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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-93481
PROSPECTUS
1,000,000 SHARES
CERUS CORPORATION
COMMON STOCK
The selling stockholders listed on page 16 are offering up to 1,000,000
shares of Cerus Corporation common stock. We sold the shares to the selling
stockholders on February 16, 2000 in a private transaction.
Our common stock trades on the Nasdaq National Market under the symbol
CERS. On February 15, 2000, the last reported sale price of our common stock was
$36.75 per share.
We will not be paying any underwriting discounts or commissions in this
offering.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
February 16, 2000
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TABLE OF CONTENTS
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CERUS..............................................................................3
RISK FACTORS.......................................................................5
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................14
WHERE YOU CAN FIND MORE INFORMATION ABOUT CERUS AND THIS OFFERING.................15
USE OF PROCEEDS...................................................................15
SELLING STOCKHOLDERS..............................................................16
PLAN OF DISTRIBUTION..............................................................18
CERTAIN TRANSACTIONS..............................................................20
LEGAL MATTERS.....................................................................21
EXPERTS...........................................................................21
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We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or buy any shares in any jurisdiction in which it is unlawful. The
information in this prospectus is current as of the date on the cover.
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CERUS
Cerus develops products to prevent the transmission of diseases through
blood transfusions. Our systems inactivate infectious pathogens in blood
components and inhibit the white blood cell activity that is responsible for
certain adverse immune and other transfusion-related reactions. Blood components
include platelets, fresh frozen plasma and red blood cells. Our pathogen
inactivation systems, which are at various stages of pre-commercial development,
treat each of these components. We believe that our proprietary technology has
the potential to inactivate many new pathogens before they are identified and
before screening tests have been developed to detect them in the blood supply.
Because our systems are designed to inactivate rather than merely test for
pathogens, they may reduce the risk of transmission of pathogens that would
remain undetected by current testing methods. We also are leveraging our core
technology into programs for decontaminating plasma derivatives and improving
the outcome of bone marrow or stem cell transplants in cancer patients.
We have completed five clinical trials of our platelet system, three
clinical trials of our fresh frozen plasma system and two clinical trials of our
red blood cell system. Our platelet system is in Phase 3 clinical trials in
Europe and the United States. Our fresh frozen plasma system is in a Phase 3
clinical trial in the United States. Our red blood cell system is in Phase 1
clinical trials in the United States. Our system for improving the outcomes of
stem cell transplants is in a Phase 1 clinical trial in the United States.
We are a Delaware corporation. Our principal executive offices are
located at 2525 Stanwell Drive, Suite 300, Concord, California 94520, and our
telephone number is (925) 603-9071. In this prospectus, "Cerus," "we," "us," and
"our" refer to Cerus Corporation, unless the context otherwise requires.
RECENT DEVELOPMENTS
U.S. PHASE 3 CLINICAL TRIAL OF OUR PLATELET PATHOGEN INACTIVATION SYSTEM
In the third quarter of 1999, we initiated platelet transfusions in a
United States Phase 3 clinical trial. The multi-center study is designed to
evaluate the ability of platelets treated with our pathogen inactivation system
to control clinical bleeding. This trial is designed to include approximately
600 patients, who will receive either treated or untreated platelets for a
specified period of time. The primary endpoint to be evaluated is the incidence
of clinical bleeding events while the patients are receiving platelet support.
PHASE 3 CLINICAL TRIALS OF OUR FRESH FROZEN PLASMA PATHOGEN INACTIVATION SYSTEM
In the third quarter of 1999, we initiated transfusions in a Phase 3
clinical trial in the first of three patient groups. This single-arm, open-label
study is designed to evaluate coagulation factor function following transfusion
of fresh frozen plasma treated with our pathogen inactivation system. We plan to
enroll 30 patients in this patient group, who will receive fresh frozen plasma
for treatment of certain types of congenital clotting factor deficiencies. We
have also received FDA clearance to conduct Phase 3 clinical trials in two
additional patient groups: patients receiving fresh frozen plasma to treat
acquired clotting factor deficiencies and patients requiring large volume fresh
frozen plasma exchange to treat diseases such as thrombotic thrombocytopenic
purpura.
In the third quarter of 1999, we completed a Phase 2b clinical trial.
This was a controlled, double-blind trial in 13 patients diagnosed with chronic
liver diseases. The study showed that correction of patients' blood clotting
time and coagulation factor levels after transfusion were not adversely affected
by our treatment.
CLINICAL TRIALS OF OUR RED BLOOD CELL PATHOGEN INACTIVATION SYSTEM
In the third quarter of 1999, we completed a Phase 1b clinical trial of
our red blood cell pathogen inactivation system. The study, which included 28
healthy subjects, each of whom received four transfusions of treated red blood
cells, demonstrated there was no detectable immune response directed against the
red blood cells treated with our pathogen inactivation system and stored for 35
days. The study also showed that circulation of
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treated red blood cells 24 hours after transfusion exceeded the American
Association of Blood Banks standard for red blood cell recovery.
In the third quarter of 1999, we completed a Phase 1a clinical trial of
our red blood cell pathogen inactivation system. The randomized, controlled
study, which included 42 healthy subjects, was designed to evaluate the
post-transfusion viability of red blood cells treated with our pathogen
inactivation system and stored for 35 days. The study showed that the
circulation of both the treated and untreated red blood cells 24 hours after
transfusion exceeded the American Association of Blood Banks standard for red
blood cell recovery.
CLINICAL TRIAL OF OUR ALLOGENEIC CELLULAR IMMUNOTHERAPY SYSTEM (ACIT)
In the third quarter of 1999, we initiated patient treatment in a Phase
1 clinical trial in patients undergoing stem cell transplantation. The study is
designed to enroll approximately 30 patients, who will receive treated donor
T-cells as an adjunct to haploidentical (half-matched) stem cell transplants.
Patients receive a transfusion of donor T-cells treated with S-59 in conjunction
with stem cells provided by a close relative.
RECEIPT OF AN $800,000 NIH GRANT
In September 1999, we were awarded an $800,000 federal grant to be
administered by the National Institutes of Health (NIH) to support research
relating to our ACIT program. The grant will provide funding over three years
for pre-clinical research relating to the use of our proprietary technologies in
conjunction with stem cell transplantation as a treatment for blood disorders
such as sickle cell anemia and thalassemia.
FOURTH QUARTER AND YEAR-END FINANCIAL RESULTS
For the three months ended December 31, 1999, we reported a net loss of
$7.1 million, or $0.60 per share, compared to a net loss of $6.2 million, or
$0.66 per share, in the comparable period of 1998. For the year ended December
31, 1999, we reported a net loss of $22.6 million, or $2.04 per share, compared
to a net loss of $29.6 million, or $3.17 per share, in the comparable period in
1998. At December 31, 1999, we had cash, cash equivalents and short-term
investments totaling $40.4 million.
ADOPTION OF STOCKHOLDER RIGHTS PLAN
Our Board of Directors approved the adoption of a stockholder rights
plan under which all stockholders of record as of November 23, 1999 will receive
rights to purchase shares of a new series of preferred stock. The rights plan is
designed to enable all of our stockholders to realize the full value of their
investment and to provide for fair and equal treatment for all stockholders in
the event that an unsolicited attempt is made to acquire Cerus.
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RISK FACTORS
You should carefully consider the following risk factors and warnings
before making an investment decision. The risks described below may not be the
only risks we face. Additional risks that we do not yet know of or that we
currently think are immaterial may also impair our business operations. If any
of the events or circumstances described in the following risks actually occurs,
our business, financial condition, or results of operations could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
OUR PRODUCTS ARE IN AN EARLY STAGE OF DEVELOPMENT AND THERE IS A HIGH RISK OF
FAILURE.
We have no products that have received regulatory approval for
commercial sale. All of our product candidates are in early stages of
development, and we face the risks of failure inherent in developing medical
devices and biotechnology products based on new technologies. Our products must
satisfy rigorous standards of safety and efficacy before they can be approved by
the United States Food and Drug Administration and international regulatory
authorities for commercial use. Our platelet, fresh frozen plasma, red blood
cell and stem cell transplantation programs are undergoing clinical testing to
evaluate safety and efficacy and concurrent preclinical studies to evaluate
their potential for carcinogenicity, mutagenicity, toxicity and other safety
factors. Our other programs are still in the early stages of research and
development. We will have to conduct significant additional product design and
development and research, preclinical (animal) and clinical (human) testing
before we can file applications with the FDA for product approval. Clinical
trials and preclinical safety studies are expensive and have a high risk of
failure. In addition, to compete effectively, our products must be easy to use,
cost-effective and economical to manufacture on a commercial scale. We cannot
assure you that we can achieve any of these objectives. Certain system
components remain in the design stage. Any of our products may fail or
experience delays in the design, development or testing processes or may not
attain market acceptance. Also, third parties may develop superior products or
have proprietary rights that preclude us from marketing our products. If
research and testing is not successful, our products are not commercially viable
or we cannot compete effectively, our business, financial condition and results
of operations will be materially adversely affected.
THE PROGRESS AND RESULTS OF OUR PRECLINICAL AND CLINICAL TESTING ARE UNCERTAIN.
We must provide the FDA and foreign regulatory authorities with
preclinical and clinical data that demonstrate the safety and efficacy of our
products before they can be approved for commercial sale. Clinical development,
including preclinical testing, is a long, expensive and uncertain process. It
may take us several years to complete our testing, and failure can occur at any
stage of testing. We cannot rely on interim results of preclinical or clinical
studies to necessarily predict their final results, and acceptable results in
early studies might not be repeated in later studies. Any preclinical or
clinical test may fail to produce results satisfactory to the FDA. Preclinical
and clinical data can be interpreted in different ways, which could delay, limit
or prevent regulatory approval. Negative or inconclusive results from a
preclinical study or clinical trial or adverse medical events during a clinical
trial could cause a preclinical study or clinical trial to be repeated or a
program to be terminated, even if other studies or trials relating to the
program are successful.
We typically rely on third-party clinical investigators to conduct our
clinical trials and other third-party organizations to perform data collection
and analysis, and as a result, we face certain additional delaying factors
outside our control. These factors include:
- difficulty in enrolling qualified subjects,
- inadequately trained or insufficient personnel at the study site, and
- delays in approvals from a study site's review board.
We cannot assure you that planned trials will begin on time or that any
of our preclinical or clinical testing will be completed on schedule or at all.
Certain of our clinical trials involve patient groups that have rare medical
conditions, and we may have difficulty in identifying and enrolling a sufficient
number of patients to complete the
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trials on a timely basis. We cannot assure you that any trials will result in
marketable products or that any products will be commercially successful even if
approved for marketing. Our product development costs will increase if we have
delays in testing or approvals. If the delays are significant, our business,
financial condition and results of operations will be materially adversely
affected.
WE FACE MANUFACTURING UNCERTAINTIES BECAUSE OUR PRODUCTS HAVE NOT BEEN
MANUFACTURED ON A COMMERCIAL SCALE.
Our products, and many of their components, have never been
manufactured on a commercial scale. It may be difficult or impossible to
manufacture our products economically on a commercial scale. We intend to use
third-party manufacturers to produce commercial quantities of our products,
including the inactivation compounds.
We have contracted with two manufacturers to provide enough S-59, the
inactivation compound we use in our platelet and fresh frozen plasma systems, to
meet our anticipated clinical trial requirements. Only one of the manufacturers
is performing the complete synthesis of S-59. If this manufacturer cannot
produce S-59 in commercial quantities, we may face delays and shortfalls before
our alternate manufacturer can produce sufficient quantities. Also, any new
manufacturer will have to prove both to us and to the FDA that its manufacturing
process complies with government regulations. We may need to identify and
qualify additional manufacturers for commercial production. We cannot be certain
that our existing manufacturers or any new manufacturer will be able to provide
required quantities of S-59.
We have produced only limited quantities of S-303, the inactivation
compound we use in our red blood cell pathogen inactivation system, for research
and clinical development. A sole third-party manufacturer has produced enough
S-303 for anticipated preclinical and clinical studies. We cannot be certain
that this manufacturer will be able to produce S-303 on a commercial scale. We
also do not know whether we will be able to enter into arrangements for the
commercial-scale manufacture of S-303 on reasonable terms or at all.
We purchase certain key components of our compounds from a limited
number of suppliers. While we believe there are alternative suppliers for these
components, it would be expensive and time-consuming to establish additional or
replacement suppliers for our compounds.
Baxter Healthcare Corporation, a development and marketing partner,
is responsible for manufacturing and assembling components of our systems.
Baxter has not manufactured these components in commercial quantities and may
not be able to provide them to us on an economical basis. Baxter intends to rely
on third parties to manufacture some of these components, which are customized
and have not been manufactured on a commercial scale. If Baxter or its
third-party component suppliers fail to develop commercially acceptable
manufacturing processes for these components, our business, results of
operations and financial condition will be materially adversely affected. If we
were unable to find adequate suppliers for these components, we would be
required to redesign the systems, which could lead to additional testing and
clinical trials. If we were required to redesign the products, our development
costs would increase and our programs could be delayed significantly.
OUR PRODUCTS MAY NEVER BE ACCEPTED BY THE HEALTH CARE COMMUNITY.
We believe that our ability to commercialize our systems effectively
will depend on the safety, efficacy and cost-effectiveness of our products and
the availability of adequate insurance reimbursement for these products. We
believe that market acceptance of our pathogen inactivation systems will depend
on the extent to which physicians, patients and healthcare payors perceive that
the benefits of using our systems justify their additional cost, given that the
blood supply has become safer in recent years. Our ability to successfully
commercialize our products depends in part on obtaining adequate reimbursement
for product costs and related treatment of blood products from governmental
authorities and private healthcare insurers (including health maintenance
organizations). Government and private third-party payors are increasingly
attempting to contain healthcare costs by limiting both the extent of coverage
and the reimbursement rate for new tests and treatments. In addition, we do not
expect our products to inactivate all known pathogens, and the inability of our
systems to inactivate certain pathogens may adversely affect market acceptance
of our products. Even if our products receive the necessary regulatory and
healthcare reimbursement approvals, our products may not achieve any significant
degree of market acceptance among blood centers, physicians, patients and
healthcare payors. Other technologies have been developed in recent years that
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have the potential to improve the safety of the blood supply. These technologies
include donor retested fresh frozen plasma, solvent-detergent treated fresh
frozen plasma and new methods to test for various blood-borne pathogens. For
various reasons, such as implementation costs and logistical concerns, the
transfusion industry has not always integrated these technologies into their
processes. Although we believe our inactivation systems can improve the safety
of the blood supply significantly, we cannot assure you that our technologies
will be accepted rapidly or at all. If our products fail to achieve market
acceptance, our business, results of operations and financial condition would be
materially adversely affected.
We are currently developing our platelet pathogen inactivation system
in the United States to treat apheresis platelets. Apheresis platelets are
collected from a single donor using an automated collection machine. Currently,
we estimate that approximately 60% of platelets are collected by apheresis in
the United States, and the balance are pooled random donor platelets. We cannot
predict whether the market for apheresis platelets will be maintained or will
develop further. If this market declines, our business, results of operation and
financial condition will be materially adversely affected. If we conduct
additional clinical trials to obtain FDA approval of the system for use in
treating random donor platelets, our development expenses will increase
significantly. In addition, FDA regulations limit the time from pooling to
transfusion to four hours to minimize the proliferation of bacterial
contamination in the pooled product. As a result, most pooling occurs in
hospitals. Our platelet system is designed for use in blood centers and requires
approximately six hours of processing. Therefore, the FDA's time limit between
pooling and transfusion currently precludes the use of our system with pooled
random donor platelets. Although our system is designed to reduce the risk of
bacterial contamination, we cannot predict whether the FDA would remove this
process time constraint to allow our system to be used with pooled random donor
platelets.
Baxter is one of three primary manufacturers of equipment for the
collection of apheresis platelets. The equipment, design and materials used to
collect the platelets vary from manufacturer to manufacturer. We are conducting
our preclinical and clinical studies using only Baxter's equipment and
materials, and initially we intend to seek FDA approval for our systems for use
only with Baxter's collection systems. As a result, market acceptance of our
platelet system will depend on the market acceptance of Baxter's collection
equipment. Blood centers may be reluctant to replace their existing equipment,
and the FDA may require us to make our systems compatible with other equipment.
If we are required to develop our platelet system for use on other
manufacturers' equipment, or if we decide to address a broader market, we will
need to perform additional studies, which will increase our development costs
and which may not be successful.
A SMALL NUMBER OF CUSTOMERS WILL DETERMINE MARKET ACCEPTANCE OF OUR PATHOGEN
INACTIVATION SYSTEMS.
The market for our pathogen inactivation systems is dominated by a
small number of blood collection centers. In the United States, the American Red
Cross collects and distributes approximately 50% of the nation's supply of blood
and blood components. Other major United States blood centers include the New
York Blood Center and United Blood Services, each of which distributes
approximately 6% of the nation's supply of blood and blood components. In
Western Europe and Japan, various national blood transfusion services or Red
Cross organizations collect, store and distribute virtually all of their
respective nations' blood and blood components supply. If we fail to properly
market, price or sell our products to even a small number of these large
customers, our business, financial condition and results of operations could be
materially adversely affected.
WE RELY HEAVILY ON BAXTER FOR DEVELOPMENT FUNDING, MARKETING AND SALES.
We have development and marketing agreements with Baxter for our
platelet, fresh frozen plasma and red blood cell pathogen inactivation systems,
and we rely on Baxter for significant financial and technical contributions to
these programs. Our ability to develop, manufacture and market these products
successfully depends significantly on Baxter's performance under these
agreements.
- Baxter can terminate our agreements or fail to perform. Baxter can
terminate the agreements without cause under certain circumstances. If
Baxter terminates the agreements or fails to provide adequate funding
to support the product development efforts, we will need to obtain
additional funding from other sources and will be required to devote
additional resources to the development of our products. We cannot
assure you that we would be able to find a suitable substitute partner
in a timely manner, on reasonable
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terms or at all. If we fail to find a suitable partner, our research,
development or commercialization of certain planned products would be
delayed significantly which would cause us to incur additional
expenditures.
- We rely on Baxter for the marketing, sales and distribution of our
products. We do not have and currently do not plan to develop our own
marketing and sales organization. Instead, we plan to rely on Baxter to
market and sell the pathogen inactivation systems. If our joint
development agreements with Baxter are terminated or if Baxter is
unable to market the products successfully, we will be required to find
another marketing, sales and distribution partner or develop these
capabilities ourselves. We may not be able to find a suitable partner
on favorable terms or on a timely basis, if at all. Developing
marketing, sales and distribution capabilities ourselves would delay
commercialization of our products and increase our costs.
- We lack control over management decisions. Baxter and we share
responsibility for managing the development programs for the pathogen
inactivation systems. Management decisions are made by a management
board that has equal representation from both Baxter and us. Our
interests and Baxter's may not always be aligned. If we disagree with
Baxter on program direction, a neutral party will make the decision.
The neutral party may not decide in our best interest. Under the
agreements, Baxter may independently develop a pathogen inactivation
system for fresh frozen plasma using their pre-existing methylene blue
technology. Such an effort by Baxter could create conflicts in our
joint program for the development of a pathogen inactivation system for
fresh frozen plasma.
OUR PRODUCTS ARE SUBJECT TO EXTENSIVE REGULATION BY DOMESTIC AND FOREIGN
GOVERNMENTS.
Our products under development and anticipated future products are
subject to extensive and rigorous regulation by United States local, state and
federal regulatory authorities and by foreign regulatory bodies. These
regulations are wide-ranging and govern, among other things:
- product development,
- product testing,
- product manufacturing,
- product labeling,
- product storage,
- product pre-market clearance or approval,
- product sales and distribution, and
- product advertising and promotion.
The FDA and other agencies in the United States and in foreign
countries impose substantial requirements upon the manufacturing and marketing
of products such as those being developed by our company or any partner. The
process of obtaining FDA and other required regulatory approvals is long,
expensive and uncertain. The time required for regulatory approvals is uncertain
and the process typically takes a number of years, depending on the type,
complexity and novelty of the product. We may encounter significant delays or
excessive costs in our efforts to secure necessary approvals or licenses.
We cannot be sure that our products will receive FDA approval in a
timely manner, if at all. Even if approvals are obtained, the marketing and
manufacturing of drug products are subject to continuing FDA and other
regulatory requirements, such as requirements to comply with good manufacturing
practices. The failure to comply with such requirements could result in
enforcement action, which could adversely affect us and our business. Later
discovery of problems with a product, manufacturer or facility may result in
additional restrictions on the product or
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manufacturer, including withdrawal of the product from the market. The
government may impose new regulations which could further delay or preclude
regulatory approval of our potential products. We cannot predict the impact of
adverse governmental regulation which might arise from future legislative or
administrative action.
We intend to generate product revenue from sales outside of the United
States. Distribution of our products outside the United States also may be
subject to extensive government regulation. These regulations, including the
requirements for approvals or clearance to market, the time required for
regulatory review and the sanctions imposed for violations, vary by country. It
is uncertain whether we will obtain regulatory approvals in such countries or
that we will be required to incur significant costs in obtaining or maintaining
our foreign regulatory approvals. Failure to obtain necessary regulatory
approvals or any other failure to comply with regulatory requirements could
result in reduced revenue and earnings.
To support our requests for FDA approval to market our products, we
intend to conduct various types of studies including:
- toxicology studies to evaluate product safety,
- in vitro and animal studies to evaluate product effectiveness, and
- human clinical trials to evaluate the safety, tolerability and
effectiveness of treated blood components.
We have conducted many toxicology studies to demonstrate our products'
safety, and we plan to conduct additional toxicology studies throughout the
product development process. At any time, the FDA may require further toxicology
or other studies to further demonstrate our products' safety, which could delay
commercialization. We believe the FDA is likely to weigh the potential risks of
using our pathogen inactivation products against the incremental benefits, which
may be less compelling in light of improved safety in the blood supply. In
addition, our clinical development plan assumes that we will not be required to
perform human clinical studies to demonstrate our systems' ability to inactivate
pathogens. Although we have discussed this plan with the FDA, they may find it
unacceptable at any time and may require human clinical trials to demonstrate
efficacy in inactivating pathogens. Such trials may be too large and expensive
to be practical.
Regulatory agencies may limit the uses, or indications, for which any
of our products is approved. For example, we believe that we will be able to
claim the inactivation of particular pathogens only to the extent we have in
vitro or animal data to support such claims.
In addition to the regulatory requirements applicable to us and our
products, there are regulatory requirements applicable to our prospective
customers, the blood centers that process and distribute blood and blood
products. Blood centers and others will likely be required to obtain approved
license supplements from the FDA before shipping products processed with our
pathogen inactivation systems interstate. This requirement or FDA delays in
approving these supplements may deter some blood centers from using our
products. Blood centers that do submit supplements may face disapproval or
delays in approval that could provide further delay or deter them from using our
products. The regulatory impact on potential customers could slow or limit the
potential sales of our products.
WE ARE USING PROTOTYPE COMPONENTS IN OUR CLINICAL TRIALS AND HAVE NOT COMPLETED
THEIR COMMERCIAL DESIGN.
The system disposables and ultraviolet light sources we use in our
clinical trials are only prototypes. We are developing the commercial design for
these products at the same time. As a result, we will be required to perform
studies to demonstrate the equivalence of the prototype and the commercial
design. We plan to demonstrate this equivalence by conducting these studies in
healthy subjects using the commercial versions of the systems. However,
regulatory agencies may require us to perform additional studies, both
preclinical and clinical, using the commercial versions of the systems. If we
are required to perform our planned studies with patients or to conduct
additional preclinical studies, the commercialization of our products will be
delayed. If we fail to develop commercial versions of the systems on schedule,
our business, results of operations and financial condition will be materially
adversely affected.
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WE HAVE ONLY A LIMITED OPERATING HISTORY AND WE EXPECT TO CONTINUE TO GENERATE
LOSSES.
We may never achieve a profitable level of operations. To date, we have
engaged primarily in research and development. Our development and general and
administrative expenses have resulted in substantial losses. As of December 31,
1999, we had an accumulated deficit of approximately $87.5 million. All of our
products are in the research and development stage, and we have not received any
revenue from product sales. We have received all of our revenue under our
agreements with Baxter and federal research grants. We will be required to
conduct significant research, development, clinical testing and regulatory
compliance activities for each of these products. We expect our losses to
continue at least through 2001. We also expect our losses to fluctuate
significantly from quarter to quarter due to differences in the timing of our
expenses and potential revenue from Baxter. Our ability to become profitable
will depend on our ability to, among other things:
- establish adequate protection of our intellectual property rights,
- complete our product development,
- obtain product regulatory approvals, and
- achieve market acceptance for our products.
WE WILL NEED ADDITIONAL FUNDS.
Our product development programs are capital-intensive. We expect to
continue to spend substantial funds for our operations for the foreseeable
future. We believe that our existing capital resources, together with the net
proceeds from this offering, anticipated payments from Baxter under our
agreements with Baxter and projected interest income, will support our current
and planned operations for at least the next 18 months. Our cash, liquidity and
capital requirements will depend on numerous factors, including additional
research and development needs, product testing results, regulatory
requirements, competitive pressures and technological advances and setbacks.
In addition, we may require substantial funds for our long-term product
development, marketing programs and operating expenses. We cannot assure you
that we will be able to raise additional funds on acceptable terms or at all. If
we raise additional funds by issuing equity securities, our existing
stockholders may experience substantial dilution.
WE OPERATE IN A COMPETITIVE INDUSTRY WITH RAPIDLY CHANGING TECHNOLOGY.
We expect our products to encounter significant competition. Our
products may compete with other approaches to blood safety and improving the
outcome of stem cell transplantation currently in use, as well as with future
products developed by biotechnology and pharmaceutical companies, hospital
supply companies, national and regional blood centers, and governmental
organizations and agencies. Our success will depend, in part, on our ability to
respond quickly to medical and technological changes through the development and
introduction of new products. Product development is risky and uncertain, and we
cannot assure you that we will develop our products successfully. Competitors'
products or technologies may make our products obsolete or non-competitive
before we are able to generate any significant revenue. Many of our competitors
or potential competitors have substantially greater financial and other
resources than we have. They may also have greater experience in preclinical
testing, human clinical trials and other regulatory approval procedures. Our
ability to compete successfully will depend, in part, on our ability to:
- attract and retain skilled scientific personnel,
- develop technologically superior products,
- develop lower cost products,
- obtain patent or other proprietary protection for our products and
technologies,
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- obtain required regulatory approvals for our products,
- be early entrants to the market, and
- manufacture, market and sell our products, independently or through
collaborations.
Several companies are developing technologies which are, or in the
future may be, the basis for products that will directly compete with or reduce
the market for our pathogen inactivation systems. A number of companies are
specifically focusing on alternative strategies for pathogen inactivation in
various blood components. In May 1998, the FDA approved solvent-detergent for
use in treating fresh frozen plasma in the United States. If the treatment of
fresh frozen plasma by solvent-detergent becomes a widespread practice, which
has not happened to date, it could adversely affect our ability to market our
fresh frozen plasma pathogen inactivation system in the United States. Several
other companies are currently marketing solvent-detergent or methylene
blue-based pathogen inactivation systems for fresh frozen plasma in Europe.
Other groups are developing synthetic blood product substitutes and
products to stimulate the growth of platelets. If any of these technologies is
successfully developed, it could have a material adverse effect on our business,
financial condition and results of operations. Baxter has agreed to certain
restrictions on its ability to independently develop and market products that
compete with our products, however, these provisions may not prevent Baxter from
developing or marketing competing products using methylene blue.
FAILURE TO ATTRACT AND RETAIN KEY EMPLOYEES WILL ADVERSELY AFFECT OUR BUSINESS.
Because of the scientific nature of our business, we depend on the
principal members of our management and scientific staff. Our success will
depend largely on our ability to attract and retain highly skilled scientific
and managerial personnel. Competition for such personnel is intense. We cannot
assure you that we will be successful in attracting and retaining such
personnel. The failure to maintain our management and scientific staff and to
attract additional key personnel could materially adversely affect our business,
financial condition and results of operations. Although we intend to provide
incentive compensation to attract and retain our key personnel, we cannot
guarantee these efforts will be successful.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY OR OPERATE OUR BUSINESS
WITHOUT INFRINGING INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Our technology will be protected from unauthorized use by others only
to the extent that it is covered by valid and enforceable patents or effectively
maintained as trade secrets. As a result, our success depends in part on our
ability to:
- obtain patents,
- protect trade secrets,
- operate without infringing upon the proprietary rights of others, and
- prevent others from infringing on our proprietary rights.
We cannot be certain that our patents or patents that we license from
others will be enforceable and afford protection against competitors. Our
patents or patent applications, if issued, may be challenged, invalidated or
circumvented. Our patent rights may not provide us with proprietary protection
or competitive advantages against competitors with similar technologies. Others
may independently develop technologies similar to ours or independently
duplicate our technologies. Due to the extensive time required for development,
testing and regulatory review of our potential products, our patents may expire
or remain in existence for only a short period following commercialization. This
would reduce or eliminate any advantage of the patents.
11.
<PAGE> 12
We cannot be certain that we were the first to make the inventions
covered by each of our issued or pending patent applications or that we were the
first to file patent applications for such inventions. We may need to license
the right to use third-party patents and intellectual property to continue
development and marketing of our products. We may not be able to acquire such
required licenses on acceptable terms, if at all. If we do not obtain such
licenses, we may need to design around other parties' patents or we may not be
able to proceed with the development, manufacture or sale of our products.
We may face litigation to defend against claims of infringement, assert
claims of infringement, enforce our patents, protect our trade secrets or
know-how, or determine the scope and validity of others' proprietary rights.
Patent litigation is costly. In addition, we may require interference
proceedings declared by the United States Patent and Trademark Office to
determine the priority of inventions relating to our patent applications.
Litigation or interference proceedings could have a material adverse effect on
our business, financial condition and results of operations and could be
unsuccessful in our efforts to enforce our intellectual property rights.
FAILURE TO OBTAIN ADEQUATE REIMBURSEMENT FROM GOVERNMENT HEALTH ADMINISTRATION
AUTHORITIES, PRIVATE HEALTH INSURERS AND OTHER ORGANIZATIONS COULD MATERIALLY
ADVERSELY AFFECT OUR FUTURE BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.
Our ability and the ability of our existing and future corporate
partners to market and sell our products will depend, in part, on the extent to
which reimbursement for the cost of our products and related treatments will be
available from government health administration authorities, private health
insurers and other organizations. Third party payors are increasingly
challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. In addition, for sales of our products in Europe,
we will be required to seek reimbursement on a country-by-country basis. We
cannot be certain that any products approved for marketing will be considered
cost effective or that reimbursement will be available or that allowed
reimbursement in foreign countries will be adequate. In addition, payors'
reimbursement policies could adversely affect our or any corporate partner's
ability to sell our products on a profitable basis.
WE MAY BE LIABLE IF OUR PRODUCTS HARM PEOPLE.
We are exposed to potential liability risks inherent in the testing and
marketing of medical devices and products. We may be liable if any of our
products causes injury, illness or death. We intend to obtain product liability
insurance before the commercial introduction of any product, but do not know
whether we will be able to obtain and maintain such insurance on acceptable
terms. Any insurance we obtain may not provide adequate coverage against
potential liabilities. A liability claim, regardless of merit or eventual
outcome, could materially adversely affect our business, results of operations
and financial condition.
WE USE HAZARDOUS SUBSTANCES THAT ARE SUBJECT TO ENVIRONMENTAL REGULATION.
Our research and development involves the controlled use of hazardous
materials, including certain hazardous chemicals, radioactive materials and
pathogens. Accordingly, we are subject to federal, state and local laws
governing the use, handling and disposal of these materials. We may incur
significant costs to comply with additional environmental and health and safety
regulations in the future. Although we believe that our safety procedures for
handling and disposing of hazardous materials comply with regulatory
requirements, we cannot eliminate the risk of accidental contamination or
injury. If an accident occurs, we could be held liable for any damages that
result.
12.
<PAGE> 13
THE MARKET PRICE OF OUR STOCK MAY BE HIGHLY VOLATILE.
The market prices for securities of emerging medical device and
biotechnology companies like us have been highly volatile. Announcements may
have a significant impact on the market price of our common stock. Such
announcements may include:
- biological or medical discoveries,
- technological innovations or new commercial services by us or our
competitors,
- developments concerning proprietary rights, including patents and
litigation matters,
- regulatory developments in both the United States and foreign
countries,
- public concern as to the safety of new technologies,
- general market conditions,
- comments made by analysts, including changes in analysts' estimates of
our financial performance, and
- quarterly fluctuations in our revenue and financial results.
The stock market has from time to time experienced extreme price and
volume fluctuations, which have particularly affected the market prices for
emerging biotechnology and medical device companies, and which have often been
unrelated to the operating performance of such companies. These broad market
fluctuations may adversely affect the market price of our common stock. In
addition, sales of substantial amounts of our common stock in the public market
following this offering could lower the market price of our common stock. In the
past, following periods of volatility in the market price of a company's stock,
securities class action litigation has occurred against the issuing company.
Such litigation could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on our revenue and earnings. Any adverse determination in such litigation could
also subject us to significant liabilities.
DELAWARE LAW, PROVISIONS IN OUR CHARTER AND OUR RIGHTS PLAN COULD MAKE THE
ACQUISITION OF OUR COMPANY BY ANOTHER COMPANY MORE DIFFICULT.
Provisions of our certificate of incorporation may have the effect of
delaying or preventing changes in control or management or limit the price that
investors may be willing to pay for shares of our common stock. We also are
subject to the provisions of Section 203 of the Delaware General Corporation
Law, an anti-takeover law, which could delay a merger, tender offer to proxy
contest or make a similar transaction more difficult. In addition, our board of
directors has the authority to issue up to 5,000,000 shares of preferred stock
without stockholders' approval, of which 8,327 shares currently are outstanding.
The rights of the holders of common stock will be subject to, and may be
affected by, the rights of the holders of outstanding preferred stock and any
preferred stock that may be issued in the future. The issuance of preferred
stock could have the effect of making it more difficult for a third party to
acquire a majority of our outstanding voting stock.
Also, in November 1999, our board of directors adopted a stockholder
rights plan, or "poison pill," which has anti-takeover effects.
13.
<PAGE> 14
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents
incorporated by reference are forward-looking statements. These statements are
based on our current expectations, assumptions, estimates and projections about
our business and our industry, and involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's results,
levels of activity, performance or achievement to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied in or contemplated by the forward-looking statements. Words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may," "should,"
"estimate," "predict," "potential," "continue," or the negative of such terms or
other similar expressions, identify forward-looking statements. In addition, any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements. Our actual
results could differ materially from those anticipated in such forward-looking
statements as a result of several factors more fully described under the caption
"Risk Factors" and in the documents incorporated by reference. The
forward-looking statements made in this prospectus relate only to events as of
the date on which the statements are made. We do not intend to update publicly
any forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
14.
<PAGE> 15
WHERE YOU CAN FIND MORE INFORMATION ABOUT CERUS AND THIS OFFERING
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
We have filed with the SEC a registration statement on Form S-3 to
register the common stock offered by this prospectus. However, this prospectus
does not contain all of the information contained in the registration statement
and the exhibits and schedules to the registration statement. We strongly
encourage you to carefully read the registration statement and the exhibits and
schedules to the registration statement.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, DC, New York, New York and
Chicago, Illinois. 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.
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 to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
The following documents filed with the SEC are incorporated by
reference in this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31,
1998;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March
31, June 30 and September 30, 1999;
3. Our Current Report on Form 8-K, dated November 3, 1999; and
4. The description of our common stock set forth in our
Registration Statement on Form 8-A, filed with the SEC on
January 8, 1997.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, including
exhibits to these documents. You should direct any requests for documents to
Cerus Corporation, Attention: Investor Relations Officer, 2525 Stanwell Drive,
Suite 300, Concord, California 94520, telephone: (925) 603-9071.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. We will not
receive any proceeds from the sale of these shares of common stock.
15.
<PAGE> 16
SELLING STOCKHOLDERS
We are registering the shares covered by this prospectus on behalf of
the selling stockholders named in the table below. We issued all of the shares
to the selling stockholders in a private placement transaction. We have
registered the shares to permit the selling stockholders and their pledgees,
donees, transferees or other successors-in-interest that receive their shares
from a selling stockholder as a gift, partnership distribution or other non-sale
related transfer after the date of this prospectus to resell the shares.
The following table sets forth the name of each selling stockholder,
the number of shares owned by each selling stockholder, the number of shares
that may be offered under this prospectus and the number of shares of our common
stock owned by each selling stockholder as of February 15, 2000, the number of
shares that may be offered under this prospectus and the number of shares of our
common stock owned by each selling stockholder after this offering is completed.
Except as set forth in the table below, none of the selling stockholders except
Baxter Healthcare Corporation has had a material relationship with us within the
past three years. See "Certain Transactions" for a description of our
relationship with Baxter. The number of shares in the column "Number of Shares
Being Offered" represent all of the shares that each selling stockholder may
offer under this prospectus. The selling stockholders may sell some, all or none
of their shares. We do not know how long the selling stockholders will hold the
shares before selling them and we currently have no agreements, arrangements or
understandings with any of the selling stockholders regarding the sale of any of
the shares. The shares offered by this prospectus may be offered from time to
time by the selling stockholders.
The percentages of shares owned prior to the offering are based on
12,779,637 shares of our common stock outstanding, giving effect to the sale of
1,000,000 shares to the selling stockholders in the private placement.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES BEING AFTER OFFERING
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------ ------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Aries Domestic Fund, LP 14,033 * 14,033 0 0
Aries Master Fund 34,873 * 34,873 0 0
Aries Domestic Fund II, LP 1,094 * 1,094 0 0
Ashton Partners L.L.C. 10,000 * 10,000 0 0
Baxter Healthcare Corporation(1) 2,403,037 18.4% 390,000 2,013,037 15.4%
BayStar Capital, L.P. 20,000 * 20,000 0 0
BayStar International LTD 20,000 * 20,000 0 0
Doyle, Lawrence S. 10,000 * 10,000 0 0
Galleon Healthcare Partners, L.P. 17,191 * 17,191 0 0
Galleon Healthcare Overseas, Ltd. 57,809 * 57,809 0 0
Lincoln Partners 75,000 * 75,000 0 0
Meriken Nominees Ltd. 20,000 * 20,000 0 0
Narragansett Offshore Ltd. 12,600 * 12,600 0 0
Narragansett I, LP 47,400 * 47,400 0 0
Oracle Partners 58,000 * 58,000 0 0
Oracle Institutional Partners 19,500 * 19,500 0 0
</TABLE>
16.
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C>
GSAM Oracle 18,500 * 18,500 0 0
Oracle Offshore 4,000 * 4,000 0 0
The R.E.K. Profit Sharing Trust
FBO Robert E. King 146,195 1.1% 20,000 126,195 1.0%
United Capital Management, Inc. 100,000 * 100,000 0 0
Weber, Alan J. 50,000 * 50,000 0 0
</TABLE>
- --------------
* less than one percent of our common stock
(1) Includes 332,700 shares of common stock issuable upon conversion of Series B
preferred stock. Baxter Healthcare Corporation is a wholly owned subsidiary
of Baxter International Inc. Baxter International Inc. is a publicly-traded
company listed on the NYSE under the symbol "BAX."
17.
<PAGE> 18
PLAN OF DISTRIBUTION
The selling stockholders may sell the shares from time to time. The
selling stockholders will act independently of us in making decisions regarding
the timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
privately negotiated transactions. The selling stockholders may effect these
transactions by selling the shares to or through broker-dealers. The selling
stockholders may sell their shares in one or more of, or a combination of:
- a block trade in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction,
- purchases by a broker-dealer as principal and resale by a
broker-dealer for its account under this prospectus,
- an exchange distribution in accordance with the rules of an
exchange,
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers, and
- privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. If the plan of
distribution involves an arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, the amendment or supplement
will disclose:
- the name of each selling stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable,
- that a broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus, and
- other facts material to the transaction.
From time to time, a selling stockholder may transfer, pledge, donate
or assign its shares of common stock to lenders or others and each of such
persons will be deemed to be a "selling stockholder" for purposes of this
prospectus. The number of shares of common stock beneficially owned by the
selling stockholder will decrease as and when it takes such actions. The plan of
distribution for the selling stockholders' shares of common stock sold under
this prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling stockholders hereunder.
Upon being notified by a selling stockholder that a donee or pledgee intends to
sell more than 500 shares, we will file a supplement to this prospectus.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with selling stockholders. The
selling stockholders also may sell shares short and redeliver the shares to
close out short positions. The selling stockholders may enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus. The selling stockholders also may
loan
18.
<PAGE> 19
or pledge the shares to a broker-dealer. The broker-dealer may sell the loaned
shares, or upon a default the broker-dealer may sell the pledged shares under
this prospectus.
In effecting sales, broker-dealers engaged by the selling stockholders
may arrange for other broker-dealers to participate in the resales.
Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from selling stockholders. Broker-dealers or agents may
also receive compensation from the purchasers of the shares for whom they act as
agents or to whom they sell as principals, or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be negotiated in connection with the sale. Broker-dealers or
agents and any other participating broker-dealers or the selling stockholders
may be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, as amended, in connection with sales of the shares.
Accordingly, any commission, discount or concession received by them and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because selling
stockholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the selling stockholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus that qualify for sale under Rule 144
promulgated under the Securities Act may be sold under Rule 144 rather than
under this prospectus. The selling stockholders have advised that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in some
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, as amended, any person engaged in the distribution of the shares
may not simultaneously engage in market making activities with respect to our
common stock for a period of two business days prior to the commencement of the
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholders. We will make copies of this prospectus available to the
selling stockholders and have informed them of the need to deliver copies of
this prospectus to purchasers at or prior to the time of any sale of the shares.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against specific liabilities,
including liabilities arising under the Securities Act. The selling stockholders
have agreed to indemnify specific persons, including broker-dealers and agents,
against specific liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
We have agreed to maintain the effectiveness of this registration
statement until each selling stockholder can sell all of the shares it holds
under Rule 144(k) promulgated under the Securities Act. The selling stockholders
may sell all, some or none of the shares offered by this prospectus.
19.
<PAGE> 20
CERTAIN TRANSACTIONS
BAXTER HEALTHCARE CORPORATION
Cerus is a party to agreements with Baxter for the development and
commercialization of platelet, fresh frozen plasma and red cell pathogen
inactivation systems. One agreement covers the platelet program, another covers
the fresh frozen plasma and red blood cell programs. Baxter also has made
several equity investments in Cerus, including investments in connection with
these collaborations.
The agreement for the platelet program provides for Baxter and Cerus
to generally share system development costs equally, subject to mutually agreed
budgets established from time to time, and for Cerus to receive 33.5% of
revenue from sales of inactivation system disposables after each party is
reimbursed for its cost of goods above a specified level. The agreement also
provides for Baxter to make a $5.0 million cash milestone payment to Cerus upon
approval by the FDA of an application to market products developed under the
platelet program, comparable approval in Europe or termination of the program.
The agreement for the fresh frozen plasma and red blood cell programs
provides for Baxter and Cerus generally to share red blood cell system
development costs equally, subject to mutually agreed budgets established
from time to time. The agreement also provides for an equal sharing of revenue
from sales of red blood cell inactivation disposables after each party is
reimbursed for its cost of goods and a specified percentage allocation, not to
exceed 14% of revenue, is retained by Baxter for marketing and administrative
expenses. Also under the agreement, Cerus and Baxter equally funded the fresh
frozen plasma program development through December 31, 1997, after which time
Baxter's funding commitment for the fresh frozen plasma development program is
limited to $1.2 million, of which $600,000 offset payments owed to Baxter in
January 1999 and $600,000 is payable to Cerus in January 2000. Baxter has an
exclusive, worldwide distribution license and will be responsible for
manufacturing and marketing the fresh frozen plasma product under the direction
of Cerus. The agreement also provides for Cerus to receive 75% and Baxter to
receive 25% of revenue from sales of fresh frozen plasma inactivation system
disposables after each party is reimbursed for its cost of goods and a specified
percentage allocation, not to exceed 14% of revenue, is retained by Baxter for
marketing and administrative expenses.
Baxter currently holds approximately 1,680,337 shares of Cerus' common
stock (2,070,337 shares, or 16.2%, after giving effect to the purchase of
390,000 shares in the private placement), and has purchased 5,000 shares of
Series A convertible preferred stock for $5 million and 3,327 shares of Series B
convertible preferred stock for $9.5 million. Baxter has made approximately
$21.8 million of development and milestone payments to Cerus and has made
$37.0 million of equity investments ($46.8 million after giving effect to the
purchase of shares in the private placement).
Baxter is the only holder of Cerus preferred stock. The Series A
preferred stock will convert to Cerus common stock upon the approval by the FDA
of an application to market products developed under the platelet program,
comparable approval in Europe or termination of the program. In the event of
marketing approval, each share of Series A preferred stock will automatically
convert into a number of shares of common stock equal to $1,000 divided by one
hundred twenty percent (120%) of the average closing price of the common stock
for the thirty (30) trading days prior to and including the trading day
immediately prior to the approval. In the event of a program termination, each
share of Series A preferred stock will automatically convert into a number of
shares of common stock equal to $1,000 divided by the average closing price of
the common stock for the thirty (30) trading days commencing with the fifteenth
(15th) trading day prior to the termination. Cerus has the right to redeem the
Series A preferred stock prior to conversion for a $5.0 million cash payment. In
the event of a program termination, Baxter may require Cerus to redeem the
Series A preferred stock for a $5.0 million cash payment.
Each share of Series B preferred stock becomes convertible at Baxter's
option into 100 shares of Cerus common stock on March 3, 2000. The Series B
preferred stock will earn a premium of 7% per annum until April 6, 2000. Cerus
has the right to redeem the Series B preferred stock prior to conversion for a
payment to Baxter equal to the aggregate purchase price of the shares redeemed.
20.
<PAGE> 21
CONSORTIUM FOR PLASMA SCIENCE
In December 1998, Cerus and the Consortium for Plasma Science entered
into an agreement for the development of a pathogen inactivation system for
source plasma. The Consortium is co-funded by four plasma fractionation
companies, one of which is Baxter. The Consortium, which is a separate entity
from its members, provides research and development funding worldwide for
technologies to improve the safety of source plasma. The agreement includes an
initial commitment of approximately $2.0 million to fund development of Cerus'
proprietary technology for use with source plasma. The initial term of the
agreement is approximately 18 months, ending June 30, 2000. The agreement
contemplates funding by the Consortium through the regulatory approval phase,
with future commitments to be determined by the Consortium annually. The
agreement provides for Cerus to pay the Consortium a royalty on potential
product sales.
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
In July 1996, the Board authorized Cerus to enter into indemnity
agreements with each of the Company's directors, executive officers, Controller
and Director of Finance. The form of indemnity agreement provides that Cerus
will indemnify against any and all expenses of the indemnified person who
incurred such expenses because of his or her status as a director, executive
officer, Controller or Director of Finance, to the fullest extent permitted by
Cerus' Bylaws and Delaware law. In addition, Cerus' Bylaws provide that Cerus
shall indemnify its directors and executive officers to the fullest extent
permitted by Delaware law, subject to certain limitations, and may also secure
insurance, to the fullest extent permitted by Delaware law, on behalf of any
director, officer, employee or agent against any expense, liability or loss
arising out of his or her actions in such capacity.
Cerus' Restated Certificate of Incorporation contains certain
provisions relating to the limitation of liability of directors. Cerus' Restated
Certificate provides that a director shall not be personally liable to Cerus or
its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payment of dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of a director, then the liability of a Cerus director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The provision in the Restated Certificate does
not eliminate the duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon by Cooley Godward LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the financial
statements included in our Annual Report on Form 10-K for the three years ended
December 31, 1998, as set forth in their report which is incorporated in this
prospectus by reference. Our financial statements are incorporated by reference
in reliance upon Ernst & Young LLP's report given on their authority as experts
in accounting and auditing.
21.
