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424(b)(4)
495,356 SHARES
ABGENIX, INC.
COMMON STOCK
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Genentech, Inc., the selling stockholder, is offering 495,356 shares
of Abgenix, Inc.'s common stock. Abgenix's stock is traded on the Nasdaq
National Market under the symbol "ABGX." The last reported sale price for the
common stock on the Nasdaq National Market on July 21, 1999 was $23.00 per
share. We advise you to obtain a current market quotation for our common
stock. We will not receive any of the proceeds from the sale of shares by the
selling stockholder and we are not offering any shares for sale under this
prospectus. See "Plan of Distribution" for a description of sales of the
shares by the selling stockholder. In this prospectus, references to
"Abgenix," "we," "us," and "our" refer to Abgenix, Inc., and its subsidiaries.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 22, 1999
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<TABLE>
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TABLE OF CONTENTS
Page
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Where You Can Find Additional Information............................ 2
Information Incorporated by Reference................................ 2
Forward Looking Information.......................................... 3
The Company.......................................................... 4
Risk Factors......................................................... 4
Use of Proceeds......................................................19
Plan of Distribution.................................................20
Legal Matters........................................................21
Experts..............................................................21
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any document
that we file at the Securities and Exchange Commission's public reference rooms
in Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. The Securities and Exchange Commission filings are
also available to the public on the Securities and Exchange Commission's
Internet web site at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 under the Securities Act with respect to the
common stock offered hereby. This prospectus, which is part of the registration
statement, does not contain all of the information set forth in the registration
statement. Certain parts of the registration statement are omitted from the
prospectus in accordance with the rules and regulations of the Securities and
Exchange Commission. You should review the registration statement and its
exhibits and schedules for further information regarding Abgenix and the common
stock offered hereby. This prospectus contains descriptions of some of our
contracts and other documents. These descriptions are not complete. We encourage
you to review the complete copies of these contracts and other documents that
have been filed as exhibits to our reports and other information filed with the
Securities and Exchange Commission pursuant to the Exchange Act or registration
statements filed with the Securities and Exchange Commission pursuant to the
Securities Act.
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission 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 that we file with the Securities and Exchange
Commission later will automatically update and supersede this information. We
incorporate by reference our documents listed below and any future filings made
by us with the Securities and Exchange Commission under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act until the offering of securities under this
prospectus is terminated.
- The description of our common stock contained in our Registration
Statement on Form 8-A filed with the Securities and Exchange Commission
on May 5, 1998;
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- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
- Current Report on Form 8-K dated March 30, 1999; and
- The description of our preferred share purchase rights contained in our
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on June 15, 1999;
You may request a copy of these filings, at no cost, by writing or
telephoning us at: Abgenix, Inc., 7601 Dumbarton Circle, Fremont, California
94555, 510-608-6500.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different or additional information. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of those documents.
FORWARD LOOKING INFORMATION
Certain of the matters discussed under the caption "Risk Factors" and
elsewhere in this prospectus or in the information incorporated by reference
herein may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such information may involve
known and unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
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THE COMPANY
Abgenix is a biopharmaceutical company that develops and intends to
commercialize antibody therapeutic products for the treatment of a variety of
disease conditions, including transplant-related diseases, inflammatory and
autoimmune disorders, cardiovascular disease and cancer. We have developed
XenoMouse technology, which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We have collaborative arrangements with
multiple pharmaceutical and biotechnology companies involving our XenoMouse
technology. In addition, we have four proprietary antibody product candidates
that are under development internally, two of which are in human clinical
trials.
Our principal executive offices are located at 7601 Dumbarton Circle,
Fremont, California 94555, and our telephone number is (510) 608-6500.
RISK FACTORS
OUR XENOMOUSE TECHNOLOGY MAY NOT PRODUCE SAFE, EFFICACIOUS OR COMMERCIALLY
VIABLE PRODUCTS
Our XenoMouse technology is a new approach to the generation of
antibody therapeutic products. We have not commercialized any antibody products
based on XenoMouse technology. We are not aware of any commercialized, fully
human antibody therapeutic products that have been generated from any
technologies similar to ours. Our antibody product candidates are still at a
very early stage of development. We have begun clinical trials with respect to
only one fully human antibody product candidate, ABX-IL8. We cannot be certain
that XenoMouse technology will generate antibodies against all the antigens to
which it is exposed in an efficient and timely manner, if at all. Furthermore,
XenoMouse technology may not result in any meaningful benefits to our current or
potential collaborative partners or be safe and efficacious for patients. If
XenoMouse technology fails to generate antibody product candidates that lead to
the successful development and commercialization of products, our business,
financial condition and results of operations will be materially adversely
affected.
CLINICAL TRIALS FOR OUR PRODUCT CANDIDATES WILL BE EXPENSIVE AND THEIR OUTCOME
IS UNCERTAIN
Conducting clinical trials is a lengthy, time-consuming and expensive
process. Before obtaining regulatory approvals for the commercial sale of any
products, we must demonstrate through preclinical testing and clinical trials
that our product candidates are safe and effective for use in humans. We will
incur substantial expense for, and devote a significant amount of time to,
preclinical testing and clinical trials.
Historically, the results from preclinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs and biologics have shown promising results in
clinical trials, but subsequently failed to establish sufficient safety and
efficacy data to obtain necessary regulatory approvals. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, regulatory
delays or rejections may be encountered as a result of many factors, including
changes in regulatory policy during the period of product development.
Only two of our product candidates, ABX-CBL and ABX-IL8 are currently
in clinical trials. Patient follow-up for these clinical trials has been
limited. To date, data obtained from these clinical trials has been insufficient
to demonstrate safety and efficacy under applicable FDA guidelines. As a result,
such data will
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not support an application for regulatory approval without further clinical
trials. Clinical trials conducted by Abgenix or by third parties on our
behalf may not demonstrate sufficient safety and efficacy to obtain the
requisite regulatory approvals for ABX-CBL and ABX-IL8 or any other potential
product candidates. Regulatory authorities may not permit us to undertake any
additional clinical trials for our product candidates.
In addition, our other product candidates are in preclinical
development. We have submitted an investigational drug application for ABX-EGF.
We have not submitted an investigational new drug application for ABX-RB2. We
have not begun clinical trials for either of these product candidates. Our
preclinical or clinical development efforts may not be successfully completed.
We may not file further investigational new drug applications. Our clinical
trials may not commence as planned.
Completion of clinical trials may take several years or more. The
length of time generally varies substantially according to the type, complexity,
novelty and intended use of the product candidate. Our commencement and rate of
completion of clinical trials may be delayed by many factors, including:
- inability to manufacture sufficient quantities of materials
used for clinical trials;
- slower than expected rate of patient recruitment;
- inability to adequately follow patients after treatment;
- unforeseen safety issues;
- lack of efficacy during the clinical trials; or
- government or regulatory delays.
We have limited experience in conducting and managing clinical trials.
We rely on third parties, including our collaborative partners, to assist us in
managing and monitoring clinical trials. Our reliance on such third parties may
result in delays in completing, or failing to complete, such trials if they fail
to perform under our agreements with them.
Our product candidates may fail to demonstrate safety and efficacy in
clinical trials. Such failure may delay development of other product candidates,
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of such failures, we may also be unable to obtain additional
financing. Our business, financial condition and results of operations will be
materially adversely affected by any delays in, or termination of, our clinical
trials.
THE CLINICAL SUCCESS OF ABX-CBL IS UNCERTAIN
We recently completed a multi-center confirmatory Phase II trial in
graft versus host disease, or GVHD. As of March 31, 1999, ABX-CBL had been
administered to a total of only 151 patients for GVHD and organ transplant
rejection indications. ABX-CBL was administered to a total of 85 of these
patients by third parties prior to Abgenix obtaining an exclusive license to
ABX-CBL. In our clinical trials, we administered ABX-CBL to only 66 of these
patients, 27 of which were used for our preliminary Phase II report submitted to
the FDA. We cannot rely on data obtained from patients studied prior to our
obtaining an exclusive license to ABX-CBL to support the efficacy of ABX-CBL in
an application for regulatory approval. In addition, our clinical trials are
being conducted with patients who have failed conventional
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treatments and who are in the most advanced stages of GVHD. During the course
of treatment, these patients can die or suffer adverse medical effects for
reasons that may not be related to ABX-CBL. Such adverse effects may affect
the interpretation of clinical trial results.
As an extension to the original Phase II trial protocol, we filed for
and received permission from the FDA to enroll additional patients at a single
dose. This protocol remains open and continues to enroll patients. Our
application to the FDA for approval to advance to Phase III clinical trials will
contain the original Phase II data plus all additional data then available from
the extension protocol. There can be no assurance that the results of the
extension protocol will be favorable or will extend the findings of the original
Phase II study. In addition, the FDA may view our application as insufficient
and require additional clinical trials before allowing us to commence a Phase
III clinical trial. Additional clinical trials will be extensive, expensive and
time-consuming. If ABX-CBL fails to receive regulatory approval, our business,
financial condition and results of operations may be materially adversely
affected.
SUCCESSFUL DEVELOPMENT OF OUR PRODUCTS IS UNCERTAIN
Our development of current and future product candidates is subject to
the risks of failure inherent in the development of new pharmaceutical products
and products based on new technologies. These risks include:
- delays in product development, clinical testing or manufacturing;
- unplanned expenditures in product development, clinical testing or
manufacturing;
- failure in clinical trials or failure to receive regulatory
approvals;
- emergence of superior or equivalent products;
- inability to manufacture product candidates on a commercial scale;
- inability to market products due to third-party proprietary rights;
- election by our collaborative partners not to pursue product
development;
- failure by our collaborative partners to successfully develop
products; and
- failure to achieve market acceptance.
Because of these risks, our research and development efforts or those
of our collaborative partners may not result in any commercially viable
products. To date, none of our collaborative partners has exercised its right to
obtain a product license. If a significant portion of these development efforts
is not successfully completed, required regulatory approvals are not obtained,
or any approved products are not commercially successful, our business,
financial condition and results of operations will be materially adversely
affected.
WE ARE AN EARLY STAGE COMPANY
You must evaluate us in light of the uncertainties and complexities
present in an early stage biopharmaceutical company. Our product candidates are
in early stages of development. We will require significant additional
investment in research and development, preclinical testing and clinical trials,
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regulatory and sales and marketing activities to commercialize current and
future product candidates. We cannot assure you that such product candidates,
if successfully developed, will generate sufficient or sustainable revenues
to enable us to be profitable.
WE HAVE A HISTORY OF LOSSES
We have incurred net losses in each of the last four years of
operation, including net losses of approximately $8.3 million in 1995, $7.1
million in 1996, $35.9 million in 1997 and $16.8 million in 1998. We have also
incurred net losses of approximately $5.4 million in the three months ended
March 31, 1999. As of March 31, 1999, our accumulated deficit was approximately
$74.7 million. Our losses have resulted principally from:
- research and development costs relating to the development of our
XenoMouse technology and antibody product candidates;
- non-recurring, cross-license and settlement costs relating to our
patent portfolio; and
- general and administrative costs relating to our operations.
We expect to incur additional operating losses until at least the year
2000 as a result of increases in our research and development costs, including
costs associated with conducting preclinical testing and clinical trials. We
expect that the amount of operating losses will fluctuate significantly from
quarter to quarter as a result of increases or decreases in our research and
development efforts, the execution or termination of collaborative arrangements,
or the initiation, success or failure of clinical trials.
OUR FUTURE PROFITABILITY IS UNCERTAIN
Prior to June 1996, our business was owned by Cell Genesys and operated
as a business unit. Since that time, we have funded our research and development
activities primarily from contributions from Cell Genesys, private placements of
preferred and common stock, the initial public offering of our common stock,
revenues generated from our collaborative arrangements, equipment leaseline
financings and loan facilities. We expect that substantially all of our revenues
for the foreseeable future will result from payments under collaborative
arrangements. To date, such payments have been in the form of upfront payments,
reimbursement for research and development expenses and milestone payments, but
may include license fees in the future. Payments under our existing and any
future collaborative arrangements will be subject to significant fluctuation in
both timing and amount. Our revenues may not be indicative of our future
performance or of our ability to continue to achieve such milestones. Our
revenues and results of operations for any period may also not be comparable to
the revenues or results of operations for any other period. We cannot assure you
that we will:
- enter into further collaborative arrangements;
- successfully complete preclinical or clinical trials;
- obtain required regulatory approvals;
- successfully develop, manufacture and market product candidates; or
- generate additional revenues or profitability.
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If we fail to achieve any of the above goals, our business, financial
condition and results of operations will be materially adversely affected.
WE WILL NEED TO FIND COLLABORATIVE PARTNERS TO DEVELOP MANY OF OUR PRODUCT
CANDIDATES
Our strategy for the development and commercialization of antibody
therapeutic products depends, in large part, upon the formation of collaborative
arrangements with several collaborative partners. Potential collaborative
partners include pharmaceutical and biotechnology companies, academic
institutions and other entities. We must enter into these collaborations to
successfully develop and commercialize product candidates. Such collaborations
are necessary in order for us to:
- access proprietary antigens for which we can generate fully human
antibody products;
- fund our research and development activities;
- fund preclinical testing, clinical trials and manufacturing;
- seek and obtain regulatory approvals; and
- successfully commercialize existing and future product candidates.
Only a limited number of fully human antibody product candidates have
been generated pursuant to our collaborations. None of these collaborative
product candidates has entered clinical testing and may not result in
commercially successful products. Current or future collaborative arrangements
may not be successful. If we fail to maintain our existing collaborative
arrangements or to enter into additional collaborative arrangements, our
business, financial condition and results of operations will be materially
adversely affected.
Our dependence on collaborative arrangements with third parties
subjects us to a number of risks. Such collaborative arrangements may not be on
terms favorable to Abgenix. Agreements with collaborative partners typically
allow partners significant discretion in electing whether to pursue any of the
planned activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Our partners may
not perform their obligations as expected. Business combinations or significant
changes in a collaborative partner's business strategy may adversely affect a
partner's willingness or ability to complete its obligations under the
arrangement. Even if we fulfill our obligations under a collaborative agreement,
our partner can terminate the agreement at any time following proper written
notice. If any collaborative partner were to terminate or breach our agreement
with it, or otherwise fail to complete its obligations in a timely manner, our
business, financial condition and results of operations may be materially
adversely affected. If we are not able to establish further collaborative
arrangements or any or all of our existing collaborative arrangements are
terminated, we may be required to seek new collaborative arrangements or to
undertake product development and commercialization at our own expense. Such an
undertaking may:
- limit the number of product candidates that we will be able to
develop and commercialize;
- reduce the likelihood of successful product introduction;
- significantly increase our capital requirements; and
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- place additional strain on management's time.
Existing or future collaborative partners may pursue alternative
technologies, including those of our competitors. Disputes may arise with
respect to the ownership of rights to any technology or products developed
with any current or future collaborative partner. Lengthy negotiations with
potential new collaborative partners or disagreements between Abgenix and our
collaborative partners may lead to delays or termination in the research,
development or commercialization of product candidates or result in time
consuming and expensive litigation or arbitration. If our collaborative
partners pursue alternative technologies or fail to develop or commercialize
successfully any product candidate to which they have obtained rights from
us, our business, financial condition and results of operations may be
materially adversely affected.
OUR JOINT VENTURE WITH AKROS PHARMA, INC. MAY LIMIT OUR ABILITY TO DEVELOP
PRODUCT CANDIDATES
In 1991, Cell Genesys and Akros Pharma, Inc. (formerly JT America,
Inc.) formed Xenotech, L.P., an equally-owned joint venture, to develop
genetically modified strains of mice which can produce fully human monoclonal
antibodies, called XenoMouse technology, and to commercialize products generated
from XenoMouse technology. Upon our organization, Cell Genesys assigned its
rights in Xenotech to us.
We must obtain licenses from Xenotech to commercialize antibody
products generated by XenoMouse technology. We have the right to license the use
of XenoMouse technology from Xenotech to develop a certain number of antigen
targets each year. If we have used our yearly allotment of licenses to develop
antigen targets and desire to acquire a license to develop additional antigen
targets, we may have to negotiate with Akros or others to acquire such rights.
Disputes with Akros, or its parent company Japan Tobacco, Inc., may result in
the loss of the right to commercialize a product candidate by either party.
Limits on our ability to acquire additional licenses to develop antigen targets,
or disputes with Akros or Japan Tobacco, will limit our ability to establish
collaborations and fully realize the commercial potential of XenoMouse
technology.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are highly competitive
and subject to significant and rapid technological change. We are aware of
several pharmaceutical and biotechnology companies that are actively engaged in
research and development in areas related to antibody therapy. These companies
have commenced clinical trials of antibody products or have successfully
commercialized antibody products. Many of these companies are addressing the
same diseases and disease indications as Abgenix or our collaborative partners.
Also, we compete with companies that offer antibody generation services to
companies that have antigens. These competitors have specific expertise or
technology related to antibody development. These companies include GenPharm
International, Inc., a wholly-owned subsidiary of Medarex, Inc., Cambridge
Antibody Technology Group plc, Protein Design Labs, Inc. and MorphoSys AG.
Some of our competitors have received regulatory approval or are developing
or testing product candidates that may compete directly with our product
candidates. Recently, Sangstat Medical Corp. received approval for an organ
transplant rejection product that may compete with ABX-CBL, which is in clinical
trials. We are also aware that several companies, including Genentech, Inc.,
have potential product candidates that may compete with ABX-IL8. Furthermore, we
are aware that ImClone Systems, Inc., Medarex and OSI Pharmaceuticals, Inc. have
potential antibody and small molecule product candidates already in clinical
development that may compete with ABX-EGF, which is in preclinical development.
We
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may also compete with Japan Tobacco in supplying XenoMouse technology or
antibody product candidates to potential collaborative partners.
Many of these companies and institutions, either alone or together with
their collaborative partners, have substantially greater financial resources and
larger research and development staffs than we do. In addition, many of these
competitors, either alone or together with their collaborative partners, have
significantly greater experience than we do in:
- developing products;
- undertaking preclinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent
protection, receiving FDA approval or commercializing products before us. If we
commence commercial product sales, we will be competing against companies with
greater marketing and manufacturing capabilities, areas in which we have limited
or no experience.
We also face, and will continue to face, competition from academic
institutions, government agencies and research institutions. There are numerous
competitors working on products to treat each of the diseases for which we are
seeking to develop therapeutic products. In addition, any product candidate that
we successfully develop may compete with existing therapies that have long
histories of safe and effective use. Competition may also arise from:
- other drug development technologies and methods of preventing or
reducing the incidence of disease;
- new small molecules; or
- other classes of therapeutic agents.
Developments by competitors may render our product candidates or
technologies obsolete or noncompetitive. We face and will continue to face
intense competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.
MARKET ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN
Our product candidates may not gain market acceptance among physicians,
patients, healthcare payors and the medical community. We may not achieve market
acceptance even if clinical trials demonstrate safety and efficacy, and the
necessary regulatory and reimbursement approvals are obtained. The degree of
market acceptance of any product candidates that we develop will depend on a
number of factors, including:
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- establishment and demonstration of clinical efficacy and safety;
- cost-effectiveness of our product candidates;
- their potential advantage over alternative treatment methods;
- reimbursement policies of government and third-party payors; and
- marketing and distribution support for our product candidates.
Physicians will not recommend therapies using our products until such
time as clinical data or other factors demonstrate the safety and efficacy of
such procedures as compared to conventional drug and other treatments. Even if
the clinical safety and efficacy of therapies using our antibody products is
established, physicians may elect not to recommend the therapies for any number
of other reasons, including whether the mode of administration of our antibody
products is effective for certain indications. For example, antibody products
are typically administered by infusion or injection, which requires substantial
cost and inconvenience to patients. Our product candidates, if successfully
developed, will compete with a number of drugs and therapies manufactured and
marketed by major pharmaceutical and other biotechnology companies. Our products
may also compete with new products currently under development by others.
Physicians, patients, third-party payors and the medical community may not
accept and utilize any product candidates that Abgenix or our collaborative
partners develop. If our products do not achieve significant market acceptance,
our business, financial condition and results of operations will be materially
adversely affected.
OUR PATENT POSITION IS UNCERTAIN AND OUR SUCCESS DEPENDS ON OUR PROPRIETARY
RIGHTS
Our success depends in part on our ability to:
- obtain patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of others;
and
- prevent others from infringing on our proprietary rights.
We will be able to protect our proprietary rights from unauthorized use
by third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
While we have pending patent applications in the United States relating to
XenoMouse technology, no patents have been issued. We try to protect our
proprietary position by filing United States and foreign patent applications
related to our proprietary technology, inventions and improvements that are
important to the development of our business. The patent position of
biopharmaceutical companies involves complex legal and factual questions and,
therefore, enforceability cannot be predicted with certainty. Patents, if
issued, may be challenged, invalidated or circumvented. Thus, any patents that
we own or license from third parties may not provide any protection against
competitors. Our pending patent applications, those we may file in the future,
or those we may license from third parties, may not result in patents being
issued. Also, patent rights may not provide us with proprietary protection or
competitive advantages against competitors with similar technology. Furthermore,
others may independently develop similar technologies or
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duplicate any technology that we have developed. The laws of certain foreign
countries do not protect our intellectual property rights to the same extent
as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary
know-how. We seek protection, in part, through confidentiality and proprietary
information agreements. These agreements may not provide meaningful protection
or adequate remedies for our technology in the event of unauthorized use or
disclosure of confidential and proprietary information. The parties may breach
such agreements. Furthermore, our trade secrets may otherwise become known to,
or be independently developed by, our competitors.
WE MAY FACE CHALLENGES FROM THIRD PARTIES REGARDING THE VALIDITY OF OUR PATENTS
AND PROPRIETARY RIGHTS
Research has been conducted for many years in the antibody field. This
has resulted in a substantial number of issued patents and an even larger number
of patent applications. Patent applications in the United States are, in most
cases, maintained in secrecy until patents issue. The publication of discoveries
in the scientific or patent literature frequently occurs substantially later
than the date on which the underlying discoveries were made. Our commercial
success depends significantly on our ability to operate without infringing the
patents and other proprietary rights of third parties. Our technologies may
infringe the patents or violate other proprietary rights of third parties. In
the event of infringement or violation, Abgenix and our collaborative partners
may be prevented from pursuing product development or commercialization. Such a
result will materially adversely affect our business, financial condition and
results of operations.
In March 1997, we entered into a cross-license and settlement agreement
with GenPharm to avoid protracted litigation. Under the cross-license, we
licensed on a non-exclusive basis certain patents, patent applications,
third-party licenses, and inventions pertaining to the development and use of
certain transgenic rodents including mice that produce fully human antibodies
that are integral to our products and business. Our business, financial
condition and results of operations will be materially adversely affected if any
of the parties breaches the cross-license agreement. We have one issued European
patent relating to XenoMouse technology that is currently undergoing opposition
proceedings within the European Patent Office and the outcome of this opposition
is uncertain.
The biotechnology and pharmaceutical industries have been characterized
by extensive litigation regarding patents and other intellectual property
rights. The defense and prosecution of intellectual property suits, United
States Patent and Trademark Office interference proceedings and related legal
and administrative proceedings in the United States and internationally involve
complex legal and factual questions. As a result, such proceedings are costly
and time-consuming to pursue and their outcome is uncertain. Litigation may be
necessary to:
- enforce our issued and licensed patents;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
If we become involved in any litigation, interference or other
administrative proceedings, we will incur substantial expense and the efforts of
our technical and management personnel will be significantly diverted. An
adverse determination may subject us to significant liabilities or require us to
seek licenses that may not be available from third parties. We may be restricted
or prevented from manufacturing and selling
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our products, if any, in the event of an adverse determination in a judicial
or administrative proceeding or if we fail to obtain necessary licenses.
Costs associated with these arrangements may be substantial and may include
ongoing royalties. Furthermore, we may not be able to obtain the necessary
licenses on satisfactory terms, if at all. These outcomes will materially
adversely affect our business, financial condition and results of operations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATIONS AND WE MAY NOT BE ABLE TO
OBTAIN REGULATORY APPROVALS
Our product candidates under development are subject to extensive and
rigorous domestic government regulation. The FDA regulates, among other things,
the development, testing, manufacture, safety, efficacy, record-keeping,
labeling, storage, approval, advertising, promotion, sale and distribution of
biopharmaceutical products. If our products are marketed abroad, they also are
subject to extensive regulation by foreign governments. None of our product
candidates has been approved for sale in the United States or any foreign
market. The regulatory review and approval process, which includes preclinical
studies and clinical trials of each product candidate, is lengthy, expensive and
uncertain. Securing FDA approval requires the submission of extensive
preclinical and clinical data and supporting information to the FDA for each
indication to establish the product candidate's safety and efficacy. For
example, we have not received FDA approval to commence Phase III clinical trials
for ABX-CBL. The approval process takes many years, requires the expenditure of
substantial resources, involves post-marketing surveillance, and may involve
ongoing requirements for post-marketing studies. Delays in obtaining regulatory
approvals may:
- adversely affect the successful commercialization of any drugs that
Abgenix or our collaborative partners develop;
- impose costly procedures on Abgenix or our collaborative partners;
- diminish any competitive advantages that Abgenix or our
collaborative partners may attain; and
- adversely affect our receipt of revenues or royalties.
Certain material changes to an approved product such as manufacturing
changes or additional labeling claims are subject to further FDA review and
approval. Any required approvals, once obtained, may be withdrawn. Compliance
with other regulatory requirements may not be maintained. Further, if we fail to
comply with applicable FDA and other regulatory requirements at any stage during
the regulatory process, Abgenix or our contract manufacturers may be subject to
sanctions, including:
- delays;
- warning letters;
- fines;
- product recalls or seizures;
- injunctions;
- refusal of the FDA to review pending market approval applications
or supplements to approval applications;
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- total or partial suspension of production;
- civil penalties;
- withdrawals of previously approved marketing applications; and
- criminal prosecutions.
We expect to rely on our collaborative partners to file investigational
new drug applications and generally direct the regulatory approval process for
many of our products. Our collaborative partners may not be able to conduct
clinical testing or obtain necessary approvals from the FDA or other regulatory
authorities for any product candidates. If we fail to obtain required
governmental approvals, our collaborative partners will experience delays in or
be precluded from marketing products developed through our research. In
addition, the commercial use of our products will be limited. Delays and
limitations may materially adversely affect our business, financial condition
and results of operations.
Abgenix and our contract manufacturers also are required to comply with
the applicable FDA current good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection by
the FDA. Such facilities must be approved before we can use them in commercial
manufacturing of our products. Abgenix or our contract manufacturers may not be
able to comply with the applicable good manufacturing practice requirements and
other FDA regulatory requirements. If Abgenix or our contract manufacturers
fails to comply, our business, financial condition and results of operations
will be materially adversely affected.
WE RELY ON A SOLE SOURCE THIRD-PARTY MANUFACTURER AND DO NOT HAVE COMMERCIAL
SCALE MANUFACTURING EXPERIENCE
We lack the resources and capability to manufacture our products on a
commercial scale. We currently manufacture only limited quantities of antibody
products for preclinical testing. While we maintain a limited inventory of
antibody products, we depend on a sole source contract manufacturer to produce
ABX-CBL, ABX-IL8 and ABX-EGF under good manufacturing practice regulations for
use in our clinical trials. Our contract manufacturer has a limited number of
facilities in which our product candidates can be produced. Our contract
manufacturer has limited experience in manufacturing ABX-CBL, ABX-IL8 and
ABX-EGF in quantities sufficient for conducting clinical trials or for
commercialization.
There are, on a worldwide basis, a limited number of contract
facilities in which our product candidates can be produced under good
manufacturing practice regulations for use in pharmaceutical drugs. It can also
take a substantial period of time for a contract facility to begin producing
antibodies under good manufacturing practice regulations. Accordingly, we depend
on our contract manufacturer to produce our product candidates under good
manufacturing practice regulations which meet acceptable standards for our
clinical trials.
Contract manufacturers often encounter difficulties in scaling up
production, including problems involving production yields, quality control and
quality assurance and shortage of qualified personnel. Our contract manufacturer
may not perform as agreed or may not remain in the contract manufacturing
business for the time required by us to successfully produce and market our
product candidates. If our contract manufacturer fails to deliver the required
quantities of our product candidates for clinical use on a timely
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basis and at commercially reasonable prices, and we fail to find a
replacement manufacturer or develop our own manufacturing capabilities, our
business, financial condition and results of operations will be materially
adversely affected.
In addition, Abgenix and our third-party manufacturer are required to
register manufacturing facilities with the FDA and foreign regulatory
authorities. The facilities will then be subject to inspections confirming
compliance with good manufacturing practice requirements established by the FDA
or corresponding foreign regulations. If Abgenix or our third-party manufacturer
fails to maintain compliance with the good manufacturing practice requirements,
our business, financial condition and results of operations will be materially
adversely affected.
WE DO NOT HAVE MARKETING AND SALES EXPERIENCE
We do not have a marketing, sales or distribution capability. For
certain products, we may establish an internal marketing and sales force. We
intend to enter into arrangements with third parties to market and sell most of
our products. We may not be able to enter into marketing and sales arrangements
with others on acceptable terms, if at all. To the extent that we enter into
marketing and sales arrangements with other companies, our revenues, if any,
will depend on the efforts of others. These efforts may not be successful. If we
are unable to enter into third-party arrangements, then we must develop a
marketing and sales force, which may need to be substantial in size, in order to
achieve commercial success for any product candidate approved by the FDA. We may
not successfully develop marketing and sales experience or have sufficient
resources to do so. If we do develop such capabilities, we will compete with
other companies that have experienced and well-funded marketing and sales
operations. If we fail to establish successful marketing and sales capabilities
or fail to enter into successful marketing arrangements with third parties, our
business, financial condition and results of operations will be materially
adversely affected.
WE DEPEND ON KEY PERSONNEL AND MUST CONTINUE TO ATTRACT AND RETAIN KEY EMPLOYEES
AND CONSULTANTS
We are highly dependent on the principal members of our scientific and
management staff. If we lose any of these persons, our business, financial
condition and results of operations may be materially adversely affected. For us
to pursue product development, marketing and commercialization plans, we will
need to hire additional qualified scientific personnel to perform research and
development. We will also need to hire personnel with expertise in clinical
testing, government regulation, manufacturing, marketing and finance. Attracting
and retaining qualified personnel will be critical to our success. We may not be
able to attract and retain personnel on acceptable terms given the competition
for such personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions.
In addition, we rely on members of our Scientific and Medical Advisory
Boards and other consultants to assist us in formulating our research and
development strategy. All of our consultants and the members of our Scientific
and Medical Advisory Boards are employed by other entities. They may have
commitments to, or advisory or consulting agreements with, other entities that
may limit their availability to us. If we lose the services of these personnel,
the achievement of our development objectives may be impeded. Such impediments
may materially adversely affect our business, financial condition and results of
operations. See "Business -- Scientific and Medical Advisory Boards."
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<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED ENTITIES
OWN A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK
As of May 31, 1999, our directors, executive officers, principal
stockholders and affiliated entities beneficially own, in the aggregate,
approximately 28.5% of our outstanding common stock. These stockholders, if
acting together, will be able to significantly influence all matters requiring
approval by our stockholders. Such matters include the election of directors and
the approval of mergers or other business combination transactions. We may be
adversely impacted by the control that such stockholders will have with respect
to matters affecting us.
WE MAY REQUIRE ADDITIONAL FINANCING
We will continue to expend substantial resources for the expansion of
research and development, including costs associated with conducting preclinical
testing and clinical trials. We will be required to expend substantial funds in
the course of completing required additional development, preclinical testing
and clinical trials of and regulatory approval for product candidates. Our
future liquidity and capital requirements will depend on many factors,
including:
- the scope and results of preclinical testing and clinical trials;
- the retention of existing and establishment of further
collaborative arrangements, if any;
- continued scientific progress in our research and development
programs;
- the size and complexity of these programs;
- the time and expense involved in obtaining regulatory approvals, if
any;
- competing technological and market developments;
- the time and expense of filing and prosecuting patent applications
and enforcing patent claims;
- the cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements and product
in-licensing; and
- other factors not within our control.
We believe that our current cash balances, cash equivalents, short-term
investments and cash generated from our collaborative arrangements will be
sufficient to meet our operating and capital requirements for at least the next
two years. However, we may need additional financing within this timeframe. We
may need to raise additional funds through public or private financing,
collaborative arrangements or other arrangements. Additional funding may not be
available to us on favorable terms, if at all. Furthermore, any additional
equity financing may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants. Collaborative arrangements may
require us to relinquish our rights to certain of our technologies, product
candidates or marketing territories. If we fail to raise additional funds when
needed, our business, financial condition and results of operations will be
materially adversely affected.
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<PAGE>
CELL GENESYS EXERCISES SIGNIFICANT INFLUENCE OVER US
As of May 31, 1999, Cell Genesys beneficially owns 22.5% of our
outstanding capital stock. As a result, Cell Genesys will have significant
influence over all matters requiring the approval of our stockholders. Such
matters include the election of our Board of Directors and changes in control of
Abgenix. We have entered into a governance agreement with Cell Genesys which
provides that so long as Cell Genesys or a group to which it belongs owns a
specific percentage of our outstanding voting stock, Cell Genesys or the group
shall have the right to nominate a fixed number of directors to serve on our
Board. The details of this arrangement are set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP NUMBER OF DIRECTORS
-------------------- -------------------
<S> <C>
50% or more 4 out of 7
Less than 50% but greater than 25% 3 out of 7
Less than 25% but greater than 15% 1 out of 7
</TABLE>
The governance agreement also provides that Cell Genesys and each of
our officers and directors who owns voting stock shall agree to vote for the
persons nominated as set forth above. We may be adversely impacted by the
significant influence which Cell Genesys will have with respect to matters
affecting us.
WE FACE UNCERTAINTY OVER REIMBURSEMENT AND HEALTHCARE REFORM
In both domestic and foreign markets, sales of our product candidates
will depend in part upon the availability of reimbursement from third-party
payors. Such third-party payors include government health administration
authorities, managed care providers, private health insurers and other
organizations. These third-party payors are increasingly challenging the price
and examining the cost effectiveness of medical products and services. In
addition, significant uncertainty exists as to the reimbursement status of newly
approved healthcare products. We may need to conduct post-marketing studies in
order to demonstrate the cost-effectiveness of our products. Such studies may
require us to provide a significant amount of resources. Our product candidates
may not be considered cost-effective. Adequate third-party reimbursement may not
be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development. Domestic and
foreign governments continue to propose and pass legislation designed to reduce
the cost of healthcare. Accordingly, legislation and regulations affecting the
pricing of pharmaceuticals may change before our proposed products are approved
for marketing. Adoption of such legislation could further limit reimbursement
for pharmaceuticals. If the government and third-party payors fail to provide
adequate coverage and reimbursement rates for our product candidates, the market
acceptance of our products may be adversely affected. If our products do not
receive market acceptance, our business, financial condition and results of
operations will be materially adversely affected.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE INSURANCE
The use of any of our product candidates in clinical trials, and the
sale of any approved products, may expose us to liability claims resulting from
such use or sale of our products. These claims might be made directly by
consumers, healthcare providers or by pharmaceutical companies or others selling
such products. We may experience financial losses in the future due to product
liability claims. We have obtained limited product liability insurance coverage
for our clinical trials. Our insurance coverage limits are $5.0 million per
occurrence and $5.0 million in the aggregate. We intend to expand our insurance
coverage to include the sale of commercial products if marketing approval is
obtained for product candidates in development. However, insurance coverage is
becoming increasingly expensive. We may not be able to
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maintain insurance coverage at a reasonable cost or in sufficient amounts to
protect us against losses. If a successful product liability claim or series
of claims is brought against us for uninsured liabilities or in excess of
insured liabilities, our business, financial condition and results of
operations may be materially adversely affected.
OUR OPERATIONS INVOLVE HAZARDOUS MATERIALS
Our research and manufacturing activities involve the controlled use of
hazardous materials. We cannot eliminate the risk of accidental contamination or
injury from these materials. In the event of an accident or environmental
discharge, we may be held liable for any resulting damages, which may exceed our
financial resources and may materially adversely affect our business, financial
condition and results of operations.
OUR STOCK PRICE IS HIGHLY VOLATILE
The market price of our common stock has been highly volatile and is
likely to continue to be volatile. Factors affecting our stock price include:
- fluctuations in our operating results;
- announcements of technological innovations or new commercial
therapeutic products by us or our competitors;
- published reports by securities analysts;
- progress with clinical trials;
- governmental regulation;
- changes in reimbursement policies;
- developments in patent or other proprietary rights;
- developments in our relationship with collaborative partners;
- public concern as to the safety and efficacy of our products; and
- general market conditions.
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS AND WE HAVE IMPLEMENTED A
STOCKHOLDERS RIGHTS PLAN
In June 1999, our Board of Directors adopted a Stockholder Rights Plan.
The Stockholder Rights Plan provides for a dividend distribution of one
Preferred Shares Purchase Right on each outstanding share of our common stock.
Each Right entitles stockholders to buy 1/1000th of a share of our Series A
participating preferred stock at an exercise price of $120.00. Each Right will
become exercisable following the tenth day after a person or group announces
acquisition of 15 percent or more of our common stock, or announces commencement
of a tender offer, the consummation of which would result in ownership by the
person or group of 15 percent or more of our common stock. In the case of Cell
Genesys, which beneficially owns 22.6% of our outstanding capital stock as of
March 31, 1999, each right will become exercisable
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following the tenth day after it announces the acquisition of 25 percent or
more of our common stock, or announces commencement of a tender offer, the
consummation of which would result in ownership by Cell Genesys of 25 percent
or more of our common stock. We will be entitled to redeem the Rights at
$0.01 per Right at any time on or before the tenth day following acquisition
by a person or group of 15 percent or more (or in the case of Cell Genesys,
25 percent or more) of our common stock.
The Stockholder Rights Plan and certain provisions of our Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire control of Abgenix. This
could limit the price that certain investors might be willing to pay in the
future for our shares of common stock. Certain provisions of our Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws allow
Abgenix to issue preferred stock without any vote or further action by the
stockholders, eliminate the right of stockholders to act by written consent
without a meeting, specify procedures for director nominations by stockholders
and submission of other proposals for consideration at stockholder meetings, and
eliminate cumulative voting in the election of directors. We are subject to
certain provisions of Delaware law which could also delay or make more difficult
a merger, tender offer or proxy contest involving Abgenix. In particular,
Section 203 of the Delaware General Corporation Law prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years unless certain conditions are met. The
Stockholder Rights Plan, the possible issuance of preferred stock, the
procedures required for director nominations and stockholder proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of Abgenix, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of our
common stock. The provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.
WE DO NOT INTEND TO PAY DIVIDENDS
We intend to retain any future earnings to finance the growth and
development of our business and we do not plan to pay cash dividends in the
foreseeable future.
WE FACE UNCERTAINTY WITH YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of our
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This may result in a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to receive
supplies from our venders, or operate our accounting and other internal systems.
If our software vendors are unable to address the Year 2000 compliance of their
products, or should our suppliers' operations be disrupted by the Year 2000
Issue, then our ability to serve collaborative partners and develop products may
be materially adversely affected.
USE OF PROCEEDS
We will not receive any proceeds from the sales of common stock by the
selling stockholder pursuant to this prospectus.
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PLAN OF DISTRIBUTION
In January 1999, we entered into a Multi-Antigen Agreement with
Genentech. In connection with the Multi-Antigen Agreement, we sold 495,356
shares of our common stock to Genentech in January 1999 at a purchase price of
$16.15 per share. Pursuant to that sale, we agreed to register the shares under
the Securities Act for resale to the public. Under the registration rights
agreement between Abgenix and the selling stockholder, we must use reasonable
efforts to cause this registration statement to be declared effective by the
Securities and Exchange Commission as soon as practicable and to keep this
registration statement, or a replacement, continuously effective under the
Securities Act until the earlier of (1) January 27, 2001 or (2) such time as the
selling stockholder has sold all shares offered by this prospectus, or a
replacement prospectus.
The sale or all of a portion of the shares of common stock offered
hereby by the selling stockholder may be effected from time to time at
prevailing market prices at the time of such sales, at prices related to such
prevailing prices, at fixed prices that may be changed or at negotiated prices.
The selling stockholder may effect such transactions by selling directly to
purchasers in negotiated transactions, to dealers acting as principals or
through one or more brokers, or any combination of these methods of sale. In
addition, shares may be transferred in connection with the settlement of call
options, short sales or similar transactions that may be effected by the selling
stockholder. Dealers or brokers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder. The selling
stockholder and any brokers or dealers that participate in the distribution may
under certain circumstances be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions received by such brokers or dealers and
any profits realized on the resale of shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Abgenix and the
selling stockholder may agree to indemnify such brokers or dealers against
certain liabilities, including liabilities under the Securities Act.
To the extent required under the Securities Act or the rules of the
Securities and Exchange Commission, a supplemental prospectus will be filed,
disclosing (1) the name of any such brokers or dealers, (2) the number of shares
involved, (3) the price at which such shares are to be sold, (4) the commissions
paid or discounts or concessions allowed to such brokers or dealers, where
applicable, (5) that such brokers or dealers did not conduct any investigation
to verify the information set out in this prospectus, as supplemented, and (6)
other facts material to the transaction.
There is no assurance that the selling stockholder will sell any or all
of the shares of common stock offered hereby.
We have agreed to pay the expenses incurred in connection with the
registration of the shares of common stock offered hereby. The selling
stockholder will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of such shares.
All of the shares offered hereby are being sold by the selling
stockholder. The shares held by the selling stockholder represent approximately
3.3% of our outstanding shares of common stock as of May 31, 1999. As of May 31,
1999, the selling stockholder did not own any shares of our common stock other
than the 495,356 shares being registered hereunder. Assuming that the selling
stockholder sells its shares of our common stock being registered hereunder and
does not acquire any other shares of our common stock after the date hereof,
upon completion of this offering, the selling stockholder will not own any
shares of our common stock.
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LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Abgenix by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. As of May 31, 1999, a certain investment partnership and
members of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
beneficially owned an aggregate of 16,250 shares of common stock of Abgenix.
EXPERTS
The financial statements of Abgenix, Inc. appearing in Abgenix, Inc.'s
Annual Report (Form 10-K) for the year ended December 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
The financial statements of Xenotech, L.P. appearing in Abgenix, Inc.'s
Annual Report (Form 10-K) for the year ended December 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and auditing.
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