
ADDITIONAL COMPREHENSIVE TOTAL
PAID-IN DEFERRED NOTES INCOME ACCUMULATED STOCKHOLDERS'
CAPITAL COMPENSATION RECEIVABLE (LOSS) DEFICIT DEFICIT
---------- ------------ ---------- -------------- ------------ ------------
Issuance of Series A:
Convertible Preferred Stock.... $ 9,000
Issuance of Series B:
Redeemable Convertible
Preferred Stock.............. --
Sale of Common Stock............. --
Net loss......................... $(3,410,000) (3,410,000)
Unrealized loss on marketable
securities..................... $(3,000) (3,000)
------------
Comprehensive loss............... (3,413,000)
---------- ----------- --------- ------- ------------ ------------
Balance at December 31, 1997..... (3,000) (3,410,000) (3,404,000)
Exercise of employee stock
options........................ $ 852,000 $(751,000) 102,000
Repurchase of Common Stock....... (9,000) (9,000)
Net loss......................... (14,179,000) (14,179,000)
Unrealized gain on marketable
securities..................... 5,000 5,000
------------
Comprehensive loss............... (14,174,000)
---------- ----------- --------- ------- ------------ ------------
Balance at December 31, 1998..... 843,000 (751,000) 2,000 (17,589,000) (17,485,000)
Exercise of employee stock
options (unaudited)............ 341,000 (191,000) 150,000
Repurchase of Common Stock
(unaudited).................... -- --
Deferred compensation
(unaudited).................... 1,059,000 $(1,059,000) --
Stock compensation expense
(unaudited).................... 50,000 50,000
Net loss (unaudited)............. (11,998,000) (11,998,000)
Unrealized gain (loss) on
marketable securities
(unaudited).................... -- --
------------
Comprehensive loss (unaudited)... (11,998,000)
---------- ----------- --------- ------- ------------ ------------
BALANCE AT SEPTEMBER 30, 1999
(UNAUDITED).................... $2,243,000 $(1,009,000) $(942,000) $ 2,000 $(29,587,000) $(29,283,000)
========== =========== ========= ======= ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1997
NINE MONTHS ENDED (DATE OF
SEPTEMBER 30, YEAR ENDED INCEPTION) TO
--------------------------- DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................... $(11,998,000) $ (9,504,000) $(14,179,000) $ (3,410,000)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization............. 326,000 218,000 296,000 105,000
Stock compensation........................ 50,000 -- -- --
Changes in operating assets and
liabilities:
Prepaid expenses and other current
assets................................ (3,000) 123,000 231,000 (347,000)
Due from strategic partner.............. (360,000) 130,000 93,000 (130,000)
Other assets............................ -- (199,000) (211,000) (3,000)
Accounts payable........................ 1,017,000 (59,000) (31,000) 556,000
Accrued expenses........................ 193,000 49,000 434,000 242,000
Due to parent company................... 9,142,000 510,000 4,008,000 739,000
------------ ------------ ------------ ------------
Net cash used in operating activities....... (1,633,000) (8,732,000) (9,359,000) (2,248,000)
INVESTING ACTIVITIES
Purchase of property and equipment.......... (485,000) (602,000) (42,000) (818,000)
Purchase of marketable securities........... -- (7,390,000) (7,385,000) (10,106,000)
Sale of marketable securities............... 4,003,000 10,760,000 13,490,000 --
------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities................................ 3,518,000 2,768,000 6,063,000 (10,924,000)
FINANCING ACTIVITIES
Proceeds from sale of Series A convertible
preferred stock........................... -- -- -- 9,000
Proceeds from sale of Series B convertible
preferred stock........................... -- -- -- 20,000,000
Net proceeds from employee stock
purchases................................. 341,000 849,000 844,000 --
Notes receivable stock...................... (191,000) (758,000) (751,000) --
Payments of capital lease obligations....... (69,000) -- (9,000) --
------------ ------------ ------------ ------------
Net cash provided by financing activities... 81,000 91,000 84,000 20,009,000
------------ ------------ ------------ ------------
Net (decrease) increase in cash and cash
equivalents............................... 1,966,000 (5,873,000) (3,212,000) 6,837,000
Cash and cash equivalents at beginning of
period.................................... 3,625,000 6,837,000 6,837,000 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of
period.................................... $ 5,591,000 $ 964,000 $ 3,625,000 $ 6,837,000
============ ============ ============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment acquired under capital leases..... $ -- $ -- $ 621,000 $ --
============ ============ ============ ============
Deferred compensation relating to issuance
of stock options.......................... $ 1,059,000 $ -- $ -- $ --
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
THE COMPANY
In May 1997, Millennium BioTherapeutics, Inc. (the Company) was incorporated
in Delaware as a wholly-owned subsidiary of Millennium Pharmaceuticals, Inc.
(MPI) to develop therapeutic proteins and antibodies, vaccines, gene therapy and
antisense products. At the time of its establishment, the Company and MPI
entered into a Technology Transfer and License Agreement, whereby the Company
licensed certain technology from MPI, in exchange for 9 million shares of the
Company's Series A Convertible Preferred Stock. Concurrently with its
establishment, the Company entered into a strategic alliance with Eli Lilly and
Company (Lilly) for the discovery and development of novel therapeutic proteins
(see Note 4). Under the terms of a related stock purchase agreement, Lilly
purchased $20 million of the Company's Series B convertible preferred stock for
an approximate 18% equity interest in the Company.
INTERIM FINANCIAL STATEMENTS
The accompanying financial statements for the nine months ended
September 30, 1999 and 1998 have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Interim results for the
nine month period ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999.
RISKS AND UNCERTAINTIES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The financial statements of the Company have been presented on the basis of
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. However, the
Company may not be able to continue its operations because it is experiencing
operating losses and has limited sources of funding for continuing operations.
In order to continue as a going concern, the Company's plans at this time are
focused on obtaining new sources of equity financing, if possible, and securing
additional collaborative partnering arrangements that will provide available
cash funding for operations. However, there can be no assurance that any such
additional financing will be available to the Company on terms that it deems
acceptable, if at all. The financial statements do not include any adjustments
relating to the recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS AND MARKETABLE SECURITIES
Cash equivalents consist principally of money market funds and corporate
bonds with original maturities of three months or less at the date of purchase.
Cash equivalents and marketable securities at December 31, 1998 and 1997 are
classified as available-for-sale.
F-7
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents and marketable
securities. The Company's cash equivalents and marketable securities are held by
high-credit quality financial institutions. By policy, the Company limits the
credit exposure to any one financial institution. At December 31, 1998, the
Company had no significant concentrations of credit risk.
PROPERTY AND EQUIPMENT
Equipment consists principally of laboratory, computer and office equipment.
Assets held under capitalized leases are stated at the present value of future
minimum lease obligations. Depreciation is recorded over the shorter of the
estimated useful life or the term of the lease using the straight-line method.
Leasehold improvements are stated at cost and are amortized over the remaining
life of the building lease.
REVENUE RECOGNITION
The Company recognizes revenue under a strategic alliance as reimbursable
expenses are incurred.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25), in accounting for its
stock-based compensation plans, rather than the alternative fair value
accounting method provided for under Financial Accounting Standards Board (FASB)
Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, as this alternative
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, when the exercise price of options
granted under the plan equals the market price of the underlying stock on the
date of grant, no compensation expense is required.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, which
established standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. The adoption
of SFAS 130 resulted in revised disclosures but had no effect on the financial
position, results of operations or liquidity of the Company. Comprehensive
income is reported by the Company in the statements of stockholders' equity.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for fiscal years
beginning after June 15, 2000. The Company believes the adoption of this new
accounting standard will not have a significant effect to its financial
statements as the Company's investment policies prohibit the use of derivatives.
INCOME TAXES
The liability method is used to account for income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and income tax bases of assets and
F-8
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liabilities, as well as net operating loss carryforwards, and are measured using
the enacted tax rates and laws that will be in effect when the differences
reverse. Deferred tax assets may be reduced by a valuation allowance to reflect
the uncertainty associated with their ultimate realization.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding. Common stock equivalents, such as outstanding stock options
and convertible preferred stocks are excluded in calculating diluted earnings
per share since their loss would be antidilutive. Accordingly, basic earnings
per share and diluted earnings per share are the same for the Company.
3. RELATED-PARTY TRANSACTIONS
The Company has entered into certain agreements with MPI whereby MPI
provides research and administrative services and facilities at negotiated fees.
MPI is reimbursed for actual costs of services and facilities based on an
allocation of both direct and indirect costs. These costs amounted to
$12.2 million and $5.6 million in 1998 and 1997, respectively.
4. STRATEGIC ALLIANCE
In May 1997, the Company entered into a collaborative agreement with Lilly
in connection with its program to discover and develop therapeutic proteins. The
agreement covers an initial three-year period during which Lilly will provide
$8-$10 million annually in research funding, with a two-year renewal option at
the same funding level. Under the terms of the agreement, the Company and Lilly
will jointly fund the collaborative program and each company will share the
rights to use and commercialize the resulting discoveries. Additional licensing
fees, development milestones and royalties will be payable by Lilly in
connection with specific therapeutic protein product candidates identified
through the collaboration and licensed by Lilly. The Company recognized
approximately $9.1 million and $5.5 million in revenues under this alliance in
1998 and 1997, respectively. Included in the 1997 revenue under strategic
alliance are $1.9 million of reimbursable expenses for research performed by MPI
prior to inception of the Company. The related expenses are included in research
and development expense.
5. MARKETABLE SECURITIES
Marketable securities consist of high-grade corporate bonds, which are
carried at fair value, with the unrealized gains and losses reported in a
separate component of stockholders' equity. There have been no realized gains or
losses on sales of any securities in 1998 or 1997.
The amortized cost and estimated fair value of debt securities at
December 31, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
1998 1997
----------------------- -------------------------
ESTIMATED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less..................... $4,001,000 $4,003,000 $10,106,000 $10,103,000
</TABLE>
F-9
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Equipment................................................... $1,481,000 $810,000
Leasehold improvements and construction in progress......... -- 8,000
---------- --------
1,481,000 818,000
Less accumulated depreciation and amortization.............. (401,000) (105,000)
---------- --------
$1,080,000 $713,000
========== ========
</TABLE>
7. LEASE COMMITMENTS
At December 31, 1998, the Company has capitalized leased equipment totaling
$621,000 with related accumulated amortization of $85,000.
At December 31, 1998, future minimum commitments under leases with
noncancellable terms of more than one year are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES
--------
<S> <C>
Year:
1999...................................................... $134,000
2000...................................................... 146,000
2001...................................................... 146,000
2002...................................................... 147,000
2003...................................................... 147,000
Thereafter................................................ 62,000
--------
Total....................................................... 782,000
Less amount representing interest........................... (170,000)
--------
Present value of minimum lease payments..................... 612,000
Less current portion of capital lease obligations........... (84,000)
--------
Capital lease obligations................................... $528,000
========
</TABLE>
Interest paid under all financing and leasing arrangements during 1998
approximated interest expense.
8. INCOME TAXES
MPI elects to consolidate the net income or loss of the Company in computing
its consolidated U.S. federal tax liability. In the event of taxable income by
the Company, the Company is required to reimburse MPI for its proportionate
share of the consolidated tax liability. Conversely, in the event that losses or
other tax attributes of the Company are used to reduce the amount of any
consolidated tax liability of MPI, then the Company shall be reimbursed from MPI
the proportionate share of reduction in MPI's tax liability. In 1998, the
Company recorded a tax benefit of $336,000 in accordance with the agreement, of
which $270,000 was owed to the Company by MPI at December 31, 1998.
F-10
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' EQUITY
PREFERRED STOCK
In the event of any liquidation, the holders of preferred stock will be
entitled to receive, prior to any distribution to holders of common stock, an
amount equal to $10 per share plus all declared but unpaid dividends on such
shares. The holders of the preferred stock are entitled to vote and receive
dividends, or any other distribution, in an amount equal to the product of the
per share amount, if any, set aside for the Class A Common Stock multiplied by
the number of whole shares of common stock into which such shares of preferred
stock are then convertible. Preferred stockholders have the right to convert, at
any time, each share of preferred stock into Class A common stock on a one
share-for-one share basis (subject to adjustment). Each share of preferred stock
shall automatically be converted into one share of Class A common stock (subject
to adjustment) upon the closing of an underwritten public offering with
aggregate gross proceeds to the Company of at least $15 million.
In the event that the Company has not closed a qualified public offering on
or before April 1, 2002, Lilly has the right to exchange all of its Series B
Preferred Stock shares for, at the election of MPI, such amount of cash, shares
of Common Stock of MPI, or a combination thereof as is equal to the fair market
value of the shares as defined under the agreement.
COMMON STOCK
Each holder of shares of Class A common stock is entitled to one vote for
each share held, whereas holders of Class B common stock are not entitled to
vote. Each share of Class B common stock will automatically be converted into
one share of Class A common stock (subject to adjustment) upon the closing of an
underwritten public offering with aggregate gross proceeds to the Company of at
least $15 million. At December 31, 1998, 12,500,000 shares of Class A common
stock were reserved for issuance upon conversion of preferred stock and
conversion of Class B common stock underlying the 1997 Equity Incentive Plan.
STOCK OPTION PLAN
In May 1997, the Board of Directors adopted the Company's 1997 Equity
Incentive Plan (the 1997 Plan). The Plan, as amended, allows for the granting of
incentive and non-statutory options to purchase up to 1,500,000 shares of
Class B common stock. Incentive options granted to employees generally vest over
a four-year period and may be exercised earlier subject to stock repurchase
provisions that vest over the same period as the original option grant.
Non-statutory options granted to consultants and other non-employees generally
vest over the period of service to the Company.
During 1999, the Company granted options to purchase 76,180 shares of Common
Stock at exercise prices below the deemed fair value, for accounting purposes,
of the stock options at the date of grant. The Company recorded an increase to
additional paid-in capital and a corresponding charge to deferred compensation
in the amount of approximately $1,059,000 to recognize the aggregate difference
between such deemed fair value and the exercise price. The deferred compensation
is being amortized over the option vesting period of four years.
F-11
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' EQUITY (CONTINUED)
The following table presents the activity of the 1997 Plan for the years
ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Outstanding at January 1............................... 593,535 $.90 -- --
Granted................................................ 814,984 .92 593,535 $.90
Exercised.............................................. (947,589) .90 -- --
Canceled............................................... (24,130) .90 -- --
-------- ---- ------- ----
Outstanding at December 31............................. 436,800 $.94 593,535 $.90
======== ==== ======= ====
Options exercisable at December 31..................... 436,800 $.94 50,216 $.90
======== ==== ======= ====
</TABLE>
The weighted-average per share fair value of options granted during 1998 and
1997 was $.22.
At December 31, 1998, the exercise prices for options outstanding ranged
from $.90 to $1.10, with a weighted average exercise price of $.94 and a
weighted average remaining contractual life of 9.14 years.
SFAS NO. 123 DISCLOSURES
Pursuant to the requirements of SFAS No. 123, the following are the pro
forma net loss for 1998 and 1997, as if the compensation cost for the 1997 Plan
had been determined based on the fair value at the grant date for grants in 1998
and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------- -----------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss.................................... $14,180,000 $14,333,000 $3,410,000 $3,427,000
</TABLE>
The fair value of stock options and common shares issued pursuant to the
1997 Plan at the date of grant were estimated using the Black-Scholes model with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Expected life (years)....................................... 2.4 4.2
Interest rate............................................... 5.43% 5.90%
Volatility.................................................. .2 .07
</TABLE>
The Company has never declared dividends on any of its capital stock and
does not expect to do so in the foreseeable future.
The effects on 1998 and 1997 pro forma net loss of expensing the estimated
fair value of stock options issued pursuant to the 1997 Plan are not necessarily
representative of the effects on reported results of operations for future years
as the periods presented include only one and two years, respectively, of option
grants under the Company's 1997 Plan.
F-12
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS
On October 14, 1999, Millennium BioTherapeutics entered into an Agreement
and Plan of Merger pursuant to which Millennium BioTherapeutics would be merged
with and into MPI. Each share of Class B Common Stock of the Company will, upon
consummation of the merger, be converted into a number of shares of common stock
of MPI equal to the average of (i) $15.00 divided by $62.536 and (ii) $15.00
divided by the average of the last recorded sale prices per share of MPI common
stock on the Nasdaq National Market over the 20 consecutive trading days ending
on the second trading day prior to the effective date of the merger. The
effective date of the merger is expected to occur in .
On October 14, 1999, MPI also entered into a Share Exchange Agreement with
Lilly. Lilly was issued 360,198 shares of MPI Common Stock in exchange for all
of the shares of the Company's Series B Convertible Preferred Stock owned by it.
MPI agreed to register the shares issued to Lilly on a registration statement on
Form S-3. The number of shares issued to Lilly will be adjusted, upward or
downward, based on the closing price of MPI Common Stock over the five
consecutive trading days ending on the first trading day prior to the
effectiveness of the Form S-3 resale Registration Statement.
F-13
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
MILLENNIUM PHARMACEUTICALS, INC.
AND
MILLENNIUM BIOTHERAPEUTICS, INC.
October 14, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
ARTICLE I--THE MERGER........................................................ 1
1.1 The Merger.................................................. 1
1.2 The Closing................................................. 2
1.3 Actions at the Closing...................................... 2
1.4 Additional Action........................................... 2
1.5 Conversion of Shares........................................ 2
1.6 Dissenting Shares........................................... 3
1.7 Exchange of Shares.......................................... 4
1.8 Fractional Shares........................................... 5
1.9 Options..................................................... 5
1.10 Certificate of Incorporation and By-laws.................... 6
1.11 No Further Rights........................................... 6
1.12 Closing of Transfer Books................................... 6
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 7
2.1 Organization, Qualification and Corporate Power............. 7
2.2 Capitalization.............................................. 7
2.3 Authorization of Transaction................................ 8
2.4 Noncontravention............................................ 8
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF THE BUYER..................... 9
3.1 Organization, Qualification and Corporate Power............. 9
3.2 Capitalization.............................................. 9
3.3 Authorization of Transaction................................ 9
3.4 Noncontravention............................................ 10
3.5 Reports and Financial Statements............................ 10
ARTICLE IV--COVENANTS........................................................ 11
4.1 Closing Efforts............................................. 11
4.2 Compliance with Section 253................................. 11
4.3 Prospectus/Information Statement and Registration
Statement................................................... 11
4.4 Operation of Business....................................... 12
4.5 Listing of Buyer Common Stock............................... 12
4.6 Funding Obligations......................................... 12
4.7 Indemnification............................................. 12
4.8 Agreements from Certain Affiliates of the Company........... 13
ARTICLE V--CONDITIONS TO CONSUMMATION OF MERGER.............................. 13
5.1 Conditions to Each Party's Obligations...................... 13
5.2 Conditions to Obligations of the Buyer...................... 14
5.3 Conditions to Obligations of the Company.................... 15
ARTICLE VI--TERMINATION...................................................... 15
6.1 Termination of Agreement.................................... 15
6.2 Effect of Termination....................................... 16
ARTICLE VII--DEFINITIONS..................................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
ARTICLE VIII--MISCELLANEOUS.................................................. 17
8.1 Survival.................................................... 17
8.2 No Third Party Beneficiaries................................ 17
8.4 Succession and Assignment................................... 17
8.5 Counterparts and Facsimile Signature........................ 18
8.6 Headings.................................................... 18
8.7 Notices..................................................... 18
8.8 Governing Law............................................... 19
8.9 Amendments and Waivers...................................... 19
8.10 Severability................................................ 19
8.11 Submission to Jurisdiction.................................. 19
8.12 Waiver of Right to Trial by Jury............................ 20
8.13 Construction................................................ 20
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of October 14, 1999 by and between Millennium
Pharmaceuticals, Inc., a Delaware corporation (the "Buyer"), and Millennium
BioTherapeutics, Inc., a Delaware corporation (the "Company"). The Buyer and the
Company are referred to collectively herein as the "Parties."
This Agreement contemplates a merger of the Company with and into the Buyer.
In such merger, the stockholders of the Company other than the Buyer will
receive common stock of the Buyer in exchange for their capital stock of the
Company.
WHEREAS, the Buyer and the Company each wish to effect the merger of the
Company with and into the Buyer.
WHEREAS, as an inducement to the Buyer to enter into this Agreement,
simultaneously with the execution and delivery of this Agreement the Company has
caused certain modifications to be made to (i) that certain Rights Exchange
Agreement, dated as of May 28, 1997, between the Company and the Buyer,
(ii) that certain Collaboration Agreement, dated as of May 28, 1997, between the
Company and Eli Lilly and Company ("Lilly") and (iii) that certain Technology
Transfer and License Agreement, dated as of May 27, 1997, between the Company
and the Buyer; and
WHEREAS, on the date hereof, the Buyer has purchased all the shares of the
Company's capital stock owned by Lilly.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants and recitals herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of this
Agreement, the Company shall merge with and into the Buyer (with such merger
referred to herein as the "Merger") at the Effective Time (as defined below).
From and after the Effective Time, the separate corporate existence of the
Company shall cease and the Buyer shall continue as the surviving corporation in
the Merger (the "Surviving Corporation"). The "Effective Time" shall be the time
at which the Surviving Corporation files a certificate of ownership and merger,
in such form or forms as may be required by, and executed in accordance with
Section 253 of the Delaware General Corporation Law (the "Certificate of
Merger") with the Secretary of State of the State of Delaware. The Merger shall
have the effects set forth in Section 259 of the Delaware General Corporation
Law.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP
in Boston, Massachusetts, commencing at 9:00 a.m. local time on the 20th
business day following the mailing to the stockholders of the Company of the
Prospectus/Information Statement (as defined in Section 4.3), or, if all of the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby have not been satisfied or waived by such date, on such
mutually agreeable later date as soon as practicable (and in any event not later
than three business days) after the satisfaction or waiver of all conditions
(excluding the delivery of any documents to be delivered at the Closing by any
of the Parties) set forth in Article V hereof (the "Closing Date").
1.3 ACTIONS AT THE CLOSING. At the Closing:
(a) the Surviving Corporation shall file the Certificate of Merger with the
Secretary of State of the State of Delaware; and
(b) the Buyer shall deliver a certificate representing the shares of Buyer
Common Stock (as defined below) to be issued in the Merger to a bank trust
company or other entity reasonably satisfactory to the Company appointed by the
Buyer to act as the exchange agent (the "Exchange Agent") in accordance with
Section 1.7.
<PAGE>
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of the Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.001 par value per share, of the Company
("Company Shares") issued and outstanding immediately prior to the Effective
Time (other than Company Shares owned beneficially by the Buyer, Dissenting
Shares (as defined below) and Company Shares held in the Company's treasury)
shall be converted into and represent the right to receive a number of shares of
common stock, $.001 par value per share, of the Buyer ("Buyer Common Stock")
equal to the Conversion Ratio. The "Conversion Ratio" shall mean the average of
the two quotients: (i) $15.00 divided by the Current MPI Share Price, and
(ii) $15.00 divided by the Closing Date MPI Share Price. "Current MPI Share
Price" shall mean $62.536. "Closing Date MPI Share Price" shall mean the average
of the last reported sale prices per share of Buyer Common Stock on the Nasdaq
National Market, as reported by Nasdaq, over the 20 consecutive trading days
ending on the trading day that is two trading days prior to the day on which the
Effective Time occurs.
(b) Each share of capital stock of the Company held in its treasury
immediately prior to the Effective Time and each share of capital stock of the
Company owned beneficially by the Buyer, including without limitation all of the
outstanding shares of Class A Preferred Stock and Class B Preferred Stock, shall
be cancelled and retired without payment of any consideration therefor.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares" means Company Shares
held by a stockholder of record immediately prior to the Effective Time (a
"Company Stockholder") and with respect to which appraisal shall have been duly
demanded and perfected in accordance with Section 262 of the Delaware General
Corporation Law and not effectively withdrawn or forfeited. Dissenting Shares
shall not be converted into or represent the right to receive Buyer Common
Stock, unless such Company Stockholder shall have forfeited his, her or its
right to appraisal under the Delaware General Corporation Law or properly
withdrawn, his, her or its demand for appraisal. If such Company Stockholder has
so forfeited or withdrawn his, her or its right to appraisal of Dissenting
Shares, then (i) as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Buyer Common Stock issuable in respect of
such Company Shares pursuant to Section 1.5, and (ii) if such event occurs after
the Effective Time, promptly following the occurrence of such event, the Buyer
shall deliver to the Exchange Agent a certificate representing the Buyer Common
Stock to which such holder is entitled pursuant to Section 1.5.
(b) The Company shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands, and
any other instruments that relate to such demands received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the Delaware General Corporation Law. The Company
shall not, except with the prior written consent of the Buyer, make any payment
with respect to any demands for appraisal of Company Shares or offer to settle
or settle any such demands.
1.7 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Buyer shall appoint the Exchange Agent
to effect the exchange for the Buyer Common Stock of certificates that,
immediately prior to the Effective Time, represented Company Shares converted
into Buyer Common Stock pursuant to Section 1.5 (including any Company Shares
referred to in clause (i) of the last sentence of Section 1.6(a))
("Certificates"). On the Closing Date, the Buyer shall deliver to the Exchange
Agent, in trust for the benefit of holders of
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Certificates, a stock certificate (issued in the name of the Exchange Agent or
its nominee) representing the Buyer Common Stock, as described in Section 1.5.
As soon as practicable after the Effective Time, the Buyer shall cause the
Exchange Agent to send a notice and a transmittal form to each holder of a
Certificate advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such Certificate in exchange
for the Buyer Common Stock issuable pursuant to Section 1.5. Each holder of a
Certificate, upon proper surrender thereof to the Exchange Agent in accordance
with the instructions in such notice, shall be entitled to receive in exchange
therefor (subject to any taxes required to be withheld) the Buyer Common Stock
issuable pursuant to Section 1.5 plus cash in lieu of any fractional shares, as
provided in Section 1.8 below. Until properly surrendered, each such Certificate
shall be deemed for all purposes to evidence only the right to receive a
certificate for the Buyer Common Stock issuable pursuant to Section 1.5. Holders
of Certificates shall not be entitled to receive certificates for the Buyer
Common Stock to which they would otherwise be entitled until such Certificates
are properly surrendered.
(b) If any Buyer Common Stock is to be issued in the name of a person other
than the person in whose name the Certificate surrendered in exchange therefor
is registered, it shall be a condition to the issuance of such Buyer Common
Stock that (i) the Certificate so surrendered shall be transferable, and shall
be properly assigned, endorsed or accompanied by appropriate stock powers,
(ii) such transfer shall otherwise be proper and (iii) the person requesting
such transfer shall pay to the Exchange Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not required to be paid.
Notwithstanding the foregoing, neither the Exchange Agent nor any Party shall be
liable to a holder of Company Shares for any Buyer Common Stock issuable to such
holder pursuant to Section 1.5 that is delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Buyer shall issue in exchange
for such lost, stolen or destroyed Certificate the Buyer Common Stock issuable
in exchange therefor pursuant to Section 1.5. The Board of Directors of the
Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to give
the Buyer a bond in such sum as it may direct as indemnity against any claim
that may be made against the Buyer with respect to the Certificate alleged to
have been lost, stolen or destroyed.
(d) No dividends or other distributions that are payable to the holders of
record of Buyer Common Stock as of a date on or after the Closing Date shall be
paid to former Company Stockholders entitled by reason of the Merger to receive
Buyer Common Stock until such holders surrender their Certificates for
certificates representing the Buyer Common Stock. Upon such surrender, the Buyer
shall pay or deliver to the persons in whose name the certificates representing
such Buyer Common Stock are issued any dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on or after
the Closing Date and which were paid or delivered between the Effective Time and
the time of such surrender; provided that no such person shall be entitled to
receive any interest on such dividends or other distributions.
1.8 FRACTIONAL SHARES. No certificates or scrip representing fractional
Buyer Common Stock shall be issued to former Company Stockholders upon the
surrender for exchange of Certificates, and such former Company Stockholders
shall not be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to any
fractional shares of Buyer Common Stock that would have otherwise been issued to
such former Company Stockholders. In lieu of any fractional shares of Buyer
Common Stock that would have otherwise been issued, each former Company
Stockholder that would have been entitled to receive a fractional share of Buyer
Common Stock shall, upon proper surrender of such person's Certificates, receive
a cash payment
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equal to the average of the Current MPI Share Price and the Closing Date MPI
Share Price, multiplied by the fraction of a share that such Company Stockholder
would otherwise be entitled to receive.
1.9 OPTIONS.
(a) As of the Effective Time, the Buyer shall assume (i) the Company's 1997
Equity Incentive Plan, as amended (the "Option Plan"), and (ii) all options to
purchase Company Shares issued by the Company pursuant to the Option Plan or
otherwise ("Options"), whether vested or unvested. Immediately after the
Effective Time, each Option outstanding immediately prior to the Effective Time
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Option at the Effective Time, such
number of shares of Buyer Common Stock as is equal to the number of Common
Shares subject to the unexercised portion of such Option multiplied by the
Conversion Ratio (with any fraction resulting from such multiplication to be
rounded down to the nearest whole number). The exercise price per share of each
such assumed Option shall be equal to the exercise price of such Option
immediately prior to the Effective Time, divided by the Conversion Ratio
(rounded up to the nearest whole cent). The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986 (as amended, the "Code"), if applicable, and all
of the other terms of the Options shall otherwise remain unchanged.
(b) As soon as practicable after the Effective Time, the Buyer shall deliver
to the holders of Options appropriate notices setting forth such holders' rights
pursuant to such Options, as amended as set forth in this Section 1.9 by the
Board of Directors of the Company in accordance with the terms of the Option
Plan, and the agreements evidencing such Options shall continue in effect on the
same terms and conditions (subject to the amendments described in this
Section 1.9 and such notice).
(c) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery upon
exercise of the Options assumed in accordance with this Section 1.9. As soon as
practicable after the Effective Time, the Buyer shall file a Registration
Statement on Form S-8 (or any successor form) under the Securities Act of 1933
(as amended, the "Securities Act") with respect to all shares of Buyer Common
Stock subject to such Options that may be registered on a Form S-8, and shall
use its best efforts to maintain the effectiveness of such Registration
Statement for so long as such Options remain outstanding.
1.10 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of the Buyer immediately prior to the Effective Time.
(b) The By-laws of the Surviving Corporation immediately following the
Effective Time shall be the same as the By-laws of the Buyer immediately prior
to the Effective Time.
1.11 NO FURTHER RIGHTS. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.12 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Buyer or the Exchange Agent, they shall be cancelled and exchanged for Buyer
Common Stock in accordance with Section 1.5, subject to applicable law in the
case of Dissenting Shares.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer as follows:
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect (as defined below). The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company has furnished to the Buyer
complete and accurate copies of its Certificate of Incorporation and By-laws.
The Company is not in default under or in violation of any provision of its
Certificate of Incorporation or By-laws. For purposes of this Agreement,
"Company Material Adverse Effect" means a material adverse effect on the assets,
business, condition (financial or otherwise) or results of operations of the
Company.
2.2 CAPITALIZATION. The authorized capital stock of the Company consists
of 25,000,000 shares of Company Shares, 23,500,000 of which are designated as
Class A Common Stock and 1,500,000 of which are designated as Class B Common
Stock, and 15,000,000 shares of Preferred Stock, $.001 par value per share,
9,000,000 of which have been designated as Series A Preferred Stock, 2,000,000
of which have been designated as Series B Preferred Stock and 4,000,000 of which
have not been designated. As of the date hereof, no shares of Class A Common
Stock, 1,350,945 shares of Class B Common Stock, 9,000,000 shares of Series A
Preferred Stock and 2,000,000 shares of Series B Preferred Stock are issued and
outstanding and none of such shares are held in the treasury of the Company. All
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued, are fully paid and nonassessable and were issued
in compliance with applicable federal and state securities laws. Except for the
conversion privileges of the Series A Preferred Stock and the Series B Preferred
Stock and except for the Options, there are no other outstanding shares of
capital stock or outstanding rights of first refusal, preemptive rights or other
rights, options, warrants, conversion rights or other agreements, either
directly or indirectly, for the purchase or acquisition from the Company of any
shares of its capital stock.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Company. Without limiting the generality of the foregoing, the Board of
Directors of the Company and the special committee thereof formed to consider
the Merger (the "Special Committee") have each (i) determined that the Merger is
fair to and in the best interests of the Company's stockholders other than the
Buyer and (ii) approved this Agreement and authorized its the execution and
delivery. This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
2.4 NONCONTRAVENTION. Subject to the filing of a Certificate of Merger as
required by the Delaware General Corporation Law, neither the execution and
delivery by the Company of this Agreement, nor the consummation by the Company
of the transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or By-laws of the Company,
(b) require on the part of the Company any filing with, or any permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (a "Governmental Entity"), (c) conflict with, result in a
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breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any contract or instrument to which the Company is a party or
by which the Company is bound or to which any of its assets is subject, except
for (i) any conflict, breach, default, acceleration, termination, modification
or cancellation which would not have a Company Material Adverse Effect and would
not adversely affect the consummation of the transactions contemplated hereby or
(ii) any notice, consent or waiver the absence of which would not have a Company
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, (d) result in the imposition of any Security
Interest (as defined below) upon any assets of the Company or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its properties or assets. For purposes of this Agreement:
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law), other
than (i) mechanic's, materialmen's, and similar liens, (ii) liens arising under
worker's compensation, unemployment insurance, social security, retirement, and
similar legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course of the Company's
business, consistent with past custom and practice (including with respect to
frequency and amount).
2.5 OPINION OF FINANCIAL ADVISOR. The special committee of the Board of
Directors of the Company has received an opinion from JSB Partners, L.P., dated
October 13, 1999, a signed copy of which has been provided to the Buyer
concurrently with the execution and delivery of this Agreement, with respect to
the fairness of the consideration to be received by the Company Stockholders in
the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. The Buyer is duly qualified to conduct
business and is in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, except where the failure to be so
qualified or in good standing would not have a Buyer Material Adverse Effect (as
defined below). The Buyer has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. For purposes of this Agreement, "Buyer Material Adverse
Effect" means a material adverse effect on the assets, business, condition
(financial or otherwise) or results of operations of the Buyer and its
subsidiaries, taken as a whole.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer, as of the
date hereof, consists of (i) 100,000,000 shares of Buyer Common Stock, of which
36,689,903 shares were issued and outstanding and none were held in the treasury
of the Buyer and (ii) 5,000,000 shares of authorized blank check preferred
stock, $.001 par value per share, none of which have been designated, were
issued and outstanding or were held in the treasury of the Buyer. All of the
issued and outstanding shares of Buyer Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. All of the
shares of Buyer Common Stock will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid, nonassessable and free
of all preemptive rights.
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3.3 AUTHORIZATION OF TRANSACTION. The Buyer has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Buyer of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Buyer required under Section 253 of the Delaware General Corporation Law. This
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against it
in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Securities Exchange Act of 1934 (as amended, the "Exchange Act") and the filing
of the Certificate of Merger as required by the Delaware General Corporation
Law, neither the execution and delivery by the Buyer of this Agreement, nor the
consummation by the Buyer of the transactions contemplated hereby, will
(a) conflict with or violate any provision of the charter or By-laws of the
Buyer, (b) require on the part of the Buyer any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, (c) conflict
with, result in breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of obligations under,
create in any party any right to terminate, modify or cancel, or require any
notice, consent or waiver under, any contract or instrument to which the Buyer
is a party or by which it is bound or to which any of its assets are subject,
except for (i) any conflict, breach, default, acceleration, termination,
modification or cancellation which would not adversely affect the consummation
of the transactions contemplated hereby or (ii) any notice, consent or waiver
the absence of which would not adversely affect the consummation of the
transactions contemplated hereby, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Buyer or any of its
properties or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously furnished
or made available to the Company complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, as filed with the Securities and Exchange Commission (the
"SEC"), and (b) all other reports filed with the SEC by the Buyer under
Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act since
December 31, 1998 (such reports are collectively referred to herein as the
"Buyer Reports"). The Buyer Reports constitute all of the documents required to
be filed with the SEC by the Buyer under Section 13 or subsections (a) or
(c) of Section 14 of the Exchange Act from January 1, 1999 through the date of
this Agreement. The Buyer Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder when
filed. As of their respective dates, the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto when filed, (ii) were prepared in accordance with
United State generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except as may be indicated therein
or in the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Buyer as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the Buyer.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGES. Since June 30, 1999, there has
occurred no event or development which has had a Buyer Material Adverse Effect.
3.7 LITIGATION. The Buyer is not a party to or, to the knowledge of the
Buyer, threatened to be made a party to (a) any unsatisfied judgment, order,
decree, stipulation or injunction or (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or before any Governmental Entity or
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before any arbitrator that, in the case of either (a) or (b), reasonably could
be expected to have a Buyer Material Adverse Effect.
ARTICLE IV
COVENANTS
4.1 CLOSING EFFORTS. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 COMPLIANCE WITH SECTION 253. The Parties shall take all necessary and
appropriate action for the Merger to become effective without a vote of the
stockholders of the Company in accordance with the provisions of Section 253 of
the Delaware General Corporation Law.
4.3 PROSPECTUS/INFORMATION STATEMENT AND REGISTRATION STATEMENT. The Buyer
shall prepare, with the assistance and cooperation of the Company, a
Registration Statement on Form S-4 as promptly as practicable after the date
hereof (the "Registration Statement"). The Registration Statement shall include
a prospectus/information statement to be used for the purpose of offering the
Buyer Common Stock to stockholders of the Company (such prospectus/information
statement, together with any accompanying letter to stockholders, shall be
referred to herein as the "Prospectus/Information Statement"). The Buyer shall
file the Registration Statement with the SEC and shall, with the assistance of
the Company, promptly respond to any SEC comments on the Registration Statement
and shall otherwise use its Reasonable Best Efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable. Promptly following such time as the Registration Statement is
declared effective, the Company shall distribute the Prospectus/Information
Statement to its stockholders.
4.4 OPERATION OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect.
4.5 LISTING OF BUYER COMMON STOCK. The Buyer shall list the Buyer Common
Stock to be issued in the Merger on the Nasdaq National Market.
4.6 FUNDING OBLIGATIONS. As an additional inducement to the Company to
enter into this Agreement, the Buyer agrees that (i) until March 31, 2000, it
shall refrain from demanding any repayments of intercompany advances it has made
or shall make to the Company and (ii) until the Effective Time, it shall make
reasonable additional advances of funds to the Company, as and when requested by
the Company.
4.7 INDEMNIFICATION.
(a) From and after the Effective Time, Buyer agrees that it will indemnify
and hold harmless each present and former director and officer of the Company
(the "Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation,
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whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent that the Company would have been permitted under Delaware law and
its Certificate of Incorporation or Bylaws in effect on the date hereof to
indemnify an Indemnified Party (and Buyer shall also advance expenses as
incurred to the fullest extent permitted under applicable law, provided the
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification).
(b) For a period of three years after the Effective Time, Buyer shall cause
the Company to maintain (to the extent available in the market) in effect a
directors' and officers' liability insurance policy covering those persons who
are currently covered by the Company's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered to Buyer) with
coverage in amount and scope at least as favorable to such persons as the
Company's existing coverage; provided, that in no event shall Buyer be required
to expend in excess of 150% of the annual premium currently paid by the Company
for such coverage.
(c) The provisions of this Section 4.7 are intended to be in addition to the
rights otherwise available to the current officers and directors of the Company
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
4.8 AGREEMENTS FROM CERTAIN AFFILIATES OF THE COMPANY. Upon the execution
of this Agreement, the Company shall provide to the Buyer a list of those
persons who are, in the Company's reasonable judgment, Affiliates of the
Company. The Company shall provide the Buyer such information and documents as
the Buyer shall reasonably request for purposes of reviewing such list and shall
notify the Buyer in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. In order to help ensure that the issuance
of and any resale of the Buyer Common Stock will comply with the Securities Act
and that the Merger will be treated as a tax-free reorganization, the Company
shall use its Reasonable Best Efforts to deliver or cause to be delivered to the
Buyer, as soon as practicable and in any case prior to the mailing of the
Prospectus/Information Statement (or, in the case of any person who becomes an
Affiliate after such date, as soon as practicable after such person becomes an
Affiliate), an Affiliate Agreement, in the form attached hereto as Exhibit A (an
"Affiliate Agreement"), executed by each of its Affiliates. The Buyer shall be
entitled to place appropriate legends on the certificates evidencing any shares
of Buyer Common Stock to be issued to Affiliates of the Company, and to issue
appropriate stop transfer instructions to the transfer agent for the Buyer
Common Stock, setting forth restrictions on transfer consistent with the terms
of the Affiliate Agreement.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) the Buyer shall have received an opinion from Hale and Dorr LLP, in a
form reasonably satisfactory to the Buyer, dated the Closing Date, to the effect
that the Merger will constitute a reorganization for federal income tax purposes
within the meaning of Section 368(a) of the Code.;
(b) the Registration Statement shall have been declared effective by the SEC
and shall not be the subject of any stop order or proceedings seeking a stop
order;
(c) no Governmental Entity of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment, injunction, statute, rule or
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regulation which shall be in effect and which shall have the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger; and
(d) (i) all waivers, permits, consents, approvals or other authorizations in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained from the appropriate Governmental Entities,
and (ii) all registrations, filings and notices in connection with the
transactions contemplated by this Agreement shall have been effected with the
appropriate Governmental Entities, except those whose failure to obtain or
effect would have neither a Buyer Material Adverse Effect nor a Company Material
Adverse Effect.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
(a) the representations and warranties of the Company set forth in the first
sentence of Section 2.1 and in Sections 2.2 and 2.3 and any representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality or as to Company Material Adverse Effect shall be true and correct
in all respects, and all other representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Effective Time as
though made as of the Effective Time, except to the extent such representations
and warranties are specifically made as of a particular date or as of the date
of this Agreement (in which case such representations and warranties shall be
true and correct as of such date);
(b) the Company shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Effective Time; and
(c) the Company shall have obtained any consent or approval of any third
party the failure of which to obtain, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the Buyer Common Stock to be issued in the Merger shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance;
(b) the representations and warranties of the Buyer set forth in the first
sentence of Section 3.1 and in Section 3.3 and any representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality or as to Buyer Material Adverse Effect shall be true and correct,
and all other representations and warranties of the Buyer set forth in this
Agreement shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Effective Time as though made as of the
Effective Time, except to the extent such representations and warranties are
specifically made as of a particular date or as of the date of this Agreement
(in which case such representations and warranties shall be true and correct as
of such date); and
(c) the Buyer shall have performed or complied with in all material respects
its agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Effective Time;
10
<PAGE>
ARTICLE VI
TERMINATION
6.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) the Buyer may terminate this Agreement by giving written notice to the
Company in the event the Company is in breach of any representation, warranty or
covenant contained in this Agreement, and such breach, individually or in
combination with any other such breach, (i) would cause the conditions set forth
in clauses (a) or (b) of Section 5.2 not to be satisfied and (ii) is not cured
within 20 days following delivery by the Buyer to the Company of written notice
of such breach;
(c) the Company may terminate this Agreement by giving written notice to the
Buyer in the event the Buyer is in breach of any representation, warranty or
covenant contained in this Agreement, and such breach, individually or in
combination with any other such breach, (i) would cause the conditions set forth
in clauses (b) or (c) of Section 5.3 not to be satisfied and (ii) is not cured
within 20 days following delivery by the Company to the Buyer of written notice
of such breach; or
(d) either Party may terminate this Agreement if the Merger shall not have
been consummated on or before December 31, 2000; provided, however, that a Party
may not terminate pursuant to this clause (d) if the terminating Party shall
have breached in any material respect its representations and warranties or its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure referred to in this clause (d).
6.2 EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant
to Section 6.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for any liability of any
Party for breaches of this Agreement).
11
<PAGE>
ARTICLE VII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ ------------
<S> <C>
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Certificates 1.7(a)
Certificate of Merger 1.1
Closing 1.2
Closing Date 1.2
Code 1.9(a)
Company Introduction
Company Shares 1.5(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(b)
Company Stockholder 1.5(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Exchange Act 3.4
Exchange Agent 1.3
Governmental Entity 2.4
Merger 1.1
Note 4.6
Options 1.9(a)
Ordinary Course of Business 2.4
Parties Introduction
Reasonable Best Efforts 4.1
SEC 3.5
Securities Act 1.9(c)
Security Interest 2.4
Special Committee 2.3
Surviving Corporation 1.1
</TABLE>
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL. None of the representations, warranties, covenants or
agreements set forth herein shall survive the Closing; provided, however, that
the covenants set forth in Section 4.7 shall survive the Closing.
8.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that the provisions in
Article I concerning issuance of the Buyer Common Stock are intended for the
benefit of the Company Stockholders and the provisions of Section 4.7 are
intended for the benefit of the officers and directors of the Company.
12
<PAGE>
8.3 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
8.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Party.
8.5 COUNTERPARTS AND FACSIMILE SIGNATURE. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
8.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
If to the Company:
Millennium BioTherapeutics, Inc.
640 Memorial Drive
Cambridge, MA 02139-4815
Attention: Vice President and General Manager
(with a copy to the General Counsel)
If to the Buyer:
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Attention: Chief Business Officer (with a copy to
the General Counsel)
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
8.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver of any right or remedy hereunder
shall be valid unless the same shall be in writing and signed by the Party
giving such
13
<PAGE>
waiver. No waiver by any Party with respect to any default, misrepresentation or
breach of warranty or covenant hereunder shall be deemed to extend to any prior
or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. Any such amendment shall be agreed to by the Company
and any such waiver shall be granted by the Company only if the Board of
Directors of the Company, acting in accordance with a recommendation of the
Special Committee, has authorized such amendment or waiver.
8.10 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
8.11 SUBMISSION TO JURISDICTION. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Delaware in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other Party with respect thereto. Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in
Section 8.7. Nothing in this Section 8.11, however, shall affect the right of
any Party to serve legal process in any other manner permitted by law.
8.12 WAIVER OF RIGHT TO TRIAL BY JURY. Each Party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand, action or
cause of action arising under this Agreement, whether sounding in contract or
tort or otherwise; and each Party hereby agrees and consents that any such
claim, demand, action or cause of action shall be decided by court trial without
a jury and that any Party to this Agreement may file a copy of this
Section 8.12 with any court as written evidence of the consent to the Parties
hereto to the waiver of their right to trial by jury.
8.13 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed to be the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
14
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
MILLENNIUM PHARMACEUTICALS, INC.
By: /s/ Steven Holtzman
--------------------------------------
Title: Chief Business Officer
MILLENNIUM BIOTHERAPEUTICS, INC.
By: /s/ John Maraganore
--------------------------------------
Title: General Manager
15
<PAGE>
EXHIBIT A
AFFILIATE AGREEMENT
, 199
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139-4815
Millennium BioTherapeutics, Inc.
640 Memorial Drive
Cambridge, MA 02139
Dear Sirs:
An Agreement and Plan of Merger dated as of October 14, 1999 (the "Merger
Agreement") has been entered into by and between Millennium
Pharmaceuticals, Inc. (the "Buyer") and Millennium BioTherapeutics, Inc. (the
"Company"). The Merger Agreement provides for the merger of the Company with and
into the Buyer (the "Merger"). In accordance with the Merger Agreement, the
shares of each class of capital stock of the Company (collectively, the "Company
Stock") owned by the undersigned at the Effective Time (as defined in the Merger
Agreement) shall be converted into shares of common stock, $.001 par value per
share, of the Buyer (the "Buyer Common Stock"), as described in the Merger
Agreement.
The undersigned may be deemed to be an "affiliate" of the Company within the
meaning of the rules promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). In consideration of the mutual agreements set forth in
the Merger Agreement and hereinafter in this agreement, the undersigned
represents and agrees as follows:
(a) The undersigned will not offer, sell, transfer, pledge, hypothecate or
otherwise dispose of, or reduce the undersigned's interest in or risk relating
to, any shares of Buyer Common Stock issued to the undersigned in the Merger
unless at such time either: (i) such transaction shall be permitted pursuant to
the provisions of Rule 145 under the Securities Act; (ii) the undersigned shall
have furnished to the Buyer an opinion of counsel, satisfactory to the Buyer, to
the effect that no registration under the Securities Act would be required in
connection with the proposed offer, sale, transfer, pledge, hypothecation or
other disposition; or (iii) a registration statement under the Securities Act
covering the proposed offer, sale, transfer, pledge, hypothecation or other
disposition shall be effective under the Securities Act.
(b) The undersigned understands that all certificates representing shares of
Buyer Common Stock delivered to the undersigned pursuant to the Merger shall
bear a legend substantially in the form set forth below, until the earliest to
occur of (i) one of the events referred to in paragraph (a) above or (ii) the
date on which the undersigned requests removal of such legend, provided that
such request occurs at least two years from the Effective Time and that the
undersigned is not at the time of such request, and has not been during the
three-month period immediately preceding such request, an affiliate of the
Buyer:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 of the Securities Act of 1933 applies and may only be
transferred in accordance with the provisions of such rule. In addition,
the shares represented by this certificate may only be transferred in
accordance with the terms of an Affiliate Agreement dated as of
, 1999 between the initial holder hereof and the corporation,
a copy of which agreement may
A-1
<PAGE>
be inspected by the holder of this certificate at the principal offices
of the corporation, or furnished by the corporation to the holder of this
certificate upon written request without charge."
(c) The Buyer, in its discretion, may cause stop transfer orders to be
placed with its transfer agent with respect to the certificates for the shares
of Buyer Common Stock which are required to bear the foregoing legend.
(d) The undersigned has, and as of the Effective Time will have, no plan or
intent (a "Plan"), and is not aware of any Plan on the part of other Company
Stockholders, to engage in a sale, transfer, pledge, hypothecation or any other
transaction that results in a direct or indirect transfer of the risk of
ownership: (i) to the Buyer, or any person related to the Buyer, of (A) any
Company Shares for consideration other than shares of Buyer Common Stock (or any
cash received in lieu of fractional shares of Buyer Common Stock), or (B) any
shares of Buyer Common Stock to be received in the Merger; or (ii) to the
Company, or any person related to the Company, of any Company Shares. For
purposes of this clause (d), the determination of whether a person is related to
the Buyer and/or the Company shall be made in accordance with Treasury
Regulation Section 1.368-1(e)(3). If any of the undersigned's representations in
this clause (d), cease to be true at any time prior to the Effective Time, then
the undersigned will deliver to each of the Buyer and the Company, prior to the
Effective Time, a written statement to that effect, signed by the undersigned.
IX MISCELLANEOUS.
This agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
This agreement shall be binding on the undersigned's successors and assigns,
including his heirs, executors and administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for the Company.
Very truly yours,
--------------------------------------
Signature
--------------------------------------
Print Name
Accepted:
MILLENNIUM PHARMACEUTICALS, INC.
- ---------------------------------------------
(signature)
- ---------------------------------------------
(print name and title)
- ---------------------------------------------
(date)
A-2
<PAGE>
MILLENNIUM BIOTHERAPEUTICS, INC.
- ---------------------------------------------
(signature)
- ---------------------------------------------
(print name and title)
- ---------------------------------------------
(date)
A-3
<PAGE>
[LETTERHEAD]
Exhibit 99.1
October 13, 1999
The Special Committee of the Board of Directors
Millennium BioTherapeutics, Inc.
640 Memorial Drive
Cambridge, MA 02181
Dear Gentlemen:
We understand that Millennium BioTherapeutics, Inc. (the "Company") and
Millennium Pharmaceuticals, Inc. (the "Buyer") are considering a transaction in
accordance with the terms set forth in a draft Agreement and Plan of Merger
dated as of October 8, 1999 (the "Agreement"), pursuant to which the Company
shall merge with and into the Buyer (the "Merger"). You have requested our
opinion regarding the fairness, from a financial point of view, of the aggregate
consideration to be received by the employee shareholders, taken as a whole, of
the Company (the "Company Employee Shareholders") pursuant to the Agreement.
Pursuant to the terms of the Agreement, each share of common stock $.001 par
value per share, of the Company (the "Company Shares"), owned by the Company
Employee Shareholders, other than Company Shares held by dissenting Company
Employee Shareholders, shall convert into shares of common stock $.001 par value
per share, of the Buyers (the "Buyer Shares") based on the conversion ratios
described in the Agreement (the "Consideration"). The total number of Buyer
Shares that the Company Employee Shareholders have the right to receive is the
number of Company Shares owned by the Company Employee Shareholders multiplied
by the average of the two quotients: (i) $15.00 divided by $62.536, and
(ii) $15.00 divided by the average closing trading price of the Buyer's Shares
for the 20 consecutive trading days ending on the day that is two trading days
prior to the day on which the Effective Time of the Merger occurs. The terms and
conditions of the Merger are set out more fully in the Agreement.
JSB Partners is a private firm engaged in providing advisory and investment
banking services to pharmaceutical and biotechnology companies, including
private placements, mergers and acquisitions, and corporate alliances. The
firm's activities are primarily directed toward financial and commercial
transactions. JSB Partners, as a customary part of its business, is regularly
engaged in the valuation of businesses and their securities for corporate and
other purposes. We have served as financial advisor to the Special Committee of
the Board of Directors of the Company in connection with the transaction
contemplated by the Agreement and will receive a fee for our services, which
include rendering the opinion. Other than the foregoing, JSB Partners has
provided no investment banking services to the Company or the Buyer for which it
has received any compensation.
Our opinion does not address the Company's underlying business decision to
effect the Merger or constitute a recommendation to any Company Employee
Shareholder as to how such shareholder should vote with respect to the Merger.
Further, the opinion expressed below addresses only the fairness of the
Consideration payable to the Company Employee Shareholders, taken as a whole,
and does not address the allocation of Consideration among Company Employee
Shareholders, whether pursuant to the Company's certificate of incorporation or
otherwise, or the adequacy of any Consideration received in the Merger by any
other holder of Company Shares other than the Company Employee Shareholders. At
your direction, we have not been asked to, nor do we, offer any opinion as to
the material terms of the Agreement or the form of the Merger. In rendering this
opinion, we have assumed, with your consent, that the final executed form of the
Agreement does not differ in any
<PAGE>
material respect from the draft we have examined and that the Company and the
Buyer will comply with all of the material terms of this Agreement.
In arriving at our opinion, we have among other things: (i) reviewed a draft
of the Agreement, (ii) reviewed internal business plans and financial forecasts
of the Company, as prepared by senior management, (iii) held discussions with
members of the Company's senior management concerning the financial condition
and operating results of the Company, (iv) compared the financial position,
resources and operating performance of the Company with publicly traded
companies and privately-held companies, (v) analyzed the historical market
prices and valuations of public and privately-held companies that JSB Partners
deemed relevant, (vi) compared the historical market price and trading activity
of the Buyer with those of other publicly traded companies that JSB Partners
deemed relevant, and (vii) reviewed industry market research studies, company
market research reports and conducted analyses as it deemed appropriate. In
addition, we have reviewed certain publicly available financial information
concerning the Buyer and the Company provided to us by the management of the
Company and performed such other studies and analyses and took into account such
other matters as we deemed relevant.
In connection with our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by us for purposes of this opinion. With respect to the financial
projections used in our analyses, we have assumed that they have been reasonably
prepared on bases reflecting the best estimates and judgments of the Buyer and
the Company senior management, respectively, as to the likely future performance
of the Buyer and the Company, respectively. In addition, we have not made an
independent valuation or appraisal of the assets of the Buyer or the Company,
nor have we been furnished with any such valuation or appraisal. Our opinion is
based on market, economic, financial and other conditions as they exist and can
be evaluated as of the date of this letter. Our opinion does not imply any
conclusion as to the likely trading range of Buyer Shares following the
consummation of the Merger.
It is understood that this letter is provided to the Special Committee of the
Board of Directors of the Company in connection with its consideration of the
proposed Merger and may not be used for any other purpose without our prior
written consent, except that we consent to the inclusion of this opinion as an
exhibit to any proxy statement or registration statement distributed to the
Company Employee Shareholders in connection with the Merger.
Based on the analysis described above and subject to the foregoing limitations
and qualifications, it is our opinion that the Consideration to be received by
the Company Employee Shareholders pursuant to the Agreement is fair from a
financial point of view to such holders, taken as a whole, as of the date of
delivery of this letter.
Very truly yours,
/s/ JSB PARTNERS, L.P.
---------------------------------------------------------------
JSB Partners, L.P.
2
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
Section 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record dated fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on a interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing sub paragraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has compiled with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger of
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent
2
<PAGE>
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent
of the corporation that is required to give either notice that such notice
has been given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the date
the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has compiled with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the city of
Wilmington, Delaware or such publication as the court deems advisable. The forms
of the notices by mail and by publication shall be approved by the court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have
3
<PAGE>
had to pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the court
of Chancery shall be dismissed was to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares o the surviving or resulting corporation.
4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper
personal benefit. The Registrant has included such a provision in its
Certificate of Incorporation.
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Article NINTH of the Registrant's Amended and Restated Certificate of
Incorporation provides that a director or officer of the Registrant (a) shall be
indemnified by the Registrant against all expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement incurred in connection with any
litigation or other legal proceeding (other than an action by or in the right of
the Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interest of the
registrant, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees),
judgment, fines and amounts paid in settlement incurred in connection with any
action by or in the right of the Registrant brought against him by virtue of his
position as a director or officer of the Registrant if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Registrant, except that no indemnification shall be made with
respect to any matter as to which such person shall have been adjudged to be
liable to the Registrants, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification of such expenses. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, he
is required to be indemnified by the Registrant against all expenses (including
attorneys' fees) incurred in connection therewith. Expenses shall be advanced to
a Director or officer at his request, provided that he undertakes to repay the
amount advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made promptly unless the Registrant
determines that the applicable standard of conduct required for indemnification
has not been met. In the event the Registrant denies a request for
indemnification, or if the Registrant fails to dispose of a request for
indemnification within 60 days after such payment is claimed by the indemnitee,
such person is permitted to petition the court to make an independent
determination as to whether such person is
II-1
<PAGE>
entitled to indemnification. As a condition precedent to the right of
indemnification, the director or officer must give the Registrant notice of the
action for which indemnity is sought and the Registrant has the right to
participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Amended and Restated Certificate of
Incorporation further provides that the indemnification provided herein is not
exclusive.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS:
- ---------
<C> <S>
2.1 Agreement and Plan of Merger by and between Millennium
Pharmaceuticals, Inc. and Millennium BioTherapeutics, Inc.
dated October 14, 1999 (included as Appendix A to the
Information Statement/Prospectus which is part of the
Registration Statement).
4.1 Form of Stock Certificate of Millennium Pharmaceuticals,
Inc. Common Stock (incorporated by reference to the
Registrant's Registration Statement on Form S-1, as amended
(file no. 333-2490)).
5.1 Opinion of Hale and Dorr LLP as to the legality of the
shares being issued (including consent).
8.1 Opinion of Hale and Dorr LLP regarding the federal income
tax consequences of the Merger (including consent).
23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of the Registrant.
23.2 Consent of Ernst & Young LLP relating to the audited
financial statements of Millennium BioTherapeutics.
23.3 Consent of Hale and Dorr LLP (included in Exhibit No. 5.1).
23.4 Consent of Hale and Dorr LLP (included in Exhibit No. 8.1).
24.1 Power of Attorney (See page II-4 of this Registration
Statement).
99.1 Opinion of JSB Partners, L.P.
99.2 Consent of JSB Partners, L.P. (included in Exhibit
No. 99.1).
</TABLE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering
II-2
<PAGE>
price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change in such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(e) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (d) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail
II-3
<PAGE>
or other equally prompt means. This includes information contained in the
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cambridge, Commonwealth of Massachusetts, on this 5th
day of November, 1999.
<TABLE>
<S> <C> <C>
MILLENNIUM PHARMACEUTICALS, INC.
By: /S/ MARK J. LEVIN
-----------------------------------------
Mark J. Levin
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned officers and directors of Millennium
Pharmaceuticals, Inc., hereby severally constitute Mark J. Levin, Kevin P. Starr
and John B. Douglas III, and each of them singly, our true and lawful attorneys
with full power to any of them, and to each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-4 filed herewith and any and all post-effective amendments to said
Registration Statement and generally to do all such things in our name and
behalf in our capacities as officers and directors to enable Millennium
Pharmaceuticals, Inc. to comply with the provisions of the Securities Act and
all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of
them, to said Registration Statement and all amendments thereto.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<C> <S> <C>
Chairman of the Board and
/s/ MARK J. LEVIN Chief Executive Officer
------------------------------------------- (Principal Executive November 5, 1999
Mark J. Levin Officer)
/s/ KEVIN P. STARR Chief Financial Officer
------------------------------------------- (Principal Financial and November 5, 1999
Kevin P. Starr Accounting Officer)
/s/ JOSHUA BOGER
------------------------------------------- Director November 5, 1999
Joshua Boger, Ph.D.
/s/ EUGENE CORDES
------------------------------------------- Director November 5, 1999
Eugene Cordes, Ph.D.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<C> <S> <C>
/s/ A. GRANT HEIDRICH
------------------------------------------- Director November 5, 1999
A. Grant Heidrich, III
/s/ RAJU S. KUCHERLAPATI
------------------------------------------- Director November 5, 1999
Raju S. Kucherlapati, Ph.D.
/s/ ERIC S. LANDER
------------------------------------------- Director November 5, 1999
Eric S. Lander, Ph.D.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and between Millennium
Pharmaceuticals, Inc. and Millennium BioTherapeutics, Inc.
dated October 14, 1999 (included as Appendix A to the
Information Statement/Prospectus which is part of the
Registration Statement).
4.1 Form of Stock Certificate of Millennium Pharmaceuticals,
Inc. Common Stock (incorporated by reference to the
Registrant's Registration Statement on Form S-1, as amended
(file no. 333-2490)).
5.1 Opinion of Hale and Dorr LLP as to the legality of the
shares being issued (including consent).
8.1 Opinion of Hale and Dorr LLP regarding the federal income
tax consequences of the Merger (including consent).
23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of the Registrant.
23.2 Consent of Ernst & Young LLP relating to the audited
financial statements of Millennium BioTherapeutics.
23.3 Consent of Hale and Dorr LLP (included in Exhibit No. 5.1).
23.4 Consent of Hale and Dorr LLP (included in Exhibit No. 8.1).
24.1 Power of Attorney (See page II-4 of this Registration
Statement).
99.1 Opinion of JSB Partners, L.P.
99.2 Consent of JSB Partners, L.P. (included in Exhibit
No. 99.1).
</TABLE>
<PAGE>
Exhibit 5.1
HALE AND DORR LLP
COUNSELLORS AT LAW
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
617-526-6000 -- FAX 617-526-5000
November 5, 1999
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Re: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), for the registration of 700,000 shares of Common
Stock, $.001 par value per share (the "Shares"), of Millennium Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), issuable pursuant to the Agreement
and Plan of Merger by and between the Company and Millennium BioTherapeutics,
Inc., a Delaware corporation, dated as of October 14, 1999 (the "Merger
Agreement").
We are acting as counsel for the Company in connection with the
issuance by the Company of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Merger Agreement, minutes of meetings of the stockholders and
the Board of Directors of the Company as provided to us by the Company, record
books of the Company as provided to us by the Company, the Certificate of
Incorporation and By-Laws of the Company, each as restated and/or amended to
date, and such other documents as we have deemed necessary for purposes of
rendering the opinions hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
<PAGE>
Millennium Pharmaceuticals, Inc.
November 5, 1999
Page 2
We assume that the appropriate action will be taken, prior to the offer
and sale of the Shares in accordance with the Merger Agreement, to register and
qualify the Shares for sale under all applicable state securities or "blue sky"
laws.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of the Commonwealth of Massachusetts, the
Delaware General Corporation Law statute and the federal laws of the United
States of America. To the extent that any other laws govern the matters as to
which we are opining herein, we have assumed that such laws are identical to the
state laws of the Commonwealth of assachusetts, and we are expressing no opinion
herein as to whether such assumption is reasonable or correct.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized for issuance and, when the Shares are issued in
accordance with the terms and conditions of the Merger Agreement, the Shares
will be validly issued, fully paid and nonassessable.
It is understood that this opinion is to be used only in connection
with the issuance of the Shares while the Registration Statement is in effect.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is based upon currently existing statutes, rules, regulations and
judicial decisions, and we disclaim any obligation to advise you of any change
in any of these sources of law or subsequent legal or factual developments which
might affect any matters or opinions set forth herein.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<PAGE>
EXHIBIT 8.1
HALE AND DORR LLP
C O U N S E L L O R S A T L A W
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
617-526-6000 - FAX 617-526-5000
November 5, 1999
Millennium Pharmaceuticals, Inc.
75 Sidney Street
Cambridge, MA 02139
Re: Merger pursuant to Agreement and Plan of Merger among
MILLENNIUM PHARMACEUTICALS, INC. AND MILLENNIUM BIOTHERAPEUTICS, INC.
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of
a registration statement (the "Registration Statement") on Form S-4, which
includes the Information Statement/Prospectus relating to the Agreement and Plan
of Merger dated as of October 14, 1999 (the "Merger Agreement"), by and among
Millennium Pharmaceuticals, Inc., a Delaware corporation ("Parent"), and
Millennium BioTherapeutics, Inc., a Delaware corporation ("Target"). Pursuant to
the Merger Agreement, Target will merge with and into Parent (the "Merger").
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Merger Agreement and the exhibits thereto or in the
letters delivered to Hale and Dorr LLP by Parent and Target containing certain
representations of Parent and Target relevant to this opinion (the
"Representation Letters"). All section references, unless otherwise indicated,
are to the United States Internal Revenue Code of 1986, as amended (the "Code").
In our capacity as counsel to Parent in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Merger Agreement and the exhibits thereto, the Representation
Letters, and such other documents as we considered relevant to our analysis. In
our examination of documents, we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures, and the legal
capacity of signatories.
We have assumed that all parties to the Merger Agreement and to any
other documents examined by us have acted, and will act, in accordance with the
terms of
<PAGE>
Millennium Pharmaceuticals, Inc.
November 5, 1999
Page 2
such Merger Agreement and documents and that the Merger will be consummated at
the Effective Time pursuant to the terms and conditions set forth in the Merger
Agreement without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the Merger
Agreement, as well as those representations contained in the Representation
Letters, are, and at the Effective Time will be, true and complete in all
material respects, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is correct without such qualification. We
have also assumed that as to all matters for which a person or entity has
represented that such person or entity is not a party to, does not have, or is
not aware of, any plan, intention, understanding, or agreement, there is no such
plan, intention, understanding, or agreement. We have not attempted to verify
independently such representations, but in the course of our representation,
nothing has come to our attention that would cause us to question the accuracy
thereof.
The conclusions expressed herein represent our judgment as to the
proper treatment of certain aspects of the Merger under the income tax laws of
the United States based upon the Code, Treasury Regulations, case law, and
rulings and other pronouncements of the Internal Revenue Service (the "IRS") as
in effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time, or at any
other time, or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you of any
developments after the Effective Time in the application or interpretation of
the income tax laws of the United States.
Our opinion represents our best judgment of how a court would decide if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger). We express
no opinion regarding the tax consequences of the Merger to shareholders of
Target that are subject to special tax rules, and we express no opinion
regarding the tax consequences of the Merger arising in connection with the
ownership of options or warrants for Target stock.
On the basis of, and subject to, the foregoing, and in reliance upon
the representations and assumptions described above, we are of the opinion that
the Merger will constitute a reorganization within the meaning of Section
368(a).
No opinion is expressed as to any federal income tax consequence of the
Merger except as specifically set forth herein, and this opinion may not be
relied upon
<PAGE>
Millennium Pharmaceuticals, Inc.
November 5, 1999
Page 3
except with respect to the consequences specifically discussed herein.
This opinion is intended solely for the purpose of inclusion as an
exhibit to the Registration Statement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name in the Registration Statement in
connection with references to this opinion and the tax consequences of the
Merger. In giving this consent, however, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Millennium
Pharmaceuticals, Inc. of 700,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 8, 1999, with
respect to the consolidated financial statements of Millennium Pharmaceuticals,
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 3, 1999
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 12, 1999, with respect to the financial
statements of Millennium BioTherapeutics, Inc. included in the Registration
Statement (Form S-4) and related Prospectus of Millennium Pharmaceuticals,
Inc. for the registration of 700,000 shares of its common stock.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 3, 1999
<PAGE>
[LETTERHEAD]
Exhibit 99.1
October 13, 1999
The Special Committee of the Board of Directors
Millennium BioTherapeutics, Inc.
640 Memorial Drive
Cambridge, MA 02181
Dear Gentlemen:
We understand that Millennium BioTherapeutics, Inc. (the "Company") and
Millennium Pharmaceuticals, Inc. (the "Buyer") are considering a transaction in
accordance with the terms set forth in a draft Agreement and Plan of Merger
dated as of October 8, 1999 (the "Agreement"), pursuant to which the Company
shall merge with and into the Buyer (the "Merger"). You have requested our
opinion regarding the fairness, from a financial point of view, of the aggregate
consideration to be received by the employee shareholders, taken as a whole, of
the Company (the "Company Employee Shareholders") pursuant to the Agreement.
Pursuant to the terms of the Agreement, each share of common stock $.001 par
value per share, of the Company (the "Company Shares"), owned by the Company
Employee Shareholders, other than Company Shares held by dissenting Company
Employee Shareholders, shall convert into shares of common stock $.001 par value
per share, of the Buyers (the "Buyer Shares") based on the conversion ratios
described in the Agreement (the "Consideration"). The total number of Buyer
Shares that the Company Employee Shareholders have the right to receive is the
number of Company Shares owned by the Company Employee Shareholders multiplied
by the average of the two quotients: (i) $15.00 divided by $62.536, and
(ii) $15.00 divided by the average closing trading price of the Buyer's Shares
for the 20 consecutive trading days ending on the day that is two trading days
prior to the day on which the Effective Time of the Merger occurs. The terms and
conditions of the Merger are set out more fully in the Agreement.
JSB Partners is a private firm engaged in providing advisory and investment
banking services to pharmaceutical and biotechnology companies, including
private placements, mergers and acquisitions, and corporate alliances. The
firm's activities are primarily directed toward financial and commercial
transactions. JSB Partners, as a customary part of its business, is regularly
engaged in the valuation of businesses and their securities for corporate and
other purposes. We have served as financial advisor to the Special Committee of
the Board of Directors of the Company in connection with the transaction
contemplated by the Agreement and will receive a fee for our services, which
include rendering the opinion. Other than the foregoing, JSB Partners has
provided no investment banking services to the Company or the Buyer for which it
has received any compensation.
Our opinion does not address the Company's underlying business decision to
effect the Merger or constitute a recommendation to any Company Employee
Shareholder as to how such shareholder should vote with respect to the Merger.
Further, the opinion expressed below addresses only the fairness of the
Consideration payable to the Company Employee Shareholders, taken as a whole,
and does not address the allocation of Consideration among Company Employee
Shareholders, whether pursuant to the Company's certificate of incorporation or
otherwise, or the adequacy of any Consideration received in the Merger by any
other holder of Company Shares other than the Company Employee Shareholders. At
your direction, we have not been asked to, nor do we, offer any opinion as to
the material terms of the Agreement or the form of the Merger. In rendering this
opinion, we have assumed, with your consent, that the final executed form of the
Agreement does not differ in any
<PAGE>
material respect from the draft we have examined and that the Company and the
Buyer will comply with all of the material terms of this Agreement.
In arriving at our opinion, we have among other things: (i) reviewed a draft
of the Agreement, (ii) reviewed internal business plans and financial forecasts
of the Company, as prepared by senior management, (iii) held discussions with
members of the Company's senior management concerning the financial condition
and operating results of the Company, (iv) compared the financial position,
resources and operating performance of the Company with publicly traded
companies and privately-held companies, (v) analyzed the historical market
prices and valuations of public and privately-held companies that JSB Partners
deemed relevant, (vi) compared the historical market price and trading activity
of the Buyer with those of other publicly traded companies that JSB Partners
deemed relevant, and (vii) reviewed industry market research studies, company
market research reports and conducted analyses as it deemed appropriate. In
addition, we have reviewed certain publicly available financial information
concerning the Buyer and the Company provided to us by the management of the
Company and performed such other studies and analyses and took into account such
other matters as we deemed relevant.
In connection with our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by us for purposes of this opinion. With respect to the financial
projections used in our analyses, we have assumed that they have been reasonably
prepared on bases reflecting the best estimates and judgments of the Buyer and
the Company senior management, respectively, as to the likely future performance
of the Buyer and the Company, respectively. In addition, we have not made an
independent valuation or appraisal of the assets of the Buyer or the Company,
nor have we been furnished with any such valuation or appraisal. Our opinion is
based on market, economic, financial and other conditions as they exist and can
be evaluated as of the date of this letter. Our opinion does not imply any
conclusion as to the likely trading range of Buyer Shares following the
consummation of the Merger.
It is understood that this letter is provided to the Special Committee of the
Board of Directors of the Company in connection with its consideration of the
proposed Merger and may not be used for any other purpose without our prior
written consent, except that we consent to the inclusion of this opinion as an
exhibit to any proxy statement or registration statement distributed to the
Company Employee Shareholders in connection with the Merger.
Based on the analysis described above and subject to the foregoing limitations
and qualifications, it is our opinion that the Consideration to be received by
the Company Employee Shareholders pursuant to the Agreement is fair from a
financial point of view to such holders, taken as a whole, as of the date of
delivery of this letter.
Very truly yours,
/s/ JSB PARTNERS, L.P.
---------------------------------------------------------------
JSB Partners, L.P.
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