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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1998
REGISTRATION NO. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TRIANGLE PHARMACEUTICALS, INC.
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 56-1930728
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE, DURHAM, NORTH CAROLINA, 27707
(919) 493-5980
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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DAVID W. BARRY, M.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
(919) 493-5980
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent For Service)
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COPIES TO:
JOHN A. DENNISTON, ESQ.
JOHN R. COOK, ESQ.
LANCE S. KURATA, ESQ.
BROBECK, PHLEGER & HARRISON LLP
550 WEST "C" STREET, SUITE 1300
SAN DIEGO, CALIFORNIA 92101
(619) 234-1966
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If only the securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per
share............................. 4,800,000 shares(2) $11.375 $54,600,000 $15,179
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933.
(2) This Registration Statement shall also cover any additional shares of
common stock which become issuable in connection with the shares registered
for sale hereby as a result of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
Registrant's outstanding shares of common stock.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PRELIMINARY PROSPECTUS--SUBJECT TO COMPLETION, DATED DECEMBER 16, 1998
TRIANGLE PHARMACEUTICALS, INC.
4,800,000 SHARES OF COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 4,800,000 shares of our common stock by some of our current
stockholders. We will not receive any proceeds from the sale of these shares.
These stockholders acquired the shares directly from us in a private placement
completed on December __, 1998.
The prices at which the selling stockholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. The selling stockholders may also sell the shares to or with the
assistance of broker-dealers, who may receive compensation in excess of their
customary commissions.
Our common stock is traded on the Nasdaq National Market under the symbol
"VIRS." On December 15, 1998 the last reported sale price of our common stock
was $11.75 per share.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell the common stock covered by this prospectus
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell the common
stock and it is not soliciting an offer to buy the common stock in any state
where the offer or sale is not permitted.
THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU
SHOULD CONSIDER BEFORE BUYING ANY SHARES OF COMMON STOCK.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER 16, 1998
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WHERE YOU CAN FIND MORE INFORMATION
We file 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, D.C., New York, New York and Chicago, Illinois. 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 on the SEC's website at
http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information 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, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings we make with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997, including certain information in our Definitive Proxy Statement in
connection with our 1998 Annual Meeting of Stockholders;
2. Our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1998, June 30, 1998 and September 30, 1998;
3. Our Current Report on Form 8-K filed September 11, 1997, as amended on
Form 8-K/A filed November 12, 1997;
4. Our Current Report on Form 8-K filed April 2, 1998; and
5. The description of our common stock contained in our Registration
Statement on Form 8-A filed October 18, 1996.
The reports and other document that we file after the date of this
prospectus will update and supersede the information in this prospectus.
You may request a copy of these filings by writing or telephoning us at:
Triangle Pharmaceuticals, Inc., 4 University Place, 4611 University Drive,
Durham, North Carolina, 27707, (919) 493-5980, Attn: General Counsel.
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS ARE NOT AUTHORIZED TO
MAKE AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
Triangle Pharmaceuticals is our trademark. This prospectus also includes
names and trademarks of other companies.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this prospectus may contain
forward-looking statements. These statements involve risks and
uncertainties. Our actual results could differ materially from those
projected in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed in the section
entitled "Risk Factors," as well as those discussed elsewhere in this
prospectus or in documents incorporated by reference herein. We undertake no
obligation to update these forward-looking statements.
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SUMMARY OF TRIANGLE'S BUSINESS
We develop new drug candidates primarily in the antiviral area, with a
particular focus on therapies for HIV, including AIDS, and the hepatitis B
virus. We have an existing portfolio of six licensed drug candidates and one
drug candidate for which we have an option to acquire a license. Members of our
senior management, prior to joining Triangle, played instrumental roles in
developing several leading antiviral therapies. Our goal is to capitalize on
our management team's expertise, as well as on advances in virology and
immunology, to identify, develop and commercialize new drug candidates that can
be used alone or in combination (coactively) to treat serious diseases.
Treating HIV with coactive therapy has shown significant clinical
benefits, including reduced virus levels and increased patient longevity.
Triangle was founded based in part on our management team's belief that the
prolonged use of coactive therapy will generate demand for new anti-HIV drugs
with favorable resistance, compliance and/or tolerance profiles. We believe
the use of anti-HIV drugs will increase because:
- the use of multiple drugs by individual patients on coactive therapy
will continue to increase,
- previously untreated patients will seek medical care as the benefits
of coactive therapy become more widely understood, and
- patient longevity will continue to increase, lengthening the duration
of drug therapy.
We believe that certain other serious diseases, such as hepatitis and
cancer, may also be treated effectively with coactive therapy. Although other
antiviral therapies are under development and some have been approved, currently
the most common treatment for the hepatitis B virus is a single drug,
administered by injection. This treatment is not always successful in
controlling the virus and is associated with significant side effects. We
believe that the hepatitis B virus, like HIV, due to its complexity and
demonstrated ability to develop resistance, may be more effectively and safely
treated with coactive therapy. Additionally, we believe there is a significant
need to develop drugs for the treatment of cancer. Many current cancer
treatments provide limited clinical benefits, particularly in those patients
with advanced (metastatic) disease.
We are developing the following drug candidates which we believe have the
potential to become valuable tools in the coactive treatment of serious
diseases:
<TABLE>
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DRUG CANDIDATES* INDICATION STATUS(1,2) TERRITORY(3)
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<S> <C> <C> <C>
MKC-442 HIV Pivotal Phase II/III Worldwide, except Japan
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FTC HIV Phase II/III Worldwide
Hepatitis B Virus Phase I/II Worldwide
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Alanosine Brain, Lung and other Pilot Phase II Worldwide
Cancers
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DMP-450 HIV Phase I(4) Worldwide
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DAPD HIV and Hepatitis B IND(5) Worldwide
Virus
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L-FMAU Hepatitis B Virus Preclinical Worldwide, except Korea
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2-CdAP Psoriasis Phase I/II(6) Worldwide
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</TABLE>
(1) Neither the FDA nor any foreign regulatory agencies have approved our drug
candidates for commercial sale.
(2) "Preclinical" means that we are testing a drug candidate for safety and
potency in animal or laboratory models. "Phase I" means that we are
testing a drug candidate for preliminary indications of safety and
tolerance in a limited number of patients or volunteers. "Phase I/II"
means that we are testing a drug candidate for safety, tolerance and
preliminary indications of efficacy in a limited number of patients.
"Phase II" means that we are testing a drug candidate for safety, efficacy
and, in some cases, optimal dosage in a limited number of patients. "Phase
II/III" means that we are testing a drug candidate for safety and efficacy
in an expanded number of patients at geographically dispersed clinical
sites. "Pivotal" means that we are conducting expanded
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clinical studies intended to support a submission for regulatory approval
of a drug candidate. "Pilot" means that we are conducting a clinical trial
with a small number of patients.
(3) Indicates the geographic territory in which we have licensed, or have an
option to acquire a license to, the right to commercialize the particular
product. We have licensed all drug candidates except alanosine, for which
we have acquired an option to obtain a license. Our ability to
commercialize products in each country in the licensed territory may be
limited by proprietary rights of third parties other than our licensors.
(4) As we disclosed in our Annual Report on Form 10-K for the year ended
December 31, 1997, the FDA placed DMP-450 on clinical hold in October 1997
because of electrocardiographic abnormalities experienced by some animals
exposed to extremely high doses of DMP-450. After discussions with the
FDA, in January 1998 we initiated a Phase I pharmacokinetic study for
DMP-450 in the United States which we have completed. At approximately the
same time, we initiated a Phase I safety and tolerance study in Europe to
determine whether we could observe any electrocardiographic abnormalities
in humans (when steady-state blood levels of DMP-450 were reached (i.e., 3
days)) with doses at or above those planned in efficacy studies. We have
completed this Phase I study and we did not observe any such abnormalities.
We plan to initiate Phase II combination studies in Europe in early 1999.
The initiation of potential efficacy studies in the United States awaits
the outcome of further discussions with the FDA, where DMP-450 remains on
partial clinical hold.
(5) An Investigational New Drug Application for DAPD filed with the FDA became
effective in November 1998. We plan to commence a Phase I/II clinical
study with DAPD in the treatment of HIV in late 1998 or early 1999. We
also plan to initiate clinical studies with DAPD in the treatment of the
hepatitis B virus during 1999.
(6) As we disclosed in our Quarterly Report on Form 10-Q for the period ended
September 30, 1998, we have decided to limit the current support of 2-CdAP
to focus financial and human resource support on those drug candidates
which we believe have the greatest potential. Should circumstances change,
we may invest in the further development of 2-CdAP in the future.
(*) For a more detailed discussion of our drug candidates, see Item I -
"Business--Product Development Programs" in our most recent Annual
Report on Form 10-K. As we disclosed in our Quarterly Report on Form 10-Q
for the period ended September 30, 1998, we recently discontinued
development activities with two of our former drug candidates, Acyclovir
Monophosphate and CS-92.
The FDA has notified us that two of our drug candidates, MKC-442 and FTC
for the treatment of HIV, qualify for designation as "fast track" products under
provisions of the Food and Drug Administration Modernization Act of 1997. The
fast track provisions are designed to expedite the review of new drugs intended
to treat serious or life-threatening conditions and essentially codified the
criteria previously established by the FDA for accelerated approval. We believe
that some of our other drug candidates may also meet the fast track criteria.
We may be able to commercialize any of our drug candidates which meet these
criteria in a shorter time period than has historically been required for drugs
that do not meet the criteria for expedited review. We cannot assure you,
however, that any of our drug candidates will qualify or continue to qualify for
expedited review or be approved in a time period that is shorter than other
drugs that do not qualify for this review.
We do not intend to engage in basic drug discovery, thereby avoiding much
of the significant investment of time and capital that is generally required
before a compound is identified and brought to clinical trials. We intend to
use our expertise to perform internally what we believe are the most critical
aspects of the drug development process, such as the design of clinical trials
and the optimization of drug synthesis. We out-source many aspects of our
clinical trials and the manufacture of drug substance to carefully selected
third parties.
Although we currently have no sales force, we believe that the high
concentration of major prescribers of anti-HIV and cancer therapies in the
United States will enable us to promote most drug candidates that we
successfully develop to these prescribers through a small, direct sales force.
Outside of the United States, we currently intend to promote any drug candidates
that we successfully develop primarily through arrangements or collaborations
with third parties. As part of the ordinary course of our business, we consider
arrangements or collaborations with third parties to market and/or sell products
we develop outside of the United States. We may not, however, enter into any
such arrangements or collaborations on satisfactory terms and any such
arrangements or collaborations we enter into may not be successful.
We have not generated any revenue and, therefore, are a development stage
company. We do not expect to have any revenue before the year 2000. We may
never achieve profitable operations or generate positive cash flow.
Triangle was incorporated in Delaware in July 1995. Our principal
executive offices are located at 4 University Place, 4611 University Drive,
Durham, North Carolina 27707, and our telephone number is (919) 493-5980.
References in this prospectus to "Triangle," "we," "our" or "us" are to Triangle
Pharmaceuticals, Inc. and our wholly-owned subsidiary, Avid Corporation, a
Pennsylvania corporation.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AND UNCERTAINTIES BEFORE DECIDING TO
PURCHASE SHARES OF OUR COMMON STOCK. AN INVESTMENT IN OUR COMMON STOCK INVOLVES
A HIGH DEGREE OF RISK. THE TERMS "WE," "OUR" AND "US" REFER TO TRIANGLE.
EARLY STAGE COMPANY; RISK OF UNSUCCESSFUL PRODUCT DEVELOPMENT
We formed our company in July 1995 and we have only a limited operating
history for you to review in evaluating our business. In addition, many of our
drug candidates are at an early stage of development and all of our drug
candidates will require expensive and lengthy testing and regulatory clearances.
None of our drug candidates have been approved by regulatory authorities. We do
not expect any of our drug candidates to be commercially available before the
year 2000. There are many reasons that we may fail in our efforts to develop
our drug candidates, including the possibility that:
- our drug candidates will be ineffective, toxic or will not receive
regulatory clearances,
- our drug candidates will be too expensive to manufacture or market or
will not achieve broad market acceptance,
- third parties will hold proprietary rights that will preclude us
from marketing our drug candidates, or
- third parties will market equivalent or superior products.
The success of our business depends upon our ability to successfully
develop and market our drug candidates.
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE
PROFITABILITY
We have incurred losses since our inception. At September 30, 1998, our
accumulated deficit was approximately $95.8 million. Our historical costs
relate primarily to the acquisition and development of our drug candidates and
general and administrative costs. We have not generated any revenue to date and
do not expect to do so before the year 2000. In addition, we expect annual
losses to increase over the next several years as we expand our drug development
efforts. To become profitable, we must successfully develop and obtain
regulatory approval for our drug candidates and effectively manufacture, market
and sell any products we develop. We may never generate significant revenues or
achieve profitable operations.
OUR NEED FOR FUTURE CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING
Our drug development programs require substantial capital expenditures,
including expenses for preclinical testing, chemical synthetic scale-up,
manufacture of drug substance for clinical trials and toxicology studies,
clinical trials of drug candidates and payments to our licensors. Our future
capital needs will depend on many factors, including:
- the progress and magnitude of our drug development programs,
- the scope and results of preclinical testing and clinical trials,
- the cost, timing and outcome of regulatory reviews,
- the costs under license and option agreements for our drug candidates
(including the costs of obtaining patent protection for our drug
candidates),
- the costs of acquiring any additional drug candidates,
- the rate of technological advances,
- the commercial potential of our drug candidates,
- the magnitude of our administrative and legal expenses,
- the costs of establishing sales and marketing functions, and
- the costs of establishing third party arrangements for manufacturing.
We expect our capital requirements to increase significantly.
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We have incurred negative cash flow from operations since we began our
company and do not expect to generate positive cash flow to fund our operations
for at least the next several years. Accordingly, we will need additional
future financings to fund our operations. We may not be able to obtain adequate
financing to fund our operations, and any additional financing we obtain may be
on terms that are not favorable to us. In addition, any additional financings
could substantially dilute our stockholders. If adequate funds are not
available, we will be required to delay, reduce or eliminate one or more of our
drug development programs, or to enter into collaborative arrangements on terms
that are not favorable to us. These collaborative arrangements could result in
the transfer to third parties of rights that we consider valuable. In addition,
we often consider the acquisition of technologies and drug candidates that would
increase our capital requirements. Our inability to meet our capital
requirements would adversely affect our business.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
To obtain regulatory approvals needed for the sale of our drug candidates,
we must demonstrate through preclinical testing and clinical trials that each
product is safe and effective. The clinical trials process is complex and
uncertain. Positive results from preclinical testing and early clinical trials
do not ensure positive results in pivotal clinical trials. Many companies in
our industry have suffered significant setbacks in pivotal clinical trials, even
after promising results in earlier trials. Any of our drug candidates may
produce undesirable side effects in humans. These side effects could cause us
or regulatory authorities to interrupt, delay or halt clinical trials of a drug
candidate. These side effects could also result in the United States Food and
Drug Administration ("FDA") or foreign regulatory authorities refusing to
approve the drug candidate for any and all targeted indications. We, the FDA or
foreign regulatory authorities may suspend or terminate clinical trials at any
time if we or they believe the trial participants face unacceptable health
risks. Clinical trials may not demonstrate that our drug candidates are safe or
effective.
Clinical trials are lengthy and expensive. They require adequate supplies
of drug substance and sufficient patient enrollment. Patient enrollment is a
function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the clinical trial. Delays in patient enrollment can
result in increased costs and longer development times. Even if we successfully
complete clinical trials, we may not be able to file any required regulatory
submissions in a timely manner and we may not receive regulatory approval for
the drug candidate. Our failure to successfully complete clinical trials and
obtain regulatory approvals will adversely affect our business.
UNCERTAINTY OF PATENTS; DEPENDENCE ON PATENTS, LICENSES AND PROPRIETARY RIGHTS
Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our drug candidates and
to avoid infringing the proprietary rights of others, both in the United States
and in foreign countries. We have no patents in our own name and we have only
five patent applications of our own pending (one of which is a joint application
with co-inventors from another institution). We have, however, licensed or we
have an option to license patents, patent applications and other proprietary
rights from third parties for each of our drug candidates. If we breach our
licenses, we may lose rights to important technology and drug candidates.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which important
legal principles are unresolved. We may not develop or obtain rights to
products or processes that are patentable. Even if we do obtain patents, they
may not adequately protect the technology we own or have in-licensed. In
addition, others may challenge, seek to invalidate, infringe or circumvent any
patents we own or in-license, and rights we receive under those patents may not
provide competitive advantages to us. Further, the manufacture, use or sale of
our products or processes may infringe the patent rights of others.
Several pharmaceutical and biotechnology companies, universities and
research institutions have filed patent applications or received patents that
cover our technologies or technologies similar to ours. Others have filed
patent applications and received patents that conflict with patents or patent
applications we have in-licensed, either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those licensed
to us. In addition, we may not be aware of all patents or patent applications
that may impact our ability to make, use or sell any of our drug candidates.
For example, United States patent applications are confidential while pending in
the Patent and Trademark Office ("PTO"), and patent applications filed in
foreign countries are often first
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published six months or more after filing. Any conflicts resulting from third
party patent applications and patents could significantly reduce the coverage of
our patents and limit our ability to obtain meaningful patent protection. If
other companies obtain patents with conflicting claims, we may be required to
obtain licenses to these patents or to develop or obtain alternative technology.
We may not be able to obtain any such license on acceptable terms or at all.
Any failure to obtain such licenses could delay or prevent us from pursuing the
development or commercialization of our drug candidates, which would adversely
affect our business.
There are significant risks regarding the patent rights of two of our
in-licensed drug candidates. We may not be able to commercialize FTC or DAPD
for HIV and/or the hepatitis B virus ("HBV") due to patent rights held by
third parties other than our licensors. Third parties have filed numerous
patent applications and have received numerous issued patents in the United
States and many foreign countries that relate to these drug candidates and
their use alone or coactively to treat HIV and HBV. As a result, our patent
position regarding the use of FTC and DAPD to treat HIV and/or HBV is highly
uncertain and involves numerous complex legal and factual questions that are
unknown or unresolved. If any of these questions is resolved in a manner
that is not favorable to us, we would not have the right to commercialize FTC
and/or DAPD in the absence of a license from one or more third parties, which
may not be available on acceptable terms or at all. In addition, even if any
of these questions is favorably resolved, we may still attempt to obtain
licenses from one or more third parties to reduce or eliminate the risks
relating to some or all of these matters. Such licenses may not be available
on acceptable terms or at all. Our inability to commercialize either of
these drug candidates could adversely affect our business.
FTC
FTC belongs to the same general class of nucleosides as 3TC. In the United
States, the FDA has approved 3TC for the treatment of HBV and for use in
combination with AZT for the treatment of HIV. Regulatory authorities have
approved 3TC for the treatment of HBV in several other countries and for use in
combination with other nucleoside analogues for the treatment of HIV in a number
of other countries. Glaxo Wellcome plc ("Glaxo") currently sells 3TC for the
treatment of HIV and HBV under a license agreement with BioChem Pharma Inc.
("BioChem Pharma"). We obtained rights to purified forms of FTC under a license
from Emory University ("Emory"). In 1990 and 1991, Emory filed in the United
States and thereafter in numerous foreign countries patent applications with
claims to compositions of matter and methods to treat HIV and HBV with FTC. In
1991, Yale University ("Yale") filed in the United States patent applications on
FTC and its use to treat HBV, and subsequently licensed its rights under those
patent applications to Emory. Our license arrangement with Emory includes all
rights to FTC and its uses claimed in the Yale patent applications.
HIV. Emory received a United States patent in 1993 covering a method to
treat HIV with FTC. In September 1998, Emory received United States and
European patents containing composition of matter claims for FTC. BioChem
Pharma filed a patent application in the United States in 1989 and received a
patent in 1991 covering a group of nucleosides in the same general class as
FTC, but which did not include FTC. BioChem Pharma filed foreign patent
applications in 1990 which expanded upon its 1989 United States patent
application to include FTC among a large class of nucleosides. The foreign
patent applications are pending in many countries and have issued in a number
of countries with claims directed to FTC and its use to treat HIV. In
addition, BioChem Pharma filed a United States patent application in 1991
specifically directed to a purified form of FTC that exhibits advantageous
properties for the treatment of HIV. BioChem Pharma has received two patents
in the United States based on this patent application, one directed to the
purified form of FTC and the other directed to a method for treating
antiviral diseases with the purified form of FTC. The PTO has declared an
interference between the latter BioChem Pharma patent and a patent
application filed by Emory. Emory may not prevail in the interference
proceeding, and the interference proceeding may also delay the decision of
the PTO regarding Emory's patent application. BioChem Pharma also filed
patent applications in many foreign countries based upon its 1991 United
States patent application and has received patents in certain countries.
BioChem Pharma may have additional patent applications pending in the United
States.
In the United States, the first to invent a technology is entitled to
patent protection on that technology. For patent applications filed prior to
January 1, 1996, United States patent law provides that a party who invented a
technology outside the United States is deemed to have invented the technology
on the earlier of the date it introduced the invention in the United States or
the date it filed its patent application. In a recent filing with the SEC,
BioChem Pharma stated that it conducts substantially all of its research
activities outside the United States. BioChem Pharma also stated that it
considers this to be a disadvantage in obtaining United States patents as
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compared to companies that mainly conduct research in the United States. We do
not know whether Emory or BioChem Pharma was the first to invent the technology
claimed in their respective United States patent applications or patents. We
also do not know whether BioChem Pharma invented the technology disclosed in its
patent applications in the United States or introduced that technology in the
United States before the date of its patent applications.
In foreign countries, the first party to file a patent application on a
technology, not the first to invent the technology, is entitled to patent
protection on that technology. We believe that Emory filed patent applications
disclosing FTC as a useful anti-HIV agent in many foreign countries before
BioChem Pharma filed its foreign patent applications on that technology.
However, BioChem Pharma has received patents in several foreign countries. In
addition, BioChem Pharma has filed patent applications on FTC and its uses in
certain countries in which Emory did not file patent applications. Emory has
opposed or otherwise challenged patent claims on FTC granted to BioChem Pharma
in Australia, Japan and Norway. Emory may not initiate opposition proceedings
in any other countries or be successful in any foreign proceeding attempting to
prevent the issuance of, revoke or limit the scope of patents issued to BioChem
Pharma. BioChem Pharma has opposed patent claims on FTC granted to Emory in
Japan and Australia. BioChem Pharma may make additional challenges to Emory
patents or patent applications, which Emory may or may not succeed in defending.
Our sales of FTC for the treatment of HIV may be held to infringe United States
and foreign patent rights of BioChem Pharma. Under the patent laws of most
countries, a product can be found to infringe a third party patent either if the
third party patent expressly covers the product or method of treatment using the
product, or if the third party patent covers subject matter that is
substantially equivalent in nature to the product or method, even if the patent
does not expressly cover the product or method. If it is determined that the
sale of FTC for the treatment of HIV infringes a BioChem Pharma patent, we would
not have the right to make, use or sell FTC for the treatment of HIV in one or
more countries in the absence of a license from BioChem Pharma. We may be
unable to obtain such a license from BioChem Pharma on acceptable terms or at
all.
HBV. Burroughs Wellcome Co. ("Burroughs Wellcome") filed patent
applications in March 1991 and May 1991 in Great Britain on a method to treat
HBV with FTC. Burroughs Wellcome filed similar patent applications in other
countries, which we believe includes the United States. Glaxo subsequently
acquired Burroughs Wellcome's rights under those patent applications. Those
patent applications were filed in all foreign countries prior to the date Emory
filed its patent application on the use of FTC to treat HBV. Burroughs
Wellcome's foreign patent applications, therefore, have priority over those
filed by Emory. In July 1996, Emory instituted litigation against Glaxo in the
United States District Court to obtain ownership of the patent applications
filed by Burroughs Wellcome, alleging that Burroughs Wellcome converted and
misappropriated Emory's invention and property and that an Emory employee is the
inventor or a co-inventor of the subject matter covered by the Burroughs
Wellcome patent applications. If Emory fails to establish ownership rights, we
will not be able to make, use or sell FTC for the treatment of HBV in countries
in which Glaxo receives patents without a license from Glaxo. If Emory
establishes only co-ownership rights (and not sole ownership) to these patents
and patent applications, laws in Europe, Korea and perhaps other countries could
prohibit Emory from licensing any co-owned patent rights without Glaxo's
consent. We may be unable to obtain such a license on acceptable terms or at
all.
BioChem Pharma filed a patent application in May 1991 in Great Britain also
directed to a method to treat HBV with FTC. BioChem Pharma filed similar patent
applications in other countries. In January 1996, BioChem Pharma received a
patent in the United States. The PTO has declared an interference between the
BioChem Pharma patent and a patent application filed by Yale. Yale licensed all
of its rights relating to FTC and its uses claimed in this patent application to
Emory, which subsequently licensed these rights to us. Yale may not prevail in
the interference proceeding, and the proceeding may delay the decision of the
PTO regarding Yale's patent application. In addition, the PTO may declare
interference proceedings with respect to other patent applications filed by
Emory, Burroughs Wellcome's patent application and BioChem Pharma's issued
United States patent. Emory may not pursue or succeed in any such proceedings.
We will not be able to sell FTC for the treatment of HBV in the United States
unless a United States court or administrative body determines that the BioChem
Pharma patent is invalid or unless we obtain a license from BioChem Pharma. We
may be unable to obtain such a license on acceptable terms or at all. In July
1991, BioChem Pharma received a United States patent on the use of 3TC to treat
HBV and has corresponding patent applications pending or issued in foreign
countries. If it is determined that the use of FTC to treat HBV is not
substantially different from the use of 3TC to treat HBV, a court could hold
that the use of FTC to treat HBV infringes these BioChem Pharma 3TC patents.
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In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes FTC, from which BioChem Pharma has received
several patents in the United States and many foreign countries. If we use a
manufacturing method that is covered by patents issued on any of these
applications, we will not be able to manufacture FTC without a license from
BioChem Pharma. We may not be able to obtain such a license on acceptable terms
or at all.
DAPD
We obtained our rights to DAPD under a license from Emory and the
University of Georgia Research Foundation, Inc. ("UGARF"). Our rights to DAPD
include five issued United States patents that cover composition of matter, a
method for the synthesis of DAPD, and methods for the use of DAPD alone or in
combination with certain other anti-HBV agents for the treatment of HBV. We
also have rights to several foreign patents that cover methods for the use of
DAPD alone or in combination with certain other anti-HBV agents for the
treatment of HBV. Additional United States and foreign patent applications are
pending which contain claims for the use of DAPD to treat HIV. Emory and UGARF
filed patent applications claiming these inventions in the United States in 1990
and 1992. BioChem Pharma filed a patent application in the United States in
1988 on a group of nucleosides in the same general class as DAPD and their use
to treat HIV, and has filed corresponding patent applications in foreign
countries. The PTO issued a patent to BioChem Pharma in 1993 covering a class
of nucleosides that includes DAPD and its use to treat HIV. Corresponding
patents have been issued to BioChem Pharma in many foreign countries. Emory has
filed an opposition to BioChem Pharma's granted patent application in the
European Patent Office based, in part, upon Emory's assertion that BioChem
Pharma's patent does not disclose how to make DAPD. Emory has informed us that
it intends to challenge BioChem Pharma's patents and patent applications in
other countries. Patent claims granted to Emory on a portion of the DAPD
technology by the Australian Patent Office have been opposed by BioChem Pharma.
We cannot assure you that a court or administrative body would invalidate
BioChem Pharma's patent claims. Further, a sale of DAPD by us may infringe
BioChem Pharma's patents. If Emory, UGARF and we do not challenge, or are not
successful in any challenge to, BioChem Pharma's issued patents or pending
patent applications (or patents that may issue from such applications), we will
not be able to manufacture, use or sell DAPD in the United States and any
foreign countries in which BioChem Pharma receives a patent without a license
from BioChem Pharma. We may not be able to obtain such a license from BioChem
Pharma on acceptable terms or at all.
With respect to any of our drug candidates, litigation, opposition and
interference proceedings, including the currently pending proceedings, could
result in substantial costs to us. We expect the costs of the currently pending
proceedings to increase significantly during the next several years. We
anticipate that additional litigation and/or proceedings will be necessary or
may be initiated to enforce any patents we own or in-license, or to determine
the scope, validity and enforceability of other parties' proprietary rights and
the priority of an invention. Any of these activities could result in
substantial costs and/or delays to us. The outcome of any of these proceedings
may significantly affect our drug candidates and technology. United States
patents carry a presumption of validity and generally can be invalidated only
through clear and convincing evidence. As indicated above, the PTO has already
declared two interferences in connection with the FTC technology. We cannot
assure you that a court or administrative body would hold our in-licensed
patents valid or would find an alleged infringer to be infringing. Further, the
license and option agreements with Emory, UGARF, The Regents of the University
of California (the "Regents"), The DuPont Merck Pharmaceutical Company ("DuPont
Merck") and Mitsubishi Chemical Corporation ("Mitsubishi") provide that each of
these licensors is primarily responsible for any patent prosecution activities,
such as litigation, interference, opposition or other actions, for the
technology licensed to us. These agreements also provide that in general we are
required to reimburse these licensors for the costs they incur in performing
these activities. Similarly, Yale and UGARF, the licensors of L-FMAU to Bukwang
Pharm. Ind. Co., Ltd. ("Bukwang"), are primarily responsible for patent
prosecution activities with respect to L-FMAU at our expense. As a result, we
generally do not have the ability to institute or determine the conduct of any
such patent proceedings unless our licensors elect not to institute or to
abandon such proceedings. If our licensors elect to institute and prosecute
patent proceedings, our rights will depend in part upon the manner in which
these licensors conduct the proceedings. In any proceedings they elect to
initiate and maintain, these licensors may not vigorously pursue or defend or
may decide to settle such proceedings on terms that are unfavorable to us. An
adverse outcome of these proceedings could subject us to significant liabilities
to third parties, require disputed rights to be licensed from third parties or
require us to cease using such technology, any of which could adversely affect
our business. Moreover, the mere uncertainty resulting from the initiation and
continuation of any technology related litigation or interference proceeding
could adversely affect our business pending resolution of the disputed matters.
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We also rely on unpatented trade secrets and know-how to maintain our
competitive position, which we seek to protect, in part, by confidentiality
agreements with employees, consultants and others. These parties may breach or
terminate these agreements, and we may not have adequate remedies for any
breach. Our trade secrets may also be independently discovered by competitors.
We rely on certain technologies to which we do not have exclusive rights or
which may not be patentable or proprietary and thus may be available to
competitors. We have filed an application for, but have not obtained, a
trademark registration for our corporate name and our logo. Several other
companies use trade names that are similar to our name for their businesses. If
we are unable to obtain any licenses that may be necessary for the use of our
corporate name, we may be required to change our name. Our management personnel
were previously employed by other pharmaceutical companies. The prior employers
of these individuals may allege violations of trade secrets and other similar
claims relating to their drug development activities for us.
EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The FDA and foreign regulatory authorities require rigorous preclinical
testing, clinical trials and other approval procedures for human pharmaceutical
products. Numerous regulations also govern the manufacturing, safety, labeling,
storage, record keeping, reporting and marketing of pharmaceutical products.
The requirements vary widely from country to country, and the time required to
complete preclinical testing and clinical trials and to obtain regulatory
approvals is uncertain. We expect the process of obtaining these approvals and
complying with appropriate government regulations to be time consuming and
expensive. If we replace a drug candidate in preclinical testing and/or
clinical trials with a modified drug candidate, it may extend the development
period. In addition, if the FDA or similar foreign regulatory authorities
require additional clinical trials, we could face increased costs and
significant development delays. Changes in regulatory policy or additional
regulations adopted during product development and regulatory review of
information we submit could also result in delays or rejections. The FDA has
notified us that two of our drug candidates, MKC-442 and FTC for the treatment
of HIV, qualify for designation as "fast track" products under provisions of the
Food and Drug Administration Modernization Act of 1997. The fast track
provisions are designed to expedite the review of new drugs intended to treat
serious or life-threatening conditions and essentially codified the criteria
previously established by the FDA for accelerated approval. These drug
candidates may not, however, continue to qualify for expedited review and our
other drug candidates may fail to qualify for expedited review. Even though
some of our drug candidates have qualified for expedited review, the FDA may not
approve them at all or any sooner than other drug candidates that do not qualify
for expedited review. Further, any approval may require postmarketing studies
or other conditions. Even after substantial time and expenditures, our drug
candidates may not receive marketing approval on a timely basis or at all. If
we are unable to demonstrate the safety and effectiveness of our drug candidates
to the satisfaction of government authorities, our business will be adversely
affected.
Even if our products receive regulatory approval, we may still face
difficulties in marketing and manufacturing those products. The approval of any
of our drug candidates may limit the indicated uses of the drug candidate. A
marketed product, its manufacturer and the manufacturer's facilities are subject
to continual review and periodic inspections. The discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on the product or manufacturer, including withdrawal of the product
from the market. The failure to comply with applicable regulatory requirements
can, among other things, result in:
- fines,
- suspended regulatory approvals,
- refusal to approve pending applications,
- refusal to permit exports from the United States,
- product recalls,
- seizure of products,
- injunctions,
- operating restrictions, and
- criminal prosecutions.
Governmental regulation may significantly delay the marketing of our
products, prevent such marketing altogether, impose costly requirements on our
activities or provide our competitors with an advantage in the market. Adverse
clinical results by others could negatively impact the development and approval
of our drug candidates.
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Some of our drug candidates are intended for use as coactive (i.e., combination)
therapy with one or more other drugs, and adverse safety, effectiveness or
regulatory developments in connection with such other drugs will also have an
adverse effect on our business. A delay in obtaining or failure to obtain
regulatory approvals for any of our drug candidates will have an adverse effect
on our business. We cannot predict the adverse effects that future government
regulations may have on our business.
We are also subject to various federal, state and local laws and
regulations relating to safe working conditions, laboratory and manufacturing
practices, the experimental use of animals and the use and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with our development work.
HIGHLY COMPETITIVE INDUSTRY; RISK OF TECHNOLOGICAL CHANGE
We are engaged in segments of the drug industry that are highly competitive
and rapidly changing. Any of our current drug candidates that we successfully
develop will compete with numerous existing therapies. In addition, many
companies are pursuing novel drugs that target the same diseases we are
targeting. We believe that a significant number of drugs are currently under
development and will become available in the future for the treatment of HIV,
HBV and cancer. We anticipate that we will face intense and increasing
competition as new products enter the market and advanced technologies become
available. Our competitors' products may be more effective, or more effectively
marketed and sold, than any of our products. Competitive products may render
our products obsolete or noncompetitive before we can recover the expenses of
developing and commercializing our products. Furthermore, the development of a
cure or new treatment methods for the diseases we are targeting could render our
drug candidates noncompetitive, obsolete or uneconomical. Many of our
competitors:
- have significantly greater financial, technical and human resources
than we have and may be better equipped to develop, manufacture and
market products,
- have extensive experience in preclinical testing and clinical trials,
obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products,
- have products that have been approved or are in late stage development
and operate large, well-funded research and development programs.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Academic institutions, governmental agencies and other
public and private research organizations are also becoming increasingly aware
of the commercial value of their inventions and are more actively seeking to
commercialize the technology they have developed.
If we successfully develop and obtain approval for our drug candidates, we
will face competition based on the safety and effectiveness of our products, the
timing and scope of regulatory approvals, the availability of supply, marketing
and sales capability, reimbursement coverage, price, patent position and other
factors. Our competitors may develop or commercialize more effective or more
affordable products, or obtain more effective patent protection, than we do.
Accordingly, our competitors may commercialize products more rapidly or
effectively than we do, which could hurt our competitive position and negatively
impact our business.
RISKS RELATED TO LICENSE AND OPTION AGREEMENTS
We have in-licensed or obtained an option to in-license our drug candidates
pursuant to agreements with our licensors. These agreements permit our
licensors to terminate the agreements under certain circumstances, such as our
failure to achieve certain development milestones or the occurrence of an
uncured material breach by us. The termination of any of these agreements could
result in the loss of our rights to a drug candidate. Upon termination of most
of our license agreements, we are required to return the licensed technology to
our licensors. In addition, most of these agreements provide that our licensors
are primarily responsible for any patent prosecution activities, such as
litigation, interference, opposition or other actions, for the technology
licensed to us. These agreements also provide that in general we are required
to reimburse our licensors for the costs they incur in performing these
activities. We believe that these costs as well as other costs under our
license and option agreements will be substantial and may increase significantly
during the next several years. Our inability or failure to pay any of these
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costs with respect to any drug candidate could result in the termination of the
license or option agreement for such drug candidate. Any such termination could
have an adverse effect on our business.
LACK OF MANUFACTURING CAPABILITIES
We do not have any internal manufacturing capacity and we rely on third
party manufacturers for the manufacture of all of our clinical trial material.
We plan to expand our existing relationships or to establish relationships with
additional third party manufacturers for products that we successfully develop.
We may be unable to establish or maintain relationships with third party
manufacturers on acceptable terms, and third party manufacturers may be unable
to manufacture products in commercial quantities on a cost effective basis. Our
dependence upon third parties for the manufacture of our products may adversely
affect our profit margins and our ability to develop and commercialize products
on a timely and competitive basis. Further, third party manufacturers may
encounter manufacturing or quality control problems in connection with the
manufacture of our products and may be unable to maintain the necessary
governmental licenses and approvals to continue manufacturing our products. Our
business could be adversely affected if we fail to establish or maintain
relationships with third parties for our manufacturing requirements on
acceptable terms.
LACK OF SALES AND MARKETING CAPABILITIES
We will have to develop a sales force or rely on arrangements with third
parties for the marketing, distribution and sale of any products we develop.
Any such third parties may have significant control over important aspects of
the commercialization of our products, including market identification,
marketing methods, pricing, composition of sales force and promotional
activities. We will also be unable to prevent any third party from pursuing
alternative products that could result in the development of products that
compete with our products and the withdrawal of support for our programs. We
will have little if any control over the amount and timing of resources that any
third party may devote to our products. We currently intend to use a direct
sales force in the United States and arrangements with third parties outside the
United States to market most of the drug candidates that we develop
successfully. We may be unable to establish marketing or sales capabilities or
to make arrangements with third parties to perform those activities on favorable
terms. Further, any internal capabilities or third party arrangements may not
be successful.
DEPENDENCE ON THIRD PARTIES FOR DEVELOPMENT AND ACQUISITION OF DRUG CANDIDATES
We have engaged and intend to continue to engage third party contract
research organizations and other third parties ("CROs") to help us develop our
drug candidates. Although we have designed the clinical trials for our drug
candidates, the CROs have conducted many of the clinical trials. As a result,
many important aspects of our drug development programs have been and will
continue to be outside our direct control. In addition, there is a risk that
the CROs will not perform all of their obligations under arrangements with us.
If the CROs do not perform clinical trials in a satisfactory manner or breach
their obligations to us, the development and commercialization of any drug
candidate may be delayed or precluded. We do not intend to engage in drug
discovery. Our strategy for obtaining additional drug candidates is to utilize
the relationships of our management team and Scientific Advisory Board to
identify drug candidates for in-licensing from companies, universities, research
institutions and other organizations. We may not succeed in acquiring
additional drug candidates on acceptable terms or at all.
DEPENDENCE ON KEY EMPLOYEES
We are highly dependent on our senior management and scientific staff,
including Dr. David Barry, our Chairman and Chief Executive Officer. Except for
Dr. Barry, we have not entered into non-competition agreements with any of our
personnel. The loss of the services of any member of our senior management or
scientific staff may significantly delay or prevent the achievement of product
development and other business objectives. Our ability to attract and retain
qualified personnel, consultants and advisors is critical to our success. In
order to pursue our drug development programs and marketing plans, we will need
to hire additional qualified scientific and management personnel. Competition
for qualified individuals is intense and we face competition from numerous
pharmaceutical and biotechnology companies, universities and other research
institutions. We may be unable to attract and retain these individuals, and our
failure to do so would have an adverse effect on our business. In addition, we
rely on members of our Scientific Advisory Board for assistance in formulating
our drug development strategy. All of the
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members of the Scientific Advisory Board are employed by other employers and any
such member may have commitments to, or consulting or advisory contracts with,
other entities that may limit their availability to us.
UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT
The efforts of governments and third party payors to contain or reduce the
cost of health care will continue to affect the business and financial condition
of drug companies. A number of legislative and regulatory proposals to change
the health care system have been proposed in recent years. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase pressure on drug pricing. While we cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business, the announcement
and/or adoption of such proposals or efforts could have an adverse effect on our
profit margins and financial condition. Sales of prescription drugs depend
significantly on the availability of reimbursement to the consumer from third
party payors, such as government and private insurance plans. These third party
payors frequently require that drug companies give them predetermined discounts
from list prices, and they are increasingly challenging the prices charged for
medical products and services. If we succeed in bringing one or more products
to the market, these products may not be considered cost effective and
reimbursement to the consumer may not be available or sufficient to allow us to
sell our products on a competitive basis.
NO ASSURANCE OF MARKET ACCEPTANCE
Our success will depend on the market acceptance of any products we
develop. The degree of market acceptance will depend upon a number of factors,
including the receipt and scope of regulatory approvals, the establishment and
demonstration in the medical community of the safety and effectiveness of our
products and their potential advantages over existing treatment methods, and
reimbursement policies of government and third party payors. Physicians,
patients, payors or the medical community in general may not accept or utilize
any product that we may develop.
UNCERTAINTY OF YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of date-sensitive devices, systems and
computer programs that use a two digit rather than a four digit recognition
system to define an applicable year. We have initiated a program and task
force to assess the Year 2000 compliance of our systems and the systems of
our key business vendors. We have inventoried and assessed our significant
internal information and operation systems, and we are replacing or modifying
those portions of our software, hardware and other equipment which we have
determined are non-compliant. We anticipate that we will complete the
required changes to our critical internal systems by March 31, 1999, and that
we will complete the testing and verification of these modified systems by
June 30, 1999. We plan to complete the testing and verification of all other
significant internal systems by September 30, 1999. Accordingly, we expect
that the Year 2000 issue will not pose significant operational problems for
our internal systems and equipment. If, however, we are unable to fix any
technologies with this two digit recognition system that we use, we could
experience system failures or miscalculations causing disruption of
operations, including the temporary inability to process transactions or
conduct normal business activities in the new millennium.
We are also assessing our key business vendors' Year 2000 compliance. We
have requested information from these vendors regarding their compliance efforts
and written assurances of their Year 2000 compliance. We currently plan to
complete our risk assessments, readiness evaluations and action and contingency
plans related to these vendors by June 30, 1999. However, it is extremely
difficult to assess the likelihood of these third parties' Year 2000 compliance
or the impact their noncompliance may have on our operations. If we fail to
implement successfully our Year 2000 compliance plan, our business could be
adversely affected. In addition, significant delays or unanticipated Year 2000
issues with key business vendors could have an adverse effect on the development
of our drug candidates and our financial condition.
RISKS RELATING TO COACTIVE THERAPY
Our success will depend significantly on the market acceptance of coactive
therapy for the treatment of HIV in the United States and Europe and for the
treatment of HBV in developing areas of the world, particularly Asia. Present
coactive treatment regimens for the treatment of HIV are expensive (published
reports indicate the
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cost per patient per year can exceed $13,000), and may increase as new
combinations are developed. These costs have resulted in limitations in the
reimbursement available from third party payors for the treatment of HIV
infection, and we expect that reimbursement pressures will continue in the
future. If coactive therapy gains acceptance as a method to treat HBV
infection, treatment regimens are also likely to be expensive. We expect that
even the cost of monotherapy for HBV will be considered expensive in developing
countries where HBV is most prevalent. Any failure of coactive therapy to
achieve significant market acceptance for the treatment of HIV or HBV could
adversely affect our business.
LIMITED PRODUCT LIABILITY INSURANCE; INSURANCE RISKS
Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of drug products and we may
face product liability claims in the future. We currently have only limited
product liability insurance relating to potential claims arising from our
clinical trials. We intend to expand our insurance coverage if and when we
begin marketing commercial products. We may, however, be unable to obtain
additional product liability insurance on commercially acceptable terms. In
addition, we may be unable to maintain our existing insurance and/or any
additional insurance we may obtain in the future at a reasonable cost or in
sufficient amounts to protect against potential losses. A successful product
liability claim or series of claims brought against us could have an adverse
effect on our business.
RISKS OF HAZARDOUS MATERIALS
We use hazardous materials, chemicals, viruses and various radioactive
compounds in our drug development programs. Although we believe that our
handling and disposing of these materials comply with state and federal
regulations, the risk of accidental contamination or injury still exists. In
the event of such an accident, we could be held liable for any damages or fines
that result and any such liability could exceed our resources.
CONCENTRATION OF STOCK OWNERSHIP; CONTROL BY MANAGEMENT AND EXISTING
STOCKHOLDERS
As of October 15, 1998, our directors, executive officers and their
respective affiliates owned approximately 33.6% of our outstanding common stock.
As a result, these stockholders are able to significantly influence all matters
requiring stockholder approval, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
could also delay or prevent a change in control of Triangle that may be favored
by other stockholders.
OUR STOCK PRICE
The market price of our common stock is likely to be volatile and could
fluctuate widely in response to many factors, including:
- announcements of the results of clinical trials,
- developments with respect to patents or proprietary rights,
- announcements of technological innovations,
- announcements of new products or new contracts by us or our
competitors,
- actual or anticipated variations in our operating results due to the
level of development expenses and other factors,
- changes in financial estimates by securities analysts,
- conditions and trends in the pharmaceutical and other industries,
- new accounting standards, and
- general market conditions and other factors.
As a result, it is possible that our operating results will be below the
expectations of market analysts and investors, which could reduce the market
price of our common stock.
If our stockholders sell a substantial number of shares of our common stock
in the public market, the market price of our common stock could be reduced. As
of October 15, 1998, there were 24,071,255 shares of common stock outstanding,
of which a majority were immediately eligible for resale in the public market
without
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restriction. In addition, holders of approximately 8,100,000 shares of common
stock (including shares issuable upon the exercise of outstanding warrants) have
rights to cause us to register these shares for sale to the public, and we filed
a registration statement to register the sale of 2,789,500 of these shares. Any
such sales may make it more difficult for us to raise needed capital through an
offering of our equity or convertible debt securities and may adversely affect
the prevailing market price of our common stock.
The stock market has experienced extreme price and volume fluctuations that
have particularly affected the market prices of equity securities of many
companies in our industry. Often, these fluctuations have been unrelated or
disproportionate to the operating performance of such companies. These market
fluctuations, as well as general economic, political and market conditions such
as recessions or international currency fluctuations, may reduce the market
price of our common stock. In the past, following periods of volatility in the
market price of the securities of companies in our industry, securities class
action litigation has often been instituted against those companies. If we face
such litigation in the future, it would result in substantial costs and a
diversion of management attention and resources, which would negatively impact
our business. Any of the risks described in these "Risks Factors," if they
occur, could have a dramatic and adverse impact on the market price of our
common stock.
CHARTER, BYLAWS AND DELAWARE LAW MAY HAVE ANTITAKEOVER EFFECTS
Our charter authorizes our Board to issue shares of undesignated preferred
stock without stockholder approval on terms as the Board may determine. The
issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to our other stockholders or otherwise adversely
affect the rights and powers, including voting rights, of our other
stockholders. Moreover, the issuance of preferred stock may make it more
difficult for a third party to acquire, or may discourage a third party from
acquiring, voting control of Triangle.
Our bylaws divide the Board into three classes of directors with each class
serving a three year term. These and other provisions of our charter and our
bylaws, as well as certain provisions of Delaware law, could delay or impede the
removal of incumbent directors and could make more difficult a merger, tender
offer or proxy contest involving Triangle, even if the events could be
beneficial to our stockholders. These provisions could also limit the price
that investors might be willing to pay for our common stock.
NO DIVIDENDS
We have never declared or paid any cash dividends on our common stock, and
we currently do not intend to pay any cash dividends in the foreseeable future.
We intend to retain our earnings, if any, for the operation of our business.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders.
SELLING STOCKHOLDERS
We are registering all 4,800,000 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 (collectively, the
"Selling Stockholders") to resell the shares when they deem appropriate.
The following table sets forth the name of each of the Selling
Stockholders, the number of shares owned by each of the Selling Stockholders,
the number of shares that may be offered under this prospectus, and the
number of shares of our common stock owned by each of the Selling
Stockholders after this offering is completed. Except as set forth in the
table below, none of the Selling Stockholders has had a material relationship
with us within the past three years other than as a result of the ownership
of the shares or other securities of Triangle. 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. We do not know how long
the Selling Stockholders will hold the shares before selling them and we
currently have no
15
<PAGE>
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 named below.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER OFFERING (4)
--------------------------- SHARES BEING ------------------------
NAME OF SELLING STOCKHOLDER NUMBER (1) PERCENT (2) OFFERED (3) NUMBER (1) PERCENT (2)
--------------------------- ----------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Argonaut Investment Fund Ltd..................... 7,000 * 7,000 0 *
Argonaut Partnership L.P......................... 30,000 * 30,000 0 *
Aries Domestic Fund, L.P......................... 56,100 * 56,000 100 *
Aries Master Fund................................ 144,100 * 144,000 100 *
Betlach Family Limited Partnership............... 50,000 * 50,000 0 *
Bridge & Co., as nominee for T. Rowe Price New
Horizons Fund, Inc............................... 1,550,000 5.4% 1,000,000 550,000 1.9%
Brown University Endowment Fund ................. 35,000 * 35,000 0 *
Caduceus Capital L.P............................. 51,000 * 51,000 0 *
Caduceus Capital II L.P. ....................... 9,000 * 9,000 0 *
Caduceus Capital Ltd............................. 65,000 * 65,000 0 *
Closefire Ltd.................................... 10,000 * 10,000 0 *
Coditec International Ltd. A..................... 4,000 * 4,000 0 *
DVG Deutsche Vermogensbildungsgesellschaft mbH... 200,000 * 100,000 100,000 *
Dompe farmaceutici s.p.a......................... 80,000 * 80,000 0 *
EAG Enterprises Ltd.............................. 25,000 * 25,000 0 *
Eaton Vance Worldwide Health Sciences Portfolio.. 200,000 * 200,000 0 *
Fund for Employee Benefit Trusts RCB Trust Emerging
Advisors Fund.................................... 112,200 * 112,200 0 *
Fund for Grantor Trusts RCB Trust Emerging Advisors
Fund............................................. 54,400 * 54,400 0 *
Galleon Healthcare Partners L.P.................. 16,000 * 16,000 0 *
Galleon Healthcare Overseas Fund, Ltd............ 10,000 * 10,000 0 *
Galleon International Fund, Ltd.................. 12,000 * 12,000 0 *
Galleon Partners, L.P............................ 4,000 * 4,000 0 *
Galleon Partners II, L.P......................... 7,000 * 7,000 0 *
Galleon Partners Omni Fund, Ltd.................. 1,000 * 1,000 0 *
Gerstenhaber Investments, L.P. ................. 8,000 * 8,000 0 *
David Gerstenhaber .............................. 5,000 * 5,000 0 *
H&Q Healthcare Investors ........................ 180,000 * 180,000 0 *
H&Q Life Sciences Investors...................... 120,000 * 120,000 0 *
Hardy Family Ltd. Partnership.................... 50,000 * 50,000 0 *
Invesco Funds Group, Inc. (5).................... 700,000 2.4% 700,000 0 *
Michael T. Jackson Trust, New Technologies Fund.. 50,000 * 50,000 0 *
KCM Biomedical, L.P. ............................ 47,500 * 47,500 0 *
The Kaufmann Fund, Inc........................... 1,000,000 3.5% 1,000,000 0 *
Charles D. Kleinow............................... 7,000 * 7,000 0 *
Marinecrew & Co. ................................ 42,600 * 42,600 0 *
Merlin BioMed International, Ltd................. 5,000 * 2,000 3,000 *
Merlin BioMed L.P................................ 24,000 * 18,000 6,000 *
H.R.H. Niloufar Pahlavi.......................... 4,000 * 4,000 0 *
RCB Trust-Oregon-Shaker Investments.............. 40,800 * 40,800 0 *
The Seedling Fund, L.P. ......................... 17,500 * 17,500 0 *
Shaker Heights Investment Fund Limited........... 6,000 * 6,000 0 *
Shaker Investments, L.P.......................... 19,000 * 19,000 0 *
Vector Later-Stage Equity Fund II, L.P.(6)....... 100,000 * 100,000 0 *
Vector Later-Stage Equity Fund II(QP), L.P.(6)... 300,000 1.0% 300,000 0 *
----------- ------------ ----------
TOTAL 5,459,200 4,800,000 659,200
</TABLE>
- --------------------------
* Represents beneficial ownership of less than 1%.
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares listed in the table, subject to community
property laws, where applicable. For purposes of this table, a person or
group of persons is deemed to have "beneficial ownership" of any shares
which such person has the right to acquire within 60 days.
(2) Percentage ownership is based on 28,871,255 shares of common stock of
Triangle outstanding on December __, 1998. For purposes of computing the
percentage of outstanding shares held by each person or group of persons
named above, any security which such person or group of persons has the
right to acquire within 60 days is deemed to be outstanding for the purpose
of computing the percentage ownership for such person or persons, but is
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(3) This registration statement shall also cover any additional shares of
common stock which become issuable in connection with the shares registered
for sale hereby as a result of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of Triangle's
outstanding shares of common stock.
(4) Assumes the sale of all shares offered hereby and no other purchases or
sales of the Company's common stock.
(5) Invesco Funds Group, Inc. is the investment advisor to The Invesco Global
Health Sciences Fund and The Invesco Small Company Growth Fund.
(6) Vector Later-Stage Equity Fund II, L.P. and Vector Later-State Equity
Fund II(QP), L.P. (the "Vector Funds") are private limited partnerships
which specialize in investments in healthcare and life sciences equity
and equity-related securities. The general partner of the Vector Funds
is Vector Fund Management II, L.L.C., which is not owned by Vector
Securities International, Inc. The Vector Funds are not broker-dealers
and invest in securities for their limited partners for long-term
investment. Vector Securities International, Inc. acted as placement
agent for the shares we issued in connection with the private placement
transaction. Vector Securities International, Inc. also acted as an
underwriter in connection with our public offering of shares of common
stock in April 1998.
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
negotiated transactions. The Selling Stockholders may effect such transactions
by selling the shares to or through broker-dealers. The shares may be sold by
one or more of, or a combination of, the following:
- 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 such broker-
dealer for its account pursuant to this prospectus,
- an exchange distribution in accordance with the rules of such
exchange,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- in 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 supplement will disclose:
- the name of each such Selling Stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- that such 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.
16
<PAGE>
In addition, 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.
In effecting sales, broker-dealers engaged by the Selling Stockholders may
arrange for other broker-dealers to participate in the resales.
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 such 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 such shares pursuant to this prospectus. The Selling
Stockholders also may loan or pledge the shares to a broker-dealer. The
broker-dealer may sell the shares so loaned, or upon a default the
broker-dealer may sell the pledged shares pursuant to this prospectus.
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
(the "Securities Act"), in connection with sales of the shares. Accordingly,
any such 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 which qualify for sale pursuant to
Rule 144 promulgated under the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus. The Selling Stockholders have
advised us 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
certain 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 Exchange Act, 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 such 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 certain liabilities,
including liabilities arising under the Securities Act. The Selling
Stockholders have agreed to indemnify certain persons, including broker-dealers
and agents, against certain liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.
17
<PAGE>
LEGAL MATTERS
For purposes of this offering, Brobeck, Phleger & Harrison LLP, San Diego,
California, is giving its opinion as to the validity of the shares. Members of
such firm own a total of 15,333 shares of Triangle's common stock.
EXPERTS
The financial statements incorporated herein by reference to the Annual
Report on Form 10-K of the Company for the year ended December 31, 1997, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
The financial statements incorporated herein by reference of Avid
Corporation and its subsidiaries included on pages 5 through 20 of the
Company's Amendment No. 1 to Current Report on Form 8-K/A filed on November
12, 1997, have been so incorporated in reliance on the report of KPMG Peat
Marwick LLP, independent accountants, given upon their authority as experts
in auditing and accounting. The report of KPMG Peat Marwick LLP covering the
December 31, 1996 financial statements of Avid Corporation and subsidiaries
contains an explanatory paragraph that states that Avid Corporation has
suffered recurring losses from operations and will require additional capital
to fund future operations, which raises substantial doubt about such entity's
ability to continue as a going concern. The consolidated financial
statements of Avid Corporation and subsidiaries do not include any
adjustments which might result from the outcome of that uncertainty.
18
<PAGE>
We have not authorized any person to make a statement that differs from
what is in this prospectus. If any person does make a statement that differs
from what is in this prospectus, you should not rely on it. This prospectus
is not an offer to sell, nor is it an offer to buy, these securities in any
state in which the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
WHERE YOU CAN FIND MORE
INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INFORMATION INCORPORATED BY
REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF TRIANGLE'S BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
</TABLE>
Prospectus December 16, 1998
4,800,000 Shares
[LOGO]
TRIANGLE PHARMACEUTICALS
COMMON STOCK
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the common stock being registered. All the amounts shown are
estimates, except for the registration fee.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . $ 15,179
Printing and engraving expenses. . . . . . . . . . 10,000
Legal fees and expenses. . . . . . . . . . . . . . 30,000
Accounting fees and expenses . . . . . . . . . . . 30,000
Transfer Agent and Registrar Fees. . . . . . . . . 5,000
Miscellaneous Expenses . . . . . . . . . . . . . . 9,821
----------
TOTAL . . . . . . . . . . . . . . . . . . . . $ 100,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits
indemnification of officers and directors of the Company under certain
conditions and subject to certain limitations. Section 145 of the Delaware
General Corporation Law also provides that a corporation has the power to
purchase and maintain insurance on behalf of its officers and directors
against any liability asserted against such person and incurred by him or her
in such capacity, or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liability under the provisions of Section 145 of the Delaware General
Corporation Law.
Article VII, Section (i) of the Restated Bylaws of the Company provides
that the Company shall indemnify its directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law. The
rights to indemnity thereunder continue as to a person who has ceased to be a
director, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred
by a director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she
is or was a director or officer of the Company (or was serving at the
Company's request as a director or officer of another corporation) shall be
paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the Company as authorized by the
relevant section of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation
Law, Article 5, Section (a) of the Company's Second Restated Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or acts or omissions that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived any improper
personal benefit.
The Company has entered into indemnification agreements with its
directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware law as it may
be amended from time to time. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the
Company (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnity for expenses), for settlements not approved
by the Company or for settlements and expenses if the settlement is not
approved by the court. The indemnification agreements provide for the
Company to advance to the individual any and all reasonable expenses
(including legal fees and expenses) incurred in investigating or defending
any such action, suit or
II-1
<PAGE>
proceeding. In order to receive an advance of expenses, the individual must
submit to the Company copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final
judicial decision that he or she is not entitled to indemnification.
The Registrant has an insurance policy covering the directors and
officers of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.3 Consent of Brobeck, Phleger & Harrison LLP. Reference is
made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-4.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the state of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the Act
need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary to
ensure that all other information in the prospectus is at least as current as
the date of those financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post-effective amendment
need not be filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver,
or cause to be delivered to each person to whom the Prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, Delaware Corporation
law, the Underwriting Agreement or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in connection
with the securities being registered hereunder, the Registrant will, unless
in the opinion of its counsel the question has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
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 Durham, State of North Carolina, on
the 16th day of December 1998.
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David W. Barry
----------------------------------------
David W. Barry
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, David
W. Barry and James A. Klein, Jr., and each of them acting individually, as
his attorney-in-fact, each with full power of substitution and
resubstitution, for him or her in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
/s/ David W. Barry Chairman of the Board and Chief Executive
- ------------------------------------ Officer (Principal Executive Officer) December 16, 1998
David W. Barry
/s/ James A. Klein, Jr. Chief Financial Officer and Treasurer
- ------------------------------------ (Principal Financial and Accounting Officer) December 16, 1998
James A. Klein, Jr.
/s/ M. Nixon Ellis Director, President and December 16, 1998
- ------------------------------------ Chief Operating Officer
M. Nixon Ellis
/s/ Anthony B. Evnin Director December 16, 1998
- ------------------------------------
Anthony B. Evnin
/s/ Standish M. Fleming Director December 16, 1998
- ------------------------------------
Standish M. Fleming
/s/ Dennis B. Gillings Director December 16, 1998
- ------------------------------------
Dennis B. Gillings
/s/ Henry G. Grabowski Director December 16, 1998
- ------------------------------------
Henry G. Grabowski
/s/ George McFadden Director December 16, 1998
- ------------------------------------
George McFadden
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
23.3 Consent of Brobeck, Phleger & Harrison LLP. Reference is
made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-4.
</TABLE>
<PAGE>
Exhibit 5.1
December 16, 1998
Triangle Pharmaceuticals, Inc.
4 University Place
4611 University Drive
Durham, North Carolina 27707
Re: Triangle Pharmaceuticals, Inc. Registration Statement on Form S-3
for Resale of 4,800,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Triangle Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), in connection with the registration for resale of
4,800,000 shares of Common Stock (the "Shares"), as described in the
Company's Registration Statement on Form S-3 ("Registration Statement") filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act").
This opinion is being furnished in accordance with the requirements of
Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents, the corporate
proceedings taken by the Company in connection with the original issuance and
sale of the Shares, and a certificate of a Company officer regarding (among
other things) the Company's receipt of consideration upon the original issuance
and sale of the Shares. Based on such review, we are of the opinion that the
Shares are duly authorized, validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
<PAGE>
December 16, 1998
Page 2
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 3, 1998 appearing on page 48 of Triangle Pharmaceuticals, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997. We also consent to
the reference to us under the heading "Experts."
PRICEWATERHOUSECOOPERS LLP
Raleigh, North Carolina
December 14, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Triangle Pharmaceuticals, Inc.:
We consent to the incorporation by reference in this Prospectus constituting
part of the Registration Statement on Form S-3 of Triangle Pharmaceuticals,
Inc. of our report dated June 27, 1997, with respect to the consolidated
balance sheets of Avid Corporation and subsidiaries (the Company) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the years then ended,
which report appears on page 5 of the Current Report on Form 8-K/A of
Triangle Pharmaceuticals, Inc. filed November 12, 1997. We also consent
to the reference to us under the heading "Experts."
Our report dated June 27, 1997, contains an explanatory paragraph that states
that the Company has suffered recurring losses from operations and will require
additional capital to fund future operations, which raises substantial doubt
about the entity's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments which might result from
the outcome of that uncertainty.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
December 14, 1998
