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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ARADIGM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
CALIFORNIA 3845 94-3133088
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CODE NUMBER) IDENTIFICATION NUMBER)
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26219 EDEN LANDING ROAD
HAYWARD, CALIFORNIA 94545
(510) 783-0100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD P. THOMPSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ARADIGM CORPORATION
26219 EDEN LANDING ROAD
HAYWARD, CALIFORNIA 94545
(510) 783-0100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JAMES C. KITCH
JEFFREY S. ZIMMAN
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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 delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
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Common Stock, no par value............ 1,111,100 $14.438 $16,041,506.25 $4,732.25
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee under Rule 457(c) of the Securities Act of 1933 based on
the average of the high and low sales prices of the Common Stock as reported
on the Nasdaq National Market on April 30, 1998.
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 THAT 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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 7, 1998
PROSPECTUS
ARADIGM CORPORATION
1,111,100 SHARES OF COMMON STOCK
This Prospectus relates to up to 1,111,100 shares (the "Shares") of common
stock, no par value (the "Common Stock"), of Aradigm Corporation, a California
corporation ("Aradigm" or the "Company"), which may be offered for sale by
certain shareholders of the Company named in this Prospectus (the "Selling
Shareholders"). Such sales may be effected from time to time by the Selling
Shareholders through one or more underwriters, brokers, dealers or agents, and
directly to one or more purchasers, in one or more transactions on the Nasdaq
National Market pursuant to and in accordance with the rules of the Nasdaq
National Market, in negotiated transactions or otherwise, at prices related to
the prevailing market prices or at negotiated prices. The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Shareholders. See "Selling Shareholders" and "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "ARDM." On April 30, 1998 the last reported sale price for the Common
Stock of the Company as reported on the Nasdaq National Market was $14.50 per
share.
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THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company will bear substantially all expenses of the offering of the
Shares, except that the Selling Shareholders will pay any applicable
underwriting fees, discounts or commissions and transfer taxes. Estimated
expenses payable by the Company in connection with this offering are estimated
to be $20,000. The aggregate proceeds to the Selling Shareholders from the
Common Stock will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of issuance and distribution not borne by the Company. See "Plan of
Distribution."
The Selling Shareholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commission received by them and any profit on the
resale of the Common Stock purchased by them may be deemed to be underwriting
discounts or commission under the Securities Act. The Company has agreed to
indemnify the Selling Shareholders and certain other persons against certain
liabilities, including liabilities under the Securities Act.
May , 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the Commission's Public Reference Section located at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at 7 World Trade Center, Suite 1300, New York, New York, 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
also makes electronic filings publicly available on the Internet. The
Commission's Internet address is http://www.sec.gov. The Commission's web site
also contains reports, proxy and information statements and other information
regarding the Company that has been filed with the Commission. The Common Stock
of the Company is quoted on the Nasdaq National Market. Reports, proxy
statements and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act, including
amendments thereto, (the "Registration Statement") relating to the Common Stock
offered hereby with the Commission. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted pursuant to the
rules and regulations of the Commission. Statements contained in this Prospectus
as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement, or
otherwise filed with the Commission, each such statement being qualified in all
respects by such reference. The Registration Statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission under the Exchange Act
are hereby incorporated by reference into this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed on or about March 24, 1998, as amended on Form
10-K/A filed on or about April 2, 1998, including all material incorporated
by reference therein;
(b) The Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders; and
(c) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents,
unless such
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exhibits are specifically incorporated by reference herein or into such
documents). Such request may be directed to: Investor Relations Department,
Aradigm Corporation, 26219 Eden Landing Road, Hayward, California 94545,
telephone number (510) 783-0100.
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THE COMPANY
Aradigm Corporation ("Aradigm" or the "Company") is engaged in the
development of novel pulmonary drug delivery systems designed to enhance the
delivery and effectiveness of a number of existing and development stage drugs
and reduce the need for injectable drug therapy. Aradigm's principal product
development programs are based on its AERx system, which uses proprietary
technologies to create aerosols from liquid drug formulations for delivery
systemically via the lung or locally to the lung. The Company believes that its
systems can potentially be used to deliver a number of existing drugs for a
variety of applications and may also offer a promising means of delivery for
many new drugs being developed by pharmaceutical and biotechnology companies.
The Company was incorporated in California in January 1991. The Company's
principal executive offices are located at 26219 Eden Landing Road, Hayward, CA
94545, and its telephone number is (510) 783-0100. For a more detailed
discussion of the business of the Company, see the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, which is incorporated by
reference herein.
Aradigm(TM), AERx(TM) and SmartMist(R) are trademarks of the Company. Trade
names and trademarks of other companies appearing in this Prospectus are the
property of their respective holders.
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RISK FACTORS
In addition to the other information in this Prospectus and in the
documents incorporated by reference herein, the following Risk Factors should be
carefully considered in evaluating the Company and its business before
purchasing the Common Stock offered by this Prospectus. Except for historical
information contained herein, the discussion in this section contains
forward-looking statements, including, without limitation, statements regarding
timing and results of clinical trials, the establishment of corporate partnering
arrangements, the anticipated commercial introduction of the Company's products
and the timing of the Company's cash requirements. These forward-looking
statements involve certain risks and uncertainties that could cause actual
results to differ materially from those in such forward-looking statements.
EARLY STAGE OF COMPANY
Aradigm, incorporated in January 1991, is in an early stage of development,
has a limited history of operations and has generated only limited revenues to
date. The Company has only one product, the SmartMist Respiratory Management
System, cleared for commercial sale, and virtually all of its potential products
are in an early stage of research or development. There can be no assurance that
the Company's research and development efforts will be successful, that any
potential products will be proven safe and effective, that regulatory clearance
or approval for the sale of any of its potential products will be obtained or
that the SmartMist system or any of the Company's potential products can be
manufactured in commercial quantities or at an acceptable cost or marketed
successfully.
HISTORY OF LOSSES; ANTICIPATED FUTURE LOSSES
The Company has not been profitable since inception and, through December
31, 1997, has incurred a cumulative deficit of approximately $35.8 million. The
Company expects to continue to incur substantial losses over at least the next
several years as the Company's research and development efforts, preclinical and
clinical testing activities, marketing and manufacturing scale-up efforts expand
and as the Company plans and builds its late stage clinical and early commercial
production capabilities. To achieve and sustain profitable operations, the
Company must successfully partner with third parties to market and sell the
SmartMist Respiratory Management System and develop, obtain regulatory approval
for, manufacture, introduce, and partner with third parties to market and sell
products utilizing the Company's AERx technologies. There can be no assurance
that the Company's partners can generate sufficient product revenue to become
profitable or to sustain profitability.
UNCERTAINTY OF SUCCESSFUL PRODUCT DEVELOPMENT
The Company's AERx systems are at an early stage of development and are
being tested using patient-operated prototypes. The AERx systems will require
substantial additional development, preclinical and clinical testing and
investment before they can be commercialized. To further develop its AERx
systems, the Company must address many engineering and design issues, including
ensuring that the device has the ability to deliver a reproducible amount of
drug into the bloodstream and can be manufactured successfully as a hand-held
system. No assurance can be made that the Company will be successful in
addressing these design, engineering and manufacturing issues. Additionally, the
Company may need to formulate and will need to package drugs for delivery by its
AERx systems. There can be no assurance that the Company will be able to
successfully formulate and package such drugs. The Company will need to
demonstrate that drugs delivered by its AERx systems remain safe and efficacious
and that over time and under differing storage conditions, such drugs will not
be subject to physical or chemical instability or other problems that would
prohibit the AERx systems from being commercially viable. While development
efforts are at different stages for different products, there can be no
assurance that the Company will be successful in any of its product development
efforts, or that the Company will not abandon some or all of its proposed
products. Failure by the Company to successfully develop its potential products
in a timely manner would have a material adverse effect on the Company.
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UNCERTAINTY OF SUCCESSFUL PRODUCT COMMERCIALIZATION
The Company's success in commercializing its products will be dependent
upon many factors, including acceptance by health care professionals and
patients. Acceptance of the Company's products will largely depend on
demonstrating that the Company's products are competitive with alternate
delivery systems with respect to safety, efficacy, ease of use and price. The
Company believes that market acceptance of its SmartMist system will depend
largely upon health care professionals and third-party payors determining that
the SmartMist system offers medical and economic benefits over existing asthma
therapies. In addition, the SmartMist system is specifically designed for the
canisters currently used by some of the leading manufacturers of MDIs. If, among
other things, manufacturers decide to change the dimensions of their canisters,
the Company could be adversely affected. Moreover, MDIs use chlorofluorocarbons
("CFCs") as a propellant for the medication. The Company is aware of initiatives
and international agreements to ban CFCs, which could have an adverse effect on
the Company. In order to commercialize the SmartMist system, the Company is
pursuing collaborations with pharmaceutical firms, disease management companies
and managed care organizations in order to develop the market for this product
and to realize its potential as a part of a broader pulmonary disease management
program. There can be no assurance that the SmartMist system or the Company's
products in development will prove competitive or that the Company will be
successful in taking products from their current state of development to
commercial introduction or success. Failure by the Company to successfully
commercialize its potential products in a timely manner would have a material
adverse effect on the Company.
DEPENDENCE UPON COLLABORATIVE PARTNERS AND NEED FOR ADDITIONAL COLLABORATIVE
PARTNERS
The Company's commercialization strategy is dependent on the Company's
ability to enter into agreements with collaborative partners. The Company's
ability to successfully develop and commercialize its first AERx system, the
AERx Pain Management System, is dependent on the Company's corporate partnership
with SmithKline Beecham. SmithKline Beecham has agreed to undertake certain
collaborative activities with the Company, fund research and development
activities with the Company, make certain payments to the Company upon
achievement of certain milestones and pay royalties to the Company if and when a
product is commercialized. If SmithKline Beecham fails to conduct these
collaborative activities in a timely manner or at all, the preclinical or
clinical development or commercialization of the AERx Pain Management System
will be delayed. In addition, the agreement may be terminated by SmithKline
Beecham and there can be no assurance that development and milestone payments
will be received. Should the Company fail to receive development funds or
achieve milestones set forth in the agreement, or should SmithKline Beecham
breach or terminate the agreement, the Company's business, financial condition
and results of operations would be materially adversely affected.
The Company will need to enter into additional agreements with corporate
partners to conduct the clinical trials, manufacturing, marketing and sales
necessary to commercialize its other potential products. In addition, the
Company's ability to apply the AERx system to any proprietary drugs, including
new drugs, biotechnology drugs or established drugs in proprietary formulations,
will depend on the Company's ability to establish and maintain corporate
partnerships or other collaborative arrangements with the holders of proprietary
rights to such drugs. There can be no assurance that the Company will be able to
establish such additional corporate partnerships or collaborative arrangements
on favorable terms or at all, or that its existing or any future corporate
partnerships or collaborative arrangements will be successful. In addition,
there can be no assurance that existing or future corporate partners or
collaborators will not pursue alternative technologies or develop alternative
products either on their own or in collaboration with others, including the
Company's competitors. There can be no assurance that disputes will not arise in
the future with the Company's existing or future corporate partners or
collaborators, and any such disagreements could lead to delays in the research,
development or commercialization of any potential products or result in
litigation or arbitration which would be time consuming and expensive. Should
any corporate partner or collaborator fail to develop or commercialize
successfully any product to which it has obtained rights from the Company, the
Company's business, financial condition and results of operations may be
materially adversely affected.
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LIMITED MANUFACTURING EXPERIENCE
The Company has only limited experience in manufacturing. In the event the
SmartMist system achieves market acceptance, the Company will need to further
increase its current manufacturing capacity or enter into an agreement with a
collaborative partner to provide such manufacturing capacity. In addition, the
Company is in the process of increasing the production of disposable drug
packets for the AERx system for later stage clinical trials. The Company
anticipates making significant expenditures to attempt to provide for the high
volume manufacturing required for multiple AERx products, if such products are
successfully developed. There can be no assurance that manufacturing and quality
control problems will not arise as the Company attempts to scale-up, or that any
such scale-up can be achieved in a timely manner or at a commercially reasonable
cost. Any failure to surmount such problems could delay or prevent late stage
clinical testing and commercialization of the Company's products. The Company's
manufacturing facilities and those of its contract manufacturers will be subject
to periodic regulatory inspections by the FDA and other federal and state
regulatory agencies and such facilities must comply with good manufacturing
practice ("GMP") requirements of the FDA. There can be no assurance the Company
will satisfy such regulatory requirements and any failure to satisfy GMP and
other requirements could have a material adverse effect on the Company.
The Company uses contract manufacturers to produce key components,
assemblies and subassemblies for its SmartMist devices and intends to use
contract manufacturers in a similar way in connection with clinical and
commercial manufacturing of its AERx devices. There can be no assurance that
Aradigm will be able to enter into or maintain satisfactory contract
manufacturing arrangements. Certain components of Aradigm's current and
potential products are or will be available initially only from single sources.
While the Company has contingency plans for alternate suppliers, there can be no
assurance that the Company could find alternate suppliers for such components.
Even if new suppliers are secured, there can be no assurance that this would not
significantly reduce or eliminate the Company's ability to supply product during
any transition. A delay of or interruption in production could have a material
adverse effect on the Company's business, financial condition and results of
operations.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue
in the foreseeable future. The development of the Company's technology and
proposed products will require a commitment of substantial funds. In addition,
costly and time-consuming research and preclinical and clinical testing
activities must be conducted to develop, refine and commercialize such
technology and proposed products. The Company's future capital requirements will
depend on many factors, including continued progress in the research and
development of the Company's technology and drug delivery systems, the ability
of the Company to establish and maintain favorable collaborative arrangements
with others, progress with preclinical studies and clinical trials, the time and
costs involved in obtaining regulatory approvals, the cost of development and
the rate of scale-up of the Company's production technologies, the cost involved
in preparing, filing, prosecuting, maintaining and enforcing patent claims and
the need to acquire licenses or other rights to new technology.
The Company has financed its operations since inception primarily through
private placements and public offerings of its capital stock, proceeds from
financings of equipment acquisitions, contract research revenue and interest
earned on investments. The Company anticipates that its existing resources,
anticipated payments from its existing corporate partners and projected interest
income, will enable the Company to maintain its current and planned operations
through 1998. However, there can be no assurance that the Company will not need
to raise substantial additional capital to fund its operations prior to such
time. There can be no assurance that additional financing will be available on
acceptable terms or at all. If additional funds are raised by issuing equity
securities, substantial dilution to shareholders may result. If adequate funds
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research or development programs or obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, product candidates
or products that the Company would not otherwise relinquish.
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DEPENDENCE UPON PROPRIETARY TECHNOLOGY; UNCERTAINTY OF PATENTS AND PROPRIETARY
TECHNOLOGY
The field of aerosolized drug delivery is crowded and a substantial number
of patents have been issued in this field. Competitors and institutions may have
applied for other patents and may obtain additional patents and proprietary
rights relating to products or processes competitive with those of the Company.
Patents or other publications may hinder or prevent the Company from obtaining
patent protection being sought or draw into question the validity of patents
already issued to the Company. In addition, patents issued to others might
provide competitors with the ability to prevent the Company from making its
products or carrying out processes necessary for use of its products. The
Company may not be able to obtain a license under any such patent and may
thereby be prevented from making products or carrying out processes which are
important or essential to the business of the Company. Although issued patents
are presumed valid under federal law, none of the patents of the Company has
been challenged in litigation. There can be no assurance that any of such
patents will be found valid if challenged. There also can be no assurance that
any of the applications will issue or if issued will later be found valid if
challenged. Further, there can be no assurance that any issued patents or
applications which might later issue as patents will provide the Company with a
degree of market exclusivity sufficient for the Company to profitably compete
against its competitors. Pending United States applications are maintained in
secret until they are issued as patents and as such can not be searched by the
Company. There may be pending applications which will later issue as patents
which will create infringement issues for the Company. Further, patents already
issued to the Company or applications of the Company which are pending may
become involved in interferences that could be resolved in favor of competitors
of the Company and involve the expenditure of substantial financial and human
resources of the Company.
Company policy is to require its officers, employees, consultants and
advisors to execute proprietary information and invention assignment agreements
upon commencement of their relationships with the Company. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's inventions, trade secrets or other proprietary information in the
event of unauthorized use or disclosure of such information. Violations of such
agreements are difficult to police.
GOVERNMENT REGULATION; UNCERTAINTY WITH PRECLINICAL AND CLINICAL TESTING
All medical devices and new drugs, including the Company's products under
development, are subject to extensive and rigorous regulation by the federal
government, principally the FDA, and by state and local governments. Such
regulations govern the development, testing, manufacture, labeling, storage,
premarket clearance or approval, advertising, promotion, sale and distribution
of such products. If medical devices or drug products are marketed abroad, they
also are subject to regulation by foreign governments.
The regulatory process for obtaining FDA premarket clearances or approvals
for medical devices and drug products is generally lengthy, expensive and
uncertain. Securing FDA marketing clearances and approvals often requires the
submission of extensive clinical data and supporting information to the FDA.
Product clearances and approvals, if granted, can be withdrawn for failure to
comply with regulatory requirements or upon the occurrence of unforeseen
problems following initial marketing.
There can be no assurance that the Company will be able to obtain necessary
regulatory clearances or approvals on a timely basis, if at all, for any of its
products under development, and delays in receipt or failure to receive such
clearances or approvals or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company. Moreover,
regulatory clearances or approvals for products such as medical devices and new
drugs, even if granted, may include significant limitations on the uses for
which such products may be marketed. Certain changes to marketed medical devices
and new drugs are subject to additional FDA review and clearance or approval.
There can be no assurance that any clearances or approvals that are required,
once obtained, will not be withdrawn or that compliance with other regulatory
requirements can be maintained. Further, failure to comply with applicable FDA
and other regulatory requirements can result in sanctions being imposed on the
Company or the manufacturers of its products, including warning letters, fines,
product recalls or seizures, injunctions, refusals to permit products to be
imported into or exported out of the United States, refusals of FDA to grant
premarket clearance or
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premarket approval of medical devices and drugs or to allow the Company to enter
into government supply contracts, withdrawals of previously approved marketing
applications and criminal prosecutions.
The Company received 510(k) clearance from the FDA in 1996 for the
SmartMist system. The Company has made modifications to the SmartMist system
since receiving clearance, which the Company believes do not require the
submission of new 510(k) notifications to the FDA. There can be no assurance,
however, that the FDA would agree with any of the Company's determinations not
to submit a new 510(k) notice for any of these changes or would not require the
Company to submit a new 510(k) notice for any of the changes made to the device.
If the FDA requires the Company to submit a new 510(k) notice for any
modification to the SmartMist system, the Company and any potential partners may
be prohibited from marketing the modified device until the 510(k) notice is
cleared by the FDA, which could have a material adverse effect on the Company.
The Company may also be subject to certain user fees that the FDA is
authorized to collect under the Prescription Drug User Fees Act of 1992 for
certain drugs, including insulin and morphine. This act expired on September 30,
1997, and legislation to reauthorize it has been passed by the House and Senate.
It must be reconciled in a House-Senate conference and signed by the President
to become law.
Before the Company can file for regulatory approvals for the commercial
sale of the Company's potential AERx products, the FDA will require extensive
preclinical and clinical testing to demonstrate the safety and efficacy of such
potential products. To date, the Company has tested an early prototype
patient-operated version of the AERx Pain Management System with morphine on a
limited number of healthy volunteers in Phase I and Phase II clinical trials in
the United States. Failure of the Company to complete or progress to more
advanced clinical trials would have a material adverse effect on the Company.
There can be no assurance that the Company will be able to manufacture
sufficient quantifies of the disposable unit-dose packets to support any future
clinical trials of the AERx system, or that the design requirements of the AERx
system will make it feasible for development beyond the prototype currently
being used.
The timing of completion of clinical trials is dependent upon, among other
factors, the enrollment of patients. Patient recruitment is a function of many
factors, including the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the study and the existence of
competitive clinical trials. Delays in planned patient enrollment in the
Company's current trials or future clinical trials may result in increased
costs, program delays or both, which could have a material adverse effect on the
Company.
The Company also is developing applications of its AERx system for the
delivery of insulin and other compounds. These applications are in an early
stage of development and the regulatory requirements associated with obtaining
the necessary marketing approvals from the FDA and other regulatory agencies are
not known. There can be no assurance that these applications of the AERx system
will prove to be viable or that any necessary regulatory approvals will be
obtained in a timely manner, if at all. Although the Company believes the data
regarding the Company's potential products is encouraging, the results of
initial preclinical and clinical testing of the products under development by
the Company are not necessarily predictive of results that will be obtained from
subsequent or more extensive preclinical and clinical testing. Furthermore,
there can be no assurance that clinical trials of products under development
will demonstrate the safety and efficacy of such products at all or to the
extent necessary to obtain regulatory approvals. Companies in the medical
device, pharmaceutical and biotechnology industries have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. The failure to demonstrate adequately the safety and efficacy of a
therapeutic product under development could delay or prevent regulatory approval
of the product and would have a material adverse effect on the Company.
In addition, due to limited experience with chronic administration of drugs
delivered via the lung for systemic effect, the FDA may require clinical data to
demonstrate that such chronic administration is safe. There can be no assurance
that the Company will be able to present such data in a timely manner, or at
all.
The FDA and other regulatory agency requirements for manufacturing, product
testing and marketing can vary depending upon whether the product is a medical
device or a drug. Manufacturers of medical devices and drugs also are required
to comply with the applicable GMP requirements, which relate to product testing
9
<PAGE> 11
and quality assurance as well as the corresponding maintenance of records and
documentation. There can be no assurance that the Company will be able to comply
with the applicable GMP and other FDA regulatory requirements as it scales up
its manufacturing operations. Such failure could have a material adverse effect
on the Company.
In addition, in order for the Company to market its products in Europe and
in certain other foreign jurisdictions, the Company and its distributors and
agents must obtain required regulatory approvals and clearances and otherwise
comply with extensive regulations regarding safety and quality. These
regulations, including the requirements for approvals or clearance to market and
the time required for regulatory review, vary from country to country. There can
be no assurance that the Company will obtain regulatory approvals in such
countries or that it will not be required to incur significant costs in
obtaining or maintaining its foreign regulatory approvals. Delays in receipt of
approvals to market the Company's products, failure to receive these approvals,
or future loss of previously received approvals could have a material adverse
effect on the Company's business, financial condition and results of operations.
Because the Company's AERx Pain Management System clinical studies involve
morphine, the Company is registered with the Drug Enforcement Agency ("DEA") and
its facilities are subject to inspection and DEA export, import, security and
production quota requirements. There can be no assurance that the Company will
not be required to incur significant costs to comply with DEA regulations in the
future or that such regulations will not have a material adverse effect on the
Company.
HIGHLY COMPETITIVE MARKETS; RISK OF ALTERNATIVE THERAPIES
The medical device, pharmaceutical and biotechnology industries are highly
competitive and rapidly evolving. The Company's success will depend on its
ability to successfully develop products and technologies for pulmonary drug
delivery. If a competing company were to develop or acquire rights to a better
pulmonary delivery device, the Company could be materially and adversely
affected.
The Company is in competition with pharmaceutical, biotechnology and drug
delivery companies and other entities engaged in the development of alternative
drug delivery systems or new drug research and testing, as well as with entities
producing and developing injectable drugs. The Company is aware of a number of
companies currently seeking to develop new products and non-invasive
alternatives to injectable drug delivery, including oral, intranasal and
transdermal delivery systems and colonic absorption systems. The Company also is
aware of other companies currently engaged in the development and
commercialization of pulmonary drug delivery systems and enhanced injectable
drug delivery systems. Many of the Company's competitors have greater research
and development capabilities, experience, manufacturing, marketing, sales,
financial and managerial resources than the Company and represent significant
competition for the Company. Acquisitions of competing drug delivery companies
by large pharmaceutical companies or partnering arrangements between such
companies could enhance competitors' financial, marketing and other resources.
The Company's competitors may succeed in developing competing technologies,
obtaining FDA approval for products more rapidly than the Company and gaining
greater market acceptance of their products than the Company's products. There
can be no assurance that developments by others will not render some or all of
the Company's proposed products or technologies uncompetitive or obsolete, which
would have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon a limited number of key management and
technical personnel. The loss of the services of one or more of such key
employees could have a material adverse effect on the Company. In addition, the
Company's success will depend upon its ability to attract and retain additional
highly qualified marketing, management, manufacturing, engineering and research
and development personnel. The Company faces intense competition in its
recruiting activities, and there can be no assurance that the Company will be
able to attract or retain qualified personnel.
10
<PAGE> 12
EXPOSURE TO PRODUCT LIABILITY
The research, development and commercialization of medical devices and
therapeutic products entails significant product liability risks. If the Company
succeeds in commercializing products using the SmartMist system or the AERx
system and if it succeeds in developing additional devices and new products, the
use of such products in clinical trials and the commercial sale of such products
may expose the Company to liability claims. These claims might be made directly
by consumers or by pharmaceutical companies or others selling such products.
Companies often address the exposure of such risk by obtaining product liability
insurance. Although the Company currently maintains limited product liability
insurance, there can be no assurance that the Company will be able to obtain
additional or maintain existing insurance on acceptable terms, or at all, or in
amounts sufficient to protect the Company. A successful claim brought against
the Company in excess of the Company's insurance coverage would have a material
adverse effect on the Company's business.
UNCERTAINTY RELATED TO THIRD-PARTY REIMBURSEMENT
In both domestic and foreign markets, sales of the Company's current and
potential products, if any, will depend in part on the availability of
reimbursement from third-party payors such as government health administration
authorities, private health insurers and other organizations. Third-party payors
are increasingly challenging the price and cost-effectiveness of medical
products and services. Significant uncertainty exists as to the reimbursement
status of newly approved health care products. There can be no assurance that
any of the Company's current and potential products will be reimbursable by
third-party payors. In addition, there can be no assurance that the Company's
current and potential products will be considered cost-effective or that
adequate third-party reimbursement will be available to enable Aradigm to
maintain price levels sufficient to realize a profit. Legislation and
regulations affecting the pricing of pharmaceuticals may change before the
Company's current and potential products are approved for marketing and any such
changes could further limit reimbursement.
HAZARDOUS MATERIALS
The Company's operations involve the controlled use of hazardous materials,
chemicals and various radioactive compounds. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and such liability could exceed the resources of the
Company.
POSSIBLE VOLATILITY OF STOCK PRICE
The market prices for securities of many companies, including the Company,
engaged in pharmaceutical development activities historically have been highly
volatile and the market from time to time has experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Prices for the Company's Common Stock may be influenced by
many factors, including investor perception of the Company, fluctuations in the
Company's operating results and market conditions relating to the pharmaceutical
industry. In addition, announcements of technological innovations or new
commercial products by the Company or its competitors, delays in the development
or approval of the Company's product candidates, developments or disputes
concerning patent or proprietary rights, publicity regarding actual or potential
developments relating to products under development by the Company or its
competitors, regulatory developments in both the United States and foreign
countries, public concern as to the safety of drug technologies and economic and
other external factors, as well as period-to-period fluctuations in financial
results, may have a significant impact on the market price of the Common Stock.
Finally, future sales of substantial amounts of Common Stock by existing
shareholders could also adversely affect the prevailing price of the Common
Stock. In the past, following periods of volatility in the market price of a
company's securities, class action securities litigation has often been
instituted against such a company. Any such litigation instigated against the
Company could result in substantial costs and a diversion of management's
attention and
11
<PAGE> 13
resources, which could have a material adverse effect on the Company's business,
financial condition and operating results.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders in this offering.
SELLING SHAREHOLDERS
In April 1998, Aradigm sold 1,111,100 shares of Common Stock of the Company
to certain purchasers pursuant to the Common Stock Purchase Agreement dated
April 3, 1998 by and among the Company and the Purchasers named therein (the
"Purchase Agreement"). In connection with such sale, the Company agreed to file
a registration statement with the Commission covering the shares issued to each
Selling Shareholder and agreed to indemnify each Selling Shareholder against
claims made against them arising out of, among other things, statements made in
such registration statement. The Company has agreed to cause this registration
statement to remain effective until all the Shares have been re-sold or April 7,
1999, whichever is earlier.
In connection with the Purchase Agreement, the Company has also agreed to
issue warrants to FB Invemed Fund, L.P. and certain affiliates of the general
partner of such fund to purchase an aggregate of 166,665 shares of Common Stock
of the Company. The Company has also agreed to grant registration rights to the
holders of such warrants. Each warrant has a five year term.
The following table provides certain information with respect to Shares
held and to be offered under this Prospectus from time to time by each Selling
Shareholder. Because the Selling Shareholders may sell all or part of their
Common Stock pursuant to this Prospectus, and this offering is not being
underwritten on a firm commitment basis, no estimate can be given as to the
number and percentage of shares of Common Stock that will be held by each
Selling Shareholder upon termination of this offering. See "Plan of
Distribution."
The Company is unaware of any material relationship between any of the
Selling Shareholders and the Company in the past three years other than as a
result of the ownership of the Shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING AFTER OFFERING(2)
---------------------- NUMBER OF SHARES --------------------
SELLING STOCKHOLDER NUMBER PERCENT(1) BEING OFFERED NUMBER PERCENT(1)
------------------- --------- ---------- ---------------- ------- ----------
<S> <C> <C> <C> <C> <C>
Deutsche
Vermogensbildungsgesellschaft mbH
(DVG)............................ 300,000 2.82% 200,000 100,000 *
FB Invemed Fund, L.P............... 462,900 4.36% 462,900 -- *
GSAM Oracle Fund................... 109,000 1.03% 60,000 49,000 *
Haussmann Holdings, N.V. .......... 27,400 * 17,600 19,800 *
Oracle Institutional Partners,
L.P. ............................ 67,200 * 25,000 45,200 *
Oracle Offshore Limited............ 37,400 * 7,000 30,400 *
Oracle Partners, L.P. ............. 225,600 2.12% 108,600 117,000 1.10%
State of Oregon.................... 246,000 2.32% 230,000 16,000 *
--------- --------- -------
Total.................... 1,475,500 1,111,100 377,400
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 10,621,030 shares of Common
Stock outstanding on April 1, 1998.
(2) Assumes the sale of all shares offered hereby.
12
<PAGE> 14
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Shareholders hereunder pursuant to contractual registration rights
contained in the Purchase Agreement. Sales may be made on the Nasdaq National
Market or in private transactions or in a combination of such methods of sale,
at fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Shareholders and any persons who participate in the
distribution of Common Stock hereby may be deemed to be underwriters within the
meaning of the Securities Act, and any discounts, commissions or concessions
received by them and any provided pursuant to the sales of shares by them might
be deemed underwriting discounts and commissions under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
The Company has agreed in the Purchase Agreement to register the shares of
Aradigm Common Stock received by the Selling Shareholders pursuant to the
Purchase Agreement under applicable Federal and state securities laws under
certain circumstances and certain times. Pursuant to the Purchase Agreement, the
Company has filed a Registration Statement related to the Shares offered hereby
and has agreed to keep such Registration Statement effective until the earliest
of (i) April 7, 1999 or (ii) the sale of all the Shares registered thereunder.
The Company will pay substantially all of the expenses incident to the offering
and sale of the Common Stock to the public, other than commissions, concessions
and discounts of underwriters, dealers or agents. Such expenses (excluding such
commissions and discounts), are estimated to be $20,000. The Purchase Agreement
provides for cross-indemnification of the Selling Shareholders and the Company
to the extent permitted by law, for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of any registration of the
Common Stock.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The financial statements of the Company appearing in the Company's Annual
Report (Form 10-K) for the year ended December 31, 1997, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon,
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
13
<PAGE> 15
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 4
Risk Factors.......................... 5
Use of Proceeds....................... 12
Selling Shareholders.................. 12
Plan of Distribution.................. 13
Legal Matters......................... 13
Experts............................... 13
</TABLE>
======================================================
======================================================
1,111,100 SHARES
COMMON STOCK
ARADIGM
CORPORATION
------------------------
PROSPECTUS
MAY , 1998
======================================================
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of the Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee............................. $ 4,733
Legal fees and expenses..................................... 10,000
Accounting fees and expenses................................ 2,500
Miscellaneous............................................... 2,500
-------
Total............................................. $19,733
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's amended and Restated Articles of Incorporation and Bylaws
include provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by California law and (ii) permit the Company to indemnify its
directors and officers, employees and other agents to the fullest extent
permitted by the California Corporations Code (the "Corporations Code").
Pursuant to Section 317 of the Corporations Code, a corporation generally has
the power to indemnify its present and former directors, officers, employees and
agents against any expenses incurred by them in connection with any suit to
which they are, or are threatened to be made, a party by reason of their serving
in such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of a
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate liability for breach of the
director's duty of loyalty to the Company or its shareholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for any transaction from which the director derived an
improper personal benefit or for any willful or negligent payment of any
unlawful dividend.
The Company has entered into agreements with its directors and executive
officers that require the Company to indemnify such persons against expenses,
judgments, fines, settlements and other amounts that such person becomes legally
obligated to pay (including expenses of a derivative action) in connection with
any proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director or
officer of the Company or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Company. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
II-1
<PAGE> 17
ITEM 16. EXHIBITS
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
3.1(1) Amended and Restated Articles of Incorporation of the
Company.
3.2(1) Bylaws of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- ---------------
(1) Incorporated by reference to the indicated exhibit in the Company's
Registration Statement (No. 333-4236), as amended.
ITEM 17. UNDERTAKINGS
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 a 20% change in the
maximum aggregate offering 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 to 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 that 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.
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.
II-2
<PAGE> 18
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
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 registrant of expenses incurred or
paid by a director, officer or controlling person of 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, 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.
II-3
<PAGE> 19
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-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hayward, State of California, on the 7th day of May,
1998.
ARADIGM CORPORATION
By: /s/ RICHARD P. THOMPSON
------------------------------------
Richard P. Thompson
President, Chief Executive Officer
and Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints jointly and severally, Richard P.
Thompson and Mark A. Olbert, and each one of them, his or her attorneys-in-fact,
each with the power of substitution, for him or her in any way and all
capacities, to sign any and all amendments (including post-effective amendments
and registration statements filed pursuant to Rule 462) to this Registration
Statement and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each said attorneys-in-fact, or his substitute
or substitutes, may do or cause to be done by virtue hereof. Pursuant to the
requirements of the Securities Act of 1933, this Registration Statement has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on the 7th day of May, 1998.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ RICHARD P. THOMPSON President, Chief Executive Officer May 7, 1998
- ----------------------------------------------------- and Director (Principal Executive
Richard P. Thompson Officer)
/s/ MARK A. OLBERT Vice President, Finance and May 7, 1998
- ----------------------------------------------------- Administration and Chief Financial
Mark A. Olbert Officer (Principal Financial and
Accounting Officer)
/s/ REID M. RUBSAMEN, M.D. Vice President, Medical Affairs, May 7, 1998
- ----------------------------------------------------- Secretary and Director
Reid M. Rubsamen, M.D
/s/ JARED A. ANDERSON, PH.D. Director May 7, 1998
- -----------------------------------------------------
Jared A. Anderson, Ph.D
/s/ ROSS A. JAFFE, M.D. Director May 7, 1998
- -----------------------------------------------------
Ross A. Jaffe, M.D
/s/ BURTON J. MCMURTRY, PH.D. Director May 7, 1998
- -----------------------------------------------------
Burton J. McMurtry, Ph.D
/s/ GORDON W. RUSSELL Director May 7, 1998
- -----------------------------------------------------
Gordon W. Russell
/s/ FRED E. SILVERSTEIN, M.D. Director May 7, 1998
- -----------------------------------------------------
Fred E. Silverstein, M.D
/s/ VIRGIL D. THOMPSON Director May 7, 1998
- -----------------------------------------------------
Virgil D. Thompson
</TABLE>
II-4
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
3.1(1) Amended and Restated Articles of Incorporation of the
Company.
3.2(1) Bylaws of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
- ---------------
(1) Incorporated by reference to the indicated exhibit in the Company's
Registration Statement (No. 333-4236), as amended.
<PAGE> 1
EXHIBIT 5.1
OPINION OF COOLEY GODWARD LLP
May 7, 1998
Aradigm Corporation
26219 Eden Landing Road
Hayward, CA 94545
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the filing by Aradigm Corporation (the "Company") of a
Registration Statement on Form S-3 on or about May 7, 1998 (the "Registration
Statement") with the Securities and Exchange Commission covering the offering of
up to 1,111,100 shares of the Company's Common Stock, no par value (the
"Shares").
In connection with this opinion, we have examined the Registration
Statement and related Prospectus, your Amended and Restated Articles of
Incorporation and Bylaws, as amended, and such other documents, records,
certificates, memoranda and other instruments as we deem necessary as a basis
for this opinion. We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof, and the due execution and delivery
of all documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares are validly issued, fully paid, and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ JEFFREY S. ZIMMAN
------------------------------------
Jeffrey S. Zimman
<PAGE> 1
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 on Form S-3 and related Prospectus of Aradigm Corporation
for the registration of 1,111,100 shares of its Common Stock and to the
incorporation by reference therein of our report dated February 6, 1998, with
respect to the financial statements of Aradigm Corporation included in its
Annual Report on Form 10-K for the year ended December 31, 1997 filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Palo Alto, California
May 7, 1998
