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As filed with the Securities and Exchange Commission on October 20, 2000
Registration No. 33-
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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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CALIFORNIA 3845 94-3133088
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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3929 POINT EDEN WAY
HAYWARD, CALIFORNIA 94545
(510) 265-9000
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
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RICHARD P. THOMPSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ARADIGM CORPORATION
3929 POINT EDEN WAY
HAYWARD, CALIFORNIA 94545
(510) 265-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
JAMES C. KITCH
JAMIE E. CHUNG
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3175 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
(650) 843-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
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
TITLE OF CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE (1)
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COMMON STOCK, no par value and related
rights to purchase Series A Junior
Participating Preferred Stock $50,000,000 $13,200
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(1) Calculated in accordance with Rule 457(o) of the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 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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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 20, 2000
PROSPECTUS
[COMPANY LOGO]
$50,000,000 Aggregate Amount of Common Stock
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This prospectus will allow us to issue shares of our common stock over time.
This means:
- we will provide a prospectus supplement each time we issue shares of our
common stock;
- the prospectus supplement will inform you about the specific terms of
that offering and also may add, update or change information contained
in this document; and
- you should read this document and any prospectus supplement carefully
before you invest.
Our common stock is listed on The Nasdaq Market's National Market under the
symbol "ARDM." On October 19, 2000, the last reported sale price for our
common stock was $21.44 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is .
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY ..................................................... 2
THE COMPANY ............................................................ 2
THE OFFERING ........................................................... 2
RISK FACTORS ........................................................... 3
FORWARD LOOKING STATEMENTS ............................................. 11
USE OF PROCEEDS ........................................................ 12
PLAN OF DISTRIBUTION ................................................... 13
WHERE YOU CAN FIND MORE INFORMATION .................................... 14
LEGAL MATTERS .......................................................... 14
EXPERTS ................................................................ 14
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YOU SHOULD RELY ONLY ON THE INFORMATION OR REPRESENTATIONS PROVIDED IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY DIFFERENT INFORMATION OR TO MAKE ANY
DIFFERENT REPRESENTATIONS IN CONNECTION WITH ANY OFFERING MADE BY THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, IN ANY STATE WHERE THE OFFER OR SALE IS
PROHIBITED. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE UNDER
THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN
THIS PROSPECTUS IS CORRECT AS OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
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ARADIGM(TM) AND AERX(TM) ARE TRADEMARKS OF THE COMPANY. THIS PROSPECTUS ALSO
INCLUDES TRADEMARKS OWNED BY OTHER PARTIES.
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PROSPECTUS SUMMARY
This prospectus contains forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors appearing
under "Risk Factors" and elsewhere in this prospectus.
The following summary does not contain all the information that may be
important to you. You should read the entire prospectus, including the financial
statements and other information incorporated by reference in this prospectus,
before making an investment decision.
THE COMPANY
ARADIGM CORPORATION
We are a leading developer of advanced pulmonary drug delivery systems for
the treatment of systemic conditions as well as lung diseases. Our hand-held
AERx(R) platform is being designed for the rapid and reproducible delivery of a
wide range of pharmaceutical drugs and biotech compounds via the lung. We
believe that our non-invasive AERx systems, which have been shown in clinical
studies to achieve performance equivalent to injection, will be a welcome
alternative to injection-based drug delivery. In addition, our systems may
improve therapeutic efficacy in cases where other existing drug delivery
methods, such as pills, transdermal patches or inhalers, are too slow or
imprecise.
We were incorporated in California in January 1991. Our principal executive
offices are located at 3929 Point Eden Way, Hayward, CA 94545, and our telephone
number is (510) 265-9000. Our Internet address is www.aradigm.com. The
information on our website is not incorporated by reference into this
prospectus.
THE OFFERING
Common stock offered by Aradigm ......... We may offer shares of our common
stock from time to time under this
prospectus at prices and on terms
to be determined at the time of the
offering. Each time we offer shares
of our common stock, we will
provide a prospectus supplement
that will inform you about the
specific terms of that offering and
also may add, update or change
information contained in this
document.
Use of proceeds ......................... For process development and capital
expenditures necessary to increase
manufacturing capacity, to fund
research and development efforts
and for working capital and general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol ........... ARDM
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RISK FACTORS
An investment in our common stock involves a high degree of risk. We operate
in a dynamic and rapidly changing environment that involves numerous risks and
uncertainties. You should carefully consider the factors described below in
addition to other information contained in this prospectus or incorporated by
reference into this prospectus before purchasing our shares. Additional risks
and uncertainties not presently known to us or that we currently see as
immaterial may also impair our business operations.
WE ARE AN EARLY STAGE COMPANY.
You must evaluate us in light of the uncertainties and complexities present
in an early stage company. 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
- 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 December 31, 1999, we have
incurred a cumulative deficit of approximately $74.9 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 commercial production capabilities.
To achieve and sustain profitability, we must, alone or with others,
develop, obtain regulatory approval for, manufacture, market and sell products
using our drug delivery platform. We cannot assure investors that we will
generate sufficient product or contract research revenue to become profitable or
to sustain profitability.
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,
which include 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 will need
to formulate and package drugs for delivery by our AERx systems. We cannot
assure investors that we will be able to do this successfully.
Even if our pulmonary delivery technology is commercially feasible, it may
not be commercially acceptable across a range of large and small molecule drugs.
For the AERx systems to be commercially viable, we will need to demonstrate that
drugs delivered by the AERx systems:
- are safe and effective;
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- 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 OUR 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 demonstrate our products'
ability to compete with alternate delivery systems with respect to:
- safety;
- efficacy;
- 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 ON 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 Respiratory Management System
depends on our development partnership with Genentech, Inc., our ability to
successfully develop and commercialize the AERx Diabetes Management System
depends on our development partnership with Novo Nordisk A/S and our ability to
successfully develop and commercialize the AERx Pain Management System depends
on our development partnership with SmithKline Beecham, plc. Novo Nordisk and
SmithKline Beecham 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.
Genentech has agreed to:
- undertake certain collaborative activity with us;
- lend us money to pay our research and development costs;
- pay us fees upon achievement of certain milestones; and
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- purchase product from us at a defined premium if and when we
commercialize a product.
The development and commercialization of these systems will be delayed if
Genentech, Novo Nordisk or SmithKline Beecham fail to conduct these
collaborative activities in a timely manner or at all. In addition, our
development partners 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 any of our development partners breach or terminate their agreement, our
business will be impaired. In addition, if Genentech terminates its agreement
with us due to a technical failure of our development program for dornase alfa,
we may be required to repay the loans Genentech makes to us to fund our work.
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, which may not
be resolved in our favor. 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.
WE HAVE LIMITED MANUFACTURING EXPERIENCE.
We have only limited manufacturing experience. We have only validated a
single clinical manufacturing facility for 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 much
of this spending will occur before our products are approved. We cannot assure
investors that:
- 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.
We are building our own manufacturing capabilities for the production of key
components of our AERx drug delivery systems. We plan to internally produce the
disposable nozzles, assemble the disposable unit-dose packets and fill the drug
into the unit-dose packets. We have limited experience in manufacturing
disposable unit-dose packets and there can be no assurance that we can
successfully do so in high volumes, in a timely manner, at an acceptable cost or
at all.
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.
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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 conducting 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;
- 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 public and
private equity financings, equipment lease financings, contract research funding
and interest earned on investments.
We anticipate that we will be able to maintain our current and planned
operations through the end of 2001 with the proceeds from this offering, our
existing resources, anticipated payments from our existing corporate partners
and projected interest income. Depending on 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 or products
that we would not otherwise relinquish.
WE DEPEND UPON PROPRIETARY TECHNOLOGY AND THE STATUS OF PATENTS AND PROPRIETARY
TECHNOLOGY IS UNCERTAIN.
Our success will depend to a significant extent on our ability to obtain and
enforce patents, maintain trade secret protection and operate without infringing
on the proprietary rights of third parties. Because the field of aerosolized
drug delivery is crowded and a substantial number of patents have been issued
and because patent positions can be highly uncertain and frequently involve
complex legal and factual questions, the breadth of claims obtained in any
application or the enforceability of our patents cannot be predicted.
Commercialization of pharmaceutical products can also be subject to substantial
delays as a result of the time required for product development, testing and
regulatory approval.
We also seek to protect some of these inventions through foreign counterpart
applications in selected other countries. Statutory differences in patentable
subject matter may limit the protection we can obtain on some of our inventions
outside of the United States. For example, methods of treating humans are not
patentable in many countries outside of the United States. These and other
issues may limit the patent protection we will be able to secure outside of the
United States.
The coverage claimed in a patent application can be significantly reduced
before a patent is issued, either in the United States or abroad. Consequently,
we do not know whether any of our pending or future patent applications
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will result in the issuance of patents or, to the extent patents have been
issued or will be issued, whether these patents will be subjected to further
proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or invalidated.
Furthermore, patents already issued to us or our pending applications may become
subject to dispute, and any disputes could be resolved against us. For example,
Eli Lilly and Company has brought an action against us seeking to have one or
more employees of Eli Lilly named as co-inventors on one of our patents. In
addition, because patent applications in the United States are currently
maintained in secrecy until patents are issued, and patent applications in
certain other countries generally are not published until more than 18 months
after they are first filed, and because publication of discoveries in scientific
or patent literature often lags behind actual discoveries, we cannot be certain
that we were the first creator of inventions covered by pending patent
applications or that we were the first to file patent applications on such
inventions.
Our policy is to require our officers, employees, consultants and advisors
to execute proprietary information and invention and assignment agreements upon
commencement of their relationships with us. There can be no assurance, 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.
We also execute confidentiality agreements with outside collaborators and
consultants. However, disputes may arise as to the ownership of proprietary
rights to the extent that outside collaborators or consultants apply
technological information developed independently by them or others to our
projects, or apply our technology to other projects, and there can be no
assurance that any such disputes would be resolved in our favor.
We may incur substantial costs if we are required to defend ourselves in
patent suits brought by third parties. These legal actions could seek damages
and seek to enjoin testing, manufacturing and marketing of the accused product
or process. In addition to potential liability for significant damages, we could
be required to obtain a license to continue to manufacture or market the accused
product or process and there would be no assurance that any license required
under any such patent would be made available to us on acceptable terms, if at
all. Litigation may also be necessary to enforce our patents against others or
to protect our know-how or trade secrets. Such litigation could result in
substantial expense, and there can be no assurance that any litigation would be
resolved in our favor.
WE MAY NOT OBTAIN REGULATORY APPROVAL FOR OUR PRODUCTS ON A TIMELY BASIS, OR AT
ALL.
All medical devices and new drugs, including our products under development,
are subject to extensive and rigorous regulation by the federal government,
principally the Food and Drug Administration, or FDA, and by state and local
government agencies. Such regulations govern the development, testing,
manufacture, labeling, storage, 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 approvals for drug products is generally
lengthy, expensive and uncertain. Securing FDA 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 approvals on a timely basis, if at all, for any of our potential
products. Even if granted, regulatory approvals may include significant
limitations on the uses for which products may be marketed. Moreover, we cannot
assure investors that any required 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;
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- refusals to permit products to be imported into or exported out of the
United States;
- withdrawals of previously approved marketing applications; and
- criminal prosecutions.
Manufacturers of drugs also are required to comply with the applicable Good
Manufacturing Practices, or 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.
In addition, to market our products in foreign jurisdictions, we and our
partners must obtain required regulatory approvals 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
jurisdictions or that we will not be required to incur significant costs in
obtaining or maintaining any 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 certain of our clinical studies involve narcotics, we are registered
with the Drug Enforcement Agency, or 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.
THE RESULTS OF PRECLINICAL AND CLINICAL TESTING ARE UNCERTAIN.
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, insulin
and dornase alfa on a limited number of individuals in Phase I and Phase II
clinical trials. 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.
Although we believe the limited data we have 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.
We are also developing applications of our AERx platform 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.
In addition, the FDA may require us to provide clinical data beyond what is
currently planned 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.
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WE ARE IN A HIGHLY COMPETITIVE MARKET AND OUR COMPETITORS MAY DEVELOP
ALTERNATIVE THERAPIES.
We are in competition with pharmaceutical, biotechnology and drug delivery
companies, hospitals, research organizations, individual scientists and
nonprofit organizations 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. We are aware of a number of companies currently
seeking to develop new products and non-invasive alternatives to injectable drug
delivery, including oral delivery systems, intranasal delivery systems,
transdermal systems, bucal and colonic absorption systems. Several of these
companies may have developed or are developing dry powder devices that could be
used for pulmonary delivery. Many of these companies and entities have greater
research and development capabilities, experience, manufacturing, marketing,
financial and managerial resources than we do. Accordingly, our competitors may
succeed in developing competing technologies, obtaining FDA approval for
products or gaining market acceptance more rapidly than we can.
WE DEPEND ON KEY PERSONNEL AND MUST CONTINUE TO ATTRACT AND RETAIN KEY
EMPLOYEES.
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 face intense competition in our recruiting activities
and 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 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 often challenge 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 use of hazardous and toxic materials, chemicals and
various radioactive compounds and generate hazardous, toxic and radioactive
wastes. Although we believe that our safety procedures for handling and
disposing of such materials comply with all state and federal regulations and
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 IS LIKELY TO REMAIN VOLATILE AND INVESTORS MAY LOSE ALL OR A
PART OF THEIR INVESTMENT.
The market prices for securities of many companies in the drug delivery
industry, including ours, have historically been highly volatile, and the market
from time to time has experienced significant price and volume
9
<PAGE> 12
fluctuations unrelated to the operating performance of particular companies. As
a result, investors may be unable to sell their shares of common stock at or
above the offering price. Prices for our common stock may be influenced by many
factors, including:
- investor perception of us;
- analyst recommendations;
- fluctuations in our operating results;
- market conditions relating to the drug delivery 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;
- failure to establish new collaborative relationships;
- 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 delivery technologies;
- period-to-period fluctuations in financial results;
- future sales of substantial amounts of common stock by 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.
WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS.
Certain provisions of the our articles of incorporation and the California
General Corporation Law could discourage a third party from acquiring, or make
it more difficult for a third party to acquire, control of us without approval
of the our board of directors. Such provisions could also limit the price that
certain investors might be willing to pay in the future for shares of common
stock. Certain of such provisions allow the board of directors to authorize the
issuance of preferred stock with rights superior to those of the common stock.
We are also subject to the provisions of Section 1203 of the California General
Corporation Law which requires a fairness opinion to be provided to our
shareholders in connection with their consideration of any proposed "interested
party" reorganization transaction.
10
<PAGE> 13
FORWARD-LOOKING STATEMENTS
This prospectus contains forward looking statements, which include
statements based on our current expectations, assumptions, estimates and
projections about us 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. Before you decide to invest in
our common stock, you should be aware that if any of the events described in the
"Risk Factors" section and elsewhere in this prospectus occur, they could have
an adverse affect on our business. We assume no obligation to update any
forward-looking statement.
11
<PAGE> 14
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We anticipate using the net proceeds of the offering for process development
and capital expenditures necessary to increase our manufacturing capacity, to
fund our research and development efforts and for working capital and general
corporate purposes. Our management has broad discretion in determining how the
proceeds of this offering will be applied. Pending such uses, the net proceeds
of this offering will be invested in short-term, investment grade,
interest-bearing securities.
We have not identified precisely the amounts we plan to spend on each of
these areas or the timing of such expenditures. Proceeds of this offering may
also be used to acquire companies or products that complement our business,
although we are not planning or negotiating any such transactions as of the date
of this prospectus. The amounts actually expended for each purpose may vary
significantly depending upon numerous factors, including continued progress and
the results of the research and development of our technology and drug delivery
systems, our ability to establish and maintain favorable collaborative
arrangements with others, progress with preclinical studies and clinical trials
and the results thereof, the time and costs involved in obtaining regulatory
approvals, the cost of development and the rate of scale-up of our 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.
12
<PAGE> 15
PLAN OF DISTRIBUTION
We may offer the shares of common stock:
- directly to purchasers;
- to or through underwriters;
- through dealers, agents or institutional investors; or
- through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
- the identity of any underwriters, dealers, agents or investors who
purchase the securities;
- the material terms of the distribution, including the amount sold and
the consideration paid;
- the amount of any compensation, discounts or commissions to be received
by the underwriters, dealers or agents;
- the terms of any identification provisions, including indemnification
from liabilities under the federal securities laws; and
- the nature of any transaction by an underwriter, dealer or agent during
the offering that is intended to stabilize or maintain the market price
of the securities.
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<PAGE> 16
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, file reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information filed by us 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 Seven World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, 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. Please call the Commission at 1-800-SEC-0330 for
more information about the operation of the public reference rooms. 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 us that has been filed with the Commission. Our common stock is quoted
on the Nasdaq National Market. Reports, proxy statements and other information
concerning us 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 us with the Commission under the Securities Act of 1933, as amended,
including amendments thereto relating to the common stock offered hereby. This
prospectus does not contain all of the information set forth in the registration
statement.
The Commission allows us to "incorporate by reference" information 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
an important part of this prospectus, and information that we file later with
the Commission will automatically update and supersede this information.
Further, all filings we make under the Exchange Act after the date of the
initial registration statement and prior to effectiveness of the registration
statement shall be deemed to be incorporated by reference into this prospectus.
We incorporate by reference the documents listed below and any future filings we
will make with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
(i) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, as amended, including all material incorporated by
reference therein;
(ii) Our Definitive Proxy Statement dated April 21, 2000 filed in
connection with our 2000 Annual Meeting of Stockholders;
(iii) Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2000 and June 30, 2000; and
(iv) The description of the common stock contained in our Registration
Statement on Form 8-A.
We 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 exhibits
are specifically incorporated by reference herein or into such documents). Such
request may be directed to: Investor Relations Department, Aradigm Corporation,
3929 Point Eden Way, Hayward, California 94545.
LEGAL MATTERS
For the purpose of this offering, Cooley Godward LLP, San Francisco,
California is giving an opinion of the validity of the issuance of the
securities offered in this prospectus.
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, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
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<PAGE> 17
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 common stock being registered. All the amounts shown are
estimates except for the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration fee ........... $ 13,200
Nasdaq National Market Additional Shares Listing fee .......... $ 17,500
Legal fees and expenses ....................................... $ 50,000
Accounting fees and expenses .................................. $ 50,000
Miscellaneous ................................................. $ 19,300
--------
Total .......................................... $150,000
========
</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
directors 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 mason 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
5.1* Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3* Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
----------
* To be filed by amendment.
15
<PAGE> 18
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Registration Certificate of Incorporation, Bylaws,
indemnification agreements 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.
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 distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is conformed in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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; and
(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, each filing of the
registrant's annual report pursuant to section 13(a) of 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.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of the registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
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<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 19th day of
October, 2000.
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 Norman Halleen, and each or any one of them, his or her true and
lawful attorney-in-fact and agent, each with the full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, 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,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each said attorney-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 19th day of October,
2000.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ RICHARD P. THOMPSON President, Chief Executive Officer October 19, 2000
------------------------------------ and Director (Principal Executive
RICHARD P. THOMPSON Officer)
/s/ NORMAN HALLEEN Vice President, Finance and October 19, 2000
------------------------------------ Administration and Chief Financial
NORMAN HALLEEN Officer (Principal Financial and
Accounting Officer)
/s/ REID M. RUBSAMEN, M.D. Secretary and Director October 19, 2000
------------------------------------
REID M. RUBSAMEN, M.D.
Director __________, 2000
------------------------------------
FRANK H. BARKER
/s/ WAYNE I. ROE Director October 19, 2000
------------------------------------
WAYNE I. ROE
/s/ VIRGIL D. THOMPSON Director October 19, 2000
------------------------------------
VIRGIL D. THOMPSON
</TABLE>
17
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<S> <C>
5.1* Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent
Auditors.
23.3* Consent of Cooley Godward LLP. Reference
is made to Exhibit 5.1.
24.1 Power of Attorney. See signature page.
</TABLE>
-----------------
* To be filed by amendment.
