<PAGE>
As filed with the Securities and Exchange Commission on November 4, 1999.
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
CURAGEN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 06-1331400
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
555 Long Wharf Drive, 11/th/ Floor
New Haven, Connecticut 06511
(203) 401-3330
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JONATHAN M. ROTHBERG, Ph.D.
Chief Executive Officer, President and
Chairman of the Board
CuraGen Corporation
555 Long Wharf Drive, 11/th/ Floor
New Haven, Connecticut 06511
(203) 401-3330
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Anne L. Bruno, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000
Approximate date of commencement of proposed sale to the public: As soon as
practical after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered/(1)/ Offering Price per Share Price/(2)/ Registration Fee
--------------- ------------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,635,366 $18.375 $30,049,850.25 $8,353.86
</TABLE>
/(1)/ Includes 46,708 shares of common stock to be issued upon exercise of
warrants and 977,636 shares of common stock to be issued upon conversion of
convertible non-voting common stock, as well as an indeterminate number of
additional shares of common stock as may from time to time be issued or become
issuable by reason of stock splits, stock dividends and other similar
transactions, which shares are registered hereunder pursuant to Rule 416.
/(2)/ The price of $18.375 per share, which was the average of the high and low
prices of the common stock reported by the Nasdaq National Market on November
3, 1999, is set forth solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) of the Securities Act of 1933, as amended.
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.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
Subject to Completion, dated November 4, 1999
CURAGEN CORPORATION
1,635,366 SHARES OF COMMON STOCK
We have registered up to 1,635,366 shares of our common stock for sale by the
selling stockholders listed on page 12 of this prospectus.
We will not receive any of the proceeds from the selling stockholders' sale of
their common stock.
Our common stock is traded on the Nasdaq National Market under the symbol
"CRGN." On November 3, 1999, the closing sale price of one share of common
stock as quoted on the Nasdaq National Market was $17.875.
Our address is CuraGen Corporation, 555 Long Wharf Drive, 11/th/ Floor, New
Haven, Connecticut 06511, and our telephone number is (203) 401-3330.
This Investment Involves A High Degree of Risk.
You Should Purchase Shares Only If You Can Afford A Complete Loss.
See "Risk Factors" Beginning on Page 2.
Neither the Securities and Exchange Commission nor any state securities
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commission has approved or disapproved of these securities, or determined if
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this prospectus is truthful or complete. Any representation to the contrary is
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a criminal offense.
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November 4, 1999
<PAGE>
CURAGEN'S BUSINESS
We research, develop and use technologies based on the understanding and
usefulness of genes, which we refer to as "genomics technologies", to accelerate
the discovery and development of products for the health of humans and animals
and the vitality of agriculture. We design our Internet-based genomics
technologies, processes and information systems to be fully integrated with one
another and to rapidly generate comprehensive information about the following:
. Gene sequence, the sequence in which Nucleotides (the building blocks
of DNA) appear in a gene and control the function of the gene;
. Variations in gene sequences (such as cSNPs);
. Gene expression, the degree of gene activity;
. Biological pathways, the pathways that proteins follow when providing
instructions to cells; and
. The potential drugs that affect these biological pathways.
We believe that we can overcome the limitations of competing technologies,
processes, and databases and can condense key steps in gene-based drug discovery
and development. We believe our technology platform will facilitate the
development of protein therapeutics, antibody-based drugs and small molecule
targets aimed at a variety of complex diseases including metabolic diseases,
cancer, auto-immune diseases and CNS disorders
Our drug discovery technology platform has three primary systems, each
consisting of proprietary technologies, automated processes and related
databases:
(i) SeqCalling for gene sequencing and cSNP discovery;
(ii) GeneCalling, a patented technology for gene discovery and
comprehensive gene expression analysis; and
(iii) PathCalling for analyzing the relationships between genes and the
proteins these genes encode in biological pathways.
Each of these technologies and related processes are fully operational and
we are commercializing each of them. We have integrated these technologies and
related processes in such a manner as to interact with each other in a highly
efficient and cost-effective manner. We are actively filing for United States
and international patent protection for each technology.
In addition to accelerating the discovery of new drug candidates, we are
utilizing the GeneCalling technology, automated process and related databases to
predict the efficacy and safety of drug candidates currently in pharmaceutical
development pipelines, and to review the performance and side effects of drugs
already being marketed. This approach is referred to as pharmacogenomics, and
is aiding in the development of more effective, safer drugs. The approach can
also potentially be utilized to identify more appropriate patient populations
for use in clinical drug studies.
We have unified our SeqCalling, GeneCalling and PathCalling technologies,
processes and databases under a computer program we refer to as "GeneScape
bioinformatics operating platform" that tracks and analyzes data and integrates
all aspects of process management, data analysis and visualization. Our
GeneScape bioinformatics operating platform is an Internet-based platform that
provides researchers from multiple sites access to our technologies, systems,
and databases simultaneously, and in real-time, allowing researchers to work
together on discovery and development projects.
We plan at this time to continue to enhance and build additional
technologies upon our Internet-based GeneScape bioinformatics operating
platform. We intend to systematically analyze the genetic basis of many common
diseases in order to identify potential therapeutic protein and antibody drug
candidates and small molecule drug targets. We are marketing our genomics
technologies and information to pharmaceutical, biotechnology and agricultural
companies through research collaborations. These research collaborations will
involve the application of our SeqCalling, GeneCalling and PathCalling
technologies, systems, and databases to collaborative research projects, and
will include support services required to characterize gene and target
discoveries. We believe these collaborations will establish milestone revenues
for successful projects, and royalty-based revenues from products emerging from
the drug development programs of our partners.
To date, we have entered into research collaborations with Biogen, Inc.,
COR Therapeutics, Inc., Genentech, Inc., Glaxo-Wellcome, Inc., Hoffmann-La
Roche, Inc., Pioneer Hi-Bred International, Inc. and Roche Vitamins, Inc. We
are also applying our suite of genomics technologies on our own behalf. We have
established internal programs to discover and initiate the development of
products for use in improving human health. We have established programs to
develop products to combat complex diseases in the areas of metabolic diseases,
cancer, auto-immune diseases and CNS disorders. We plan to continue our efforts
to discover disease related genes and their roles in disease, and are filing for
United States and international patent protection relating to these discoveries.
We were incorporated in Delaware in November 1991. Our principal executive
offices are located at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut
06511, and our telephone number is (203) 401-3330.
<PAGE>
RISK FACTORS
Investing in our common stock is very risky. You should be able to bear a
complete loss of your investment. This prospectus, including the documents
incorporated by reference, contains forward-looking statements that involve
risks or uncertainties. Actual events or results may differ materially from
those discussed in this prospectus and in the documents incorporated by
reference. Factors that could cause or contribute to such differences include,
but are not limited to, the factors discussed below as well as those discussed
elsewhere in this prospectus and in the documents incorporated by reference.
We Are In The Early Stages Of Development And Commercialization.
Our technologies and databases are still in the early stages of development
and we have just begun to incorporate our technologies into commercialized
products. We may not be able to continue to successfully develop or
commercialize our technologies. In addition, our collaborators may not discover
or develop any therapeutic, agricultural or diagnostic products through the
utilization of our technologies. Even if we or our collaborators develop
products for commercial use, we may not, however, be able to develop products
that:
. Meet applicable regulatory standards, in a timely manner or at all;
. Can successfully compete with other technologies and products;
. Can avoid infringing the proprietary rights of others;
. Can be manufactured in sufficient quantities or at reasonable cost; or
. Can be marketed successfully.
We expect that it will be a number of years, if ever, before we will recognize
revenue from the sale of therapeutic, agricultural or diagnostic products.
We Have A History Of Operating Losses And Expect To Incur Losses In The Future.
We have a limited operating history and are at an early stage of
development. We have experienced operating losses since our inception and expect
these losses to continue for the next several years. We may never be profitable
or achieve significant revenues. For example, we experienced net losses of
$18,936,920 in 1998, $7,290,434 in 1997 and $606,241 in 1996. As of December 31,
1998, we had an accumulated deficit of $28,939,508. We had a net loss of
$19,279,463 for the nine months ended September 30, 1999 and an accumulated
deficit of $47,218,971 as of September 30, 1999. In order to develop our
technologies, including expanding our SeqCalling, GeneCalling and PathCalling
database development efforts, we expect to incur significant increases in our
expenses over the next several years. In addition, we expect significant
increases in expenses in connection with our internal research programs. As a
result, we expect to incur operating losses at least through 2002. Our ability
to achieve significant revenues or profitability will depend upon obtaining
research collaborations and subscribers for our SeqCalling, GeneCalling and
PathCalling products and services and related databases. Although we currently
have seven research collaborations, we may not be able to obtain any additional
research collaborations or enter into any additional subscription arrangements
for our products or services.
Our Technology And Products Are Unproven.
We have developed and intend to continue to develop our SeqCalling,
GeneCalling and PathCalling technology and related databases. These technologies
are used to identify novel genes, biological pathways and drug candidates to
facilitate the discovery and development of therapeutic, agricultural and
diagnostic products. These technologies, however, involve new and unproven
approaches. If we fail to identify such novel genes, biological pathways and
drug candidates, we could be materially, adversely affected. Our technology and
development focus is primarily directed toward the development of drugs to treat
a variety of complex diseases as well as agronomic traits. There is limited
scientific understanding generally relating to the role of genes in these
diseases and traits, and few products based on gene discoveries have been
developed and commercialized. Accordingly, even if we were successful in
identifying genes, biological pathways or drug candidates associated with
specific diseases or in identifying genes associated with certain agronomic
traits, there is no guarantee that we or our collaborators will be able to
develop therapeutic, agricultural or diagnostic products. To date, we have not
developed or commercialized any such products based on our technological
methods.
In addition, the success of our SeqCalling, GeneCalling and PathCalling
products and services and the related databases will depend upon our ability to
generate data concerning the following:
. gene sequences;
. gene variations;
. the level of gene activity;
. biological pathways; and
. drug candidates using software tools.
However, because of the complexity of such products, we may not be able to
detect any design defects or software errors in our database products or any of
our further products, if any.
Our strategy of using a systematic analysis of the genetic information
contained within a cell to discover and develop novel therapeutic,
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agricultural and diagnostic products is unproven. There is little precedent for
the business represented by our SeqCalling, GeneCalling and PathCalling products
and services and related databases. Our methods, processes and related services
may not be accepted.
Due to the specialized nature and price of our products and services and
related databases, there are a limited number of pharmaceutical, biotechnology
and agricultural companies that are potential customers for our products and
services. Additional reasons why there may not be a great demand for our
products and services include:
. Our potential collaborators and subscribers may determine to conduct
in-house gene research;
. Our competitors may offer similar services at competitive prices;
. We may not be able to service satisfactorily our collaborators and
subscribers;
. Others may publicly disclose or patent the proprietary information
contained in our databases (including information related to gene
expression, biological pathways or drug candidates); and
. Technological innovations may be discovered that are more advanced
than those used by and available to us.
Our SeqCalling, GeneCalling and PathCalling databases are still in the
early stages of development. We may not be able to populate our SeqCalling,
GeneCalling and PathCalling databases with information that is useful to our
collaborators and subscribers in a timely manner. Even if we complete and
developed successfully our technology and databases, such technology or database
may not be accepted by, or useful to, our collaborators or subscribers.
We May Need To Raise Additional Funding Which May Not Be Available.
We anticipate that our existing capital resources are not sufficient to
fund our future operating plans and we will therefore need to raise significant
additional capital. We established a substantial scientific infrastructure in
order to complete the development of our technology and to continue to add
information to our databases. We used substantial amounts of cash to establish
this infrastructure and expect our capital and operating expenses to increase
over the next several years as we expand this infrastructure and our research
and development activities. The amount of additional capital which we expect we
will need to raise will depend on many factors, including:
. The progress of our research programs;
. The number and breadth of our research programs;
. Our ability to attract collaborators for or subscribers to our
products and services;
. The achievement of the milestones under certain of our existing
collaborations;
. Our ability to establish and maintain additional collaborations;
. The progress of our collaborators;
. Our activities relating to the commercialization rights we have
retained in our collaborations;
. Our costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. The costs and timing of obtaining regulatory approvals for any of our
products.
We expect that we will raise the additional capital we require through
public or private equity offerings, debt financings or additional collaborations
and licensing arrangements. Additional financing may not be available to us when
we need it, or, if available, that we will be able to obtain such financing on
favorable terms to us or our stockholders. If we raise additional capital by
issuing equity securities, the issuance of such securities would result in
ownership dilution to our stockholders. If we raise additional funds through
collaborations and licensing arrangements, we may be required to relinquish
rights to certain of our technologies or product candidates, or to grant
licenses on unfavorable terms. The relinquishing of rights or granting of
licenses on unfavorable terms could materially, adversely affect our business,
financial condition and results of operations. If adequate funds are not
available, our business, financial condition and results of operations would be
materially, adversely affected.
We Rely Heavily On Our Collaborative Partners.
We do not expect to develop or market any therapeutic, agricultural or
diagnostic products on our own. As a result, we will be dependent on
collaborators for the preclinical study and clinical development of therapeutics
and for regulatory approval, manufacturing and marketing of therapeutic,
agricultural and diagnostic products resulting from the application of our
technology. It is important, then, that we enter into research collaborations
and licensing arrangements with a variety of third parties so we can implement
our strategy to develop and commercialize therapeutic, agricultural and
diagnostic products based upon our discoveries. We have entered into research
collaborations with and COR Therapeutics, Inc. ("COR"), Glaxo-Wellcome, Inc.
("Glaxo-Wellcome"), Hoffmann-La Roche Inc. ("Roche Pharma"), Pioneer Hi-Bred
International, Inc. ("Pioneer Hi-Bred") and Roche Vitamins Inc. ("Roche
Vitamins"), and research collaboration and database subscription arrangements
with Biogen, Inc. ("Biogen") and Genentech, Inc. ("Genentech"). Our agreements
with collaborators typically will allow them significant discretion in electing
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whether to pursue such activities. We cannot control the amount and timing of
resources our collaborators devote to our programs or potential products.
Further, we may not able to establish any additional research collaborations,
licensing or subscription arrangements. In order to achieve and sustain
profits, we believe we need to attract additional collaborators and subscribers
for our products and services and related databases.
We recognize revenue under our collaborative arrangements generally through
the work performed on behalf of our collaborators by our employees, or based
upon the attainment of certain benchmarks specified in the related agreements.
We are currently negotiating to restructure one of our collaborative
arrangements, and may consider restructuring other arrangements in the future,
to recognize revenue based upon work performed on a per project basis, rather
than on a per employee basis.
Set forth below is a description of some of our key collaboration
arrangements.
Pioneer Hi-Bred
In June 1997, we entered into a Collaborative Research and License
Agreement with Pioneer Hi-Bred whereby we agreed to perform research that will
be funded by Pioneer Hi-Bred. As of March 1998, Pioneer Hi-Bred pays us at a
rate of $5,000,000 per year, in quarterly installments due in advance, on or
before the first day of each calendar quarter. Pioneer Hi-Bred has the right to
terminate the research program at any time upon a breach by us and on three
months' written notice at any time after May 2000.
Biogen
In October 1997, we entered into a research collaboration and database
subscription arrangement with Biogen to discover novel genes and therapeutics
across a range of Biogen-specified disease programs. We also expect under the
collaboration to conduct pharmacogenomic analysis of selected products and
product candidates in Biogen's portfolio. The collaboration will provide Biogen
with access to our proprietary genomics platform, including the GeneScape
bioinformatics operating system in order to generate GeneCalling and PathCalling
databases from Biogen-specified disease systems. Biogen will additionally
provide us with payments over five years to support a research collaboration to
generate project-specific GeneCalling and PathCalling databases from Biogen-
specified disease systems and to gain non-exclusive access to our GeneCalling
and PathCalling subscription databases. Payments could reach $18,500,000 if the
research collaboration and database subscription arrangement both continue for
the full five-year term. Biogen has an option to acquire exclusive licenses to
certain discoveries arising from the collaboration. Biogen has the right to
terminate the research collaboration upon any breach by us of any material
obligation under the Biogen Agreement or at its sole discretion at any time
after October 1999, on six months' written notice. In addition, Biogen may
terminate its subscription to our GeneCalling and PathCalling databases at any
time upon three months' written notice.
Genentech
In November 1997, we entered into a research collaboration and database
subscription arrangement with Genentech to discover novel genes and therapeutics
across a range of Genentech-specified disease programs. Genentech will
additionally provide us with funding of up to $24,000,000 over five years if the
database subscription arrangement is not terminated, the research collaboration
continues for the full five-year term and Genentech elects to retain licenses to
its discoveries. Genentech has the right to terminate the research
collaboration, upon a breach by us of any material obligation under the
Genentech Agreement or at its sole discretion, on one month's prior notice on or
after November 2000. Genentech has an option to acquire licenses to certain
discoveries arising from the collaboration.
Glaxo-Wellcome
In November 1998, we entered into a drug discovery collaboration with
Glaxo-Wellcome to utilize our genomics systems for the study and selection of
Glaxo-Wellcome compounds for clinical development. This pharmacogenomics
collaboration, up to five years in duration, is intended to enable Glaxo-
Wellcome to select drug candidates with the highest likelihood of success in
clinical trials. Specifically, we will evaluate the gene responses of the
numerous compounds across Glaxo-Wellcome therapeutic programs to identify which
genes are working effectively. Under the terms of the agreement, we will receive
$2,750,000 per year, plus additional milestone and royalty payments if any drugs
emerge from this collaboration. Either Glaxo-Wellcome or we may terminate the
pharmacogenomics collaboration without cause at its or our sole discretion,
respectively, upon three months' prior written notice to the other party.
However neither party may terminate this agreement prior to fifteen months after
the effective date of the agreement.
Roche Pharma and Roche Vitamins
In March 1999, we signed a life sciences target discovery and
pharmacogenomics collaboration retroactively effective as of January 1, 1999
with F. Hoffmann-La Roche Ltd. and its affiliates, Hoffmann-La Roche Inc. and
Roche Vitamins Inc. This agreement outlines strategic partnerships with Roche
with F. Hoffmann-La Roche Ltd. and its affiliates and is designed to evaluate
existing product candidates, discover new drug targets, and facilitate the
development of drugs and diagnostic tests for the purposes of improving human
and animal health. Under the terms of the agreement we will receive $1,500,000
per year from Roche Pharma and $2,000,000 per year from Roche Vitamins. The
agreement is for an initial term of two years and includes an option to extend
for three additional one year terms.
COR
In May 1999, we signed a product discovery and pharmacogenomics agreement
with COR. Under the terms of this agreement, we will apply our SeqCalling,
GeneCalling, and PathCalling technologies, related services, and
pharmacogenomics expertise to identify new drug targets and develop novel
cardiovascular drugs. This collaboration provides for payments of $1,250,000 per
year with an initial term of eighteen months and options to extend the
collaboration for three additional twelve month terms. The Company may also
receive milestone and royalty payments for products developed by COR as a result
of this collaboration.
Our Business Could Be Harmed If Our Collaborations Are Terminated Early.
There can be no assurance that our collaborations will not be terminated at
the time they are eligible to be terminated by the collaborator or earlier upon
a material breach by us. Any such termination could materially, adversely affect
our business, financial condition and results of operation. We may not be able
to maintain or expand existing collaborations. If any of our collaborators were
to breach or terminate its agreement
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with us or otherwise fail to conduct collaborative activities successfully and
in a timely manner, the preclinical or clinical development or commercialization
of product candidates or research programs would be delayed or terminated. Any
such delay or termination could materially, adversely affect our business,
financial condition and results of operations.
Our Business Could Be Harmed If Funding From Our Collaborators Were Reduced or
Terminated.
We intend to rely on certain of our collaborators for significant funding
in support of our research efforts. If funding from one or more of our
collaborative programs were reduced or terminated, we would need to devote
additional internal resources to product development, scale back or terminate
certain research development programs or seek alternative collaborators.
Disputes may arise in the future with respect to the ownership of rights to any
technology developed with our collaborators. These and other possible
disagreements between collaborators and us could lead to delays in the
collaborative research, development or commercialization of certain therapeutic,
agricultural or diagnostic products, or could require or result in litigation or
arbitration to resolve. Such disputes could materially, adversely affect our
business, financial condition and results of operations.
Competition In Our Field Is Intense And Likely to Increase.
We face, and will continue to face, intense competition from one or more of
the following entities:
. pharmaceutical companies;
. biotechnology companies;
. diagnostic companies;
. academic and research institutions; and
. government agencies.
We are also subject to significant competition from organizations that are
pursuing technologies and products that are the same as or similar to our
technology and products. Many of the organizations competing with us have
greater capital resources, research and development staffs and facilities and
marketing capabilities. In addition, research in the field of genomics generally
is highly competitive. Our competitors in the genomics area include:
. Affymetrix, Inc.;
. Celera Genomics Group;
. Human Genome Sciences, Inc.;
. Millennium Pharmaceuticals, Inc;
. major pharmaceutical companies; and
. universities and other research institutions (including those
receiving funding from the federally funded Human Genome Project).
We believe that our future success will depend in large part on our ability
to maintain a competitive position in the genomics field. Before we may recover
our expenses in connection with the development of our products or technologies,
however, such products or technologies may become obsolete resulting from rapid
technological developments by us or others. Our products could also be made
obsolete by less expensive or more effective technologies. We may not be able to
make the enhancements to our technology necessary to compete successfully with
newly emerging technologies.
A number of our competitors are attempting to rapidly identify and patent
genes and gene fragments sequenced at random, typically without specific
knowledge of the function of such genes or gene fragments. If our competitors
discover or characterize important genes or gene fragments before we do, it
could adversely affect any of our related disease research programs. We expect
that competition in genomics research will intensify as technical advances are
made and become more widely known.
If Our Patent Applications Do Not Result In Issued Patents, Then Our Competitors
May Obtain Rights To Commercialize Our Discoveries.
Our business and competitive position are dependent upon our ability to
protect our SeqCalling, GeneCalling and PathCalling proprietary databases,
proprietary software and other proprietary methods and technology. We have filed
patent applications for our proprietary methods and devices for gene expression
analysis, for discovery of biological pathways and for drug screening. As of
November 1, 1999, we had over 27 patent applications pending covering our
technology with the United States Patent and Trademark Office, and had filed
several corresponding international and foreign patent applications. As of
November 1, 1999, we have been issued three patents with respect to aspects of
our technology.
Our commercial success also depends in part on obtaining patent protection
on genes and proteins for which we or our collaborators or subscribers discover
utility and on products, methods and services based on such discoveries. We have
applied for patent protection on novel genes and proteins, novel mutants of
known genes and their uses, partial sequences of novel proteins and their gene
sequences and uses, and novel uses for previously identified genes discovered by
third parties. We have sought and intend to continue to seek patent protection
for novel uses for genes and proteins which may have been patented by third
parties. In such cases, we would need a license from the holder of the patent
with respect to such gene or protein in order to make, use or sell such gene or
protein for such use. We may not be able to acquire such licenses on
commercially reasonable terms, if at all. Our patent application filings that
result from the identification of genes associated with the cause or effect of a
particular disease generally seek to protect the genes and the proteins encoded
by such genes. We also seek patent protection for our therapeutic, diagnostic
and drug screening methods and products.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including us, are generally uncertain and involve complex legal and
factual questions. Our patent applications may not protect our technologies and
products because of the following reasons:
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. There is no guarantee that any of our pending patent applications will
result in additional issued patents;
. We may develop additional proprietary technologies that are not
patentable;
. There is no guarantee that any patents issued to us or our
collaborative customers will provide a basis for commercially viable
products;
. There is no guarantee that any patents issued to us or our
collaborative customers will provide us with any competitive
advantages;
. There is no guarantee that any patents issued to us or our
collaborative customers will not be challenged or circumvented or
invalidated by third parties; and
. There is no guarantee that any patents issued to others will not have
an adverse effect on our ability to do business.
In addition, patent law relating to the scope of claims in the technology
fields in which we operate is still evolving. The degree of future protection
for our proprietary rights is uncertain. Furthermore, there can be no assurance
that others will not independently develop similar or alternative technologies,
duplicate any of our technologies, or, if patents are issued to us, design
around the patented technologies developed by us. In addition, we could incur
substantial costs in litigation if we are required to defend ourselves in patent
suits brought by third parties or if we initiate such suits.
The Issuance Of Patents May Not Provide Us With Sufficient Protection.
We may not be able to obtain further patents for our products or methods,
or, if we are able to obtain further patents, these patents may not provide us
with substantial protection or be commercially beneficial. The issuance of a
patent is not conclusive as to its validity or enforceability, nor does it
provide the patent holder with freedom to operate without infringing the patent
rights of others. A patent could be challenged by litigation and, if the outcome
of such litigation were adverse to the patent holder, competitors could be free
to use the subject matter covered by the patent, or the patent holder may
license the technology to others in settlement of such litigation. The
invalidation of key patents owned by or licensed to us or non-approval of
pending patent applications could increase competition, and materially,
adversely affect our business, financial condition and results of operations. In
addition, any application or exploitation of our technology could infringe
patents or proprietary rights of others and any licenses that we might need as a
result of such infringement might not be available to us on commercially
reasonable terms, if at all. A third party has indicated to us that it believes
we may be required to obtain a license in order to perform certain processes
that we use in the conduct of our business. We believe that if required, such
license would be available on commercially reasonable terms.
We cannot predict whether our or our competitors' pending patent
applications will result in the issuance of valid patents. Litigation, which
could result in substantial cost to us, may also be necessary to enforce our
patent and proprietary rights and/or to determine the scope and validity of
others' proprietary rights. We may participate in interference proceedings that
may in the future be declared by the United States Patent and Trademark Office
to determine priority of invention, which could result in substantial cost to
us. The outcome of any such litigation or interference proceeding might not be
favorable to us, and we might not be able to obtain licenses to technology that
we require or that, if obtainable, we could license such technology at a
reasonable cost.
The public availability of expressed sequence tags, genomic sequence
information or other sequence information prior to the time we apply for patent
protection on a corresponding full-length or partial gene could adversely affect
our ability to obtain patent protection with respect to such gene or gene
sequences. In addition, certain other groups are attempting to rapidly identify
and characterize genes through the use of gene expression analysis and other
technologies. To the extent any patents issue to other parties on such partial
or full-length genes or uses for such genes, the risk increases that the sale of
potential products, including therapeutics, or processes developed by us or our
collaborators may give rise to claims of patent infringement. Others may have
filed and in the future are likely to file patent applications covering genes or
gene products that are similar or identical to our products. Any such patent
application may have priority over our patent applications. Any legal action
against us or our collaborators claiming damages and seeking to enjoin
commercial activities relating to the affected products and processes could, in
addition to subjecting us to potential liability for damages, require us or our
collaborators to obtain a license in order to continue to manufacture or market
the affected products and processes or could enjoin us from continuing to
manufacture or market the affected products and processes. There can be no
assurance that we or our collaborators would prevail in any such action or that
any license required under any such patent would be made available on
commercially acceptable terms, if at all. We believe that there may be
significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in such litigation, it could consume a
substantial portion of our managerial and financial resources.
There is substantial uncertainty concerning the extent to which supportive
data will be required for issuance of patents for human therapeutics. If data
additional to that available to us is required, our ability to obtain patent
protection could be delayed or otherwise adversely affected. Although the United
States Patent and Trademark Office issued new utility guidelines in July 1995
that address the requirements for demonstrating utility for biotechnology
inventions, particularly for inventions relating to human therapeutics, there
can be no assurance that the United States Patent and Trademark Office examiners
will follow such guidelines or that the United States Patent and Trademark
Office's position will not change with respect to what is required to establish
utility for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General Agreement
on Tariffs and Trade has resulted in certain changes to United States patent
laws that became effective on June 8, 1995. Most notably, the term of patent
protection for patent applications filed on or after June 8, 1995 is no longer a
period of seventeen years from the date of grant. The new term of United States
patents will commence on the date of issuance and terminate twenty years from
the earliest filing date in the United States to which priority is claimed for
the application. Because the time from filing to issuance of biotechnology
patent applications is often more than three years, a twenty-year term from the
claimed United States priority date may result in a substantially shortened term
of patent protection, which may adversely affect our patent position. If this
change results in a shorter period of patent coverage, our business could be
adversely affected to the extent that the duration and level of the royalties we
are entitled to receive from our strategic partners is based on the existence of
a valid patent.
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We Cannot Be Certain That Our Security Measures Protect Our Proprietary
Technologies.
We also rely upon trade secret protection for some of our confidential and
proprietary information that is not subject matter for which patent protection
is being sought. We believe that we have developed proprietary technology,
processes and information systems for use in gene expression, biological pathway
and molecular target discovery, including proprietary biological protocols,
instrumentation, robotics and automation, software and an integrated
bioinformatics system. In addition, we have developed a database of proprietary
gene expression patterns and biological pathways which we update on an ongoing
basis and which can be accessed over the Internet. We have taken security
measures to protect our proprietary technologies, processes, information systems
and data and continue to explore ways to enhance such security. Such measures,
however, may not provide adequate protection for our trade secrets or other
proprietary information. While we require employees, academic collaborators and
consultants to enter into confidentiality and/or non-disclosure agreements where
appropriate, any of the following could still occur:
. Proprietary information could be disclosed;
. Others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade
secrets or disclose such technology; or
. We may not be able to meaningfully protect our trade secrets.
We Are Uncertain As To Whether We Will Be Able To Retain Commercialization
Rights.
In our research collaborations, we will seek to retain commercialization
rights for the development and marketing of certain pharmaceutical, agricultural
and diagnostic products or services. We may not be successful in retaining such
rights and no such pharmaceutical, agricultural or diagnostic products or
services have been developed to date by us. We may seek to commercialize any
such retained rights, as well as any products developed in our internal
development programs, directly or through collaborations with others. To date,
we have not initiated significant activities with respect to the exploitation of
any of our retained commercialization rights or any products developed in our
internal development programs. The value of these rights and products, if any,
will be largely derived from our gene expression, biological pathway and drug
screening efforts, the success of which is also uncertain. Even if we identify
and label relevant disease-related genes, biological pathways and/or drug
candidates, the commercialization of retained rights and products developed
internally will require us to develop manufacturing, marketing and sales forces,
all of which will require additional capital.
We may not be able to develop or obtain such resources. To the extent that
we are required to rely on third parties for these resources, failure to
establish and maintain such relationships could materially, adversely affect our
ability to realize value from our retained commercialization rights and products
developed internally. If we seek to commercialize retained rights and products
developed internally through joint ventures or research collaborations, we may
be required to relinquish material rights on terms that may not be favorable to
us. To date, we have not entered into any agreement concerning any such
arrangements, and we may not be able to enter into any such agreements on
acceptable terms, if at all. In addition, we may not realize any value from any
retained commercialization rights and products developed internally.
Compliance With Government Regulation Is Critical To Our Business.
Prior to the marketing of any new drug developed by us or our collaborative
customers, that new drug must undergo an extensive regulatory approval process
in the United States and other countries. This regulatory process, which
includes preclinical and clinical studies, as well as post-marketing
surveillance to establish a compound's safety and efficacy, can take many years
and require the expenditure of substantial resources. Data obtained from such
studies are susceptible to varying interpretations that could delay, limit or
prevent regulatory approval. The rate of completion of clinical trials is
dependent upon, among other factors, the enrollment of patients. Patient accrual
is a function of many factors, including:
. the size of the patient population;
. the proximity of patients to clinical sites;
. the eligibility criteria for the study; and
. the existence of competitive clinical trials.
Delays in planned patient enrollment in clinical trials may result in
increased costs, program delays or both, which could materially adversely affect
us. We may encounter delays or rejections based upon changes in United States
Food and Drug Administration policies for drug approval during the period of
product development and FDA regulatory review of each submitted new drug
application, in the case of new pharmaceutical agents, or product license
application in the case of biologics. We may also encounter similar delays in
the regulatory approval of any diagnostic product and in obtaining regulatory
approvals in foreign countries. Under current guidelines, proposals to conduct
clinical research involving gene therapy at institutions supported by the
National Institutes of Health must be approved by the Recombinant DNA Advisory
Committee and the National Institutes of Health. We may not be able to obtain
regulatory approval for any drugs or diagnostic products developed by us or our
collaborative customers. Furthermore, regulatory approval may impose limitations
on the indicated use of a drug. Because certain of the products likely to result
from our disease research programs involve the application of new technologies
and may be based upon a new therapeutic approach, such products may be subject
to substantial additional review by various government regulatory authorities
and, as a result, regulatory approvals may be obtained more slowly than for
products using more conventional technologies.
Even if we obtain regulatory approval for a marketed product, such product
and its manufacturer are subject to continuing review. We may be adversely
affected by the discovery of previously unknown problems with a product,
including withdrawal of the product from the market. We could incur various
adverse consequences as a result of any of the following events:
. Violations of regulatory requirements at any stage, including
preclinical studies and clinical trials, the approval process or post-
approval;
. The FDA's delay in approval or refusal to approve a product;
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. Withdrawal of an approved product from the market; or
. The imposition of criminal penalties against the manufacturer and new
drug application or product license application holder.
We have not submitted an investigational new drug application for any
product candidate, and no product candidate has been approved for
commercialization in the United States or elsewhere. We intend to rely primarily
on our collaborators to file investigational new drug applications and generally
direct the regulatory approval process. We or any of our collaborators may not
be able to conduct clinical testing or obtain the necessary approvals from the
FDA or other regulatory authorities for any products. Failure by us to obtain
required governmental approvals will delay or preclude our collaborators from
marketing drugs or diagnostic products developed by us or limit the commercial
use of such products and could have a material adverse effect on our business,
financial condition and results of operations.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. We are subject to federal, state and local
laws and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local laws and regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, we could be held liable for any
damages that result and any liability could exceed our resources.
We Depend On Attracting and Retaining Key Employees.
We are highly dependent on the principal members of our management and
scientific staff, including Dr. Jonathan M. Rothberg, our Chief Executive
Officer, President and Chairman of the Board. The loss of services of any of
these personnel could materially, adversely affect our business, financial
condition and results of operations. We have not entered into employment
agreements with any of the principal members of our management or scientific
staff that bind any of them to a specific term of employment. We maintain key
person life insurance on the life of Dr. Rothberg in the amount of $2,000,000.
Our future success also will depend in part on the continued services of our key
scientific and management personnel and our ability to attract, hire and retain
additional personnel. There is intense competition for such qualified personnel
and there can be no assurance that we will be able to continue to attract and
retain such personnel. Failure to attract and retain key personnel could
materially, adversely affect our business, financial condition and results of
operations.
Our Recent Significant Expansion Could Materially Adversely Affect Us.
We have recently experienced significant growth in the following:
. the number of our employees;
. the extent of our genomics efforts;
. the extent of our database development;
. our research programs and collaborations; and
. the scope of our operations.
This growth has placed, and may continue to place, a significant strain on
our management and operations. Our ability to manage effectively such growth
will depend upon our ability to strengthen our management team and our ability
to attract and retain skilled employees. Our success will also depend on the
ability of our officers and key employees to continue to implement and improve
our operational, management information and financial control systems and to
expand, train and manage our work force. In addition, we must continue to take
steps to provide resources to support our collaborative customers and
subscribers as their numbers increase. Our inability to manage our growth
effectively could materially adversely affect our business, financial condition
and results of operations.
We Are Dependent Upon Our Licensed Technologies.
We have acquired or licensed certain components of our technologies from
third parties. Changes in such third party agreements, or termination thereof,
could materially adversely affect our research and development activities. We
may not be able to acquire from third parties or develop new technologies,
either alone or with others. Failure to license or otherwise acquire necessary
technologies could materially, adversely affect our business, financial
condition and results of operations. In addition, certain of such licenses
impose an obligation on us to market the licensed technology to third parties. A
breach by us of any such license or other failure by us to maintain rights to
such technology could have a material adverse effect on our business, financial
condition and results of operations.
The Government Has Certain Rights To Funded Technologies.
Under our government grants and agreements, the government has a statutory
right to practice or have practiced and, under certain circumstances (including
inaction on our part or our licensees to achieve practical application of the
invention or a need to alleviate public health or safety concerns not reasonably
satisfied by us or our licensees), to grant to other parties licenses under, any
inventions first reduced to practice under the government grants and agreements.
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We Are Dependent On Academic Collaborators and Scientific Advisors.
We have relationships with collaborators and consultants at academic and
other institutions who conduct research at our request. Such collaborators and
consultants are not our employees. Substantially all of our collaborators and
consultants are employed by employers other than us and may have commitments to,
or consulting or advisory contracts with, other entities that may limit their
availability to us. As a result, we have limited control over their activities
and, except as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to our
activities. Our ability to discover genes and biological pathways involved in
human disease and commercialize products based on those discoveries may depend
in part on continued collaborations with researchers at academic and other
institutions. We may not be able to negotiate additional acceptable
collaborations with collaborators or consultants at academic and other
institutions or that our existing collaborations will be successful.
Our academic collaborators, consultants and scientific advisors may have
relationships with other commercial entities, some of which could compete with
us. Our academic collaborators, consultants and scientific advisors sign
agreements which provide for confidentiality of our proprietary information and
of the results of studies. We may not be able to maintain the confidentiality of
our technology and other confidential information in connection with every
academic collaboration or advisory arrangement, and any unauthorized
dissemination of our confidential information could materially, adversely affect
our business, financial condition and results of operations. Further, any such
collaborator, consultant or advisor may enter into an employment agreement or
consulting arrangement with one of our competitors.
The Sale Of Our Products Involves A Lengthy Sales Cycle.
Our ability to obtain collaborators and subscribers for our products and
services depends in significant part upon the perception that such products and
services can help accelerate drug discovery and development efforts. The sales
cycle is typically lengthy due to the education effort that is required as well
as the need to effectively sell the benefits of our products and services to a
variety of constituencies within potential collaborators and subscribers,
including research and development personnel and key management. In addition,
each subscription and collaboration will involve the negotiation of agreements
containing terms that may be unique to each subscriber or collaborator. We may
expend substantial funds and management effort with no assurance that a database
subscription or a collaboration will result.
Our Quarterly Operating Results Have Fluctuated Greatly.
Our results of operations historically have fluctuated on a quarterly basis
and can be expected to continue to be subject to quarterly fluctuations. We
expect that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial. Quarterly operating results can fluctuate as a
result of a number of factors, including the following:
. The commencement, delay, cancellation or completion of contracts;
. The timing of option, license and milestone payments under our
agreements;
. The mix of services provided by us;
. The timing of start-up expenses for new services and facilities; and
. The timing and integration of acquisitions and changes in regulations
related to our products and services.
We believe that quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. In addition, fluctuations in quarterly results could affect the
market price of our common stock in a manner unrelated to our longer term
operating performance.
There Are Risks Associated With Commercializing Pharmaceutical Products.
Although we are not currently developing any potential pharmaceutical
products, should we choose to do so, any such products will require significant
research and development and preclinical testing, and will require extensive
clinical testing prior to submission of any regulatory application for
commercial use. Such activities, if undertaken without the collaboration of
others, would require the expenditure of significant funds. Such potential
pharmaceutical products will be subject to the risks of failure inherent in the
development of pharmaceutical products based on new technologies. These risks
include the possibilities that such potential pharmaceutical products will be
found to be unsafe or ineffective or otherwise fail to receive necessary
regulatory clearances; that the products, if safe and effective, will be
difficult to manufacture on a large scale or uneconomical to market; that
proprietary rights of third parties will preclude us or our partners from
marketing such products; or that third parties will market superior or
equivalent products. As a result, we may not be able to develop through our
research and development activities any commercially viable products. Clinical
trials or marketing of any such potential pharmaceutical products may expose us
to liability claims from the use of such pharmaceutical products. We may not be
able to obtain product liability insurance or, if obtained, that sufficient
coverage can be acquired at a reasonable cost. In addition, should we choose to
develop pharmaceutical products internally, we will have to make significant
investments in pharmaceutical product development, marketing, sales and
regulatory compliance resources, and we will have to establish or contract for
the manufacture of products under the Good Manufacturing Practices of the FDA.
There can be no assurance that we will be able to develop or commercialize
successfully any potential pharmaceutical products. Any potential products
developed by our licensees will be subject to the same risks.
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Our Business May Be Adversely Affected By The Uncertainty Associated With
Pharmaceutical Pricing, Reimbursement and Related Matters.
Our business, financial condition and results of operations may be
materially adversely affected by the continuing efforts of government and third
party payors to contain or reduce the costs of health care through various
means. In certain foreign markets, pricing and profitability of prescription
pharmaceuticals are subject to government control. In the United States, we
expect that there will continue to be a number of federal and state proposals to
implement similar government control. In addition, increasing emphasis on
managed care in the United States will continue to put pressure on the pricing
of pharmaceutical and diagnostic products. Cost control initiatives could
decrease the price that we or any of our subscribers and collaborators receives
for any products in the future and may have a material adverse effect on our
business, financial condition and results of operations. Further, to the extent
that cost control initiatives have a material adverse effect on our subscribers
or collaborators, our ability to commercialize our products and to realize
royalties could be adversely affected.
Our ability and the ability of any of our subscribers or collaborative
customers to commercialize pharmaceutical or diagnostic products may depend in
part on the extent to which reimbursement for the products will be available
from government and health administration authorities, private health insurers
and other third party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Third party payors,
including Medicare, increasingly are challenging the prices charged for medical
products and services. Government and other third party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. Third party insurance coverage might
not be available to patients for any products discovered and developed by us or
our subscribers or collaborators. If adequate coverage and reimbursement levels
are not provided by government and other third party payors for our products,
the market acceptance of these products may be reduced. Any such reduction may
have a material adverse effect on our business, financial condition, results of
operations and cash flows.
Our Stock Price Has Been And May Continue To Be Volatile.
The market price of our common stock since our initial public offering in
March 1998 has been volatile. This volatility has been caused, and will in the
future continue to be caused, by the following factors, some of which are beyond
our control:
-Announcements of our results of research activities;
-Quarterly variations in our operating results;
-New collaborative agreements;
-Technological innovations by ourselves and our competitors;
-Announcements of new commercial products and initiatives by us,
collaborative partners or competitors;
-Changes in government regulation or new regulatory actions;
-Changes in patent laws;
-Developments concerning proprietary rights;
-Developments in litigation initiated against us or by us; and
-Fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology and biotechnology sectors.
Our Business Could Be Affected By Year 2000 Computer Problems.
The "Year 2000 Problem" arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer programs
may recognize a year that ends in "00" as the Year 1900 rather than the Year
2000. This could result in a significant disruption or operations and an
inability to process certain transactions. Early in 1998, upon going public, we
assessed our internal computer systems and our non-information technology
systems. We determined that because our computer applications use four digits
to identify a year in the field date, our internal computer systems are
internally compliant with Year 2000 requirements. With respect to material non-
information technology systems, we determined that substantially all of these
systems were provided by third parties.
We have developed a strategic plan to estimate the potential risks related
to third parties with which we have significant relationships. These third
parties are collaborative partners, financial institutions, vendors, payroll
service providers, utility companies, granting agencies and providers of non-
information technology systems. We have distributed inquiry letters to the
third party providers and evaluated the responses received. In addition, we
have reviewed public statements or web sites of some of the third parties. We
have determined that, based solely on this review, that approximately 85% of the
third parties are fully compliant and approximately 15% are still in the process
of becoming compliant. Of the 15% of the third parties still in the process of
becoming compliant, we consider approximately half of that number of third
parties to be material to the continuation of our daily operations, and not able
to be easily replaced prior to December 31, 1999. We will continue to monitor
their progress, either through direct discussions, written inquiries or a review
of their public statements or web sites.
There have been no material historical costs incurred to date by us related
to Year 2000 compliance. While we cannot predict what impact the Year 2000
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problem of third parties may have on us, we do not currently believe that we
will incur material costs in resolving the Year 2000 problems of third parties
with whom we interact. However, in the event that any of the third parties that
we cannot replace encounter Year 2000 problems, we may incur material costs in
resolving these Year 2000 problems.
We have assessed the potential risks associated with non-compliance of our
external third parties, 15% of whom are still in the process of evaluating their
Year 2000 compliance status, and concluded that the Year 2000 issues will not
have a material effect on the continuation of our normal daily operations.
However, this conclusion is based on a variety of factors and assumptions, some
of which are beyond our control. For instance, some third parties may have
incorrectly concluded that they are or will be Year 2000 compliant. In
addition, we may be unable to replace third parties that we thought we could
replace. Further, we and such third parties may not have anticipated all of the
problems that the Year 2000 problems may generate. If we or any of these third
parties encounter Year 2000 problems, they could have a significant impact on
our ability to effectively continue our normal daily operations.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain
forward-looking statements. These statements relate to future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks outlined under "Risk Factors" that may cause
our or our industry's actual results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Before
deciding to purchase our common stock you should carefully consider the risks
described in the "Risk Factors" section, in additional to the other information
set forth in this prospectus and the documents incorporated by reference herein.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform such statement to actual
results.
USE OF PROCEEDS
All net proceeds from the sale of our common stock will go to the selling
stockholders who offer and sell their shares. Accordingly, we will not receive
any proceeds from the selling stockholders' sale of their common stock.
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SELLING STOCKHOLDERS
The following table lists the selling stockholders and other information
regarding the beneficial ownership of the common stock by each of the selling
stockholders as of October 15, 1999. The information provided in the table
below has been obtained from the selling stockholders. The selling stockholders
may sell all, some or none of their shares in this offering. See "Plan of
Distribution."
<TABLE>
<CAPTION>
Names Number of Shares Owned Prior to Maximum Number Shares Beneficially
of Selling Offering/(1)/ Of Shares Being Owned After Offering/(2)/
--------------------------------
Stockholders Number Percent Offered Number Percent
- ------------ ----- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Transamerica Business 21,111 * 21,111 0 *
Credit Corporation/(3)/
Casdin Life Sciences 153,583 * 25,597 127,986 *
Partners L.P./(4)/
Biogen, Inc./(5)/ 1,145,804 7.2% 611,022 534,782 3.4%
Genentech, Inc./(5)/ 1,719,585 10.2% 977,636 741,949 4.4%
</TABLE>
______________
* Less than one percent of the outstanding shares of common stock.
(1) The number of shares of common stock issued and outstanding on October
15, 1999 was 15,880,827. The calculation of number of shares owned and
percentage ownership for each listed selling stockholder is based upon the
number of shares of common stock issued and outstanding at October 15,
1999, plus the shares of common stock issuable upon exercise of currently
exercisable warrants or the conversion of currently convertible non-voting
common stock held by such selling stockholder.
(2) Assumes that all of the shares held by the selling stockholders and
being offered under this prospectus are sold, that the shares are sold to
unaffiliated third parties and that the selling stockholders acquire no
additional shares of common stock before the completion of this offering.
(3) The 21,111 shares of common stock which may be sold by Transamerica
Business Credit Corporation are issuable upon exercise of warrants issued
in connection with lease arrangements between Transamerica and us.
(4) The 25,597 shares of common stock which may be sold by Casdin Life
Sciences Partners, L.P. are issuable upon exercise of a warrant purchased
from us in a private placement.
(5) The 611,022 shares of common stock which may be sold by Biogen, Inc.
and the 977,636 shares of common stock which may be sold by Genentech, Inc.
have been or will be issued by us to each of Biogen and Genentech,
respectively, in repayment of the entire outstanding balance of loans made
by each of them in the aggregate amount of $26 million. The shares of
common stock which may be sold by Genentech are issuable by us on
conversion by Genentech of an equivalent number of convertible non-voting
common shares issued to Genentech in repayment of the loan amount.
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PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling stockholders.
"Selling stockholders", as used in this prospectus, includes donees, pledgees
and distributees selling shares received from a named selling stockholder after
the date of this prospectus. The selling stockholders may offer their shares at
various times in one or more of the following transactions, or in other kinds of
transactions:
. transactions on the Nasdaq National Market;
. in private transactions other than through the Nasdaq National Market;
. in connection with short sales of the shares;
. by pledge to secure debts and other obligations;
. in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
. in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares. If
this happens, broker-dealers will either receive discounts or commissions from
the selling stockholders, or they will receive commissions from purchasers of
shares for whom they acted as agents.
Selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of that Rule.
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. of Boston,
Massachusetts, has delivered its opinion that the shares of common stock offered
in this prospectus have been validly issued and are fully paid and non-
assessable. Mintz Levin owns an aggregate of 17,073 shares of common stock and
a warrant to purchase 3,000 shares of common stock. Attorneys of Mintz Levin
and certain members of their families and trusts for their own benefit own an
aggregate of approximately 25,346 shares of common stock and a warrant to
purchase 12,000 shares of common stock.
EXPERTS
Our financial statements incorporated in this Prospectus by reference from
our Annual Report on Form 10-K for the year ended December 31, 1998 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference room. Our SEC filings are also available
to the public at the SEC's web site at "http://www.sec.gov." In addition, you
can read and copy our SEC filings at the office of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, DC, 20006.
This prospectus is only part of a Registration Statement on Form S-3 that
we have filed with the SEC under the Securities Act and therefore omits certain
information contained in the Registration Statement. We have also filed exhibits
and schedules with the Registration Statement that are excluded from this
prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or other
document. You may inspect a copy of the Registration Statement, including the
exhibits and schedules, without charge at the public reference room, or obtain a
copy from the SEC upon payment of the fees prescribed by the SEC.
13
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with it,
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 information we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. The
documents we are incorporating by reference are:
Annual Report on Form 10-K for the year ended December 31, 1998 filed
on March 26, 1999;
Definitive Proxy Statement filed on April 14, 1999;
Current Report on Form 8-K, filed on September 8, 1999;
Quarterly Report on Form 10-Q, for the quarter ended March 31, 1999,
filed on May 14, 1999;
Quarterly Report on Form 10-Q, for the quarter ended June 30, 1999,
filed on August 13, 1999;
Quarterly Report on Form 10-Q, for the quarter ended September 30,
1999, filed on November 2, 1999; and
The description of the common stock contained in our Registration
Statement on Form S-1 filed with the SEC on October 16, 1997,
including any amendments or reports filed for the purpose of updating
such description.
14
<PAGE>
================================================================================
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell and
seeking offers to buy Shares of our common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of November 4, 1999. You should not assume that this prospectus
is accurate as of any other date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CuraGen's Business........................................................ 1
Risk Factors.............................................................. 2
Forward-Looking Statements................................................ 11
Use of Proceeds........................................................... 11
Selling Stockholders...................................................... 12
Plan of Distribution...................................................... 13
Legal Matters............................................................. 13
Experts................................................................... 13
Where You Can Find More Information....................................... 13
Incorporation of Documents by Reference................................... 14
</TABLE>
1,635,366 shares
CURAGEN CORPORATION
Common Stock
($.01 par value per share)
________________
PROSPECTUS
________________
November 4, 1999
================================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the Company's estimates (other than the SEC
and Nasdaq registration fees) of the expenses in connection with the issuance
and distribution of the shares of common stock being registered. None of the
following expenses are being paid by the selling stockholders.
Item Amount
------
SEC registration fee............................ $ 8,353.86
Nasdaq listing fee.............................. 17,500.00
Legal fees and expenses......................... 20,000.00
Accounting fees and expenses.................... 2,500.00
Miscellaneous fees and expenses................. 646.14
Total........................................... $ 49,000.00
Item 15. Indemnification of Directors and Officers.
The amendment and restatement of the Company's Certificate of Incorporation
(the "Restated Certificate") provides that the Company shall indemnify to the
fullest extent authorized by the Delaware General Corporation Law ("DGCL"), each
person who is involved in any litigation or other proceeding because such person
is or was a director or officer of the Company or is or was serving as an
officer or director of another entity at the request of the Company, against all
expense, loss or liability reasonably incurred or suffered in connection
therewith. The Restated Certificate provides that the right to indemnification
includes the right to be paid expenses incurred in defending any proceeding in
advance of its final disposition; provided, however, that such advance payment
will only be made upon delivery to the Company of an undertaking, by or on
behalf of the director or officer, to repay all amounts so advanced if it is
ultimately determined that such director is not entitled to indemnification. If
the Company does not pay a proper claim for indemnification in full within 60
days after a written claim for such indemnification is received by the Company,
the Restated Bylaws authorize the claimant to bring an action against the
Company and prescribe what constitutes a defense to such action.
Section 145 of the DGCL permits a corporation to indemnify any director or
officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, if he or she had no reason to
believe his or her conduct was unlawful. In a derivative action, (i.e., one
brought by or on behalf of the corporation), indemnification may be made only
for expenses, actually and reasonably incurred by any director or officer in
connection with the defense or settlement of such an action or suit, if such
person acted in good faith and in a manner that he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the DGCL, Article Tenth of the Restated
Certificate eliminates the liability of a director or the corporation or its
stockholders for monetary damages for such breach of fiduciary duty as a
director, except for liabilities arising (i) from any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) from acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) from any
transaction from which the director derived an improper personal benefit. The
Company has obtained primary and excess insurance policies insuring the
directors and officers of the Company against certain liabilities that they may
incur in their capacity as directors and officers. Under such policies, the
insurers, on behalf of the Company, may also pay amounts for which the Company
has granted indemnification to the directors or officers.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(Filed as Exhibit 3.3 to the Registrant's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission, File No.
333-38051, and incorporated herein by reference.)
4.2 Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.5 to
the Registrant's Registration on Form S-1 filed with the Securities
and Exchange Commission, File No. 333-38051, and incorporated herein
by reference.)
4.3 Article Fourth of the Amended and Restated Certificate of
Incorporation of the Registrant (Filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission, File No. 333-38051, and
incorporated herein by reference.)
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1).
II-1
<PAGE>
24.1 Power of Attorney (included on signature page).
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or any
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) 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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
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 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by 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, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 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.
(d) 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 is 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Haven and State of
Connecticut on the 4th day of November, 1999.
CURAGEN CORPORATION
By: /s/ Jonathan M. Rothberg, Ph.D.
-------------------------------
Jonathan M. Rothberg, Ph.D.
Chief Executive Officer, Chairman of the Board
and President
POWER OF ATTORNEY
The registrant and each person whose signature appears below constitutes and
appoints Jonathan M. Rothberg, Ph.D. and David M. Wurzer, C.P.A. and each of
them singly, his, her or its true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him, her or it and in his,
her or its name, place and stead, in any and all capacities, to sign and file
(i) any and all amendments (including post-effective amendments) to this
Registration Statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he, she, or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his 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 below by the following persons and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jonathan M. Rothberg Chief Executive Officer, Chairman of the Board of Director and President November 4, 1999
- ------------------------
Jonathan M. Rothberg, Ph.D. (Principal Executive Officer)
/s/ David M. Wurzer Executive Vice-President, Treasurer and Chief Financial Officer November 4, 1999
- ------------------------
David M. Wurzer, C.P.A. (Principal Financial and Accounting Officer)
/s/ Richard H. Booth Director November 4, 1999
- ------------------------
Richard H. Booth, C.P.A., C.L.U., Ch.F.C.
/s/ Vincent T. DeVita Director November 4, 1999
- ------------------------
Vincent T. DeVita, Jr., M.D.
/s/ Robert E. Patricelli Director November 4, 1999
- --------------------------
Robert E. Patricelli, J.D.
/s/ James L. Vincent Director November 4, 1999
- --------------------------
James L. Vincent
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(Filed as Exhibit 3.3 to the Registrant's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission, File No.
333-38051, and incorporated herein by reference.)
4.2 Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.5 to
the Registrant's Registration on Form S-1 filed with the Securities
and Exchange Commission, File No. 333-38051, and incorporated herein
by reference.)
4.3 Article Fourth of the Amended and Restated Certificate of
Incorporation of the Registrant (Filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission, File No. 333-38051, and
incorporated herein by reference.)
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
regarding legality.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. APPEARS HERE]
November 4, 1999
CuraGen Corporation
555 Long Wharf Drive
New Haven, CT 06511
Ladies and Gentlemen:
We have acted as counsel to CuraGen Corporation, a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement"), pursuant to which the Company is registering under
the Securities Act of 1933, as amended, a total of 1,635,366 shares (the
"Shares") of its common stock, $.01 par value per share (the "Common Stock"),
for resale to the public. The Shares are to be sold by the selling stockholders
identified in the Registration Statement. This opinion is being rendered in
connection with the filing of the Registration Statement. All capitalized terms
used herein and not otherwise defined shall have the respective meanings given
to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated By-Laws, both as
currently in effect, such other records of the corporate proceedings of the
Company and certificates of the Company's officers as we have deemed relevant,
and the Registration Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified, photostatic or facsimile copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when sold,
will be duly and validly issued, fully paid and non-assessable shares of the
Common Stock.
Our opinion is limited to the General Corporation Laws of The State of
Delaware, and we express no opinion with respect to the laws of any other
jurisdiction. No opinion is expressed herein with respect to the qualification
of the Shares under the securities or blue sky laws of any state or any foreign
jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of CuraGen Corporation on Form S-3 of our report dated February 12,
1999, appearing in the Annual Report on Form 10-K of CuraGen Corporation for
the year ended December 31, 1998 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Hartford, Connecticut
November 3, 1998
