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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-72037
PROSPECTUS
2,428,338 SHARES
ARADIGM CORPORATION
COMMON STOCK
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The selling shareholders identified in this prospectus may sell up to
2,428,338 shares of common stock of Aradigm Corporation, a California
corporation. The selling shareholders may offer and sell their shares of common
stock from time to time:
- on terms to be determined at the time of a sale;
- in transactions on the Nasdaq National Market;
- in privately negotiated transactions; or
- in a combination of these methods of sale.
Please see "Where You Can Find More Information" on page 12 for additional
information about us on file with the United States Securities and Exchange
Commission.
Aradigm's Common Stock is traded on the Nasdaq National Market under the
symbol "ARDM." On March 10, 1999 the closing price for the Common Stock on the
Nasdaq National Market was $8.69 per share.
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WE STRONGLY URGE YOU TO READ AND CONSIDER THIS PROSPECTUS CAREFULLY AND IN
ITS ENTIRETY. INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
March 11, 1999
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THE COMPANY
We are developing 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. Our principal product
development programs are based on our AERx(TM) Pulmonary Drug Delivery System,
which uses proprietary technologies to create aerosols from liquid drug
formulations for delivery systemically via the lung or locally to the lung. We
believe that our 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.
Our company was incorporated in California in January 1991. References in
the prospectus to "Aradigm," "we," "our," "us" and the "Company" refer to
Aradigm Corporation, a California corporation. Our principal executive offices
are located at 3929 Point Eden Way, Hayward, CA 94545, and our telephone number
is (510) 265-9000. We maintain a website at www.aradigm.com. The contents of our
web page are not incorporated herein and are not a part of this prospectus. For
a more detailed discussion of our business, see our Annual Report on Form 10-K
for the year ended December 31, 1998, which is incorporated by reference herein.
Aradigm(TM) and AERx(TM) are trademarks of the Company. Trade names and
trademarks of other companies appearing in this prospectus are the property of
their respective holders.
RISK FACTORS
You should carefully consider the following risk factors and all other
information in this prospectus and incorporated by reference herein before
purchasing our common stock. Investing in our common stock has a high degree of
risk. The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties that are not yet identified or
that we currently think are immaterial may also materially adversely affect our
business. If any of the following risks actually occur, our business, financial
condition or results of operations would likely suffer and could result in a
complete loss of your investment.
In addition to historical information, this prospectus contains
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties that could cause actual results to differ materially
from those in such forward-looking statements.
WE HAVE A LIMITED OPERATING HISTORY
We were incorporated in January 1991 and we have a limited operating
history and have generated only limited revenues to date. Virtually all of our
potential products are in an early stage of research or development. We cannot
assure you that:
- our research and development efforts will be successful;
- any potential products will be proven safe and effective;
- regulatory clearance or approval to sell any potential products will be
obtained; or
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- any of our potential products can be manufactured in commercial
quantities or at an acceptable cost or marketed successfully.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES
We have never been profitable, and through September 30, 1998, we have
incurred a cumulative deficit of approximately $46.9 million. We expect to
continue to incur substantial losses over at least the next several years as we:
- expand our research and development efforts;
- expand our preclinical and clinical testing activities;
- expand our manufacturing efforts; and
- plan and build our clinical and initial commercial production
capabilities.
WE MAY NOT BE ABLE TO DEVELOP PRODUCTS SUCCESSFULLY
Our AERx systems are at an early stage of development and we are currently
testing them using hand-held prototypes. Before we can begin to sell the AERx
systems commercially, we will need to invest in substantial additional
development and conduct preclinical and clinical testing. In order to further
develop our AERx systems, we will need to address engineering and design issues,
including ensuring that the AERx systems can deliver a reproducible amount of
drug into the bloodstream and can be manufactured successfully as hand-held
systems. We cannot assure investors that we will be successful in addressing
these design, engineering and manufacturing issues. Additionally, we may need to
formulate and will need to package drugs for delivery by our AERx systems. We
cannot assure investors that we will be able to do this successfully.
For the AERx systems to be commercially viable, we will need to demonstrate
that drugs delivered by the AERx systems:
- are safe and effective;
- will not be subject to physical or chemical instability over time and
under differing storage conditions; and
- do not suffer from other problems that would affect commercial viability.
While our development efforts are at different stages for different
products, we cannot assure investors that we will successfully develop any
products. We may also abandon some or all of our proposed products. If we cannot
develop potential products in a timely manner, our business will be impaired.
WE MAY NOT BE ABLE TO COMMERCIALIZE PRODUCTS SUCCESSFULLY
Our success in commercializing our products depends on many factors,
including acceptance by health care professionals and patients. Their acceptance
of our products will largely depend on our ability to show them that our
products' ability to compete with alternate delivery systems with respect to:
- safety;
- efficacy;
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- ease of use; and
- price.
We cannot assure investors that our products will be competitive with
respect to these factors or that our partners will be able to successfully
market any of them in a timely manner.
WE DEPEND UPON COLLABORATIVE PARTNERS AND NEED ADDITIONAL COLLABORATIVE PARTNERS
Our commercialization strategy depends on our ability to enter into
agreements with collaborative partners. In particular, our ability to
successfully develop and commercialize the AERx Pain Management System depends
on our corporate partnership with SmithKline Beecham and our ability to
successfully develop and commercialize the AERx Diabetes Management System
depends on our corporate partnership with Novo Nordisk. SmithKline Beecham and
Novo Nordisk have agreed to:
- undertake certain collaborative activities with us;
- design and conduct advanced clinical trials;
- fund research and development activities with us;
- pay us fees upon achievement of certain milestones; and
- purchase product at a defined premium, pay royalties and/or share gross
profits if and when we commercialize a product.
The development and commercialization of these systems will be delayed if
SmithKline Beecham or Novo Nordisk fail to conduct these collaborative
activities in a timely manner or at all. In addition, SmithKline Beecham or Novo
Nordisk could terminate these agreements and we cannot assure investors that we
will receive any development and milestone payments. If we do not receive
development funds or achieve milestones set forth in the agreements, or if
SmithKline Beecham or Novo Nordisk breach or terminate either agreement, our
business will be impaired.
We will also need to enter into agreements with other corporate partners to
conduct the clinical trials, manufacturing, marketing and sales necessary to
commercialize other potential products. In addition, our ability to apply the
AERx system to any proprietary drugs will depend on our ability to establish and
maintain corporate partnerships or other collaborative arrangements with the
holders of proprietary rights to such drugs. We cannot assure investors that we
will be able to establish such additional corporate partnerships or
collaborative arrangements on favorable terms or at all, or that our existing or
future corporate partnerships or collaborative arrangements will be successful.
Nor can we assure investors 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 our
competitors. We could have disputes with our existing or future corporate
partners or collaborators. Any such disagreements could lead to delays in the
research, development or commercialization of any potential products or could
result in time-consuming and expensive litigation or arbitration. If any of our
corporate partners or collaborators do not develop or commercialize any product
to which it has obtained rights from us, our business could be impaired.
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WE HAVE LIMITED MANUFACTURING EXPERIENCE
We have only limited manufacturing experience. We have validated only a
single pilot-scale facility for manufacturing disposable packets for our various
AERx systems. We anticipate spending significant amounts to attempt to provide
for the high-volume manufacturing required for multiple AERx products, and some
of this spending will occur before our products are approved. We cannot assure
investors that:
- we will be able to manufacture sufficient quantities of our products to
support any future clinical trials;
- the design requirements of the AERx system will make it feasible for us
to develop it beyond the current prototype;
- manufacturing and quality control problems will not arise as we attempt
to scale-up; or
- any scale-up can be achieved in a timely manner or at a commercially
reasonable cost.
Failure to address these issues could delay or prevent late-stage clinical
testing and commercialization of our products.
Our manufacturing facilities and our contract manufacturers' facilities
will be subject to periodic regulatory inspections by the Food and Drug
Administration (FDA) and other federal and state regulatory agencies. These
facilities must comply with the good manufacturing practice (GMP) requirements
of the FDA. We cannot assure investors that we will satisfy such regulatory
requirements, and any failure to satisfy GMP and other requirements could impair
our business.
We intend to use contract manufacturers to produce key components,
assemblies and subassemblies in the clinical and commercial manufacturing of our
AERx devices. We cannot assure investors that we will be able to enter into or
maintain satisfactory contract manufacturing arrangements. Certain components of
our products may be available, at least initially, only from single sources. We
cannot assure investors that we could find alternate suppliers for any of these
components. A delay of or interruption in production resulting from any supply
problem could have a material adverse effect on our business.
WE WILL NEED ADDITIONAL CAPITAL AND OUR ABILITY TO FIND ADDITIONAL
FUNDING IS UNCERTAIN
Our operations to date have consumed substantial and increasing amounts of
cash. We expect the negative cash flow from operations to continue in the
foreseeable future. We will need to commit substantial funds to develop our
technology and proposed products. We will have to continue to conduct costly and
time-consuming research and preclinical and clinical testing to develop, refine
and commercialize our technology and proposed products. Our future capital
requirements will depend on many factors, including:
- progress in researching and developing our technology and drug delivery
systems;
- our ability to establish and maintain favorable collaborative
arrangements with others;
- progress with preclinical studies and clinical trials;
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- time and costs to obtain regulatory approvals;
- costs of development and the rate we expand our production technologies;
- costs of preparing, filing, prosecuting, maintaining and enforcing patent
claims; and
- our need to acquire licenses or other rights to technology.
Since inception, we have financed our operations primarily through equity
financings, financings of equipment acquisitions, contract research revenue and
interest earned on investments.
We anticipate that we will be able to maintain our current and planned
operations through the next two years with our existing resources, anticipated
payments from our existing corporate partners and projected interest income.
Depending upon the timing and nature of additional development collaborations,
we may need to raise additional funds to fund operations beyond that period. Our
cash requirements may change because of our research and development efforts,
including capital expenditures and funding preclinical and clinical trials and
manufacturing capacity. We may seek additional funding through collaborations or
through public or private equity financings. We cannot assure investors that
additional financing will be available on acceptable terms or at all. If we
raise additional funds by issuing equity securities, substantial dilution to
shareholders may result. If adequate funds are not available, we may be required
to delay, reduce the scope of, or eliminate one or more of our research or
development programs or obtain funds through arrangements with collaborative
partners or others. Such arrangements might require us to relinquish rights to
certain of our technologies, product candidates or products that we would not
otherwise relinquish.
WE DEPEND UPON PROPRIETARY TECHNOLOGY; THE STATUS OF PATENTS AND PROPRIETARY
TECHNOLOGY IS UNCERTAIN
The field of aerosolized drug delivery is crowded and a substantial number
of patents have been issued. Competitors and institutions may have applied for
and may obtain additional patents and proprietary rights relating to competing
products or processes.
Patents or other publications may hinder us from obtaining patent
protection or draw into question the validity of patents already issued to us.
In addition, patents issued to others might allow competitors to prevent us from
making our products or carrying out processes necessary to use our products. We
may not be able to obtain a license under any such patent and may be prevented
from making products or carrying out processes which are important or essential
to our business. We cannot assure investors that any of our patents would be
upheld as valid if challenged in litigation. There also can be no assurance that
any of our patent applications will issue or, if issued, will later be found
valid if challenged. Furthermore, we cannot assure investors that any issued
patents or patent applications will provide us with sufficient market
exclusivity to profitably compete against our competitors. In the United States,
patent applications are secret until they are issued. As a result, we cannot
know what patents others may have applied for. We may take actions now that
create infringement issues if and when a pending application covering similar
technology is subsequently issued. Furthermore, patents already issued to us or
our pending applications may become subject to dispute, and any disputes could
be resolved against us. Whether or not we are successful, any dispute could
involve the expenditure of substantial financial and human resources.
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We require our officers, employees, consultants and advisors to execute
proprietary information and invention assignment agreements when they began
their relationships with us. We cannot assure investors, however, that these
agreements will provide meaningful protection for our 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.
OUR BUSINESS IS REGULATED BY THE GOVERNMENT; RESULTS OF PRECLINICAL
AND CLINICAL TESTING ARE UNCERTAIN
All medical devices and new drugs, including our 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. Medical devices or drug products that are marketed abroad are
also subject to regulation by foreign governments.
The 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 applicants to
submit extensive clinical data and supporting information to the FDA. Even if
granted, the FDA can withdraw product clearances and approvals for failure to
comply with regulatory requirements or upon the occurrence of unforeseen
problems following initial marketing.
We cannot assure investors that we will be able to obtain necessary
regulatory clearances or approvals on a timely basis, if at all, for any of our
potential products. Our business would suffer if:
- receipt of clearances or approvals is delayed;
- we fail to receive such clearances or approvals; or
- we fail to comply with existing or future regulatory requirements.
Even if granted, regulatory clearances or approvals may include significant
limitations on the uses for which products may be marketed. Certain changes to
marketed medical devices and new drugs are subject to additional FDA review and
clearance or approval.
We cannot assure investors that any required clearances or approvals, once
obtained, will not be withdrawn or that we will remain in compliance with other
regulatory requirements. If we (or manufacturers of our components) fail to
comply with applicable FDA and other regulatory requirements, we (and they) are
subject to sanctions, including:
- warning letters;
- fines;
- product recalls or seizures;
- injunctions;
- refusals to permit products to be imported into or exported out of the
United States;
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- FDA refusal to grant premarket clearance or premarket approval of medical
devices and drugs;
- FDA refusal to allow us to enter into government supply contracts;
- withdrawals of previously approved marketing applications; and
- criminal prosecutions.
Before we can file for regulatory approval for the commercial sale of our
potential AERx products, the FDA will require extensive preclinical and clinical
testing to demonstrate their safety and efficacy. To date, we have tested
prototype patient-operated versions of our AERx Systems with morphine and
insulin on a limited number of individuals in Phase I and Phase II clinical
trials in the United States and with insulin on a limited number of individuals
in Phase I and Phase II trials in Australia. If we do not or cannot complete
these trials or progress to more advanced clinical trials, we may not be able to
commercialize our AERx products.
Completing clinical trials in a timely manner depends on, among other
factors, the enrollment of patients. Our ability to recruit patients depends on
a number of 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 our current or future clinical trials may result in increased costs, program
delays or both.
We are also developing applications of our AERx system for the delivery of
other compounds. These applications are in an early stage of development and we
do not yet know the degree of testing and development that will be needed to
obtain necessary marketing approvals from the FDA and other regulatory agencies.
We cannot assure investors that these applications will prove to be viable or
that any necessary regulatory approvals will be obtained in a timely manner, if
at all. Although we believe the data regarding our potential products is
encouraging, the results of initial preclinical and clinical testing do not
necessarily predict the results that we will get from subsequent or more
extensive preclinical and clinical testing. Furthermore, we cannot assure
investors that clinical trials of these products will demonstrate that these
products are safe and effective to the extent necessary to obtain regulatory
approvals. Many companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials. If we cannot adequately demonstrate that
any therapeutic product we are developing is safe and effective, regulatory
approval of that product would be delayed or prevented, which would impair our
business.
In addition, the FDA may require us to provide clinical data to demonstrate
that the chronic administration of drugs delivered via the lung for systemic
effect is safe. We cannot assure investors that we will be able to present such
data in a timely manner, or at all.
Manufacturers of medical devices and drugs also are required to comply with
the applicable GMP requirements, which relate to product testing, quality
assurance and maintaining records and documentation. We cannot assure investors
that we will be able to comply with the applicable GMP and other FDA regulatory
requirements for manufacturing as we expand our manufacturing operations, which
would impair our business.
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In addition, to market our products in foreign jurisdictions, we and our
partners must obtain required regulatory approvals and clearances from foreign
regulatory agencies and comply with extensive regulations regarding safety and
quality. We cannot assure investors that we will obtain regulatory approvals in
such countries or that we will not be required to incur significant costs in
obtaining or maintaining our foreign regulatory approvals. If approvals to
market our products are delayed, if we fail to receive these approvals, or if we
lose previously received approvals, our business would be impaired.
Because our AERx Pain Management System clinical studies involve morphine,
we are registered with the Drug Enforcement Agency (DEA) and our facilities are
subject to inspection and DEA export, import, security and production quota
requirements. We cannot assure investors that we will not be required to incur
significant costs to comply with DEA regulations in the future or that such
regulations will not otherwise harm our business.
WE ARE IN A HIGHLY COMPETITIVE MARKET AND OUR COMPETITORS MAY DEVELOP
ALTERNATIVE THERAPIES
The medical device, pharmaceutical and biotechnology industries are highly
competitive and rapidly evolving. Our success depends on our 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, our business would be harmed.
We compete 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. There are 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. A competitor of the Company has recently received
approval for fentanyl, a narcotic analgesic, to treat rapid-onset pain in
certain types of patients. Other companies are currently developing and
commercializing enhanced injectable drug delivery systems and pulmonary drug
delivery systems. Many of our competitors have greater research and development
capabilities, experience, manufacturing, marketing, sales, financial and
managerial resources than we do, and they represent significant competition for
our business. Our competitors' financial, marketing and other resources could be
further enhanced if they are acquired by large pharmaceutical companies or if
they enter into partnering arrangements.
Our competitors may succeed in developing competing technologies, obtaining
FDA approval for products more rapidly than us and in gaining greater market
acceptance of their products than our products. We cannot assure investors that
developments by others will not render some or all of our proposed products or
technologies uncompetitive or obsolete.
WE DEPEND ON KEY PERSONNEL
We depend on a small number of key management and technical personnel.
Losing any of these key employees could harm our business and operations. Our
success also depends on our ability to attract and retain additional highly
qualified marketing, management, manufacturing, engineering and research and
development personnel. We
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face intense competition in our recruiting activities, and we may not be able to
attract or retain qualified personnel.
WE MAY BE EXPOSED TO PRODUCT LIABILITY
Researching, developing and commercializing medical devices and therapeutic
products entails significant product liability risks. The use of our products in
clinical trials and the commercial sale of such products may expose us 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 we currently have product liability insurance, we
cannot assure investors that we can maintain such insurance or obtain additional
insurance on acceptable terms, in amounts sufficient to protect our business, or
at all. A successful claim brought against us in excess of our insurance
coverage would have a material adverse effect on our business.
THIRD-PARTY REIMBURSEMENT FOR OUR PRODUCTS IS UNCERTAIN
In both domestic and foreign markets, sales of our potential products, if
any, 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. We cannot assure investors that any of our products will be
reimbursable by third-party payors. In addition, we cannot assure investors that
our products will be considered cost-effective or that adequate third-party
reimbursement will be available to enable us to maintain price levels sufficient
to realize a profit. Legislation and regulations affecting the pricing of
pharmaceuticals may change before our products are approved for marketing and
any such changes could further limit reimbursement.
WE USE HAZARDOUS MATERIALS
Our operations involve the controlled use of hazardous materials, chemicals
and various radioactive compounds. Although we believe that our safety
procedures for handling and disposing of such materials comply with the state
and federal regulations standards, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, we could be held liable for any damages that result and such
liability could exceed the resources of our business.
OUR STOCK PRICE MAY BE VOLATILE
The market prices for securities of many companies in the pharmaceutical
development industry, including ours, have historically been highly volatile,
and the market from time to time has experienced significant price and volume
fluctuations unrelated to the operating performance of particular companies.
Prices for our common stock may be influenced by many factors, including:
- investor perception of us;
- analyst recommendations;
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- fluctuations in our operating results;
- market conditions relating to the pharmaceutical industry;
- announcements of technological innovations or new commercial products by
us or our competitors;
- publicity regarding actual or potential developments relating to products
under development by us or our competitors;
- developments or disputes concerning patent or proprietary rights;
- delays in the development or approval of our product candidates;
- regulatory developments in both the United States and foreign countries;
- public concern as to the safety of drug technologies;
- period-to-period fluctuations in financial results;
- future sales of substantial amounts of common stock by existing
shareholders; or
- economic and other external factors.
In the past, class action securities litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. Any such litigation instigated against us could result in
substantial costs and a diversion of management's attention and resources.
YEAR 2000 ISSUE
As the year 2000 approaches, a "Year 2000" issue has arisen because many
existing application software programs, operating systems and manufacturing
equipment containing computer-related components (Systems) were designed to use
only the last two digits to represent a year (e.g., the year 1998 is represented
by "98" on the system or in the program). As a result, the year 1999 (i.e.,
"99") could be the maximum date value Systems will be able to process
accurately. If not corrected, the Year 2000 problem could cause system failures
or miscalculations resulting in inaccuracies in computer output or disruptions
of operations, including inaccurate processing of financial, personnel and other
information as well as the inability to process transactions or engage in
similar normal business activities.
We are currently developing a strategy to address the potential exposures
related to the impact of the Year 2000 problem on our Systems. We have appointed
a project manager to lead our assessment of the Year 2000 problem. We have begun
an initial inventory of our key internal financial, informational and
operational systems, including manufacturing control systems, to identify those
areas that may be affected by the Year 2000 problem. We intend to complete this
inventory by the end of the first quarter of fiscal 1999. We are in the final
stages of developing plans for implementing and testing any necessary
modifications to these key Systems to ensure Year 2000 compliance. We currently
estimate that any required remediation programs will be completed by the third
quarter of fiscal 1999.
In addition to the risks associated with our own Systems, we have
relationships with, and are to varying degrees dependent upon, a large number of
third parties that provide us
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with information, goods and services. If significant numbers of these third
parties experience failures in their own Systems due to the Year 2000 problem,
it could affect our ability to process transactions or engage in similar normal
business activities. We have not yet determined the impact on our operations, if
any, if key third parties fail to take necessary actions. We have initiated
formal communications with significant third parties to assess their Year 2000
compliance and determine the extent to which we may be vulnerable to those third
parties' failure to remedy their own Year 2000 issues.
We do not yet know the total cost associated with becoming Year 2000
compliant. To date, we have not incurred, and we do not anticipate that we will
incur, significant operating expenses that would be material to our business.
While we plan to complete modifications of our business-critical Systems prior
to the Year 2000, if we (or our third-party providers) do not complete such
modifications in a timely manner, the Year 2000 problem could impair our
business. We cannot predict the extent of any such impact. We cannot assure
investors that we or any third party will not encounter any unforeseen problems
with respect to any Systems, and these unforeseen problems could impair our
business. We currently have no contingency plans to deal with any major Year
2000 non-compliance, though we will develop such plans over the coming quarters.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, which include
statements based on our current expectations, assumptions, estimates and
projections about our company and our industry, including statements about the
timing and results of clinical trials, regulatory approval, the establishment of
corporate partnering arrangements, the anticipated commercial introduction of
our products and the timing of our cash requirements. Words such as "believes,"
"anticipates," "expects," "intends," "plans" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying these statements. Actual results could differ materially from
those projected in any forward-looking statements for the reasons detailed in
"Risk Factors" or elsewhere in this Prospectus. We assume no obligation to
update any forward-looking statement.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement. We also file annual, quarterly and special reports,
proxy statements and other information with the SEC.
You may inspect and copy these materials at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the SEC's regional offices at 7 World Trade Center, Suite 1300, New York,
New York, 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. You may also obtain copies of these materials from the SEC at prescribed
rates by writing to the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC
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at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from the SEC's website at www.sec.gov.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ARDM." You may inspect reports and other information concerning us at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998, filed on March 9, 1999, including all material incorporated by
reference therein;
2. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, filed on March 24, 1998, an amendment thereto filed on April 2,
1998 and an amendment thereto filed on June 22, 1998, including all
material incorporated by reference therein;
3. Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998, filed on May 15, 1998 and an amendment thereto filed on July 6,
1998, including all material incorporated by reference therein;
4. Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998, filed on August 14, 1998, including all material incorporated by
reference therein;
5. Our Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1998, filed on November 13, 1998, including all material
incorporated by reference therein;
6. Our Current Report on Form 8-K, filed on September 2, 1998, including
all material incorporated by reference therein; and
7. The description of the common stock contained in our Registration
Statement on Form 8-A.
8. The Proxy Statement for our 1998 Annual Meeting of Shareholders.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
Aradigm Corporation
Investor Relations Department
3929 Point Eden Way
Hayward, California 94545
Telephone: (510) 265-9000
13
<PAGE> 14
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of common stock by
any selling shareholder in this offering.
14
<PAGE> 15
SELLING SHAREHOLDERS
In January 1999, we agreed to sell 2,428,338 shares of Common Stock of the
Company upon meeting certain closing conditions, including the effectiveness of
this registration statement to certain purchasers pursuant to a Common Stock
Purchase Agreement dated January 27, 1999 by and among us and the Purchasers
named therein. In connection with this sale, we agreed to file a registration
statement with the SEC 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 this registration
statement. We have agreed to cause this registration statement to remain
effective until (a) all the common stock has been re-sold (b) all the common
stock may be re-sold in a three-month period under Rule 144 or (c) two years
after the closing of the transactions contemplated in the Common Stock Purchase
Agreement, whichever is earlier.
The following table provides certain information with respect to shares of
common stock 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, only an 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."
We are unaware of any material relationship between any of the selling
shareholders and us in the past three years other than as a result of the
ownership of the shares of common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING NUMBER OF OFFERING(2)
---------------------- SHARES BEING --------------------
SELLING SHAREHOLDER NUMBER PERCENT(1) OFFERED NUMBER PERCENT(1)
------------------- --------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
The Kaufmann Fund, Inc................ 1,044,167 * 666,667 377,500 *
Invesco Global Health Services Fund... 380,952 * 380,952 0 *
Biotechnology Investments Limited..... 350,000 * 350,000 0 *
H & Q Healthcare Investors............ 225,000 * 225,000 0 *
Bank Invest........................... 300,000 * 200,000 100,000 *
State of Oregon PERS/ZCG.............. 390,000 * 160,000 230,000 *
H & Q Life Sciences Investors......... 125,000 * 125,000 0 *
Pharma/wHealth FCP.................... 100,000 * 100,000 0 *
Public Employee Retirement System of
Idaho............................... 150,000 * 50,000 100,000 *
Delta Opportunity Fund, Ltd........... 47,619 * 47,619 0 *
The Magee/Bernhard LLC................ 25,000 * 25,000 0 *
NFIB Employee Pension Trust........... 25,000 * 25,000 0 *
The A&JS Family LLC................... 15,000 * 15,000 0 *
Wells Family LLC...................... 15,000 * 15,000 0 *
Morgan Trust Co. of the Bahamas Ltd.
as trustee u/a/d 11/30/93........... 15,000 * 15,000 0 *
Roanoke College....................... 15,000 * 15,000 0 *
Amherst College....................... 10,000 * 10,000 0 *
Alza Corporation Retirement Plan...... 12,000 * 2,000 10,000 *
Wolfson Investment Partners LP........ 1,100 * 1,100 0 *
TOTAL........................ 2,428,338
</TABLE>
- -------------------------
* Less than one percent.
(1) Percentage of ownership is based on 12,171,584 shares of common stock
outstanding on March 5, 1999.
(2) Assumes the sale of all shares offered hereby.
15
<PAGE> 16
PLAN OF DISTRIBUTION
We are registering the shares of common stock offered by the selling
shareholders pursuant to contractual registration rights contained in the Common
Stock Purchase Agreement. The selling shareholders may sell their shares on the
Nasdaq National Market, in private transactions or in a combination of such
methods of sale. The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated or at fixed prices. For their shares, the selling
shareholders will receive the purchase price of the shares sold less any agents'
commissions or underwriters' discounts and other related expenses. If the
selling shareholders sell shares to or through brokers or dealers, they may pay
the brokers or dealers compensation in the form of discounts, concessions or
commissions. We will not receive any proceeds from the sale of shares by the
selling shareholders.
The selling shareholders and any persons who participate in the sale of the
shares may be deemed to be "underwriters" as defined in 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.
We have agreed in the Common Stock Purchase Agreement to register the
shares of our common stock received by the selling shareholders pursuant to the
Common Stock Purchase Agreement under applicable federal and state securities
laws under certain circumstances and at certain times. Pursuant to the Common
Stock Purchase Agreement, we have filed a registration statement related to the
shares offered hereby and have agreed to keep such registration statement
effective until (a) all the common stock has been re-sold (b) all the common
stock may be re-sold in a three-month period under Rule 144 or (c) two years
after the closing of the transactions contemplated in the Common Stock Purchase
Agreement, whichever is earlier.
We are not paying any underwriting commissions or discounts in this
offering. We will, however, pay for the expenses incurred in this offering. We
estimate these expenses to be approximately $25,000. We have agreed to indemnify
the selling shareholders and certain other persons against certain liabilities,
including liabilities under the Securities Act.
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
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 1998, as set forth in their report, which is incorporated in this
prospectus by reference. Our financial statements are incorporated by reference
in reliance on their report, given on their authority as experts in accounting
and auditing.
16
<PAGE> 17
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- ------------------------------------------------------
WE HAVE AUTHORIZED NO ONE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS THAT ARE NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD RELY ONLY
ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SHARES IN ANY
JURISDICTION WHERE IT IS UNLAWFUL. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THE DOCUMENT.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company........................... 2
Risk Factors.......................... 2
Forward-Looking Statements............ 12
Where You Can Find More Information... 12
Use of Proceeds....................... 14
Selling Shareholders.................. 15
Plan of Distribution.................. 16
Legal Matters......................... 16
Experts............................... 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
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2,428,338 SHARES
COMMON STOCK
ARADIGM
CORPORATION
-------------------------
PROSPECTUS
-------------------------
MARCH 11, 1999
- ------------------------------------------------------
- ------------------------------------------------------
