<PAGE>
As filed with the Securities and Exchange Commission on February 17, 2000
Registration No. 333-95293
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------
MAXIM PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 87-0279983
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
8899 University Center Lane, Suite 400
San Diego, California 92122
(858) 453-4040
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Dale A. Sander
Vice President, Finance, Chief Financial Officer and Secretary
MAXIM PHARMACEUTICALS, INC.
8899 University Center Lane, Suite 400
San Diego, California 92122
(858) 453-4040
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
Steven Kaplan, Esq. Gerald S. Tanenbaum, Esq.
ARNOLD & PORTER CAHILL GORDON & REINDEL
555 Twelfth Street, N.W. 80 Pine Street
Washington, D.C. 20004-1202 New York, New York 10005
(202) 942-5000 (212) 701-3000
</TABLE>
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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 in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, 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. / /
- ---------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Prospectus Subject to Completion
Dated February 17, 2000
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 an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
2,500,000 SHARES
[MAXIM LOGO]
COMMON STOCK
Maxim Pharmaceuticals, Inc. is offering all of the shares of common stock. Our
common stock is listed on the American Stock Exchange under the symbol "MMP" and
on the Stockholm Stock Exchange under the symbol "MAXM." On February 16, 2000,
the closing price of our common stock on the American Stock Exchange was
$56.00 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount Maxim
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Per Share $ $ $
- -------------------------------------------------------------------------------------------
Total $ $ $
- -------------------------------------------------------------------------------------------
</TABLE>
We have granted the underwriters the right to purchase up to an additional
375,000 shares of common stock to cover over-allotments.
J.P. Morgan & Co.
Prudential Vector Healthcare
a unit of Prudential Securities
Aragon Securities AB
, 2000
<PAGE>
Maxamine-Registered Trademark- Clinical Trial Status
<TABLE>
<CAPTION>
Phase I/II Phase III
Indication Research Preclinical Clinical Clinical Market
- --------------------------------------------- -------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Malignant Melanoma X X X * NDA filing
planned for
mid 2000
Acute Myelogenous Leukemia X X X *
Renal Cell Carcinoma X X *
Hepatitis C X X *
Colorectal Adenocarcinoma X X
Prostate Adenocarcinoma X X
</TABLE>
X Completed
* In Process
How Maxamine Therapy Works
WITHOUT MAXAMINE -- SUPRESSION OF NK AND T CELLS
[GRAPHIC ILLUSTRATING THE INFORMATION INCLUDED IN THE FOLLOWING PARAGRAPH]
Our drug MAXAMINE protects critical immune cells and is administered in
combination with immunotherapeutic agents such as cytokines that stimulate these
same immune cells. Two kinds of immune cells, Natural Killer (NK) cells and
cytotoxic T cells, possess an ability to kill and support the killing of cancer
cells and virally infected cells. Without MAXAMINE however, NK cells and T cells
are suppressed by phagocytic cells, another class of white blood cells found in
abundant quantities in and around tumors and areas of infection.
MAXAMINE IMMUNE-ENHANCEMENT TECHNOLOGY
[GRAPHIC ILLUSTRATING THE INFORMATION INCLUDED IN THE FOLLOWING PARAGRAPH]
MAXAMINE attaches to phagocytes and prevents the production and release of free
radicals, thereby protecting NK and T cells. MAXAMINE'S protective effect allows
immune-stimulating agents, such as the cytokines IL-2 and IFN-(alpha), to more
effectively activate NK cells and T cells to enhance the killing of tumor cells
or virally infected cells. Because MAXAMINE improves basic immune functions, it
may be used in combination with many cytokines and other immunotherapeutic
agents, and it has the potential to be used in a broad range of cancers and
infectious diseases that can be recognized by the immune system.
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 5
Forward-Looking Statements........... 12
Price Range of Common Stock.......... 13
Dividend Policy...................... 13
Use of Proceeds...................... 14
Capitalization....................... 15
Selected Financial Data.............. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 17
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Business............................. 21
Management........................... 37
Material U.S. Federal Tax
Considerations for Non-U.S. Holders
of Common Stock.................... 39
Underwriting......................... 41
Legal Matters........................ 42
Experts.............................. 42
Where You Can Find More
Information........................ 43
</TABLE>
------------------------
In this prospectus, "Maxim," "we," us" and "our" refer to Maxim
Pharmaceuticals, Inc.
We own or have the right to various trademarks, service marks and trade names
used in our business. These include MAXAMINE-REGISTERED TRADEMARK-, MAXAMINE
THERAPY-TM-, MAXDERM-TM-, MAXVAX-TM- and the Maxim logo. This prospectus also
includes trademarks, service marks and trade names owned by other companies.
------------------------
Unless otherwise indicated, information in this prospectus assumes no exercise
of the underwriters' over-allotment option.
<PAGE>
Prospectus Summary
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. IT
IS NOT COMPLETE, AND DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER
BEFORE INVESTING IN OUR COMMON STOCK. TO FULLY UNDERSTAND THIS OFFERING AND ITS
CONSEQUENCES TO YOU, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING
THE "RISK FACTORS" SECTION, THE FINANCIAL DATA AND THE DOCUMENTS THAT WE
INCORPORATE BY REFERENCE INTO THIS PROSPECTUS.
Maxim Pharmaceuticals, Inc.
Maxim is developing a new generation of drugs, therapies and vaccines for
cancer, infectious diseases and topical disorders.
Our lead drug candidate, MAXAMINE, has the potential to greatly improve the
ability of the immune system to fight cancer and viral infections. MAXAMINE,
which is based on the naturally occuring molecule histamine, is designed to
improve immunotherapy by protecting critical immune cells. MAXAMINE is
administered in combination with cytokines, a class of proteins that stimulate
these same immune cells. More than 1,000 patients have participated in our
completed and ongoing clinical trials in advanced malignant melanoma, acute
myelogenous leukemia, hepatitis C and renal cell carcinoma. Our clinical results
to date suggest that MAXAMINE THERAPY, the administration of MAXAMINE in
combination with cytokines, is a safe, at-home treatment that can improve
patient survival.
MAXAMINE is currently being tested in three Phase III cancer clinical trials:
- - Our most advanced Phase III trial of MAXAMINE is a 305-patient study based in
the United States for the treatment of advanced malignant melanoma, the most
deadly form of skin cancer. We expect to complete this trial in the first
half of 2000 and plan to file a New Drug Application for advanced malignant
melanoma with the Food and Drug Administration, or FDA, in mid 2000.
- - We are conducting a second Phase III trial of MAXAMINE in advanced malignant
melanoma. This trial is based in Europe, Australia, Canada and Israel and is
designed to broaden the exposure of clinicians outside the United States to
our drug and to prepare the international markets for our expected product
launch.
- - Our third Phase III trial is a study of MAXAMINE as a remission therapy for
acute myelogenous leukemia, the most common acute adult leukemia. This trial
is being conducted in 12 countries including the United States.
In November 1999, clinicians from the largest enrolling site in our U.S. Phase
III melanoma trial submitted an abstract to an upcoming cancer conference
describing preliminary survival data from the 40 patients enrolled at their
center. The preliminary single-center results demonstrated a statistically
significant increase in overall survival for patients treated with MAXAMINE as
compared to the control group.
We conducted a series of Phase II clinical trials in which patients with
malignant melanoma and acute myelogenous leukemia were treated with MAXAMINE.
These studies showed a more than doubling of survival and remission times for
patients treated with MAXAMINE as well as the ability to maintain patient
quality of life during treatment. Earlier-stage clinical studies also suggested
promise in renal cell carcinoma, a cancer of the kidneys, and multiple myeloma,
a cancer of the bone marrow.
MAXAMINE is also under clinical development for the treatment of hepatitis C, a
viral infection targeting the liver. Hepatitis C is more easily transmitted than
HIV and is now the leading blood-borne infection in the United States. More than
4.5 million people are estimated to be infected with hepatitis C in the United
States, and more than 200 million people are estimated to be infected worldwide.
1
<PAGE>
In November 1999, we announced preliminary 12-week results from a 129-patient
Phase II study of MAXAMINE in combination with the cytokine interferon for the
treatment of hepatitis C. After 12 weeks of therapy, the combination of MAXAMINE
and interferon achieved a complete biochemical and viral response in 70% of all
patients, compared to the 20-30% response that is commonly observed in patients
with similar profiles treated with interferon alone.
Assuming FDA approval of MAXAMINE, we plan to directly market the drug in the
United States, potentially under an alliance with a pharmaceutical company or
other collaborator. In addition, we expect to establish alliances with
pharmaceutical companies for the marketing of MAXAMINE in key international
markets. In 1999, we entered into agreements with two pharmaceutical companies
to market MAXAMINE in Australia and New Zealand, and Israel, respectively. We
are currently in the process of evaluating, and are in discussions with,
pharmaceutical companies to serve as marketing collaborators.
We are also developing MAXDERM, a MAXAMINE-related series of drug candidates for
the treatment of certain topical disorders. Randomized, blinded,
placebo-controlled pilot studies have been conducted in more than 75 patients.
Studies in patients with oral mucositis and in patients with herpes labialis, or
cold sores, suggested that topical gels based upon the MAXDERM technology
resolved lesions more effectively than placebo controls. In January 2000, we
reported the results of two preclinical trials of a gel based on our MAXDERM
technology in the treatment of oral mucositis. Our preclinical trials showed
significantly reduced healing time for this serious side effect of chemotherapy
and radiation therapy. Other clinical data suggest that gels based on the
MAXDERM technology may be beneficial in the treatment of bed sores, shingles,
burns, eye infections and other related conditions.
Our third technology platform, MAXVAX, is currently in preclinical development
and is designed to facilitate a new class of needle-free mucosal vaccines for
several infectious diseases including respiratory infections, sexually
transmitted diseases and gastrointestinal tract diseases.
Among the proprietary protection surrounding our MAXAMINE technology are U.S.
and international patents and patent applications covering the use of MAXAMINE
or other molecules with similar immunotherapeutic characteristics in the
treatment of cancer and infectious diseases in combination therapies. We also
own or have rights to patent applications covering the method of producing
MAXAMINE, its mechanism of action and the use of these molecules in other
medical applications. We own or have rights to 19 U.S. patents, including seven
U.S. patents relating to MAXAMINE. We own or have rights to 16 U.S. patent
applications, including nine U.S. patent applications relating to MAXAMINE.
Corresponding international patents or patent applications have been issued or
are pending.
Our principal executive offices are located at 8899 University Center Lane,
Suite 400, San Diego, California 92122 and our telephone number is (858)
453-4040.
2
<PAGE>
The Offering
The following information is based on 16,543,797 shares of common stock
outstanding on February 16, 2000 and includes the conversion of our series B
preferred stock into 2,676,640 shares of common stock and the issuance of
335,540 shares of common stock as dividends in connection with that conversion.
It excludes 1,236,258 shares of common stock issuable upon the exercise of
outstanding stock options, 2,071,900 shares of common stock issuable upon the
exercise of redeemable common stock purchase warrants and 647,024 shares of
common stock issuable upon the exercise of other common stock purchase warrants.
It also excludes an additional 140,516 shares of common stock available for
future issuance under our stock option and other employee benefit plans.
<TABLE>
<S> <C>
Common Stock Offered............................ 2,500,000 shares
Common Stock Outstanding After the Offering..... 19,043,797 shares
Over-Allotment Option........................... 375,000 shares
Use of Proceeds................................. We intend to use the net proceeds of this
offering for:
- clinical trials and other development
activities for MAXAMINE;
- the planned market launch of MAXAMINE;
- product research and development activities
for MAXDERM and MAXVAX; and
- working capital and general corporate
purposes.
Dividend Policy................................. We have not paid cash dividends on our common
stock and have no intention to do so in the
foreseeable future.
American Stock Exchange Symbol.................. "MMP"
Stockholm Stock Exchange Symbol................. "MAXM"
</TABLE>
3
<PAGE>
Summary Financial Data
The as adjusted condensed balance sheet data below is adjusted to reflect the
sale of 2,500,000 shares of common stock in this offering at an assumed public
offering price of $56.00 per share and our receipt of the net proceeds therefrom
after deducting underwriting discounts and offering expenses.
<TABLE>
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three Months Ended
Year Ended September 30, December 31,
------------------------------ -------------------
<CAPTION>
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT PER SHARE DATA
Condensed Statements of Operations Data:
Research and collaboration revenue.................... $ -- $ 181 $ 1,078 $ 88 $ 140
Operating expenses:
Research and development............................ 5,353 20,147 36,638 8,779 9,051
Business development and marketing.................. 384 1,313 1,683 453 558
General and administrative.......................... 1,992 2,660 2,880 694 844
------- -------- -------- ------- --------
Total operating expenses.......................... 7,729 24,120 41,201 9,926 10,453
Other income, net..................................... 834 2,084 897 390 284
------- -------- -------- ------- --------
Net loss before preferred stock dividends............. (6,895) (21,855) (39,226) (9,448) (10,029)
Dividends on preferred stock........................ -- -- 483 -- 2,413
------- -------- -------- ------- --------
Net loss applicable to common stock................... $(6,895) $(21,855) $(39,709) $(9,448) $(12,442)
======= ======== ======== ======= ========
Basic and diluted net loss per share applicable to
common stock........................................ $ (1.03) $ (2.37) $ (3.94) $ (0.95) $ (1.09)
Weighted average shares outstanding................... 6,671 9,215 10,079 9,903 11,401
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
As of December 31,
As of September 30, 1999
------------------------------ ----------------------
1997 1998 1999 Actual As Adjusted
-------- -------- -------- -------- -----------
(unaudited)
IN THOUSANDS
Condensed Balance Sheet Data:
Cash, cash equivalents and investments........... $ 12,160 $ 35,769 $ 17,942 $ 32,850 $163,700
Working capital.................................. 8,505 24,812 7,979 20,640 151,490
Total assets..................................... 15,858 42,022 24,515 39,893 170,743
Long-term debt, less current portion............. 555 977 908 788 788
Deficit accumulated during the development
stage.......................................... (20,832) (42,687) (81,913) (91,942) (91,942)
Total stockholders' equity....................... 13,393 31,116 10,843 23,479 154,329
</TABLE>
4
<PAGE>
Risk Factors
YOU SHOULD CAREFULLY CONSIDER EACH OF THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW AND ALL OF THE OTHER INFORMATION IN THIS PROSPECTUS OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON
STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE
FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US, OR THAT WE
CURRENTLY BELIEVE TO BE IMMATERIAL, MAY ALSO ADVERSELY AFFECT OUR BUSINESS OR
THE TRADING PRICE OF OUR STOCK. IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES
DEVELOP INTO ACTUAL EVENTS, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF
OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE.
Risks Related to Maxim
THE DEVELOPMENT OF OUR PRODUCTS IS SUBJECT TO UNCERTAINTIES, MANY OF WHICH ARE
BEYOND OUR CONTROL. IF WE FAIL TO SUCCESSFULLY DEVELOP OUR PRODUCTS, OUR ABILITY
TO GENERATE REVENUES WILL BE SUBSTANTIALLY IMPAIRED.
Potential products based on our MAXAMINE, MAXDERM and MAXVAX technologies will
require extensive clinical testing, regulatory approval and substantial
additional investment before we can sell them. We cannot assure you that any of
our products will:
- - be successfully developed;
- - prove to be safe and effective in clinical trials;
- - meet applicable regulatory standards;
- - be capable of being produced in commercial quantities at acceptable costs;
- - be commercially viable;
- - be eligible for third party reimbursement from governmental or private
insurers; or
- - be successfully marketed or achieve market acceptance.
We have not completed final testing for efficacy or safety in humans for any of
our products, and any delay in our expected testing and development schedules,
or any elimination of a product development program in its entirety, will
negatively impact our ability to generate revenues in the future from the sale
of our products.
BECAUSE WE ARE DEPENDENT ON OUR COLLABORATIVE PARTNERS AND CONTRACTORS FOR
CLINICAL TESTING AND FOR CERTAIN RESEARCH AND DEVELOPMENT ACTIVITIES, THE
RESULTS OF OUR CLINICAL TRIALS AND SUCH RESEARCH ACTIVITIES ARE, TO A CERTAIN
EXTENT, BEYOND OUR CONTROL.
Our business strategy requires us to rely on our collaborative partners and
contractors to assist us with clinical testing and certain research and
development activities. As a result, our success is dependent upon the success
of these outside parties in performing their responsibilities. Although we
believe our collaborative partners are economically motivated to perform on
their contractual obligations, we cannot control the adequacy and timeliness of
the resources and expertise applied to these activities by our collaborators. In
addition, we may not be able to negotiate acceptable collaborative arrangements
required to implement our business strategy, and even if we are able to enter
into further collaborative arrangements in the future, we cannot be sure that
these arrangements will be successful.
5
<PAGE>
OUR PRODUCTS MAY NOT BE ACCEPTED, PURCHASED OR USED BY DOCTORS, PATIENTS OR
PAYORS.
MAXAMINE, and any of our other products in development, may not achieve market
acceptance even if they are approved by the FDA and similar foreign regulatory
agencies. The degree of market acceptance of our products will depend on a
number of factors, including:
- - the scope of regulatory approvals;
- - the establishment and demonstration of the clinical efficacy, safety and
advantages of our products by the medical community;
- - the potential advantages of our products over existing treatment methods; and
- - reimbursement policies of government and other third-party payors.
We cannot guarantee that physicians, patients, payors or the medical community
in general will accept and utilize any products that we develop.
WE HAVE YET TO MARKET OR SELL ANY OF OUR PRODUCTS.
Although we currently intend to market or co-market MAXAMINE in the United
States, we have never before marketed or sold any pharmaceutical product. In
order to market or co-market MAXAMINE or our other products, we will need to
hire a significant number of people with relevant pharmaceutical experience to
staff our sales force and marketing group, and possibly also to make appropriate
arrangements with strategic partners. If we cannot develop the required
marketing and sales expertise both internally and through our partnering
arrangements, our ability to generate revenue from product sales will likely
suffer.
We intend to rely on our collaborative partners to market and sell MAXAMINE in
international markets, and such arrangements may be sought to market MAXDERM and
MAXVAX in all markets. We have not yet entered into any collaborative
arrangement with respect to marketing or selling MAXAMINE with the exception of
agreements relating to Australia, New Zealand and Israel, and have not entered
into any agreements regarding the marketing or selling of MAXDERM or MAXVAX. We
cannot guarantee that we will be able to enter into any such arrangements on
terms favorable to us, or at all. If we are able to enter into marketing and
selling arrangements with collaborative partners, we cannot assure you that such
marketing collaborators will apply adequate resources and skills to their
responsibilities, or that their marketing efforts will be successful.
WE WILL BE DEPENDENT ON THIRD PARTY MANUFACTURERS OF OUR PRODUCTS. OUR ABILITY
TO SELL OUR PRODUCTS MAY BE HARMED TO THE EXTENT ADEQUATE QUANTITIES OF OUR
PRODUCTS ARE NOT MANUFACTURED ON A TIMELY BASIS.
We do not intend to acquire or establish our own dedicated manufacturing
facilities for MAXAMINE in the foreseeable future. We have contracted and expect
to continue to contract with established pharmaceutical manufacturers for the
production of MAXAMINE. If we are unable to continue to contract with
third-party manufacturers on acceptable terms or our manufacturers do not comply
with applicable regulatory requirements, our ability to conduct clinical testing
and to produce commercial quantities of MAXAMINE and other products will be
adversely affected. If we cannot adequately manufacture our products, it could
result in delays in submissions for regulatory approval and in commercial
product launches, which in turn could materially impair our competitive position
and the possibility of achieving profitability. We cannot guarantee that we will
be able to maintain our existing contract manufacturing relationships, or
acquire or establish new, satisfactory third-party relationships to provide
adequate manufacturing capabilities in the future.
6
<PAGE>
WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES. IF WE DO NOT
BECOME PROFITABLE, WE MAY ULTIMATELY BE FORCED TO DISCONTINUE OUR OPERATIONS.
We are a development-stage enterprise. We have experienced net losses every year
since our inception and, as of December 31, 1999, had an accumulated deficit of
approximately $91.9 million. We anticipate incurring substantial additional
losses over at least the next several years related to developing and testing
our product candidates and preparing for commercialization and planned market
launches of our products. If we do not become profitable, our stock price will
be negatively affected, and we may ultimately be forced to discontinue our
operations.
WE WILL LIKELY NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE. IF WE ARE UNABLE TO
OBTAIN THE FUNDS NECESSARY TO CONTINUE OUR OPERATIONS, WE MAY BE REQUIRED TO
DELAY, SCALE BACK OR ELIMINATE ONE OR MORE OF OUR PRODUCT DEVELOPMENT PROGRAMS.
We have already spent substantial funds developing our products and business. We
expect to continue to have negative cash flow from our operations for at least
the next several years. We will likely have to raise additional funds to
complete the development of our products and to bring them to market. Our future
capital requirements will depend on numerous factors, including:
- - the results of our clinical trials;
- - the timing and scope of any additional clinical trials undertaken;
- - the scope and results of our research and development programs;
- - the time required to obtain regulatory approvals;
- - our ability to establish marketing alliances and collaborative agreements;
- - the cost of our internal marketing activities; and
- - the cost of filing, prosecuting and, if necessary, enforcing patent claims.
Additional financing may not be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to delay, scale back or
eliminate one or more of our product development programs or obtain funds
through arrangements with collaborative partners or others that may require us
to relinquish rights to certain of our technologies or products that we would
not otherwise relinquish.
WE COMPETE AGAINST MANY COMPANIES AND RESEARCH INSTITUTIONS THAT ARE DEVELOPING
PRODUCTS TO TREAT THE SAME DISEASES AS OUR PRODUCTS. TO THE EXTENT THESE
COMPETITORS ARE SUCCESSFUL IN DEVELOPING AND MARKETING SUCH PRODUCTS, OUR FUTURE
POTENTIAL MARKET SHARE AND REVENUES COULD BE REDUCED.
There are many companies, both publicly and privately held, including well-known
pharmaceutical companies and academic and other research institutions, engaged
in developing pharmaceutical products for the treatment of cancer and infectious
diseases. Products developed by any of these companies or institutions may
demonstrate greater safety or efficacy than our products or be more widely
accepted by doctors, patients or payors. Many of our competitors and potential
competitors have substantially greater capital, research and development
capabilities and human resources than we do. Many of these competitors also have
significantly greater experience than we do in undertaking preclinical testing
and clinical trials of new pharmaceutical products and obtaining FDA and other
regulatory approvals. If any of our products are approved for commercial sale,
we will also be competing with companies that have greater resources and
experience in manufacturing, marketing and selling pharmaceutical products. To
the extent that any of our competitors succeed in developing products that are
more effective, less costly or have better side effect profiles than our
7
<PAGE>
products, then our future potential market share could decrease which may have a
negative impact on our business.
Industry Risks
OUR PRODUCT CANDIDATES ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATION WHICH
COULD INCREASE THE COST OF DEVELOPING OUR PRODUCTS AND DELAY OR PREVENT THE
SALES OF OUR PRODUCTS.
Our product candidates are subject to significant regulation by the FDA as well
as similar agencies in countries outside the United States. Satisfaction of the
lengthy and detailed laboratory and clinical testing procedures required to
submit an application for regulatory approval is costly and may take a number of
years. If we do not receive FDA approval for our products under development, we
will not be able to market or sell our products in the United States. This would
prevent us from generating product revenue in the United States and would be
extremely detrimental to our business and financial condition. European and
other international regulatory approvals are subject to similar risks and
uncertainties as regulatory approvals in the United States.
We are devoting substantial time and financial resources to our clinical trials,
but we cannot be sure that the results of our clinical trials will support the
submission of a New Drug Application, or NDA, or a Product License Application,
or that any applications we do file will be approved by the FDA or any similar
foreign agency on a timely basis, or at all.
Once we do receive regulatory approval, we will still be subject to ongoing
regulatory requirements. Moreover, government regulation may increase at any
time, creating additional costs and delays for us.
IF WE FAIL TO SECURE ADEQUATE PROTECTION OF OUR INTELLECTUAL PROPERTY OR THE
RIGHT TO USE CERTAIN INTELLECTUAL PROPERTY OF OTHERS, WE MAY NOT BE ABLE TO
PROTECT OUR PRODUCTS AND TECHNOLOGIES FROM COMPETITORS.
Our success depends in large part on our ability to obtain, maintain and protect
patents and trade secrets and to operate without infringing upon the proprietary
rights of others. If we are unable to do so, our products and technologies may
not provide us with any competitive advantage.
The patent positions of biotechnology and pharmaceutical companies are highly
uncertain and involve complex legal and factual questions, and the breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
As a result, patents may not issue from any of our patent applications. Further,
patent applications in the United States are secret until a patent issues, and
we cannot be certain that others have not filed patent applications for
technology covered by our pending applications or that we were the first to file
patent applications for this technology. In addition, patents currently held by
us or issued to us in the future, or to licensors from whom we have licensed
technology rights, may be challenged, invalidated or circumvented so that our
intellectual property rights may not protect our technologies or provide
commercial advantage to us. In addition, we also rely on unpatented trade
secrets and proprietary know-how, and we cannot be sure that others will not
obtain access to or independently develop such trade secrets and know-how.
Enforcement of our intellectual property rights against any infringers of our
patents relating to MAXAMINE will be costly and time-consuming. Because of the
nature of those patents, we could be required to bring lawsuits against many
different entities such as hospitals or clinics. This would have the effect of
increasing the costs of enforcing our rights.
The pharmaceutical industry has experienced extensive litigation regarding
patent and other intellectual property rights. Although, to date, we are not
aware of any intellectual property claims against us, in the future we could be
forced to incur substantial costs in defending ourselves in lawsuits that are
brought against us claiming that we have infringed the patent rights of others
or in asserting our patent rights in lawsuits against other parties. We may also
be required to participate in interference proceedings declared by the U.S.
Patent and Trademark Office for the purpose of determining the priority of
inventions in connection with our patent applications or
8
<PAGE>
other parties' patent applications. Adverse determinations in litigation or
interference proceedings could require us to seek licenses that may not be
available on commercially reasonable terms or subject us to significant
liabilities to third parties.
THE TECHNOLOGY IN OUR SECTOR IS DEVELOPING RAPIDLY, AND OUR FUTURE SUCCESS
DEPENDS ON OUR ABILITY TO KEEP ABREAST OF TECHNOLOGICAL CHANGE.
We are engaged in the pharmaceutical field, which is characterized by extensive
research efforts and rapid technological progress. New developments in oncology,
cancer therapy, medicinal pharmacology, biochemistry and other fields are
expected to continue at a rapid pace. Research and discoveries by others may
render some or all of our proposed programs or products noncompetitive or
obsolete. Our business strategy is subject to the risks inherent in the
development of new products using new technologies and approaches. Unforeseen
problems may develop with these technologies or applications, and we may not be
able to successfully address technological challenges we encounter in our
research and development programs. This may result in our inability to develop
commercially feasible products.
THE MARKETABILITY OF OUR PRODUCTS MAY DEPEND ON REIMBURSEMENT AND REFORM
MEASURES IN THE HEALTH CARE INDUSTRY.
Our success may depend, in part, on the extent to which reimbursement for the
costs of therapeutic products and related treatments will be available from
third-party payors such as government health administration authorities, private
health insurers, managed care programs and other organizations. Over the past
decade, the cost of health care has risen significantly, and there have been
numerous proposals by legislators, regulators and third-party health care payors
to curb these costs. Some of these proposals have involved limitations on the
amount of reimbursement for certain products. We cannot guarantee that similar
federal or state health care legislation will not be adopted in the future or
that any products sought to be commercialized by us will be considered
cost-effective or that adequate third-party insurance coverage will be available
for us to establish and maintain price levels sufficient for realization of an
appropriate return on our investment in product development. Moreover, the
existence or threat of cost control measures could have an adverse effect on the
willingness of potential collaborators to pursue research and development
programs related to our products.
Offering Risks
THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE. THE SALE OF THESE SHARES
MAY DEPRESS OUR STOCK PRICE.
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices for our common stock and our ability
to raise equity capital in the future. As of February 16, 2000, we had
outstanding 16,543,797 shares of common stock. Of these shares, an aggregate of
15,644,292 shares are freely tradable in the public market, unless acquired by
our affiliates. The remaining 899,505 shares are "restricted securities" as that
term is defined in Rule 144 under the Securities Act of 1933, of which 897,422
shares are eligible for immediate sale in the public market pursuant to
Rule 144, subject to certain volume and manner of sale limitations. As of
February 16, 2000, we also had outstanding redeemable common stock purchase
warrants exercisable for 2,071,900 shares of common stock, all of which have
been registered and will be eligible for immediate sale in the public market
upon issuance.
As of February 16, 2000, approximately 562,412 shares of common stock underlying
warrants, 796,258 shares underlying stock options outstanding under our
long-term incentive plan and 40,522 shares reserved for issuance under our
401(k) plan will be available for immediate sale in the public market. There
were 84,612 shares of common stock underlying certain warrants and 440,000
shares of common stock reserved for issuance under other option grants
outstanding as of February 16, 2000, none of which have been registered for
public
9
<PAGE>
sale and all of which will be subject to the public sale restrictions of
Rule 144 or Rule 701 under the Securities Act, where applicable.
OUR STOCK PRICE MAY BE HIGHLY VOLATILE DUE TO EXTERNAL FACTORS.
Our common stock currently trades on the American Stock Exchange and on the
Stockholm Stock Exchange. Historically, our common stock has generally
experienced relatively low daily trading volumes in relation to the aggregate
number of shares outstanding. Sales of substantial amounts of our common stock
in the public market could adversely affect the prevailing market prices of our
common stock and our ability to raise equity capital in the future.
Factors that may have a significant impact on the market price or the liquidity
of our common stock also include:
- - actual or potential clinical trial results relating to products under
development by us or our competitors;
- - delays in our testing and development schedules;
- - events or announcements relating to our collaborative relationships with
others;
- - announcements of technological innovations or new products by us or our
competitors;
- - developments or disputes concerning patents or proprietary rights;
- - regulatory developments in both the United States and foreign countries;
- - economic and other external factors, as well as period-to-period fluctuations
in our financial results;
- - market conditions for pharmaceutical and biotechnology stocks; and
- - publicity regarding actual or potential medical results relating to products
under development by us or our competitors.
External factors may also adversely affect the market price for our common
stock. The price and liquidity of our common stock may be significantly affected
by the overall trading activity and market factors on the American Stock
Exchange and the Stockholm Stock Exchange, and these factors may differ between
the two markets. In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies. The market prices of the
common stock of many publicly traded pharmaceutical or biotechnology companies
have in the past been, and can in the future be expected to be, especially
volatile.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The public offering price of our common stock in this offering will be
substantially higher than the net tangible book value per share of our
outstanding common stock. As of December 31, 1999, our net tangible book value
was approximately $21.5 million, or $1.71 per share of common stock, and on a
pro forma basis for this offering, based on an assumed public offering price of
$56.00 per share, and the conversion of our series B preferred stock, will be
approximately $152.3 million, or $8.44 per share of common stock. The amount of
the increase in net tangible book value to existing stockholders will be
approximately $6.73 per share of common stock. Purchasers of our common stock in
this offering will experience immediate and substantial dilution of
approximately $47.56 per share of common stock.
10
<PAGE>
CERTAIN OF OUR CHARTER AND BY-LAW PROVISIONS MAY DETER A THIRD PARTY FROM
ACQUIRING US.
Certain provisions of our charter and by-laws may make it more difficult for a
third party to acquire control of us. These provisions include:
- - a staggered or classified board;
- - the inability of stockholders to act by written consent; and
- - no right to remove directors other than for cause.
Our board of directors has the authority to issue, at any time, without further
stockholder approval and after conversion of the series B preferred stock, up to
5,000,000 shares of preferred stock, and to determine the price, rights,
privileges and preferences of those shares. These shares could be used in
connection with a stockholder rights plan or "poison pill." Any issuance of
preferred stock could discourage a third party from acquiring a majority of our
outstanding voting stock.
Furthermore, we are subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law, which may also dissuade a
potential acquiror of our common stock.
11
<PAGE>
Forward-Looking Statements
This prospectus contains and incorporates by reference certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements give our current expectations or forecasts of
future events. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. Such statements may include
words such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" and other words or terms of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these
forward-looking statements include statements relating to:
- - our history of operating losses and anticipation of future losses;
- - our need for additional capital and uncertainty of additional funding;
- - uncertainty of our product development;
- - government regulation and uncertainties of obtaining regulatory approval on a
timely basis or at all;
- - uncertainties related to our patent and proprietary rights;
- - our dependence on key personnel;
- - uncertainties relating to clinical trials;
- - collaborative partners and contractors;
- - our lack of experience in marketing or selling pharmaceutical products;
- - our dependence on third-party manufacturers of our products;
- - uncertainties regarding the acceptance, purchase and use of our products;
- - intense competition and rapid technological change in the biopharmaceutical
industry;
- - the value and price of our common stock; and
- - uncertainties relating to health care reform measures and third-party
reimbursement.
Any or all of our forward-looking statements in this prospectus may turn out to
be wrong. They can be affected by inaccurate assumptions we might make or by
known or unknown risks and uncertainties. Many factors mentioned in our
discussion in this prospectus will be important in determining future results.
Consequently, no forward-looking statement can be guaranteed. Actual future
results may vary materially.
We will not update these forward looking statements, whether as a result of new
information, future events or otherwise. You should, however, review additional
disclosures we make in our Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and Annual Reports on Form 10-K filed with the SEC.
12
<PAGE>
Price Range of Common Stock
Our common stock began trading publicly on the American Stock Exchange under the
symbol "MMP" on July 10, 1996. The following table sets forth the high and low
intraday sales price for our common stock by quarter, as reported by the
American Stock Exchange, for the periods indicated:
<TABLE>
<CAPTION>
-------------------------
<S> <C> <C>
High Low
--- ---
Year Ended September 30, 1998:
First Quarter........................................... $19 1/4 $12 1/4
Second Quarter.......................................... 16 5/8 13 3/4
Third Quarter........................................... 23 14 1/8
Fourth Quarter.......................................... 20 1/2 14
Year Ended September 30, 1999:
First Quarter........................................... $16 1/2 $11 5/8
Second Quarter.......................................... 15 5/8 10 1/2
Third Quarter........................................... 11 3/8 9
Fourth Quarter.......................................... 10 5/8 7 1/2
Year Ending September 30, 2000:
First Quarter........................................... $20 1/8 $ 8
Second Quarter (through February 16, 2000).............. $60 5/8 $18 1/4
</TABLE>
On February 16, 2000, the last sale price of our common stock, as reported by
the American Stock Exchange, was $56.00 per share. As of that date, there were
approximately 4,230 holders of record of our common stock. Our common stock is
also traded on the Stockholm Stock Exchange under the ticker symbol "MAXM."
Dividend Policy
Since our initial public offering, we have not paid cash dividends on our common
stock. We currently anticipate that any earnings will be retained for the
continued development of our business and we do not anticipate paying any cash
dividends on our common stock in the foreseeable future. We have entered into a
bank loan agreement which has the potential to restrict our ability to pay
dividends.
13
<PAGE>
Use of Proceeds
Our net proceeds from the sale of 2,500,000 shares of common stock in this
offering are estimated to be approximately $130.9 million, or approximately
$150.6 million if the underwriters' over-allotment option is exercised in full,
after deducting underwriting discounts and estimated offering expenses, based
upon an assumed public offering price of $56.00 per share.
We intend to use the net proceeds of this offering, together with our current
cash balances, cash equivalents and marketable securities, for:
- - product development activities related to MAXAMINE including ongoing and
planned clinical trials, manufacturing development, regulatory application
and other research and development;
- - the planned market launch of MAXAMINE including the establishment of a U.S.
sales force;
- - other research and development primarily for our MAXDERM and MAXVAX
technologies; and
- - working capital and general corporate purposes.
We may also use a portion of the net proceeds to acquire technologies or
products complementary to our business, although no material expenditures in
connection with any acquisitions are anticipated as of the date of this
prospectus. Pending application of the net proceeds as described above, we
intend to invest the net proceeds from this offering in investment grade
instruments.
14
<PAGE>
Capitalization
The following table sets forth as of December 31, 1999 unaudited information
about our cash, cash equivalents and investments and capitalization:
- - on an actual basis; and
- - as adjusted to give effect to
- the conversion of our series B preferred stock into 2,676,640 shares of
our common stock,
- the issuance of an additional 335,540 shares of common stock as dividends
to the holders of the series B preferred stock in connection with that
conversion, and
- our receipt of the estimated net proceeds from the sale of the 2,500,000
shares of common stock in this offering at an assumed public offering
price of $56.00 after deducting underwriting discounts and estimated
offering expenses.
The actual information is based on 12,529,925 shares of common stock outstanding
on December 31, 1999. It excludes 1,306,441 shares of common stock issuable upon
the exercise of outstanding stock options, 2,676,640 shares of common stock
issuable upon the conversion of our series B preferred stock, 2,483,000 shares
of common stock issuable upon the exercise of redeemable common stock purchase
warrants and 1,450,098 shares of common stock issuable upon the exercise of
other common stock purchase warrants. It also excludes an additional 151,391
shares of common stock available for future issuance under our stock option and
other employee benefit plans.
<TABLE>
<CAPTION>
-------------------
<S> <C> <C>
As of December 31,
1999
<CAPTION>
Actual As Adjusted
-------- -----------
<S> <C> <C>
IN THOUSANDS, EXCEPT SHARE DATA
Cash, cash equivalents and investments...................... $ 32,850 $163,700
======== ========
Long-term debt, less current portion........................ $ 788 $ 788
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares
authorized, 267,664 shares issued and outstanding
actual; zero shares issued and outstanding as
adjusted................................................ -- --
Common Stock, $.001 par value, 35,000,000 shares
authorized, 12,529,925 shares issued and outstanding
actual; 18,042,105 shares issued and outstanding as
adjusted................................................ 12 18
Additional paid-in capital................................ 115,472 246,316
Deficit accumulated during the development stage.......... (91,942) (91,942)
Deferred compensation..................................... (2) (2)
Accumulated other comprehensive loss...................... (61) (61)
-------- --------
Total stockholders' equity.............................. 23,479 154,329
-------- --------
Total capitalization.................................. $ 24,267 $155,117
======== ========
</TABLE>
15
<PAGE>
Selected Financial Data
The selected financial data presented below under the captions "Statements of
Operations Data" and "Balance Sheet Data" for, and as of the end of, each of the
years in the five-year period ended September 30, 1999, are derived from the
financial statements of Maxim Pharmaceuticals, Inc., which financial statements
have been audited by KPMG LLP, independent certified public accountants. The
financial statements as of September 30, 1998 and 1999, and for each of the
years in the three-year period ended September 30, 1999 and the report thereon,
are incorporated by reference in this prospectus. The selected financial data
presented below for the three months ended December 31, 1998 and 1999 and as of
December 31, 1999 are derived from unaudited interim financial statements of
Maxim Pharmaceuticals, Inc. incorporated by reference in this prospectus and
have been prepared on the same basis as the audited financial statements and in
the opinion of management contain all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
position at that date and the results of operations for these periods. The
results of operations for the three months ended December 31, 1999 are not
necessarily indicative of the results to be expected in subsequent periods or
for the year as a whole. The as adjusted balance sheet data reflects the sale of
2,500,000 shares of common stock offered hereby at an assumed price of $56.00
per share and the receipt of the estimated net proceeds therefrom. The following
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes to the financial statements in our Annual
Report on Form 10-K for the fiscal year ended September 30, 1999 and our
Quarterly Report on Form 10-Q for the three months ended December 31, 1999
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended
Year Ended September 30, December 31,
---------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- ----------- -----------
(unaudited)
IN THOUSANDS, EXCEPT PER SHARE DATA
Statements of Operations Data:
Research and collaboration revenue........... $ -- $ -- $ -- $ 181 $ 1,078 $ 88 $ 140
Operating expenses:
Research and development................... 985 1,609 5,353 20,147 36,638 8,779 9,051
Business development and marketing......... -- 112 384 1,313 1,683 453 558
General and administrative................. 1,116 1,243 1,992 2,660 2,880 694 844
------- ------- ------- -------- -------- ----------- -----------
Total operating expenses................. 2,101 2,964 7,729 24,120 41,201 9,926 10,453
Other income (expense):
Investment income.......................... 5 260 927 2,247 1,023 429 304
Interest expense........................... (487) (197) (78) (89) (146) (39) (31)
Other income (expense)..................... (207) (220) (15) (74) 20 -- 11
Gain on sale of subsidiary................. -- 2,288 -- -- -- -- --
------- ------- ------- -------- -------- ----------- -----------
Total other income (expense)............. (689) 2,131 834 2,084 897 390 284
------- ------- ------- -------- -------- ----------- -----------
Net loss before preferred stock dividends.... (2,790) (833) (6,895) (21,855) (39,226) (9,448) (10,029)
Dividends on preferred stock............... -- -- -- -- 483 -- 2,413
------- ------- ------- -------- -------- ----------- -----------
Net loss applicable to common stock.......... $(2,790) $ (833) $(6,895) $(21,855) $(39,709) $ (9,448) $ (12,442)
======= ======= ======= ======== ======== =========== ===========
Basic and diluted net loss per share of
common stock............................... $ (0.87) $ (0.20) $ (1.03) $ (2.37) $ (3.94) $ (0.95) $ (1.09)
======= ======= ======= ======== ======== =========== ===========
Weighted average shares outstanding.......... 3,209 4,075 6,671 9,215 10,079 9,903 11,401
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31,
1999
As of September 30, ---------------------
---------------------------------------------------- As
1995 1996 1997 1998 1999 Actual Adjusted
-------- -------- -------- -------- -------- -------- ----------
(unaudited)
IN THOUSANDS
Balance Sheet Data:
Cash, cash equivalents and investments..... $ 513 $ 19,144 $ 12,160 $ 35,769 $ 17,942 $ 32,850 $163,700
Working capital (deficit).................. (5,324) 16,212 8,505 24,812 7,979 20,640 151,490
Total assets............................... 2,454 21,255 15,858 42,022 24,515 39,893 170,743
Long-term debt, less current portion....... 247 -- 555 977 908 788 788
Deficit accumulated during the development
stage.................................... (13,103) (13,937) (20,832) (42,687) (81,913) (91,942) (91,942)
Total stockholders equity (deficit)........ (3,644) 20,124 13,393 31,116 10,843 23,479 154,329
</TABLE>
16
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED FINANCIAL DATA" AND
OUR FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND OTHER PARTS OF THIS PROSPECTUS CONTAIN
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
Overview
During the periods encompassed by this prospectus, we have devoted substantially
all of our resources to our MAXAMINE, MAXDERM and MAXVAX product development
programs. We conduct our research and product development efforts through a
combination of internal and collaborative programs. In addition to internal
management and staff, we rely upon arrangements with universities, other
clinical research sites and contract research organizations for a significant
portion of our product development efforts. Oversight of all external and
collaborative programs is conducted by our executive officers and other staff
from our headquarters located in San Diego, California.
Our products are in the development stage and we do not expect revenue from
product sales in the near future. We expect to continue to incur losses as we
continue our research and development activities, particularly those relating to
Phase III and Phase II clinical trials using MAXAMINE and the preparation for
the planned market launch of MAXAMINE. Losses may fluctuate from quarter to
quarter and such fluctuations may be substantial as a result of, among other
factors, the number and timing of clinical trials conducted, the funding, if
any, provided as a result of corporate collaborations, the results of clinical
testing and the timing of FDA or international regulatory approvals. We cannot
assure you that we will successfully develop, commercialize, manufacture or
market our products or ever achieve or sustain product revenues or
profitability.
Results of Operations
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
RESEARCH AND COLLABORATION REVENUE. Research and collaboration revenue for the
quarter ended December 31, 1999 was $140,000, compared to $88,000 for the same
period in the prior year. The revenue consists of collaborative support related
to our clinical trials, and the increase relates to the expansion of such
trials.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
quarter ended December 31, 1999 were $9,051,000, an increase of $272,000, or 3%,
over the same period in the prior year. The expenses were primarily attributable
to increased activity related to three Phase III cancer clinical trials of
MAXAMINE initiated in prior years and continuing into the current year. In
addition to these and other cancer trials, the current quarter includes efforts
associated with a Phase II clinical trial in hepatitis C commenced in mid 1999.
Costs associated with these trials include clinical trial site and contract
research organization costs, hiring additional clinical and development
personnel and other clinical costs.
BUSINESS DEVELOPMENT AND MARKETING AND GENERAL AND ADMINISTRATIVE
EXPENSES. Business development and marketing expenses for the quarter ended
December 31, 1999 were $558,000, an increase of $105,000, or 23%, over the same
period in the prior year. This increase was due to additional personnel and
other resources devoted to preparation for the potential market launch of
MAXAMINE, including market evaluations, sales launch planning and corporate
partnering efforts. For the quarter ended December 31, 1999, general and
17
<PAGE>
administrative expenses were $844,000, an increase of $150,000, or 22%, over the
same period in the prior year due to general expenses associated with our
expanded operations.
OTHER INCOME (EXPENSE). Investment income was $304,000 for the quarter ended
December 31, 1999, a decrease of $125,000, or 29%, from the same period in the
prior year. This decrease was a result of the reduction in the average principal
balance of interest-bearing investments. Interest expense for the quarter ended
December 31, 1999 was $31,000, a decrease of $8,000, or 20%, from the same
period in the prior year. This decrease was a result of the reduction in the
outstanding principal balance under bank loan agreements.
NET LOSS. Net loss before preferred stock dividends for the quarter ended
December 31, 1999 totaled $10,029,000, an increase of $581,000, or 6%, over the
same period in the prior year. The increase was due to the expansion of our
research and development and general corporate activities described above. Net
loss attributable to common stock for the quarter ended December 31, 1999
totaled $12,442,000, an increase of $2,994,000, or 32%, over the same period in
the prior year. The increase was primarily the result of $2,413,000 in dividends
associated with our series A and series B preferred stock. Of the total
dividends, $2,015,000 was associated with the series A preferred stock that was
converted to common stock during the quarter and was no longer outstanding at
December 31, 1999.
During the quarter ended December 31, 1999, we exercised our right to call for
an automatic conversion of our series A preferred stock into common stock. As
required in the event of an automatic conversion, we were required to pay the
holders upon conversion, in cash or additional shares of series A preferred
stock at the option of the holder, an amount equal to the dividends that would
have been paid had the series A preferred stock remained outstanding for one
year after issuance. We recorded $2,015,000 in dividends associated with the
series A preferred stock during the three months ended December 31, 1999, of
which $1,894,000 related to the settlement of dividend obligations resulting
from the automatic conversion to common stock. Of the total series A preferred
stock dividends recorded during the quarter, $63,000 were paid in cash, and the
remainder were paid through the issuance of securities.
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
RESEARCH AND COLLABORATION REVENUE. For the year ended September 30, 1999,
research and collaboration revenue consisting of collaborative support and fees
for exclusive MAXAMINE marketing rights for the territories of Australia, New
Zealand and Israel totaled $1,078,000, compared to $181,000 for the year ended
September 30, 1998. There was no such revenue earned in the year ended
September 30, 1997.
RESEARCH AND DEVELOPMENT EXPENSES. For the year ended September 30, 1999,
research and development expenses were $36,638,000, an increase of $16,491,000,
or 82%, over the prior year. This increase was primarily attributable to
increased activity related to late-stage cancer clinical trials of MAXAMINE,
including clinical trial site and contract research organization costs, hiring
additional clinical and development personnel and other clinical costs. These
clinical trials include a Phase III clinical trial in malignant melanoma
commenced in the United States in July 1997, an international Phase III
malignant melanoma clinical trial commenced in November 1997, a global Phase III
clinical trial in acute myelogenous leukemia commenced in February 1998 and a
European Phase II clinical trial in hepatitis C commenced in May 1999. For the
year ended September 30, 1998, research and development expenses were
$20,147,000, an increase of $14,793,000, or 276%, over the prior year. This
increase was primarily due to increased activity in cancer clinical trials of
MAXAMINE.
BUSINESS DEVELOPMENT AND MARKETING AND GENERAL AND ADMINISTRATIVE
EXPENSES. Business development and marketing expenses for the year ended
September 30, 1999 were $1,683,000, an increase of $370,000, or 28%, over the
prior year. This increase was due to additional personnel and other resources
devoted to preparation for the potential market launch of MAXAMINE, including
corporate partnering efforts, market evaluations and
18
<PAGE>
third-party reimbursement evaluations. For the year ended September 30, 1999,
general and administrative expenses were $2,880,000, an increase of $220,000, or
8%, over the prior year. This increase was due to general expenses associated
with our expanded operations. Business development and marketing expenses for
the year ended September 30, 1998 were $1,313,000, an increase of $929,000, or
242%, over the prior year. General and administrative expenses for the year
ended September 30, 1998 totaled $2,660,000, an increase of $667,000, or 33%,
over the prior year. Both of these increases resulted from the expanded
activities described above.
OTHER INCOME (EXPENSE). Investment income was $1,023,000 for the year ended
September 30, 1999, a decrease of $1,225,000, or 54%, from the prior year. This
decrease was a result of the reduction in the principal balance of
interest-bearing investments used to finance our operations. Investment income
for the year ended September 30, 1998 totaled $2,247,000, an increase of
$1,320,000 over the prior year. This increase primarily resulted from income on
the proceeds of our follow-on public offering completed in October 1997.
Interest expense for the year ended September 30, 1999 was $146,000, an increase
of $57,000, or 64%, over the prior year. This increase was primarily
attributable to interest incurred on additional advances made under our line of
credit agreement used to finance qualified equipment purchases. Interest expense
for the year ended September 30, 1998 increased slightly over with that of the
prior year and totaled $89,000.
NET LOSS. Net loss for the year ended September 30, 1999 totaled $39,709,000,
an increase of $17,855,000, or 82%, over the prior year. The increase was
primarily due to the expansion of our research and development and general
corporate activities described above, and also includes $483,000 of accrued
dividends on preferred stock included in the net loss applicable to common
stock. Net loss for the year ended September 30, 1998 totaled $21,855,000, an
increase of $14,959,000, or 217%, over the prior year.
Liquidity and Capital Resources
We, as a development stage enterprise, anticipate incurring substantial
additional losses over at least the next several years due to, among other
factors, the need to expend substantial amounts on our ongoing and planned
clinical trials, preparation for the planned market launch of MAXAMINE, other
research and development activities, and related business development and
general corporate expenses. We have financed our operations primarily through
the sale of our equity securities, including an initial public offering in 1996,
an international follow-on public offering in 1997 and private offerings of
preferred stock in 1999 that provided us with net proceeds of approximately
$22.3 million (including proceeds from the exercise of warrants), $34.7 million
and $40.8 million, respectively.
As of December 31, 1999, we had cash, cash equivalents and investments totaling
approximately $32.8 million. For the three months ended December 31, 1999, net
cash used in our operating activities was approximately $7.2 million. For the
year ended September 30, 1999, net cash used in our operating activities was
approximately $36.0 million. Our cash requirements may fluctuate in future
periods as we conduct additional research and development activities including
clinical trials, other research and development activities, and efforts
associated with the commercial launch of any products that are approved for sale
by government regulatory bodies. Among the activities that may result in an
increase in cash requirements are three Phase III cancer clinical trials and
four Phase II clinical trials of MAXAMINE currently underway and preparation for
the planned market launch of MAXAMINE.
Our cash requirements may vary materially from those now planned because of the
results and scope of clinical trials and other research and development
activities, the time required to obtain regulatory approvals, the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, our ability to establish marketing alliances and
collaborative arrangements and the cost of our internal marketing activities. As
a result of these factors, it is difficult to predict accurately the timing and
amount of our cash requirements. We plan to pursue the issuance of additional
equity securities, as well as corporate marketing alliances and
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collaborative agreements, as required to meet our cash requirements. The
issuance of additional equity securities could result in substantial dilution to
our stockholders. We cannot assure you that additional funding will be available
on terms acceptable to us, if at all. The failure to fund our capital
requirements would have a material adverse effect on our business, financial
condition and results of operations. We have never paid a cash dividend on our
common stock and do not contemplate the payment of cash dividends on our common
stock in the foreseeable future.
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Business
Overview
We are developing a new generation of drugs, therapies and vaccines for cancer,
infectious diseases and topical disorders. Our lead drug candidate, MAXAMINE,
has the potential to greatly improve the ability of the immune system to fight
cancer and viral infections. MAXAMINE, which is based on the naturally occuring
molecule histamine, is designed to improve immunotherapy by protecting critical
immune cells. MAXAMINE is administered in combination with cytokines, a class of
proteins that stimulate these same immune cells. More than 1,000 patients have
participated in our completed and ongoing clinical trials in advanced malignant
melanoma, acute myelogenous leukemia, hepatitis C and renal cell carcinoma. Our
clinical results to date suggest that MAXAMINE THERAPY, the administration of
MAXAMINE in combination with other cytokines, is a safe, at-home treatment that
can improve patient survival.
Our most advanced Phase III trial of MAXAMINE is a 305-patient study based in
the United States for the treatment of advanced malignant melanoma, the most
deadly form of skin cancer. We expect to complete this trial in the first half
of 2000 and plan to file a NDA with the FDA for this cancer in mid 2000. We also
are conducting a Phase III trial of MAXAMINE in acute myelogenous leukemia, the
most common acute adult leukemia, and have Phase II trials of MAXAMINE underway
in hepatitis C and renal cell carcinoma. We expect to pursue supplemental NDAs
in each of these diseases subsequent to our NDA in melanoma.
We conducted a series of Phase II clinical trials in which patients with
malignant melanoma and acute myelogenous leukemia were treated with MAXAMINE.
These Phase II studies have shown a more than doubling of survival and remission
times for patients treated with MAXAMINE as well as the ability to maintain
patient quality of life during treatment. Earlier-stage clinical studies have
also suggested promise in renal cell carcinoma, a cancer of the kidneys, and
multiple myeloma, a cancer of the bone marrow.
MAXAMINE is also under clinical development for the treatment of hepatitis C,
the leading blood-borne infection in the United States. We are currently
conducting a 129-patient trial in hepatitis C, and preliminary results showed
that after 12 weeks of treatment the combination of MAXAMINE and the cytokine
interferon achieved a complete response in 70% of all patients compared to the
20-30% response commonly observed in patients with similar profiles treated with
interferon alone.
We are also developing MAXDERM, a MAXAMINE-related series of drug candidates for
the treatment of certain topical disorders. Our third technology platform,
MAXVAX, is currently in preclinical development and is designed to facilitate a
new class of needle-free mucosal vaccines for several infectious diseases.
Maxamine
MAXAMINE has the potential to greatly improve the ability of the immune system
to fight cancer and viral infections. In many patients with cancer and chronic
infectious diseases, the capacity of the patient's immune system to detect and
destroy tumor cells or virally infected cells is compromised. In recent years,
significant research has focused on mechanisms to enhance the immune system's
ability to combat cancer and infectious diseases, a treatment approach known as
immunotherapy. Current immunotherapy is largely based on the use of cytokines,
such as interleukin-2 (IL-2) and interferon-alpha (IFN-(alpha) ), naturally
occurring proteins that stimulate certain key immune cells. However, cytokines
only demonstrate a clinically significant tumor response in a small portion of
cancer patients, often produce severe adverse side effects and do not produce
sustained responses in the majority of hepatitis C patients.
MAXAMINE THERAPY combines the administration of MAXAMINE, an immuno-modulator
that protects critical immune cells, with the administration of cytokines such
as IL-2 and IFN-(alpha) that stimulate these same immune cells. This combination
of action is designed to improve the immune system's ability to identify,
disable and destroy malignant or infected cells. MAXAMINE is based on histamine,
a naturally occurring molecule, and
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its usefulness in immunotherapy was first discovered by our collaborative
scientists at the University of Goteborg, Sweden.
Two kinds of immune cells, Natural Killer (NK) cells and cytotoxic T cells,
possess an ability to kill and support the killing of cancer cells and virally
infected cells, and much of the current practice of immunotherapy is based on
the fact that IL-2 and IFN-(alpha) are potent stimulators of NK cells and T
cells. Our researchers have shown, however, that NK cells and T cells are
suppressed by phagocytic cells, another component of the body's immune system.
Phagocytes are a class of white blood cells, which include monocytes,
macrophages and neutrophils, found in abundant quantities in and around tumors
and areas of infection. The release of free radicals by phagocytes results in
apoptosis, or programmed cell death, of NK cells and T cells, thereby destroying
their cytotoxic capability and rendering the immune response against the tumor
or virus largely ineffective.
Programmed Cell Death of NK and T Cells Without MAXAMINE
[DRAWING]
ILLUSTRATING THE INFORMATION INCLUDED IN PRECEDING PARAGRAPH
MAXAMINE is designed to modulate the immune system to protect NK cells and T
cells, allowing immunotherapy to be more effective. When histamine, a natural
molecule present in the body, or other molecules in the class known as histamine
type-2 (H(2)) receptor agonists bind to the H(2) receptor on the phagocytes, the
production and release of free radicals is temporarily prevented. The prevention
of the release of free radicals allows immune-stimulating agents, such as IL-2
and IFN-(alpha) , to activate NK cells and T cells more effectively, thus
enhancing the killing of tumor cells or virally infected cells.
MAXAMINE Immune-Enhancement Technology
[DRAWING]
ILLUSTRATING THE INFORMATION INCLUDED IN PRECEDING PARAGRAPH
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MAXAMINE increases the effectiveness of basic immune functions and may be used
in combination with, and improve the effectiveness of, many cytokines and other
immunotherapeutic agents. Because MAXAMINE impacts basic immune functions, it
has the potential to be used in a broad range of cancers and infectious diseases
that can be recognized by the immune system. This potential broad applicability
is highlighted by our preliminary favorable results obtained to date in the
treatment of patients with malignant melanoma, acute myelogenous leukemia, renal
cell carcinoma and hepatitis C. In addition, because MAXAMINE has been shown to
increase the effectiveness of cytokines, lower doses of cytokines such as IL-2
and IFN-(alpha) can potentially be used in MAXAMINE THERAPY without compromising
therapeutic effectiveness, thereby reducing serious side effects associated with
the cytokines. Moreover, we have designed MAXAMINE THERAPY so that it may be
delivered to patients through a subcutaneous injection, thereby permitting
treatment at home.
Among the proprietary protection surrounding our MAXAMINE technology are U.S.
and international patents and patent applications covering the use of histamine,
upon which MAXAMINE is based, or any H(2) receptor agonist in the treatment of
cancer and infectious diseases in combination therapies, as well as patent
applications covering the method of producing MAXAMINE, its mechanism of action
and the use of H(2) receptor agonists in other medical applications.
POTENTIAL BENEFITS OF MAXAMINE
We believe that MAXAMINE may be integral in the growing trend toward combination
therapy for certain cancers and infectious diseases and may offer a number of
important clinical and commercial advantages relative to current therapies or
approaches, including:
- - EXTENDING LIFE. Late-stage clinical trials of MAXAMINE provided evidence of
substantially improved therapeutic efficacy (extended survival and remission
intervals) over approved therapies or standards of care.
- - MAINTAINING QUALITY OF LIFE. Late-stage clinical trials indicated that
MAXAMINE is safe and may reduce the toxic side effects of cytokines and other
biological response modifiers, thereby allowing the maintenance of the
patient's quality of life during outpatient therapy.
- - OUTPATIENT ADMINISTRATION. MAXAMINE can be safely administered subcutaneously
on an outpatient basis, in contrast to the in-hospital administration
required for many other therapies.
- - COST EFFECTIVE. The delivery of MAXAMINE THERAPY on an outpatient basis may
eliminate the costs associated with in-hospital patient care. These factors,
combined with the potential improvements in efficacy, contribute favorably to
the assessment of benefit versus cost for this therapy.
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MAXAMINE CLINICAL TRIAL STATUS
The table below summarizes our current and completed clinical trial activities
for each disease we currently target or may target in the future with MAXAMINE.
We have 11 Phase I/II trials and three Phase III trials completed or currently
underway and expect to file a NDA for advanced malignant melanoma in mid 2000.
Our clinical trials are staged so that, if these trials are successful,
additional product approvals may follow in the periods subsequent to our initial
product launch in melanoma.
MAXAMINE Clinical Trial Status
<TABLE>
Indication Trial Phase Status Location
- --------------------------- ---------------------------- -------------------- ----------------
<S> <C> <C> <C>
Advanced Malignant Melanoma Phase III Ongoing, patient United States
enrollment completed
Phase III Ongoing Europe,
Australia,
Canada and
Israel
Phase II advanced research Ongoing United States
Phase II liver metastases Completed Europe
Phase II low-dose Completed Europe
Phase II high-dose Completed Europe
Acute Myelogenous Leukemia Phase III Ongoing United States,
Europe,
Australia,
Canada and
Israel
Phase II Completed Europe
Renal Cell Carcinoma Phase II controlled Ongoing Europe
Phase II single arm Ongoing Europe
Phase I Completed Europe
Multiple Myeloma Phase I Completed Europe
Hepatitis C Phase II Ongoing Europe and
Israel
Phase I Completed Europe
</TABLE>
CANCER INDICATIONS FOR MAXAMINE
Cancer comprises a large and diverse group of diseases resulting from the
uncontrolled proliferation of abnormal, or malignant, cells. Most cancers will
spread beyond their original sites and invade surrounding tissue and may also
metastasize to more distant sites and ultimately cause death unless effectively
treated. To be effective, cancer treatment must target not only the primary
tumor site but also distant metastases. A report from the American Cancer
Society, 1999 CANCER FACTS AND FIGURES, estimates that a total of approximately
1,220,000 new cases and approximately 560,000 deaths were expected for invasive
cancers in the United States in 1999. Predominant forms of cancer include
leukemia and lymphoma, breast, lung, urinary, prostate, melanoma, ovarian,
colon, rectal and brain cancers. The National Cancer Institute estimates that
the direct medical cost of treating cancer in the United States is $35 billion
per year.
Information regarding certain cancer indications is summarized below. These
following estimates are for the cancers initially targeted by MAXAMINE based
upon the American Cancer Society's 1999 CANCER FACTS AND FIGURES for the United
States.
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Estimated Incidence for Selected Cancers for 1999 for the United States
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
Annual
--------------------
New Cases Deaths
--------- --------
Malignant Melanoma................................... 44,000 7,300
Acute Myelogenous Leukemia........................... 10,000 7,300
Renal Cell Carcinoma................................. 30,000 12,000
All Invasive Cancers................................. 1,220,000 560,000
</TABLE>
Predominant methods of treating cancer generally include surgery, radiation
therapy, chemotherapy and immunotherapy. Although these techniques have achieved
success for certain cancers, particularly when detected in the early stages,
each has drawbacks which may significantly limit their success in treating
certain types and stages of cancer. For example, cancer may recur even after
repeated attempts at surgical removal of tumors or after other treatment.
Surgery may be successful in removing visible tumors but may leave smaller
undetectible nests of cancer cells in the patient which continue to proliferate.
Radiation and chemotherapy are relatively imprecise methods for the destruction
of cancer cells because such therapies can kill both cancer cells and normal
cells. Radiation and chemotherapy also have toxic side effects which may
themselves be lethal to the patient. These toxic side effects may also restrict
the application of these treatments to less than optimal levels required to
ensure eradication of the cancer.
The high number of cancer-related deaths indicates the need for more efficacious
therapies for many patients. Many existing therapies have been approved on the
basis that they shrink or limit the growth of tumors for a short period of time,
but they have failed to demonstrate that they provide a survival benefit to
patients. We believe, however, that increased patient survival is becoming the
most important measurement of a drug's effectiveness.
ADVANCED MALIGNANT MELANOMA. Malignant melanoma is the most serious form of
skin cancer and is one of the most rapidly increasing cancers in the world.
There are more than 44,000 new cases of melanoma and 7,300 deaths from the
disease each year in the United States.
Our initial Phase II clinical trial in malignant melanoma was conducted in
Sweden at the Sahlgrenska University Hospital in Goteborg. In that study, 15
patients with advanced metastatic malignant melanoma were treated with a
high-dose regimen of IL-2 together with daily injections of IFN-(alpha) in
five-day cycles. Eight of the patients were also given MAXAMINE injections twice
daily in combination with IL-2 and IFN-(alpha) .
The results of the initial Phase II clinical trial indicated that MAXAMINE may
be given as an effective adjuvant to treatment with IL-2 and IFN-(alpha) . In
the seven patients who did not receive MAXAMINE, one partial response (defined
as a 50% reduction of the total tumor burden) was observed in a patient with
skin and lymph node melanoma. In the eight patients treated with MAXAMINE, four
partial and two mixed responses were observed. Notably, two of the MAXAMINE
patients had complete resolution of their extensive liver metastases. Sites of
response in the MAXAMINE patients also included skin, lymph nodes, skeleton,
spleen and muscle. Depending upon the characteristics of the patient group being
studied, the survival results of advanced-stage cancer trials are typically
measured by either mean or median survival. Mean survival represents the average
duration of survival for the group. Median survival represents the point in time
at which 50% of the patients are still surviving. In patients receiving MAXAMINE
in the initial trial, there was a statistically significant improvement in
overall survival (p < 0.03). The MAXAMINE patients had a mean survival of
14.7 months, more than double the mean survival of 6.8 months in the control
group. One patient remained completely free of detectable disease more than four
years after the commencement of treatment with MAXAMINE.
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A second advanced malignant melanoma study was undertaken at the Sahlgrenska
University Hospital in Sweden to determine if MAXAMINE, in combination with a
lower-dose regimen of the same cytokines (IL-2 and IFN-(alpha) , would retain
the efficacy seen in the first study, while reducing the side effects of the
cytokine portion of the treatment. Lowering the doses of the cytokines reduces
many of the side effects of these drugs, thereby facilitating tolerance of the
therapy and even allowing self-administration of the drugs at home. The median
survival time of patients with advanced (stage IV) malignant melanoma using
conventional treatments is historically reported to be six to seven months. In
this second, low-dose malignant melanoma study, 11 patients had a median
survival time of 15.5 months, more than double the rate generally reported for
the normal course of the disease and exceeding the favorable results from the
high-dose study described above. In this second malignant melanoma clinical
trial, the combination of MAXAMINE with low-dose cytokines was well-tolerated,
and patients were treated at home on an out-patient basis.
A third study in malignant melanoma was conducted in Sweden and consisted
primarily of advanced-stage patients with metastases of their cancer to the
liver. This patient group historically has a poor prognosis for survival. In our
three completed Phase II malignant melanoma trials, a total of 16 patients had
liver metastases. The 16 patients treated with MAXAMINE had a substantially
improved survival outcome with a mean of 14 months survival as a group compared
to the typically reported mean survival time of four months or less for these
patients.
Our multi-center Phase III clinical trial of MAXAMINE in the United States for
the treatment of advanced malignant melanoma commenced in 1997 and is nearing
completion. In this clinical trial, advanced malignant melanoma patients are
being treated with a combination of MAXAMINE and IL-2, while patients in the
control group are being treated with the same dose of IL-2 alone. The primary
endpoints of the study are overall patient survival and survival of patients
with liver metastases, and the secondary endpoints include quality of life,
tumor response rate and duration of response. More than 50 clinical sites in the
United States participated in the study, and enrollment was completed in
February 1999.
Two clinical events in 1999 highlighted the progress of the trial:
- - In March 1999, the Data Safety Monitoring Board, an independent group
monitoring the safety of the Phase III trial, performed an interim analysis
of data from the study and concluded that there were no safety concerns with
continuing the trial. The Data Safety Monitoring Board also concluded that
the trial had the opportunity to meet its principal endpoints relevant to
regulatory approval and should continue under its approved protocol.
- - In November 1999, clinicians from the largest enrolling site in the Phase III
trial submitted an abstract to an upcoming cancer conference describing
preliminary survival data from the 40 patients enrolled at their center. The
preliminary single-center results demonstrated a statistically significant
increase in overall survival for patients treated within the MAXAMINE as
compared to the control group.
We expect to complete this Phase III trial in the first half of 2000 and expect
to file a NDA with the FDA in mid 2000.
We commenced a second Phase III trial of MAXAMINE for the treatment of advanced
malignant melanoma in November 1997 based in Europe, Australia, Canada and
Israel. Patients in the MAXAMINE group receive a co-administration of MAXAMINE
plus low-dose IL-2 and IFN-(alpha) , while patients in the control group receive
dacarbazine (DTIC), the most commonly used chemotherapeutic agent for the
treatment of advanced malignant melanoma, particularly in Europe and Australia.
The endpoints of this study are the same as the U.S. study described above, and
this international study is designed to include approximately 200 patients.
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The two Phase III malignant melanoma trials complement each other by addressing
separate clinical and marketing issues:
- - The U.S. Phase III trial is designed to seek regulatory approval as an
adjunct to IL-2 in the U.S., Europe, Australia and other markets by
demonstrating that the combination of MAXAMINE and IL-2 is better at
extending patient survival than the administration of the same dose of IL-2
alone.
- - The European trial is designed to broaden the exposure of the drug outside
the United States, prepare the international markets for our expected launch
and provide a comparison of immunotherapy with chemotherapy.
ACUTE MYELOGENOUS LEUKEMIA. Acute Myelogenous Leukemia (AML) is the most common
form of acute leukemia in adults, and prospects for long-term survival are poor
for the majority of patients. There are approximately 10,000 new cases of AML
and 7,300 deaths caused by the cancer each year in the United States. Once
diagnosed with AML, patients are typically treated with chemotherapy, and the
majority achieve complete remission. Unfortunately, 75-80% of patients who
achieve their first complete remission will relapse, and the median time in
remission before relapse is only 12 months with current treatments. The
prospects for these relapsed patients is poor, and less than five percent
survive long term. There are currently no effective remission therapies for AML
patients.
MAXAMINE is designed to augment the body's ability to scavenge, attack and
eliminate residual leukemic cells. We conducted a Phase II study in Sweden in
which 39 AML patients in remission were treated with the combination of MAXAMINE
and low-dose IL-2. The objective of the therapy with MAXAMINE is to prevent
relapse and prolong leukemia-free survival while maintaining a good quality of
life for patients during treatment.
In the Phase II study, 26 patients in their first complete remission were
treated with MAXAMINE and IL-2 and experienced a substantial increase in
leukemia-free survival. The patients treated with MAXAMINE had achieved a median
time to relapse through the last date of evaluation in December 1999 of
28 months compared to 12 months under the current standard of care. The median
time to relapse of the MAXAMINE patients has the potential to increase as
leukemia-free patients are still under evaluation. These results were achieved
despite the fact that the patients treated with MAXAMINE were a relatively older
group of patients and more than half (15 of 26) of the patients were categorized
as high risk with the poorest prognosis for long-term survival.
Also treated in the Phase II study were 13 patients who were in their second or
subsequent complete remission. Prior to entering the study, these patients had
suffered a relapse of AML and were treated with an additional round of
chemotherapy to induce a complete remission. These subsequent remissions
normally have a shorter duration than the prior complete remission, with a
median time to relapse of only six months in the case of patients in their
second complete remission. Less than five percent of these patients survive long
term. The 13 patients treated with the combination of MAXAMINE and IL-2
experienced a substantial increase in remission duration, and the median time to
relapse for the MAXAMINE patients was 16 months, more than double the six-month
historic median.
Also notable in the study was the fact that the patients safely
self-administered more than 8,000 doses of MAXAMINE at home. No unexpected side
effects from the drug have been identified during the study, and 75% of the
evaluable patients returned to work while taking MAXAMINE.
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In early 1998, we commenced a Phase III AML clinical trial based in 12
countries, including clinical sites in the United States, Europe, Australia,
Canada and Israel. The trial is designed as a remission therapy to demonstrate
that MAXAMINE can prolong leukemia-free remission time and prevent relapse in
AML patients compared to the current standard of care, which is no therapy
during remission. In the study, patients in their second or greater complete
remission will be evaluated for up to 18 months, while patients in their first
complete remission will be evaluated for up to 24 months. The trial is designed
to include approximately 300 patients and we expect to complete enrollment in
2000.
The FDA has granted orphan drug status to MAXAMINE for the treatment of AML.
Orphan drug status provides for U.S. marketing exclusivity for seven years upon
marketing approval by the FDA. The status also provides certain tax benefits and
exempts us from certain FDA application fees.
RENAL CELL CARCINOMA. There are approximately 30,000 new cases each year of
renal cell carcinoma (RCC), cancer of the kidneys, in the United States.
Metastatic RCC often is resistant to radiation therapy and chemotherapy, and the
disease results in more than 12,000 deaths each year.
We conducted a pilot study of six RCC patients in Sweden to evaluate the safety
and feasibility of MAXAMINE in this patient group. In this small study, three
patients were treated with MAXAMINE and cytokines (IFN-(alpha) and IL-2) and
achieved a mean survival of 29 months, while the other three patients were
treated with the cytokines alone and achieved a mean survival of four months.
We have two European Phase II studies underway in RCC, the objectives of which
are to provide support for the promotion and potential amendment to labeling of
MAXAMINE for the treatment of RCC. The first is a study of the combination of
MAXAMINE, IL-2 and interferon in 40 patients in Sweden and Denmark. The second
is a randomized trial of the combination of MAXAMINE and IL-2 versus IL-2 alone
in 120 patients in the United Kingdom and Denmark. This second trial is being
funded by our clinical collaborators.
HEPATITIS C INDICATION FOR MAXAMINE
Hepatitis C is more easily transmitted than HIV and is now the leading
blood-borne infection in the United States. The U.S. Center for Disease Control
and Prevention estimates that over 4.5 million Americans are infected with the
hepatitis C virus. The World Health Organization and other sources estimate that
at least 200 million people are infected worldwide. Hepatitis is a disease
characterized by inflammation of the liver and, in many cases, permanent
cirrhosis (scarring) of the liver tissues. The cycle of disease from infection
to significant liver damage can take 20 years or more. Some experts estimate
that without substantial improvements in treatment, deaths from hepatitis C will
surpass those from HIV. Hepatitis C is the leading cause of liver cancer and the
primary reason for liver transplantation in many countries. The majority of
patients do not effectively respond to existing therapies or to therapies known
by us to be under development.
The standard treatment for hepatitis C is interferon, an immunotherapeutic agent
often given in combination with the anti-viral drug
Ribavirin-Registered Trademark-. The majority of patients do not attain a
sustained response with current therapies. Several factors can influence the
patient's response to therapy including the patient's viral load and the
genotype of the virus with which the patient is infected. Of the several
variations, or genotypes, of hepatitis C, genotype-1 is the most common type in
the United States. Patients infected with this genotype, and those with viral
levels greater than two million copies per milliliter of blood, typically have
the poorest response to treatment.
In 1998, we announced results from a Phase I feasibility study in hepatitis C
patients using MAXAMINE. In the study, ten patients who were characterized as
nonresponders after a year of treatment with IFN-(alpha) were put back on
treatment with the same dose of IFN-(alpha) plus MAXAMINE for 12 weeks. The
study indicated that the combination of MAXAMINE with IFN-(alpha) is safe in the
treatment of hepatitis C patients, and that
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MAXAMINE may enhance the efficacy of IFN-(alpha) in patients who were previously
nonresponsive to IFN-(alpha) therapy.
In May 1999, we commenced a Phase II clinical trial of MAXAMINE in the treatment
of patients with hepatitis C. The trial is designed to evaluate the combination
of MAXAMINE and IFN-(alpha) , in the treatment of chronic hepatitis C patients
who had not previously received treatment with IFN-(alpha) . The primary purpose
of this study is to determine the most appropriate dose regimen for MAXAMINE in
the treatment of chronic hepatitis C. We also hope to provide further evidence
that MAXAMINE may benefit cytokines such as IFN-(alpha) in the treatment of
hepatitis C. The trial is based in the United Kingdom, Belgium, Israel and
Russia, and 129 patients were enrolled. Patients were randomly assigned to one
of four treatment groups, and each patient received MAXAMINE, in one of four
dosing regimens, plus IFN-(alpha) . The study will evaluate the efficacy and
safety of each of the four dosing regimens of MAXAMINE. The primary measures of
efficacy in the study will be reduction in viral load and normalization of liver
function, measured by the liver enzyme ALT, a standard measure of liver
function.
Patients responding during the first 12 weeks of treatment will continue
treatment through 48 weeks, with evaluations at 24, 48 and 72 weeks. The study
includes a high percentage of patients that would normally be considered
difficult to treat as characterized by high viral loads and a genotype-1
infection. The mean viral load of the patients in this study was 6.7 million
copies per milliliter of blood, and 50% of the patients were infected with
genotype-1.
After 12 weeks of treatment, 70% of the patients treated with MAXAMINE in
combination with IFN-(alpha) attained complete biochemical and viral response. A
complete biochemical response is defined as normalization of liver enzyme
levels; a complete viral response is defined by virus levels that are below the
limit of detection using a validated PCR-RNA technique. Published reports
suggest that 20-30% of patients with similar profiles achieve a complete
biochemical and viral response when treated with interferon therapy alone.
In addition, study results showed that after four weeks of treatment, 80% of
patients showed rapid responses characterized by a 2 log reduction in viral load
or a complete viral and ALT response. Lastly, the results also suggested that
MAXAMINE provided a benefit even in the patients expected to have a poor
prognosis. After 12 weeks of treatment, a complete viral response was achieved
by 61% of the patients with a genotype-1 infection, and by 62% of the patients
having greater than two million viral copies per milliliter of blood.
MAXDERM Topical Therapies
Our MAXDERM technology expands our product pipeline into therapies for a number
of key medical conditions for which topical delivery is preferred. For millions
of patients, topical disorders such as herpes labialis, herpes zoster, oral
mucositis, canker sores and decubitus ulcers result in prolonged pain, suffering
and slow healing times that can lead to an increased risk of secondary
infection. The patient's immune response, localized inflammation and
wound-healing status may contribute to the difficulty in treating many of these
disorders.
The MAXDERM technology and pipeline of potential products is based on research
on the active molecules underlying MAXAMINE. The MAXDERM discovery may be able
to address the underlying mechanisms that cause many of the above disorders, and
may enhance the cellular immune response, reduce inflammation and enhance the
wound healing process. This discovery is novel and differs from the anti-viral,
pain relieving and anti-bacterial approaches underlying many existing and
proposed treatments.
Randomized, blinded, placebo-controlled pilot studies have been conducted in
more than 75 patients with oral mucositis, herpes labialis, or cold sores,
decubitus ulcers, shingles, burns and conjunctivitis. Patients experienced
improved healing times when treated with gels based on the MAXDERM technology
compared to a placebo control. We are currently evaluating the MAXDERM
technology and assessing current and anticipated medical needs to determine the
appropriate disorders in which to conduct more extensive clinical studies.
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ORAL MUCOSITIS
Oral mucositis (stomatitis) is a common and debilitating side effect of
chemotherapy or head and neck radiation used in the treatment of cancer. There
are possibly a million new cases each year in the United States and major
international markets with no effective treatments yet available.
Mucositis includes the formation of canker sore-like lesions within the mouth
that may extend to the tongue and throat and result in mild to severe discomfort
and difficulty eating and drinking. The lesions may last two to three weeks, and
in severe cases patients require hospitalization, morphine to alleviate pain and
limitations to their cancer treatment. We believe that a product that would
assist patients with this discomforting condition would fit with our objective
of maintaining the quality of patients' lives during therapy, and would fit
strategically with our proposed marketing plans for MAXAMINE.
During 1999, we completed two preclinical trials of a gel based on the MAXDERM
technology in oral mucositis which suggested that the drug candidate can prevent
and significantly reduce the time required to heal oral lesions. In addition, a
small pilot human study was conducted in which nine patients with oral mucositis
were randomized and treated with one of two doses of our gel or a placebo. The
patients treated with our gel experienced complete healing of lesions in a mean
time of three to four days, depending upon the dosage. Patients treated with the
placebo experienced no reduction in lesions during the treatment period.
Patients treated with our gel also reported a reduction in the discomfort
associated with eating and drinking.
HERPES LABIALIS
A pilot study of gels based on the MAXDERM technology was also conducted in 18
patients with herpes labialis, or cold sores. In the randomized, blinded study,
patients with herpes labialis treated with a formulation of our gel containing
the highest concentration of active ingredient demonstrated a 99% improvement of
their lesions following only four days of administration. Patients treated with
the placebo, conversely, experienced an increase in mean lesion size during the
study period.
MAXVAX Mucosal Vaccine Carrier/Adjuvant Platform
MAXVAX is a mucosal vaccine carrier/adjuvant platform based on the cholera toxin
B subunit (CTB). CTB has already been administered to hundreds of thousands of
patients worldwide and is a major component of an existing oral cholera vaccine
and traveler's diarrhea vaccine. Most current vaccines have been designed to
provide systemic immunity administered through injection. They treat or prevent
infection only after the infecting organism has entered the blood stream or deep
tissues of the body. The mechanisms which induce mucosal immunity appear to be
distinct from those that protect systemically. We believe that the MAXVAX
approach to therapeutic and protective vaccines has the potential to elicit both
mucosal and systemic immunity by delivering antigens directly to the mucosal
system. By combining our proprietary recombinant form of CTB with vaccine
antigens and/or genes, we believe that we may be able to develop effective, new
needle-free mucosal-based vaccines.
The MAXVAX approach to therapeutic and protective vaccines has been shown to
elicit both mucosal and systemic immunity and is based upon "non-injectable"
administration. We believe that there are numerous important potential clinical
and commercial advantages to mucosal immunization compared with traditional
injected vaccine products, including greater clinical efficacy, higher level of
safety, lower cost of administration and improved vaccine utilization.
Product Development and Collaborative Relationships
We conduct our research and other product development efforts through a
combination of internal personnel and collaborative programs. For MAXAMINE, we
rely upon our clinical management personnel in extensive collaboration with
universities and other clinical research sites, contract research organizations
and similar
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service providers and persons. We expect to rely upon a similar combination of
internal personnel and collaborators as we expand the clinical and other
development of MAXDERM. Current research and development efforts related to
MAXVAX are primarily conducted in our internal laboratories, although we expect
to rely heavily on pharmaceutical company collaborative relationships to advance
the clinical development of the technology.
We have relied upon licensing and other transactions to gain access to certain
of our proprietary technologies. Our current and planned clinical trials of
MAXAMINE rely heavily upon contractual relationships with universities and other
clinical trial sites, contract research organizations, home nursing
organizations and regulatory and other consultants. Our strategy for
development, commercialization and marketing of each of our product candidates
will involve, where appropriate, the establishment of marketing and other
collaborative relationships with pharmaceutical industry partners.
During 1998, we entered into clinical collaborations with Chiron Corporation,
Amgen Inc. and BioNative AB. Each of these companies possess cytokines that may
benefit from use in combination with MAXAMINE. Under each of these agreements,
we receive economic and other support for important clinical trials without
giving up any marketing or other future rights to MAXAMINE. For example, Chiron
is providing the IL-2 drug (Proleukin-Registered Trademark-) requirements and
other assistance related to our Phase III AML clinical trial. These
collaborations reinforce our belief that MAXAMINE is complementary rather than
competitive with many existing and future drugs, and may be the key to the
successful use of many biotherapeutic agents.
We expect to pursue additional collaborations to further the expanded use and
development of MAXAMINE. We will also seek other collaborative relationships for
the further development of MAXDERM and MAXVAX or in other situations where we
believe that the clinical testing, marketing, manufacturing and other resources
of pharmaceutical or other collaborators will enable us to more effectively
develop particular products or access geographic markets.
Marketing and Sales
Assuming FDA approval of MAXAMINE, we plan to directly market the drug in the
United States, potentially under an alliance with a pharmaceutical company or
other collaborator. In addition, we expect to establish alliances with
pharmaceutical companies for the marketing of MAXAMINE in key international
markets. We are currently in the process of evaluating, and are in discussions
with, pharmaceutical companies to serve as marketing collaborators.
We are currently undertaking efforts to prepare to market MAXAMINE in the United
States, and we have built a core marketing group with experience in planning and
managing successful U.S. launches of pharmaceutical products. As we move closer
to the potential market launch of MAXAMINE, we have and will continue to
undertake activities required to prepare for launch including market evaluations
and reimbursement analysis. We will also continue to build awareness of the drug
among leading clinicians. The treatment of cancer is a highly specialized
activity in which the approximately 3,500 practicing oncologists in the United
States tend to be concentrated in approximately 1,500 major medical centers.
Marketing MAXAMINE directly in the United States will require us to build and/or
access a marketing infrastructure, including sales representatives, through a
combination of the recruitment of personnel to us, an alliance with a
co-promotion partner and/or the retention of a contract sales organization. Our
plan is to defer the build up of this infrastructure until we complete a review
of Phase III clinical data and an assessment of the regulatory process related
to the potential approval to market MAXAMINE in the United States.
In 1999, we entered into an agreement granting F. H. Faulding & Co., Ltd. the
right to market MAXAMINE in Australia and New Zealand. During 1999, we also
entered into an agreement granting MegaPharm, Ltd. the right to market MAXAMINE
in Israel. In other international markets, we are in the process of evaluating,
and are
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in discussions with, pharmaceutical companies to serve as marketing
collaborators for major geographic regions, including Europe and the Pacific
Rim.
Our marketing strategy for MAXDERM will be developed over time based upon, among
other factors, the specific indications targeted for therapy. Due to the nature
of the vaccine markets, we intend to establish agreements with pharmaceutical
companies with large distribution systems for MAXVAX and do not expect to
establish a direct sales capability in the vaccine area.
Manufacturing
We do not intend to acquire or establish our own dedicated manufacturing
facilities for MAXAMINE in the foreseeable future. There are a number of
facilities in compliance with FDA Good Manufacturing Practice available for
contract manufacturing, and we have contracted with established pharmaceutical
manufacturers for the production of MAXAMINE. These manufacturers are supplying
the MAXAMINE required for our current clinical trial activities, and have
demonstrated the capability to supply commercial quantities of the product for
the potential market launch.
We believe that, in the event of the termination of an agreement with any single
supplier or manufacturer, we would likely be able to enter into agreements with
other suppliers or manufacturers on similar terms. We are currently establishing
relationships with additional manufacturers to provide alternate sources of
supply for MAXAMINE.
Patents, Licenses and Proprietary Rights
We own or have the rights to 19 issued or allowed U.S. patents and 16 U.S.
patent applications. Corresponding patent applications have been filed, and in a
number of instances patents have been issued, in major international markets,
including Europe, Australia and Japan. Our policy is to file, where possible,
patent applications to protect technologies, inventions and improvements that
are important to the development of our business. We have devoted substantial
attention and resources to our patent and license portfolio. Maintaining patents
and licenses and conducting an assertive patent prosecution strategy is a
priority for us.
KEY GRANTED PATENTS AND PENDING APPLICATIONS
We hold the following U.S. patents or allowed applications related to MAXAMINE,
a technology platform based upon histamine, a naturally occurring H(2) receptor
agonist:
- - a U.S. patent relating to the combination of IL-2 and H(2) receptor agonists
(H(2)RAs);
- - a U.S. patent relating to the combination of IFN-(alpha) and H(2)RAs;
- - an allowed U.S. patent relating to a method for treating cancer or infectious
disease using certain NK cell activators in combination with certain
compounds that inhibit the production or release of hydrogen peroxide,
including histamine, or a hydrogen peroxide scavenger;
- - an allowed U.S. patent relating to methods of treating cancer in a patient
receiving radiation therapy or chemotherapy, using certain NK cell activators
in combination with a compound that inhibits the production or release of
hydrogen peroxide, including histamine, or a hydrogen peroxide scavenger;
- - a U.S. patent encompassing certain treatment with histamine in combination
with any NK cell activating cytokine or chemotherapeutic agent;
- - a U.S. patent relating to compositions comprising interferon-(alpha) and
histamine or related compounds and methods of treating viral infections using
the claimed compositions; and
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- - an allowed U.S. patent relating to methods for the therapeutic administration
of histamine and related compounds, the combination of histamine or related
compounds and a controlled release carrier, and a device for the
administration of histamine and related compounds.
Corresponding patents have also issued in international markets.
We also hold nine other patent applications in the United States relating to the
use of MAXAMINE with other cytokines and biotherapies, method of production,
mechanisms, rates and routes of administration, and other proprietary claims
that have also been filed internationally.
We also hold a worldwide, exclusive license to Professional Pharmaceuticals,
Inc.'s (PPI) five issued or allowed U.S. patents or applications for material
compositions and other rights underlying the MAXDERM technology. We also hold
one U.S. patent application related to the MAXDERM technology. Corresponding
patents for the above have also been filed internationally.
In the MAXVAX area, we hold a worldwide exclusive license to the U.S. and
international patents of Vitec AB and SBL Vaccin for recombinantly producing CTB
for use in infectious diseases other than cholera, bacterial related diarrheas
and HIV (we hold non-exclusive rights to this patent with regard to HIV). We
also hold exclusive license rights to related patent applications as well as a
patent application with respect to certain therapeutic and anti-inflammatory
properties of CTB.
We have also filed three of our own U.S. and an international patent
applications related to MAXVAX covering the use of CTB to make vaccines against
chlamydia and other sexually transmitted diseases and methods for developing
CTB-based vaccines.
TECHNOLOGY RIGHTS
In 1993, we entered into a technology transfer agreement under which we
purchased certain intellectual property and patent rights related to our
MAXAMINE technology. The technology transfer agreement requires that we pay
certain royalty obligations to the two inventors of the technology, although, as
part of a subsequent agreement with us, one of the inventors waived his royalty
rights. We have also filed a number of additional patent applications and
received additional patents encompassing the MAXAMINE technology as described
above.
In 1998, we entered into a license agreement with PPI for an exclusive,
worldwide license to technology related to material compositions and other
patent rights underlying the MAXDERM technology. The license agreement requires
that we pay certain royalty obligations to PPI. We have also filed an additional
patent application related to the MAXDERM technology.
In 1993, we entered into an option and license agreement with Vitec and SBL,
under which we exercised an option for an exclusive, worldwide license to
technology related to CTB for use in a chlamydia vaccine. Under the agreement,
we are required to use our best efforts to engage SBL to manufacture any
products which result from the application of the licensed technology. We also
have to make royalty payments on the net sales of products using the licensed
technology and to make additional license and milestone payments to Vitec upon
the execution of any sub-licenses. Under the agreement, any party may terminate
the license agreement, with respect to the rights and duties of that party, as a
result of a material breach of the agreement by another party.
In 1994, we entered into a second license agreement with Vitec and SBL for an
exclusive, worldwide license to technology rights related to CTB for all
infectious diseases except chlamydia (which is governed by the agreement
discussed above), HIV (which is governed by a separate non-exclusive sub-license
agreement held by us), cholera and bacterial-related diarrheas. Under the
agreement, we have agreed to use our best efforts to engage SBL to manufacture
any products which result from the application of licensed technology, and both
Vitec and Maxim will receive a percentage of any profits that SBL derives from
manufacturing such products. The licensors may terminate the agreement upon a
material breach of the agreement by us.
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In 1998, we filed arbitration in Sweden relating to the licensors' performance
under the above agreements. The arbitration alleges certain causes of action
against the licensors, among other things, misstatements regarding the scope of
our licensed rights, and seeks damages and declaratory relief. The arbitration
also seeks specific performance of the licensors' obligations under the
agreements, including full disclosure of relevant manufacturing information. In
1999, the arbitration panel ruled that the scope of our licensed rights under
the agreements is identical to the rights understood and asserted by us. The
panel is expected to rule on the remaining issues in 2000. We cannot determine
what impact, if any, an unfavorable resolution of the existing concerns would
have on the commercial value of the MAXVAX technology.
We also hold other licenses relating to CTB, including a non-exclusive
sub-license to CTB for the prevention and treatment of HIV infection, and an
exclusive, worldwide license to patent applications and related technology
rights with respect to certain therapeutic and anti-inflammatory properties of
CTB.
Government Regulation
Regulation by governmental authorities in the United States and other countries
is a significant factor in the development, manufacture and marketing of our
proposed products and in our ongoing research and product development
activities. The nature and extent to which such regulation applies to us will
vary depending on the nature of any products which may be developed by us. We
anticipate that many, if not all, of our products will require regulatory
approval by governmental agencies prior to commercialization. In particular,
human therapeutic and vaccine products are subject to rigorous preclinical and
clinical testing and other approval procedures of the FDA and similar regulatory
authorities in European and other countries. Various governmental statutes and
regulations also govern or influence testing, manufacturing, safety, labeling,
storage and record-keeping related to such products and their marketing. The
process of obtaining these approvals and the subsequent compliance with
appropriate statutes and regulations require the expenditure of substantial time
and money. Any failure by us or our collaborators to obtain, or any delay in
obtaining, regulatory approval could adversely affect the marketing of any
products developed by us, and prevent us from generating product revenues and
obtaining adequate cash to continue present and planned operations.
FDA APPROVAL PROCESS
Prior to commencement of clinical studies involving humans, preclinical testing
of new pharmaceutical products is generally conducted on animals in the
laboratory to evaluate the potential efficacy and the safety of the product. The
results of these studies are submitted to the FDA as a part of an
Investigational New Drug application, which must become effective before
clinical testing in humans can begin. Typically, human clinical evaluation
involves a time consuming and costly three-phase process. In Phase I, clinical
trials are conducted with a small number of people to assess safety and to
evaluate the pattern of drug distribution and metabolism within the body. In
Phase II, clinical trials are conducted with groups of patients afflicted with a
specific disease in order to determine preliminary efficacy, optimal dosages and
expanded evidence of safety. In Phase III, large-scale, multi-center,
comparative trials are conducted with patients afflicted with a target disease
in order to provide enough data to demonstrate the efficacy and safety required
by the FDA. The FDA closely monitors the progress of each of the three phases of
clinical testing and may, at its discretion, re-evaluate, alter, suspend or
terminate the testing based upon the data which have been accumulated to that
point and its assessment of the risk/benefit ratio to the patient. Monitoring of
all aspects of the study to minimize risks is a continuing process. Reports of
all adverse events must be made to the FDA.
The results of the preclinical and clinical testing on a non-biologic drug and
certain diagnostic drugs are submitted to the FDA in the form of a NDA for
approval prior to commencement of commercial sales. In the case of vaccines, the
results of clinical trials are submitted as a Biologics License Application. In
responding to a NDA or Biologics License Application, the FDA may grant
marketing approval, request additional information or deny the application if
the FDA determines that the application does not satisfy its regulatory approval
criteria. There can be no assurance that approvals will be granted on a timely
basis, if at all, for any of our products. Similar procedures are in place in
countries outside the United States.
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EUROPEAN AND OTHER REGULATORY APPROVAL
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities in Europe and other countries will likely be
necessary prior to commencement of marketing the product in such countries. The
regulatory authorities in each country may impose their own requirements and may
refuse to grant, or may require additional data before granting, an approval
even though the relevant product has been approved by the FDA or another
authority. As with the FDA, the regulatory authorities in the European Union
countries and other developed countries have lengthy approval processes for
pharmaceutical products. The process for gaining approval in particular
countries varies, but generally follows a similar sequence to that described for
FDA approval. In Europe, the European Committee for Proprietary Medicinal
Products provides a mechanism for EU-member states to exchange information on
all aspects of product licensing. The EU has established a European agency for
the evaluation of medical products, with both a centralized community procedure
and a decentralized procedure, the latter being based on the principle of
licensing within one member country followed by mutual recognition by the other
member countries.
OTHER REGULATIONS
We are also subject to various U.S. federal, state, local and international
laws, regulations and recommendations relating to safe working conditions,
laboratory manufacturing practices and the use and disposal of hazardous or
potentially hazardous substances, including radioactive compounds and infectious
disease agents, used in connection with our research work. The extent of
government regulation which might result from future legislation or
administrative action cannot be predicted accurately.
Third-Party Reimbursement
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain international markets, pricing negotiations are
often required in each country of the European Community, even if approval to
market the drug under the European Medical Evaluation Authority's centralized
procedure is obtained. In the United States, there have been, and we expect that
there will continue to be, a number of federal and state proposals to implement
similar government control. In addition, an increasing emphasis on managed care
in the United States has and will continue to increase the pressure on
pharmaceutical pricing. While we cannot predict whether any such legislative or
regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on our business, the announcement of such proposals or
efforts could have a material adverse effect on our ability to raise capital,
and the adoption of such proposals or efforts could have a material adverse
effect on our business, financial condition and results of operations. Further,
to the extent that such proposals or efforts have a material adverse effect on
other pharmaceutical companies that are prospective corporate partners for us,
our ability to establish corporate collaborations may be adversely affected. In
addition, in both the United States and elsewhere, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third-party payors, such as government and private insurance
plans that mandate predetermined discounts from list prices. Third-party payors
are increasingly challenging the prices charged for medical products and
services. If we succeed in bringing one or more products to the market, we
cannot assure you that these products will be considered cost effective and that
reimbursement to the consumer will be available or will be sufficient to allow
us to sell our products on a competitive basis.
Competition
Competition in the discovery and development of methods for treating or
preventing cancer and infectious disease is intense. Numerous pharmaceutical,
biotechnology and medical companies and academic and research institutions in
the United States and elsewhere are engaged in the discovery, development,
marketing and sale of
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products for the treatment of cancer and infectious disease. These include
surgical approaches, new pharmaceutical products and new biologically derived
products. We expect to encounter significant competition for the principal
pharmaceutical products we plan to develop. Companies that complete clinical
trials, obtain regulatory approvals and commence commercial sales of their
products before us may achieve a significant competitive advantage. A number of
pharmaceutical companies are developing new products for the treatment of the
same diseases being targeted by us, particularly hepatitis C. In some instances,
our competitors already have products in late-stage clinical trials. In
addition, certain pharmaceutical companies are currently marketing drugs for the
treatment of the same diseases being targeted by us, and may also be developing
new drugs to address these disorders.
In the area of immunotherapy, the impact of competition for MAXAMINE may be
reduced by the fact that the drug may be complementary to many other
biotherapeutic agents. MAXAMINE THERAPY combines the administration of MAXAMINE
with the administration of biotherapeutic agents. Accordingly, MAXAMINE and
these biotherapeutic agents may not be competitive but may play complementary
and synergistic roles in enhancing the immune system. For this reason, we
believe that continuing advancements in the overall field of immunotherapy may
create new opportunities for MAXAMINE.
Many of our competitors have substantially greater financial, clinical testing,
regulatory compliance, manufacturing, marketing, human and other resources.
Additional mergers and acquisitions in the pharmaceutical industry may result in
even more resources being concentrated with our competitors. We believe that our
competitive success will be based on our ability to create and maintain
scientifically advanced technology, develop proprietary products, attract and
retain scientific personnel, obtain patent or other protection for our products,
obtain required regulatory approvals, obtain orphan drug status for certain
products and manufacture and successfully market our products either
independently or through outside parties.
Employees and Consultants
As of December 31, 1999, we had 52 employees, all but three of whom were based
at our two facilities in San Diego, California. We believe our relationship with
our employees is satisfactory. We expect to hire other experienced professionals
in 2000 to, among other things, address the requirements of the planned market
launch of MAXAMINE and other commercialization efforts.
In addition to our employees, we have engaged a number of experienced
consultants in North America, Europe and Australia with pharmaceutical and
business backgrounds to assist in our product development efforts. We plan to
leverage our key personnel by making extensive use of contract laboratories,
development consultants, and collaborations with pharmaceutical companies to
expand our preclinical and clinical trials.
Properties
We currently lease approximately 35,000 square feet of laboratory and office
space in two facilities in San Diego, California. Approximately 5,000 square
feet of laboratory space is subleased to a third party. We believe that our
existing facilities will be adequate to accommodate the implementation of our
current business strategies.
Legal Proceedings
We are not engaged in any material legal proceedings other than the arbitration
relating to MAXVAX described above under "--Patents, Licenses and Proprietary
Rights."
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Management
Executive Officers and Directors
The names of our executive officers and directors as of February 16, 2000 and
their ages are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Name Age Position
- ----------------------------------------------------------------------------------------------------------
Chairman of the Board, President and Chief
Larry G. Stambaugh........................ 53 Executive Officer
Vice President, Development and Chief Technical
Kurt R. Gehlsen, Ph.D..................... 43 Officer
Chief Financial Officer, Vice President, Finance
Dale A. Sander............................ 40 and Secretary
Geoffrey B. Altman........................ 38 Vice President, Marketing and Sales
Colin B. Bier, Ph.D....................... 53 Director
Gary E. Frashier.......................... 63 Director
Theodor H. Heinrichs...................... 72 Director
Per-Olof Martensson....................... 62 Director
F. Duwaine Townsen........................ 66 Director
</TABLE>
Larry G. Stambaugh has served as our Chairman of the Board of Directors,
President and Chief Executive Officer since 1993. From 1989 to 1992,
Mr. Stambaugh served in a number of positions at ABC Laboratories, Inc., an
international contract science research laboratory, including Chairman of the
Board of Directors, President and Chief Executive Officer. From 1983 to 1989,
Mr. Stambaugh served as Executive Vice President and Chief Financial Officer of
CNB Financial Corporation, a multi-bank holding company. Mr. Stambaugh received
a B.A. in business administration from Washburn University and is a Certified
Public Accountant.
Kurt R. Gehlsen, Ph.D. joined us as Chief Technical Officer and Vice President,
Development in 1996. From 1991 to 1995, Dr. Gehlsen served as Chairman of the
Board of Directors, President and Chief Executive Officer of Trauma
Products, Inc., a biomedical company. From 1989 to 1991, Dr. Gehlsen served as
Senior Research Scientist and Head, Division of Molecular and Cellular Biology,
Pharmacia Experimental Medicine Division of Pharmacia, Inc., a biopharmaceutical
company and as Vice President, Chief Operating Officer and Director of Molecular
and Cellular Biology for the La Jolla Institute for Experimental Medicine.
Dr. Gehlsen received a B.S. in biology from the University of Arizona and a
Ph.D. from the University of Arizona College of Medicine.
Dale A. Sander joined us in 1996 as Chief Financial Officer, Vice President,
Finance and Secretary. From 1993 to 1996, Mr. Sander served as Chief Financial
Officer of Pacific Pharmaceuticals, Inc., a biotechnology company. From 1991 to
1993, Mr. Sander served as Chief Financial Officer of Tactyl
Technologies, Inc., a medical device manufacturer. Prior to 1991, Mr. Sander
worked for over nine years with Ernst & Young, an international professional
service firm. Mr. Sander is a Certified Public Accountant and has a B.S. in
Accounting from San Diego State University.
Geoffrey B. Altman joined us in 1997 and serves as Vice President, Marketing and
Sales. From 1997 to 1998, Mr. Altman served as Senior Director, Marketing and
Sales of the Company. From 1994 to 1997, Mr. Altman served as Director of
Worldwide Marketing Development and Director of U.S. Sales and Marketing of
Agouron Pharmaceuticals, a biopharmaceutical company. Prior to 1994, Mr. Altman
worked for six years with Amgen Inc., a biopharmaceutical company, as Product
Manager for the launch of the drug Neupogen-Registered Trademark- and as
Associate Director responsible for the U.S. marketing of Neupogen. Mr. Altman
received a B.A. in Chemistry with a Biochemistry concentration from the
University of California San Diego and a M.B.A. in Marketing and Finance from
the University of Chicago.
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Colin B. Bier, Ph.D. has served as one of our directors since 1994. Dr. Bier has
served as Managing Director of ABA BioResearch, an independent bioregulatory
affairs consulting firm, since 1988. Dr. Bier is also a director of Boston Life
Sciences, Inc. and NYMOX Pharmaceuticals Corporation.
Gary E. Frashier has served as one of our directors since 1999. Mr. Frashier
served as Chief Executive Officer of OSI Pharmaceuticals, a drug discovery
company, from 1990 until his retirement in 1998. He has served as Chairman of
the Board of Directors of OSI since 1997. Prior to OSI, Mr. Frashier served as
Chief Executive Officer of Genex Corporation, led a management buy-out and
served as Chief Executive Officer of Continental Water Systems, Inc., and served
as Executive Vice President of Millipore Corporation. Mr. Frashier also serves
as Principal of Management Associates, a provider of consulting services to
entrepreneurial companies and on the Board of Directors of Cytoclonal
Pharmaceutics, Inc.
Theodor H. Heinrichs has served as one of our directors since 1999.
Mr. Heinrichs served as General Partner of the Hambrecht & Quist Life Science
Venture from 1985 to 1997. Previously, Mr. Heinrichs also served as Chairman and
Chief Executive Officer of Cutter Laboratories, Inc. and Chairman and Chief
Executive Officer of Miles Laboratories, Inc.
Per-Olof Martensson has served as one of our directors from 1993 to 1995 and
again beginning in 1996. Since 1998, and from 1991 to 1997, Mr. Martensson has
served as President and Chief Executive Officer of Karo Bio AB, a pharmaceutical
company; he is also a director of the company. From 1997 to 1998 Mr. Martensson
served as Chairman of Karo Bio. Since 1990, Mr. Martensson has owned and
operated POM Advisory Services AB, an independent consulting firm. From 1992 to
1995, Mr. Martensson served as Chairman of Skandigen AB, a diversified
investment company. From 1987 to 1990, Mr. Martensson served as President of
Pharmacia LEO Therapeutics AB, and as Executive Vice President of Pharmacia AB,
both biopharmaceutical companies. From 1985 to 1990, Mr. Martensson served as
President and Chief Executive Officer of AB LEO, a biopharmaceutical company.
Mr. Martensson is also a director of AB Elekta.
F. Duwaine Townsen has served as one of our directors since 1993. Mr. Townsen
has served as a Managing Partner of Ventana Growth Funds, a group of five
venture capital funds, since 1983. Additionally, Mr. Townsen serves as General
Partner of Endpoint, a late stage healthcare and biotechnology fund. Prior to
joining Ventana, Mr. Townsen served as Chairman of the Board of Directors and
Chief Executive Officer of Kay Laboratories, Inc., a manufacturer of medical
products. Mr. Townsen is also a director emeritus of Cymer, Inc.
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Material U.S. Federal Tax Considerations for
Non-U.S. Holders of Common Stock
The following is a general discussion of certain material U.S. federal income
and estate tax consequences of the ownership and disposition of our common stock
by a beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder"
is a person or entity that, for U.S. federal income tax purposes, is a
non-resident alien individual, a foreign corporation or a foreign estate or
trust.
This discussion is based on the U.S. Internal Revenue Code of 1986, as amended,
and administrative interpretations as of the date of this prospectus, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances (including, without limitation, Non-U.S. Holders who are
pass-through entities or who hold their common stock through pass-through
entities) and does not address any tax consequences arising under the laws of
any state, local or foreign jurisdiction. Prospective holders should consult
their tax advisors with respect to the particular tax consequences to them of
owning and disposing of our common stock, including the consequences under the
laws of any state, local or foreign jurisdiction.
Dividends
Subject to the discussion below, dividends, if any, paid to a Non-U.S. Holder of
our common stock generally will be subject to withholding tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. For
purposes of determining whether tax is to be withheld at a 30% rate or at a
reduced rate as specified by an income tax treaty, we ordinarily will presume
that dividends paid on or before December 31, 2000 to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted.
Under U.S. Treasury Regulations applicable to dividends paid after December 31,
2000 (the "New Regulations"), to obtain a reduced rate of withholding under a
treaty, a Non-U.S. Holder generally will be required to provide an Internal
Revenue Service Form W-8 BEN certifying such Non-U.S. Holder's entitlement to
benefits under a treaty. The New Regulations also provide special rules to
determine whether, for purposes of determining the applicability of a tax
treaty, dividends paid to a Non-U.S. Holder that is an entity should be treated
as paid to the entity or those holding an interest in that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder that are
effectively connected with the Non-U.S. Holder's conduct of a trade or business
within the United States if a Form 4224 or, after December 31, 2000, a Form W-8
ECI, stating that the dividends are so connected is filed with us. Instead, the
effectively connected dividends will be subject to regular U.S. income tax in
the same manner as if the Non-U.S. Holder were a U.S. resident unless a specific
treaty exemption applies. A non-U.S. corporation receiving effectively connected
dividends may also be subject to an additional "branch profits tax" which is
imposed, under certain circumstances, at a rate of 30% (or such lower rate as
may be specified by an applicable treaty) of the non-U.S. corporation's
effectively connected earnings and profits, subject to certain adjustments.
Generally, we must report to the U.S. Internal Revenue Service the amount of
dividends paid, the name and address of the recipient, and the amount, if any,
of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a Non-U.S. Holder at an address within the United States may
be subject to backup withholding imposed at a rate of 31% if the Non-U.S. Holder
fails to establish that it is entitled to an exemption or to provide a correct
taxpayer identification number and certain other information to us.
Under current U.S. federal income tax law, backup withholding generally does not
apply to dividends paid on or before December 31, 2000 to a Non-U.S. Holder at
an address outside the United States, unless the payer
39
<PAGE>
has knowledge that the payee is a U.S. person. Under the New Regulations,
however, a Non-U.S. Holder will be subject to backup withholding unless
applicable certification requirements are met.
We have not paid cash dividends on our common stock and have no intention to do
so in the foreseeable future.
Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income tax with
respect to gain realized on a sale or other disposition of our common stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States and a specific treaty exemption does not apply, (ii)
in the case of certain Non-U.S. Holders who are non-resident alien individuals
and hold our common stock as a capital asset, such individuals are present in
the United States for 183 or more days in the taxable year of the disposition,
(iii) the Non-U.S. Holder is subject to tax pursuant to the provision of the
U.S. Internal Revenue Code regarding the taxation of U.S. expatriates, or (iv)
we are or have been a "U.S. real property holding corporation" within the
meaning of Section 897(c)(2) of the U.S. Internal Revenue Code at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. We believe that we are not, and do not anticipate
becoming, a U.S. real property holding corporation. Even if we are treated as a
U.S. real property holding corporation, gain realized by a Non-U.S. Holder on a
disposition of our common stock will not be subject to U.S. federal income tax
so long as (i) the Non-U.S. Holder is considered to have beneficially owned no
more than five percent of the common stock at all times within the shorter of
(a) the five year period preceding the disposition or (b) the holder's holding
period and (ii) our common stock is regularly traded on an established
securities market (within the meaning of Section 897(c)(3) of the U.S. Internal
Revenue Code and the temporary Treasury Regulations thereunder) at some time
during the calendar year in which the disposition occurs. There can be no
assurance that our common stock will continue to qualify as regularly traded on
an established securities market.
Information Reporting Requirements and Backup and Withholding on Disposition of
Common Stock
Under current U.S. federal income tax law, information reporting and backup
withholding imposed at a rate of 31% will apply to the proceeds of a disposition
of our common stock effected by or through a U.S. office of a broker unless the
disposing holder certifies as to its non-U.S. status or otherwise establishes an
exemption. Generally, U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds where the transaction is effected
outside the United States through a non-U.S. office of a non-U.S. broker.
However, U.S. information reporting requirements (but not backup withholding)
will apply to a payment of disposition proceeds where the transaction is
effected outside the United States by or through an office outside the United
States of a broker that fails to maintain documentary evidence that the holder
is a Non-U.S. Holder and that certain conditions are met, or that the holder
otherwise is entitled to an exemption, and the broker is (i) a U.S. person, (ii)
a foreign person which derived 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes, or (iv)
effective after December 31, 2000, a foreign partnership (A) at least 50% of the
capital or profits interest in which is owned by U.S. persons, or (B) that is
engaged in a U.S. trade or business.
Effective after December 31, 2000, backup withholding will apply to a payment of
those disposition proceeds if the broker has actual knowledge that the holder is
a U.S. person.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
Federal Estate Tax
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in our common stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.
40
<PAGE>
Underwriting
Maxim and the underwriters named below have entered into an underwriting
agreement covering the common stock to be offered in this offering. J.P. Morgan
Securities Inc., Prudential Securities Incorporated and Aragon
Fondkommission AB are acting as representatives of the underwriters. Each
underwriter has agreed to purchase the number of shares of common stock opposite
its name below.
<TABLE>
<CAPTION>
---------
<S> <C>
Number of
Underwriters Shares
---------
J.P. Morgan Securities Inc..................................
Prudential Securities Incorporated..........................
Aragon Fondkommission AB....................................
---------
Total..................................................... 2,500,000
=========
</TABLE>
The underwriting agreement provides that if the underwriters take any of the
shares presented in the table above, then they must take all of these shares. No
underwriter is obligated to take any shares allocated to a defaulting
underwriter except under limited circumstances.
The underwriters are offering the shares of common stock, subject to the prior
sale of shares, and when, as and if such shares are delivered to and accepted by
them. The underwriters will initially offer to sell shares to the public at the
public offering price shown on the cover page of this prospectus. The
underwriters may sell shares to securities dealers at a discount of up to $
per share from the public offering price. Any of these securities dealers
may resell shares to other brokers or dealers at a discount of up to $
per share from the public offering price. After the initial offering, the
underwriters may vary the public offering price and other selling terms.
If the underwriters sell more shares than the total number shown in the table
above, the underwriters have the option to buy up to an additional 375,000
shares of common stock from us to cover such sales. The underwriters may
exercise this option during the 30-day period from the date of this prospectus.
If any shares are purchased with this option, the underwriters will purchase
shares in approximately the same proportion as shown in the table above.
The following table shows the per share and total underwriting discounts that we
will pay to the underwriters. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
Paid by Maxim
--------------------
No Full
Exercise Exercise
-------- ---------
Per share............................................. $ $
------ ------
Total............................................... $ $
====== ======
</TABLE>
The underwriters may purchase and sell shares of common stock in the open market
in connection with this offering. These transactions may include short shares,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the
41
<PAGE>
purpose of preventing or slowing a decline in the market price of the common
stock while the offering is in progress. The underwriters may also impose a
penalty bid, which means that an underwriter must repay to the other
underwriters a portion of the underwriting discount received by it. An
underwriter may be subject to a penalty bid if the representatives of the
underwriters, while engaging in stabilizing or short covering transactions,
repurchase shares sold by or for the account of that underwriter. These
activities may stabilize, maintain or affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that might exist in the open market. If the underwriters commence these
activities, they may discontinue them at any time.
We estimate that the total expenses of this offering payable by us, excluding
underwriting discounts, will be $750,000.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
It is expected that delivery of the shares will be made to investors on or about
, 2000.
We and our executive officers and directors have agreed, with limited
execptions, that, during the period beginning from the date of this prospectus
and continuing to and including the date 90 days after the date of this
prospectus, none of us will, directly or indirectly, offer, sell, offer to sell,
contract to sell or otherwise dispose of any shares of common stock or any of
our securities which are substantially similar to the common stock, including
but not limited to any securities that are convertible into or exchangeable for,
or that represent the right to receive, common stock or any such substantially
similar securities or enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, the economic consequence of
ownership of common stock or any securities substantially similar to the common
stock, other than pursuant to the exercise of stock options and warrants
outstanding on the date of this prospectus and the conversion of our preferred
stock, without the prior written consent of J.P. Morgan Securities Inc.
From time to time in the ordinary course of their respective businesses, certain
of the underwriters and their affiliates have engaged in and may in the future
engage in commercial banking and/or investment banking transactions with us and
our affiliates.
Legal Matters
Arnold & Porter, Washington, D.C., will render an opinion for us that the shares
of common stock offered hereby, when sold in connection with this offering, will
be validly issued, fully paid and non-accessible. Legal matters in connection
with the offering will be passed upon for the underwriters by Cahill Gordon &
Reindel, New York, New York.
Experts
The financial statements of Maxim Pharmaceuticals, Inc. as of September 30, 1998
and 1999, and for each of the years in the three-year period ended
September 30, 1999, and for the period from inception (October 23, 1989) through
September 30, 1999, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
42
<PAGE>
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You can request copies of these documents by contacting the SEC and paying a fee
for the copying cost. Please call the SEC 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.
This prospectus is part of a registration statement on Form S-3, including
amendments, that we have filed with the SEC relating to the common stock offered
by this prospectus. This prospectus does not contain all of the information set
forth in the registration statement, the exhibits and schedules, some portions
of which the SEC allows us to omit. Statements contained in this prospectus as
to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of that
contract or other document filed as an exhibit to the registration statement.
For further information about us and the common stock offered by this prospectus
we refer you to the registration statement and its exhibits and schedules which
may be obtained as described above.
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
that we filed with the SEC before the date of this prospectus, while information
that we file later with the SEC will automatically update and supersede prior
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 until all of the shares being
offered in this propsectus are sold:
- - our Annual Report on Form 10-K for the fiscal year ended September 30, 1999
- - our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999; and
- - our registration statement on Form 8-A filed on June 28, 1996 which includes a
description of our common stock.
You may request copies of these filings, at no cost, by writing or telephoning
us at:
Maxim Pharmaceuticals, Inc.
Attention: Investor Relations
8899 University Center Lane, Suite 400
San Diego, CA 92122
Telephone (858) 453-4040
43
<PAGE>
[MAXIM LOGO]
<PAGE>
Part II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses payable by Maxim in
connection with the sale of the shares of common stock being registered. All
amounts shown are estimates except for the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 24,174
--------
American Stock Exchange listing fee......................... $ 17,500
--------
NASD filing fee............................................. $ 9,657
--------
Legal fees and expenses..................................... $250,000
--------
Accounting fees and expenses................................ $ 60,000
--------
Printing fees............................................... $175,000
--------
Miscellaneous expenses...................................... $213,669
--------
Total..................................................... $750,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Maxim's Bylaws provide that Maxim will indemnify its directors and executive
officers and may indemnify its other officers, employees and other agents to the
fullest extent permitted by Delaware law. Maxim is also empowered under its
Bylaws to enter into indemnification contracts with its directors and officers
and to purchase insurance on behalf of any person whom it is required or
permitted to indemnify. Pursuant to this provision, Maxim has entered into
indemnity agreements with each of its directors and officers and currently
maintains directors and officers insurance coverage.
In addition, Maxim's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, Maxim's directors will not be liable for
monetary damages for breach of the directors' fiduciary duty of care to Maxim
and its stockholders. This provision in the Certificate of Incorporation does
not eliminate the duty of care, and in appropriate circumstances equitable
remedies such as an injunction or other forms of non-monetary relief would
remain available under Delaware law. Each director will continue to be subject
to liability for breach of the director's duty of loyalty to Maxim or its
stockholders, 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, and for unlawful payments of
dividends or unlawful stock purchase or redemption. This provision also does not
affect a director's responsibilities under any other laws, such as the federal
securities laws or state or federal environmental laws.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------- -----------
<C> <S>
1.1......... Form of Underwriting Agreement.
5.1......... Opinion of Arnold & Porter.
23.1......... Independent Auditors' Consent.
23.2......... Consent of Arnold & Porter (included in Exhibit 5.1).
24.1......... Power of Attorney (included on page II-3 of the Registration
Statement as initially filed).*
</TABLE>
- ------------------------
* Previously filed.
Item 17. Undertakings.
We hereby undertake 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 this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 421(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(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.
Insofar as indemnification by us for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Maxim
Pharmaceuticals, Inc. pursuant to the provisions referenced above or otherwise,
we have been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of Maxim
Pharmaceuticals, Inc. 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 hereunder, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act of 1933, as amended, and will be governed by the final adjudication of such
issue.
We hereby undertake that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
II-2
<PAGE>
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 San Diego, State of California, on the 17th day of
February, 2000.
<TABLE>
<S> <C> <C>
MAXIM PHARMACEUTICALS, INC.
By: /s/ DALE A. SANDER
----------------------------------------
Dale A. Sander
VICE PRESIDENT, FINANCE
CHIEF FINANCIAL OFFICER
</TABLE>
Power of Attorney
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<C> <S> <C>
Chairman of the Board,
* President and Chief
------------------------------------------- Executive Officer February 17, 2000
Larry G. Stambaugh (Principal Executive
Officer)
Vice President, Finance,
/s/ DALE A. SANDER Chief Financial Officer
------------------------------------------- and Secretary (Principal February 17, 2000
Dale A. Sander Financial and Accounting
Officer)
*
------------------------------------------- Director February 17, 2000
Colin B. Bier, Ph.D.
*
------------------------------------------- Director February 17, 2000
Gary E. Frashier
*
------------------------------------------- Director February 17, 2000
Theodor H. Heinrichs
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<C> <S> <C>
*
------------------------------------------- Director February 17, 2000
Per-Olof Martensson
*
------------------------------------------- Director February 17, 2000
F. Duwaine Townsen
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ DALE A. SANDER
--------------------------------------
Dale A. Sander
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------- -----------
<C> <S>
1.1......... Form of Underwriting Agreement.
5.1......... Opinion of Arnold & Porter.
23.1......... Independent Auditors' Consent.
23.2......... Consent of Arnold & Porter (included in Exhibit 5.1).
24.1......... Power of Attorney (included on page II-3 of the Registration
Statement as initially filed).*
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
Exhibit 1.1
MAXIM PHARMACEUTICALS, INC.
2,500,000 Shares of Common Stock
Underwriting Agreement
_____________, 2000
J.P. Morgan Securities Inc.
Prudential Securities Incorporated
Aragon Fondkommission AB
As Representatives of the several underwriters
listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Maxim Pharmaceuticals Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several Underwriters listed in
Schedule I hereto (the "Underwriters") for whom you are acting as
representatives (the "Representatives") an aggregate of 2,500,000 shares of
Common Stock, par value $.001 per share, of the Company (the "Underwritten
Shares") and, for the sole purpose of covering over-allotments in connection
with the sale of the Underwritten Shares, at the option of the Underwriters, up
to an additional 375,000 shares of Common Stock, par value $.001 per share, of
the Company (the "Option Shares"). The Underwritten Shares and the Option Shares
are herein referred to as the "Shares". The shares of Common Stock, par value
$.001 per share, of the Company to be outstanding after giving effect to the
sale of the Shares are herein referred to as the "Common Stock".
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective, including
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act, is referred to
in this Agreement as the "Registration Statement", and the prospectus in the
form first used to confirm sales of Shares is referred to in this Agreement as
the "Prospectus". If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. Any reference
in this Agreement to the Registration Statement, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
<PAGE>
-2-
under the Securities Act, as of the effective date of the Registration Statement
or the date of such preliminary prospectus or the Prospectus, as the case may
be, and any reference to "amend", "amendment" or "supplement" with respect to
the Registration Statement, any preliminary prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") that are deemed to
be incorporated by reference therein.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to sell the Underwritten Shares to the
several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the number of Underwritten Shares set forth opposite such
Underwriter's name in Schedule I hereto at a purchase price per share of
$__________ (the "Purchase Price").
In addition, the Company agrees to issue and sell the Option
Shares to the several Underwriters as hereinafter provided, and the Underwriters
on the basis of the representations and warranties herein contained, but subject
to the conditions hereinafter stated, shall have the option to purchase,
severally and not jointly, from the Company up to an aggregate of 375,000 Option
Shares at the Purchase Price for the sole purpose of covering over-allotments
(if any) in the sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option
Shares to be purchased by each Underwriter shall be the number of Option Shares
which bears the same ratio to the aggregate number of Option Shares being
purchased as the number of Underwritten Shares set forth opposite the name of
such Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject to such
adjustments to eliminate any fractional Shares as the Representatives in their
sole discretion shall make.
The Underwriters may exercise the option to purchase the
Option Shares at any time (but not more than once) on or before the thirtieth
day following the date of the Prospectus, by written notice from the
Representatives to the Company. Such notice shall set forth the aggregate number
of Option Shares as to which the option is being exercised and the date and time
when the Option Shares are to be delivered and paid for which may be the same
date and time as the Closing Date (as hereinafter defined) but shall not be
earlier than the Closing Date or later than the tenth full Business Day (as
hereinafter defined) after the date of such notice (unless such time and date
are postponed in accordance with the provisions of
<PAGE>
-3-
Section 9 hereof). Any such notice shall be given at least two Business Days
prior to the date and time of delivery specified therein.
2. The Company understands that the Underwriters intend (i) to
make a public offering of the Shares as soon as in the judgment of the
Representatives is advisable after (A) the Registration Statement has become
effective and (B) the parties hereto have executed and delivered this Agreement
and (ii) initially to offer the Shares upon the terms set forth in the
Prospectus. The Company further understands that the Underwriters intend (i) to
direct any offering in Sweden to a limited circle of investors within the
meaning of the Swedish Act on Trading in Financial Instruments (the "Swedish
Act") or (ii) that the consideration to be paid by each investor in Sweden will
be SEK 300,000 or more.
3. Payment for the Shares shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representatives, in the case of the Underwritten Shares, on __________, 2000, or
at such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Representatives and the Company may agree upon
in writing or, in the case of the Option Shares, on the date and time specified
by the Representatives in the written notice of the Underwriters' election to
purchase such Option Shares. The time and date of such payment for the
Underwritten Shares are referred to herein as the "Closing Date" and the time
and date for such payment for the Option Shares, if other than the Closing Date,
are herein referred to as the "Additional Closing Date". As used herein, the
term "Business Day" means any day other than a day on which banks are permitted
or required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or
the Additional Closing Date, as the case may be, shall be made against delivery
to the Representatives for the respective accounts of the several Underwriters
of the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates for
the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
4. The Company represents and warrants to each Underwriter
that:
(a) no order preventing or suspending the use of any
preliminary prospectus has been issued by the Commission, and each
preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant
to Rule 424 under the Securities Act, complied when so filed in all
<PAGE>
-4-
material respects with the Securities Act and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
PROVIDED that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter or the distribution of the
Shares furnished to the Company in writing by such Underwriter through
the Representatives expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission; and the Registration Statement and
Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the
Securities Act and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as
of the date of the Prospectus and any amendment or supplement thereto,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Prospectus, as amended or
supplemented, if applicable, at the Closing Date or Additional Closing
Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; except that the foregoing representations and
warranties shall not apply to statements or omissions in the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter or the
distribution of the Shares furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein;
(c) the documents incorporated by reference in the Prospectus,
when they were filed with the Commission, as the case may be, conformed
in all material respects to the requirements of the Exchange Act, and
none of such documents contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents are filed with the
Commission, will conform in all material respects to the requirements
of the Exchange Act, and will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
<PAGE>
-5-
(d) the financial statements, and the related notes thereto,
included or incorporated by reference in the Registration Statement and
the Prospectus present fairly in all material respects the financial
position of the Company as of the dates indicated and the results of
its operations and changes in its cash flows for the periods specified;
said financial statements have been prepared in conformity with United
States generally accepted accounting principles applied on a consistent
basis except as disclosed in the notes to such financial statements,
and the supporting schedules, if any, included or incorporated by
reference in the Registration Statement present accurately in all
material respects the information required to be stated therein;
(e) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company,
or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business,
prospects, management, financial position, or results of operations of
the Company (a "Material Adverse Change"), otherwise than as set forth
or contemplated in the Prospectus; and except as set forth or
contemplated in the Prospectus, the Company has not entered into any
transaction or agreement (whether or not in the ordinary course of
business) material to the Company;
(f) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business, so as to require such qualification, other than
where the failure to be so qualified or in good standing would not have
a material adverse effect on the business, prospects, management,
financial position, or results of operations of the Company (a
"Material Adverse Effect");
(g) the Company has no subsidiaries;
(h) this Agreement has been duly authorized, executed and
delivered by the Company;
(i) the Company has an authorized capitalization as set forth
in the Prospectus and such authorized capital stock conforms as to
legal matters to the description thereof set forth or incorporated by
reference in the Prospectus, and all of the outstanding shares of
capital stock of the Company have been duly authorized and validly
issued, are fully-paid and non-assessable and are not subject to any
pre-emptive or similar rights; and, except as described in or
contemplated by the Prospectus, there are
<PAGE>
-6-
no outstanding rights (including, without limitation, pre-emptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity
interest in the Company, or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of
any capital stock of the Company, any such convertible or exchangeable
securities or any such rights, warrants or options;
(j) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and, when issued and delivered to and paid
for by the Underwriters in accordance with the terms of this Agreement,
will be duly issued and will be fully paid and non-assessable and will
conform to the description thereof set forth or incorporated by
reference in the Prospectus; and the issuance of the Shares is not
subject to any preemptive or similar rights;
(k) the Company is not, and with the giving of notice or lapse
of time or both would not be, in violation of, or in default under, its
certificate of incorporation or by-laws or any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Company is a party or by which it or any of its properties is
bound, except for violations and defaults which individually and in the
aggregate are not material to the Company; the issue and sale of the
Shares and the performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated herein
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any of the property or assets of the Company is
subject, nor will any such action result in any breach or violation of
the provisions of the certificate of incorporation or the by-laws of
the Company or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, license, registration or qualification
of or with any such court or governmental agency or body is required
for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except such
consents, approvals, authorizations, orders, licenses, registrations or
qualifications as have been obtained or made under the Securities Act
and as may be required under state securities or Blue Sky Laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
(l) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its
<PAGE>
-7-
properties or to which the Company is or may be a party or to which any
property of the Company is or may be the subject which, if determined
adversely to the Company, would, individually or in the aggregate,
reasonably be expected to have, a Material Adverse Effect, and, to the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others; and there are no
statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement that are not described
or filed as required;
(m) the Company has good title to all personal property owned
by it, in each case free and clear of all liens, encumbrances and
defects except such as are described or referred to in the Prospectus
or such as do not materially affect the value of such property and do
not interfere with the use made or proposed to be made of such property
by the Company; and any real property and buildings held under lease by
the Company are held by it under valid, existing and enforceable leases
with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the
Company;
(n) no relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required by the Securities Act to be described in the
Registration Statement and the Prospectus which is not so described;
(o) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by reason
of the filing of the Registration Statement with the Commission or the
issue and sale of the Shares except for rights that have been waived or
are immaterial in nature and amount;
(p) the Company is not and, after giving effect to the
offering and sale of the Shares will not be, an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(q) KPMG LLP, which has certified certain financial statements
of the Company, are independent public accountants as required by the
Securities Act;
(r) the Company has filed all federal, state, local and
foreign tax returns which have been required to be filed and has paid
all taxes shown thereon and all assessments received by it to the
extent that such taxes have become due and are not being contested in
good faith, except where such failure to file required tax returns or
pay such taxes and assessments would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
and, except as disclosed in the
<PAGE>
-8-
Registration Statement and the Prospectus, there is no tax deficiency
which has been or might reasonably be expected to be asserted or
threatened against the Company which would reasonably be expected to
have a Material Adverse Effect;
(s) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Common Stock;
(t) the Company owns, possesses or has obtained all licenses,
permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with,
all federal, state, local and other governmental authorities (including
foreign regulatory agencies), all self-regulatory organizations and all
courts and other tribunals, domestic or foreign, necessary to own or
lease, as the case may be, and to operate its properties and to carry
on its business as conducted as of the date hereof, except where such
failure to do so would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and the
Company has not received any actual notice of any proceeding relating
to revocation or modification of any such license, permit, certificate,
consent, order, approval or other authorization, except as described in
the Registration Statement and the Prospectus; and the Company is in
compliance with all laws and regulations relating to the conduct of its
business as conducted as of the date hereof, except where such
noncompliance would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect;
(u) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company which are
reasonably likely to have a Material Adverse Effect;
(v) the Company (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to
conduct its business and (iii) is in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(w) each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for
<PAGE>
-9-
employees or former employees of the Company and its affiliates has
been maintained in material compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of
1986, as amended ("Code"); no prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan which is
subject to the funding rules of Section 412 of the Code or Section 302
of ERISA, no "accumulated funding deficiency" as defined in Section 412
of the Code has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeded the present value
of all benefits accrued under such plan determined using reasonable
actuarial assumptions;
(x) the Company owns, is licensed to use or otherwise
possesses adequate rights to use the patents, patent rights, licenses,
inventions, trademarks, service marks, trade names, copyrights and
know-how, including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems,
processes or procedures (collectively, the "Intellectual Property")
reasonably necessary to carry on the business conducted by it, except
to the extent that the failure to own, be licensed to use or otherwise
possess adequate rights to use such Intellectual Property would not
reasonably be expected to have a Material Adverse Effect; the Company
has not received any notice of infringement of or conflict with, and
the Company has no knowledge of any infringement of or conflict with,
asserted rights of others with respect to its Intellectual Property
which could reasonably be expected to result in a Material Adverse
Effect; the discoveries, inventions, products or processes of the
Company referred to in the Registration Statement and the Prospectus do
not, to the knowledge of the Company, infringe or conflict with any
right or patent of any third party, or any discovery, invention,
product or process which is the subject of a patent application filed
by any third party, which infringement or conflict could reasonably be
expected to have a Material Adverse Effect; except as described in the
Prospectus, the Company is not obligated to pay a royalty, grant a
license or provide other consideration to any third party in connection
with its patents, patent rights, licenses, inventions, trademarks,
service marks, trade names, copyrights and know-how; and no third
party, including any academic or governmental organization, possesses
rights to the Intellectual Property which, if exercised (including by
the development of products competitive with those of the Company)
would reasonably be expected to have a Material Adverse Effect;
(y) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, the studies,
tests and preclinical and clinical trials conducted by or on behalf of
the Company that are described in the Registration
<PAGE>
-10-
Statement and the Prospectus were and, if still pending, are being
conducted in accordance in all material respects with experimental
protocols, procedures and controls pursuant to, where applicable,
accepted professional scientific standards; the descriptions of the
results of such studies, tests and trials contained in the Registration
Statement and the Prospectus are accurate and complete in all material
respects; the Company has not received any notices or correspondence
from the United States Food and Drug Administration (the "FDA") or any
foreign, state or local governmental body exercising comparable
authority requiring the termination, suspension or material
modification of any studies, tests or preclinical or clinical trials
conducted by or on behalf of the Company which termination, suspension
or material modification would reasonably be expected to have a
Material Adverse Effect;
(z) the statistical and market-related data included or
incorporated by reference in the Registration Statement and the
Prospectus are based on or derived from sources which are believed by
the Company to be reliable;
(aa) the Company carries, or is covered by, insurance in such
amounts and covering such risks as it reasonably believes is adequate
for the conduct of its business and the value of its properties; and
(bb) the Company has reviewed its operations and any third
parties with which the Company has a material relationship to evaluate
the extent to which the business or operations of the Company has been
or will be affected by the Year 2000 Problem; as a result of such
review, the Company has no reason to believe, and does not believe,
that the Year 2000 Problem has had or will have a Material Adverse
Effect or result in any material loss or interference with the
Company's business or operations. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000.
5. The Company covenants and agrees with each of the several
Underwriters:
(a) to use its best efforts to cause the Registration
Statement to become effective at the earliest possible time and, if
required, to file the final Prospectus with the Commission within the
time periods specified by Rule 424(b) and Rule 430A under the
Securities Act and to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the
<PAGE>
-11-
Prospectus and for so long as the delivery of a prospectus is required
in connection with the offering or sale of the Shares; and to furnish
copies of the Prospectus to the Underwriters in New York City prior to
10:00 a.m., New York City time, on the Business Day next succeeding the
date of this Agreement in such quantities as the Representatives may
reasonably request;
(b) to deliver, at the expense of the Company, to the
Representatives four signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits and documents incorporated by reference therein, and to each
other Underwriter a conformed copy of the Registration Statement (as
originally filed) and each amendment thereto, in each case without
exhibits but including the documents incorporated by reference therein
and, during the period mentioned in paragraph (e) below, to each of the
Underwriters as many copies of the Prospectus (including all amendments
and supplements thereto) and documents incorporated by reference
therein as the Representatives may reasonably request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus (other than documents filed
under the Exchange Act that are deemed to be incorporated by reference
therein), whether before or after the time the Registration Statement
becomes effective, to furnish to the Representatives a copy of the
proposed amendment or supplement for review and not to file any such
proposed amendment or supplement to which the Representatives
reasonably object;
(d) to advise the Representatives promptly, and to confirm
such advice in writing, (i) when the Registration Statement has become
effective, (ii) when any amendment to the Registration Statement has
been filed or becomes effective, (iii) when any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof, (iv) of any request by the
Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or
the Prospectus or the initiation or threatening of any proceeding for
that purpose, (vi) of the occurrence of any event, within the period
referenced in paragraph (e) below, as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, and (vii) of
the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, and to use its commercially reasonable efforts to prevent
the
<PAGE>
-12-
issuance of any such stop order, or of any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or
of any order suspending any such qualification of the Shares, or
notification of any such order thereof and, if issued, to obtain as
soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to
be delivered in connection with sales by the Underwriters or any
dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if it is necessary to amend or
supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company if delivery of the Prospectus is
required at any time prior to the expiration of nine months after the
Closing Date (and at the expense of such Underwriter if delivery of the
Prospectus is required more than nine months after the Closing Date),
to the Underwriters and to the dealers (whose names and addresses the
Representatives will furnish to the Company) to which Shares may have
been sold by the Representatives on behalf of the Underwriters and to
any other dealers upon request, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus
as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus will comply with law; it being
understood that the foregoing obligations include preparing and
furnishing a Swedish-language prospectus if required by the Swedish Act
in the opinion of counsel to the Underwriters;
(f) to endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and to continue such
qualification in effect so long as reasonably required for distribution
of the Shares; PROVIDED that the Company shall not be required to file
a general consent to service of process, to register as a broker or
dealer, or to expose itself to taxation in any such jurisdiction;
(g) to make generally available to its security holders and to
the Representatives as soon as practicable an earnings statement
covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the effective date of the
Registration Statement, which shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Commission promulgated
thereunder;
(h) during the period of three years after the date of this
Agreement, to furnish to the Representatives copies of all reports or
other communications (financial or other) furnished to holders of the
Shares, and copies of any reports and financial
<PAGE>
-13-
statements furnished to or filed with the Commission or any national
securities exchange;
(i) for a period of 90 days after the date of the Prospectus
not to (i) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any
swap, option, future, forward or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise without the prior written consent of
J.P. Morgan Securities Inc., other than the Shares to be sold hereunder
and any shares of Common Stock of the Company issued upon the
conversion of any convertible preferred stock or the exercise of
options and warrants outstanding on the date of the Prospectus or
options granted under existing employee stock option plans or the
issuance of any rights by the Company;
(j) to use the net proceeds received by the Company from the
sale of the Shares pursuant to this Agreement in the manner specified
in the Prospectus under the caption "Use of Proceeds";
(k) to use its best efforts to list, subject to notice of
issuance, the Shares on the American Stock Exchange and the Stockholm
Stock Exchange (the "Exchanges"); and
(l) whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all costs and expenses incident to the performance of
its obligations hereunder, including without limiting the generality of
the foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution and delivery of the Shares, (ii) incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or
qualification of the Shares under the laws of such jurisdictions as the
Representatives may designate (including fees of counsel for the
Underwriters and its disbursements not to exceed $_________ in the
aggregate), (iv) in connection with the listing of the Shares on the
Exchanges, (v) related to the filing with, and clearance of the
offering by, the National Association of Securities Dealers, Inc., (vi)
in connection with the printing (including word processing and
duplication costs) and delivery of this Agreement, any Blue Sky Survey
and the furnishing to the Underwriters and dealers of copies of the
Registration Statement and the Prospectus, including mailing and
<PAGE>
-14-
shipping, as herein provided, (vii) any expenses incurred by the
Company in connection with a "road show" presentation to potential
investors, (viii) the cost of preparing stock certificates and (ix) the
cost and charges of any transfer agent and any registrar.
6. The several obligations of the Underwriters hereunder to
purchase the Shares on the Closing Date or the Additional Closing Date, as the
case may be, are subject to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) the Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed under the
Securities Act, such post-effective amendment shall have become
effective) not later than 5:00 P.M., New York City time, on the date
hereof; and no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; the Prospectus shall have been filed with
the Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations under
the Securities Act and in accordance with Section 5(a) hereof; and all
requests for additional information shall have been complied with to
the satisfaction of the Representatives;
(b) the representations and warranties of the Company
contained herein are true and correct on and as of the Closing Date or
the Additional Closing Date, as the case may be, as if made on and as
of the Closing Date or the Additional Closing Date, as the case may be,
and the Company shall have complied with all agreements and all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date or the Additional Closing Date, as the case
may be;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date or the Additional Closing Date, as the
case may be, there shall not have occurred any downgrading, nor shall
any notice have been given of (i) any downgrading, (ii) any intended or
potential downgrading or (iii) any review or possible change that does
not indicate an improvement, in the rating accorded any securities of
or guaranteed by the Company by any "nationally recognized statistical
rating organization", as such term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the
capital stock or long-term debt of the Company or any Material Adverse
Change, or any development involving a prospective Material Adverse
Change, otherwise than as set forth or contemplated in the Prospectus,
the effect of which in the judgment of the Representatives makes it
<PAGE>
-15-
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the Closing Date or the Additional Closing
Date, as the case may be, on the terms and in the manner contemplated
in the Prospectus; and the Company has not sustained since the date of
the latest audited financial statements included or incorporated by
reference in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date or the Additional Closing Date, as the case may be, a
certificate of two executive officers of the Company, one of which with
specific knowledge about the Company's financial matters, satisfactory
to the Representatives to the effect set forth in subsections (a)
through (d) (with respect to the respective representations,
warranties, agreements and conditions of the Company) of this Section
and to the further effect that there has not occurred any Material
Adverse Change, or any development involving a prospective Material
Adverse Change, from that set forth or contemplated in the Registration
Statement;
(f) Arnold & Porter, special counsel for the Company, shall
have furnished to the Representatives their written opinions, dated the
Closing Date or the Additional Closing Date, as the case may be, in
form and substance satisfactory to the Representatives, to the effect
that:
(i) the Company is validly existing as a corporation
in good standing under the laws of its jurisdiction of
incorporation, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of ____________________;
(iii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iv) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained or incorporated by reference in the Prospectus;
(v) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when delivered to and
paid for by the Underwriters
<PAGE>
-16-
in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable and the issuance
of the Shares is not subject to any preemptive or similar
rights known to such counsel;
(vi) the statements in the Prospectus under "Material
U.S. Federal Tax Considerations for Non-U.S. Holders of Common
Stock", and in the Registration Statement in Item 15, insofar
as such statements constitute a summary of the terms of the
legal matters or documents referred to therein, fairly present
the information called for with respect to such legal matters
or documents;
(vii) the Registration Statement has been declared
effective under the Securities Act and, to the knowledge of
such counsel, no order preventing or suspending the use of any
preliminary prospectus has been issued by the Commission and
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose
has been instituted or threatened by the Commission;
(viii) such counsel is of the opinion that the
Registration Statement and the Prospectus and any amendments
and supplements thereto (other than the documents incorporated
by reference therein and the financial statements and related
schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act;
(ix) the issue and sale of the Shares being delivered
on the Closing Date or the Additional Closing Date, as the
case may be, and the performance by the Company of its
obligations under this Agreement and the consummation of the
transactions contemplated herein will not conflict with or
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any agreement or
instrument filed as an exhibit to the Company's Annual Report
on Form 10-K for the year ended September 30, 1999 or to any
statements, reports or other information filed with the
Commission thereafter to which the Company is a party or by
which the Company is bound or to which any of the property or
assets of the Company is subject, except for such breaches or
violations that would not, individually or in the aggregate,
have a Material Adverse Effect; nor will any such action
result in any breach or violation of the provisions of the
certificate of incorporation or the by-laws of the Company;
nor will any such action result in breach or violation of any
applicable law or statute or, to the knowledge of such
counsel, any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any of its properties, except for such breaches or
<PAGE>
-17-
violations that would not, individually or in the aggregate,
have a Material Adverse Effect;
(x) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation of the other transactions
contemplated by this Agreement, except such consents,
approvals, authorizations, orders, registrations or
qualifications as have been obtained or made under the
Securities Act; and as may be required under state securities
or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xi) the Company is not and, after giving effect to
the offering and sale of the Shares, will not be an
"investment company" or entity "controlled" by an "investment
company", as such terms are defined in the Investment Company
Act;
(xii) the statements in the Prospectus under "Risk
Factors--Industry Risks--Our product candidates are subject to
significant government regulation which could increase the
cost of developing our products and delay or prevent the sales
of our products" and "Business--Government Regulation",
insofar as such statements constitute a summary of applicable
law and regulatory process, fairly summarize the information
contained therein; and
(xiii) the descriptions in the Registration Statement
and the Prospectus of the legal and governmental proceedings
and procedures by or before the FDA or any foreign, state or
local governmental body exercising comparable authority fairly
summarize the information contained therein.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States, the District of Columbia and the States of Delaware and
New York, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in
form and substance reasonably satisfactory to Underwriters' counsel) of
other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws; and (B) as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible
officers of the Company and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company. The opinion of
such counsel for the Company shall state that the opinion of any such
other counsel upon which they relied is in form satisfactory to such
counsel and, in such counsel's opinion, the Underwriters and they are
justified in relying thereon. Such counsel also shall separately
deliver a letter
<PAGE>
-18-
stating that (i) nothing has caused such counsel to believe that (other
than the financial statements and related schedules and other financial
and statistical data therein and documents incorporated by reference in
the Registration Statement, as to which such counsel need express no
belief) the Registration Statement and the prospectus included therein
at the time the Registration Statement became effective contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that the Prospectus, as amended or
supplemented, if applicable, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; (ii) there are no legal proceedings
pending or threatened against the Company that are required to be
disclosed in the Registration Statement or Prospectus, other than those
disclosed or incorporated by reference therein; and (iii) there are no
contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not described or referred to therein or
so filed. With respect to the matters to be covered above counsel may
state their belief is based upon their participation in the preparation
of the Registration Statement and the Prospectus and any amendment or
supplement thereto (other than the documents incorporated by reference
therein) and review and discussion of the contents thereof (including
the documents incorporated by reference therein) but is without
independent check or verification except as specified.
The opinion of Arnold & Porter described above shall be
rendered to the Underwriters at the request of the Company and shall so
state therein.
(g) Knobbe, Martens, Olson & Bear LLP, counsel for the
Company, shall have furnished to the Representatives their written
opinions, dated the Closing Date or the Additional Closing Date, as the
case may be, in form and substance satisfactory to the Representatives,
to the effect that:
(i) the statements in the Prospectus under "Risk
Factors--Industry Risks--If we fail to secure adequate
protection of our intellectual property or the right to use
certain intellectual property of others, we may not be able to
protect our products and technologies from competitors" and
"Business--Patents, Licenses and Proprietary Rights", insofar
as such statements constitute a summary of the Company's
Intellectual Property, fairly present the information called
for with respect thereto;
(ii) to the knowledge of such counsel, the Company
owns, possesses or has the right to use the Intellectual
Property employed by it in connection with the business
conducted by it as of the date hereof;
<PAGE>
-19-
(iii) to the knowledge of such counsel, the Company
has not received any notice of infringement of or conflict
with, and such counsel has no knowledge of any infringement of
or conflict with, asserted rights of others with respect to
the Company's Intellectual Property which could reasonably be
expected to result in a Material Adverse Effect;
(iv) to the knowledge of such counsel, the
discoveries, inventions, products or processes of the Company
referred to in the Prospectus do not infringe or conflict with
any right or patent of any third party, or any discovery,
invention, product or process which is the subject of a patent
application filed by any third party;
(v) to the knowledge of such counsel, except as
described in the Prospectus, the Company is not obligated to
pay a royalty, grant a license or provide other consideration
to any third party in connection with its patents, patent
rights, licenses, inventions, trademarks, service marks, trade
names, copyrights and know-how; and
(vi) to the knowledge of such counsel, no third
party, including any academic or governmental organization,
possesses rights to the Company's Intellectual Property which,
if exercised, could enable such third party to develop
products competitive with those of the Company or could
reasonably be expected to have a Material Adverse Effect.
In rendering such opinions, such counsel may rely as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company.
The opinion of Knobbe, Martens, Olson & Bear LLP described
above shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(h) on the date of this Agreement and also on the Closing Date
or Additional Closing Date, as the case may be, KPMG LLP shall have
furnished to you letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, containing
statements and information of the type customarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus;
(i) the Representatives shall have received on and as of the
Closing Date or Additional Closing Date, as the case may be, an opinion
of Cahill Gordon & Reindel, counsel to the Underwriters, with respect
to the due authorization and valid
<PAGE>
-20-
issuance of the Shares, the Registration Statement, the Prospectus and
other related matters as the Representatives may reasonably request,
and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(j) the Shares to be delivered on the Closing Date or
Additional Closing Date, as the case may be, shall have been approved
for listing on the Exchanges, subject only to official notice of
issuance;
(k) on or prior to the Closing Date or Additional Closing
Date, as the case may be, the Company shall have furnished to the
Representatives such further certificates and documents as the
Representatives shall reasonably request;
(l) the "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and each of the executive officers and
directors [and certain stockholders] of the Company relating to sales
and certain other dispositions of shares of Common Stock or certain
other securities, delivered to you on or before the date hereof, shall
be in full force and effect on the Closing Date or Additional Closing
Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each
Underwriter, each affiliate of any Underwriter which assists such Underwriter in
the distribution of the Shares and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities in any jurisdiction (including, without limitation, the
legal fees and other expenses incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein; PROVIDED that the foregoing indemnity
with respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) from
whom the person asserting any such losses, claims, damages or liabilities
purchased Shares if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary prospectus is eliminated or
remedied in the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) and, if required by law, a
<PAGE>
-21-
copy of the Prospectus (as so amended or supplemented) shall not have
been furnished to such person at or prior to the written confirmation
of the sale of such Shares to such person.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only with reference to information relating to such Underwriter furnished to
the Company in writing by such Underwriter through the Representatives expressly
for use in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to the preceding
paragraphs, such person (the "Indemnified Person") shall promptly notify the
person against whom such indemnity may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the Indemnified Person,
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the reasonable fees and expenses of
such counsel related to such proceeding. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the reasonable fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the Underwriters,
each affiliate of any Underwriter which assists such Underwriter in the
distribution of the Shares and such control persons of Underwriters shall be
designated in writing by J.P. Morgan Securities Inc. and any such separate firm
for the Company, its directors, its officers who sign the Registration Statement
and such control persons of the Company shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified
<PAGE>
-22-
Person shall have requested an Indemnifying Person to reimburse the
Indemnified Person for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the Indemnifying Person agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 90 days
after receipt by such Indemnifying Person of the aforesaid request and (ii)
such Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the preceding
paragraphs of this Section 7 is unavailable to an Indemnified Person or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand shall be
deemed to be in the same respective proportions as the net proceeds from the
offering (before deducting expenses) received by the Company and the total
underwriting discounts received by the Underwriters, in each case as set forth
in the table on the cover of the Prospectus, bear to the aggregate initial
public offering price of the Shares. The relative fault of the Company on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity for
such purposes) or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the
<PAGE>
-23-
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares set forth opposite their names in Schedule I hereto,
and not joint.
The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any other person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement
(or the obligations of the several Underwriters with respect to the Option
Shares) may be terminated in the absolute discretion of the Representatives, by
notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (or, in the case of the Option Shares,
prior to the Additional Closing Date) (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange or the American Stock Exchange or the National Association
of Securities Dealers, Inc. or the Stockholm Stock Exchange, (ii) trading of any
securities of or guaranteed by the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representatives, is material and
adverse and which, in the judgment of the Representatives, makes it
impracticable to market the Shares being delivered at the Closing Date or the
Additional Closing Date, as the case may be, on the terms and in the manner
contemplated in the Prospectus.
<PAGE>
-24-
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Underwritten Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the Representatives
may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 9 by an
amount in excess of one-tenth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date or the Additional Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date, and arrangements satisfactory to the Representatives and the
Company for the purchase of such Shares are not made within 36 hours after such
default, this Agreement (or the obligations of the several Underwriters to
purchase the Option Shares, as the case may be) shall terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case either you or the Company shall have the right to postpone the Closing
Date (or, in the case of the Option Shares, the Additional Closing Date), but in
no event for longer than seven days, in order that the required changes, if any,
in the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement or any condition of the Underwriters' obligations cannot be
fulfilled, the Company agrees to reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and expenses of their counsel)
reasonably
<PAGE>
-25-
incurred by the Underwriters in connection with this Agreement or the
offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be
binding upon the Company, the Underwriters, each affiliate of any Underwriter
which assists such Underwriter in the distribution of the Shares, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by
the Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf of
the Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telefax: 212-648-5705); Attention: Syndicate Department. Notices to
the Company shall be given to it at 8899 University Center Lane, Suite 400, San
Diego, California 92122 (telefax: 858-453-5005); Attention: Dale A. Sander.
13. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
<PAGE>
-26-
If the foregoing is in accordance with your understanding,
please sign and return four counterparts hereof.
Very truly yours,
MAXIM PHARMACEUTICALS, INC.
By:
---------------------------
Name:
Title:
Accepted: __________, 2000
J.P. Morgan Securities Inc.
Prudential Securities Incorporated
Aragon Fondkommission AB
Acting severally on behalf
of themselves and the
several Underwriters listed
in Schedule I hereto.
By: J.P. Morgan Securities Inc.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By:
---------------------------------
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares
UNDERWRITER To Be Purchased
- ----------- ---------------------
<S> <C>
J.P. Morgan Securities Inc.......................................
Prudential Securities Incorporated...............................
Aragon Fondkommission AB.........................................
---------------------
Total................................
=====================
</TABLE>
<PAGE>
EXHIBIT A
LOCK-UP AGREEMENT
February ___, 2000
J.P. MORGAN SECURITIES INC.
PRUDENTIAL SECURITIES INCORPORATED
ARAGON FONDKOMMISSION AB
As Representatives of the several
Underwriters named in Schedule I to
the Underwriting Agreement referred to below
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Re: Maxim Pharmaceuticals, Inc. -
Public Offering of 2,500,000 Shares of Common Stock
---------------------------------------------------
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of
the several Underwriters, propose to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Maxim Pharmaceuticals, Inc., a Delaware
corporation (the "COMPANY"), providing for the public offering (the "PUBLIC
OFFERING") by the several Underwriters named in Schedule I to the Underwriting
Agreement (the "UNDERWRITERS") of Common Stock, $0.001 par value (the "COMMON
STOCK"), of the Company. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Underwriting Agreement.
In consideration of the Underwriters' agreement to purchase
and make the Public Offering of the Common Stock, and for other good and
valuable consideration receipt of which is hereby acknowledged, the undersigned
hereby agrees that, without the prior written consent of J.P. Morgan Securities
Inc. on behalf of the Underwriters, the undersigned will not, directly or
indirectly, during the period ending 90 days after the date of the prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of any shares of Common
Stock or any securities of the Company which are substantially similar to the
Common Stock, including but not limited to any securities convertible into or
exercisable or exchangeable for, or that represent the right to receive, Common
Stock (including, but not limited to, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the
<PAGE>
-2-
Securities and Exchange Commission and securities which may be issued upon
exercise of a stock option or warrant) or (2) enter into any swap, option,
future, forward or other agreement that transfers, in whole or in part, any of
the economic consequences of ownership of the Common Stock or any securities of
the Company which are substantially similar to the Common Stock, including, but
not limited to, any security convertible into or exercisable or exchangeable
for, or that represent the right to receive, Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, other than pursuant
to the exercise of stock options and warrants outstanding on the date of the
Prospectus and the conversion of Series B Preferred Stock, $.001 par value, of
the Company. In addition, the undersigned agrees that, without the prior written
consent of J.P. Morgan Securities Inc. on behalf of the Underwriters, it will
not, during the period ending 90 days after the date of the Prospectus, make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any substantially similar securities of the Company,
including but not limited to any security convertible into or exercisable or
exchangeable for Common Stock.
In furtherance of the foregoing, the Company and any duly
appointed transfer agent for the registration or transfer of the securities
described herein are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Lock-Up Agreement.
The undersigned hereby represents and warrants that the
undersigned has full power and authority to enter into this Lock-Up Agreement.
All authority herein conferred or agreed to be conferred and any obligations of
the undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting
Agreement does not become effective, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this
Lock-Up Agreement.
The undersigned understands that the Underwriters are entering
into the Underwriting Agreement and proceeding with the Public Offering in
reliance upon this Lock-Up Agreement.
THIS LOCK-UP AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
<PAGE>
-3-
Very truly yours,
---------------------------------
Name:
Title:
<PAGE>
-4-
Accepted as of the date first set forth above:
J.P. MORGAN SECURITIES INC.
PRUDENTIAL SECURITIES INCORPORATED
ARAGON FONDKOMMISSION AB
Acting severally on behalf of themselves and the
several Underwriters named in Schedule I to the
Underwriting Agreement
By: J.P. MORGAN SECURITIES INC.
By:
------------------------------
Name:
Title:
<PAGE>
Exhibit 5.1
February 15, 2000
Board of Directors
Maxim Pharmaceuticals, Inc.
8899 University Center Lane
Suite 400
San Diego, California 92122
Re: Maxim Pharmaceuticals, Inc.
Registration Statement on Form S-3
File No. 333-95293
Ladies and Gentlemen:
We have acted as special counsel to Maxim Pharmaceuticals, Inc., a
Delaware corporation ("Company"), in connection with a Registration Statement on
Form S-3, as amended by Amendments No. 1 and 2 thereto (the "Registration
Statement"), relating to the proposed offer and sale of up to 2,875,000 shares
of the Company's common stock, $.001 par value ("Common Stock"), by the Company.
In connection with rendering the opinions set forth in this letter, we
have examined and relied upon the Registration Statement, the Company's
Certificate of Incorporation and Bylaws as in effect on the date of this
opinion, resolutions of the Board of Directors of the Company, and the originals
or copies of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below.
The opinions set forth herein are subject to the following
qualifications, which are in addition to any other qualifications contained
herein:
(i) We have assumed without verification the genuineness of all
signatures on all documents, the authority of the parties (other than the
Company) executing such documents, the authenticity of all documents submitted
to us as originals, and the conformity to original documents of all documents
submitted to us as copies.
(ii) The opinions set forth herein are based on existing laws,
ordinances, rules, regulations, and judicial and administrative decisions as
they presently have been interpreted, and we can give no assurance that our
opinions would not be different after
<PAGE>
Maxim Pharmaceuticals, Inc.
February 15, 2000
Page 2
any change in any of the foregoing occurring after the date hereof.
(iii) We have assumed without verification that, with respect to the
minutes of any meetings of the Board of Directors or any committees thereof of
the Company that we have examined, due notice of the meetings was given or duly
waived, the minutes accurately and completely reflect all actions taken at the
meetings and a quorum was present and acting throughout the meetings.
(iv) We have assumed without verification the accuracy and completeness
of all corporate records made available to us by the Company.
(v) We express no opinion as to the effect or application of any laws
or regulations other than the internal laws of the State of Delaware. As to
matters governed by the laws specified in the preceding sentence, we have relied
exclusively on the latest standard compilations of such statutes and laws as
reproduced in commonly accepted unofficial publications available to us.
Based on the foregoing, upon the assumption that there will be no
material changes in the documents we have examined and the matters investigated
referred to above, we are of the opinion that 2,875,000 shares of Common Stock,
when issued and sold as described in the Registration Statement for lawful
consideration of not less than $.001 per share, will be validly issued, fully
paid and nonassessable under the Delaware General Corporation Law as in effect
on this date.
This letter does not address any matters other than those expressly
addressed herein. This letter is given for your sole benefit and use. No one
else is entitled to rely hereupon. This letter speaks only as of the date
hereof. We undertake no responsibility to update or supplement it after such
date.
We hereby consent to your filing of this opinion as an exhibit to the
Registration Statement and to reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/Arnold & Porter
----------------------
Arnold & Porter
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
Maxim Pharmaceuticals, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the headings "Selected Financial Data" and "Experts"
in the Prospectus.
KPMG LLP
San Diego, California
February 17, 2000
