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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AUGUST 13, 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
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COLLATERAL THERAPEUTICS, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 33-0661290
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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11622 El Camino Real, San Diego, CA 92130 858-794-3400
(Address, Including Zip Code, And Telephone Number, Including Area Code,
Of Registrant's Principal
Executive Offices)
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Jack W. Reich, Ph.D.
President and Chief Executive Officer
COLLATERAL THERAPEUTICS, INC.
11622 El Camino Real, San Diego, CA 92130 858-794-3400
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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COPIES TO:
Faye H. Russell, Esq.
Maria P. Sendra, Esq.
BROBECK, PHLEGER & HARRISON LLP
550 West "C" Street, Suite 1300
San Diego, California 92101
(619) 234-1966
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If only the securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box: / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered(1) Per Share(2) Offering Price(2) Fee
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Common Stock, $.001 par value per share..... 2,150,000 shares $18.375 $39,506,250 $10,983
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(1) This Registration Statement shall also cover any additional shares of
common stock which become issuable in connection with the shares
registered for sale hereby as a result of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
Registrant's outstanding shares of common stock.
(2) The price of $18.375, the average of the high and low prices of
Collateral's common stock on the Nasdaq Stock Market's National Market on
August 10, 1999, is set forth solely for the purpose of computing the
registration fee in accordance with Rule 457(c) under the Securities Act
of 1933 as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED AUGUST 13, 1999
PRELIMINARY PROSPECTUS
The information in this preliminary prospectus is not complete and may
be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell the common stock and it is not soliciting an
offer to buy the common stock in any state where the offer or sale is not
permitted.
2,150,000 SHARES
COLLATERAL THERAPEUTICS, INC.
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 2,150,000 shares of our common stock, which is held by some of
our current stockholders. These stockholders acquired the shares directly from
us in a private placement completed on August 11, 1999.
Our common stock is traded on the Nasdaq National Market under the
symbol "CLTX." On August 10, 1999, the average of the high and low price for the
common stock was $18.375.
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THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 13 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU
SHOULD CONSIDER BEFORE BUYING ANY SHARES OF COMMON STOCK.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is _____________ ___, 1999
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS....................................................1
COLLATERAL THERAPEUTICS, INC..................................................2
RISK FACTORS.................................................................10
WHERE YOU CAN FIND MORE INFORMATION..........................................23
INFORMATION INCORPORATED BY REFERENCE........................................23
USE OF PROCEEDS..............................................................24
PLAN OF DISTRIBUTION.........................................................24
SELLING STOCKHOLDERS.........................................................27
LEGAL MATTERS................................................................28
EXPERTS......................................................................28
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FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS PROSPECTUS MAY CONTAIN
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED IN THE SECTION ENTITLED "RISK FACTORS,"
AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS OR IN DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE UNDERTAKE NO OBLIGATION TO
UPDATE THESE FORWARD-LOOKING STATEMENTS.
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COLLATERAL THERAPEUTICS, INC.
OVERVIEW
Collateral is focused on the discovery, development and
commercialization of non-surgical gene therapy products for the treatment of
cardiovascular diseases, including coronary artery disease, peripheral
vascular disease, congestive heart failure and heart attack. Our non-surgical
gene therapy products use technologies which include our methods of gene
therapy, therapeutic genes and gene delivery vectors.
Cardiovascular disease is the leading cause of death in the U.S. In
1999, the American Heart Association reported that an estimated 58.8 million
patients in the U.S. had cardiovascular disease. The American Heart
Association also estimated in 1999 that the U.S. healthcare system spends
approximately $178.2 billion annually on the care and treatment of patients
with cardiovascular diseases.
We believe that our products under development hold the potential to
revolutionize the treatment of cardiovascular diseases. We believe that these
products could provide a new standard of care by offering patients simpler,
more cost-effective and lower-risk alternatives to currently available
treatments, such as coronary artery bypass surgery and angioplasty. Our
initial gene therapy products are designed to promote and enhance
angiogenesis, a natural biological process that results in the growth of
additional blood vessels to restore adequate levels of blood flow to
oxygen-deprived tissues. In collaboration with our partner Schering AG, in
May 1998 we began early stage testing in humans in a Phase 1/2 trial for
GENERX-TM-, the first of our gene therapy products.
We have designed our initial gene therapy products for non-surgical
administration by an interventional cardiologist using our methods of gene
therapy. These methods involve a one-time intra-coronary infusion of our
product through a standard cardiac catheter, which could be administered at
the time of initial angiography, on an out-patient basis. In addition to our
products designed to promote and enhance angiogenesis, we are also actively
researching gene therapy products designed to enhance function of the heart
in patients suffering from heart failure and to stimulate heart muscle
regeneration after heart attack.
The following table describes GENERX-TM- and our other non-surgical
cardiovascular gene therapy product candidates and their development status:
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PRODUCT TECHNOLOGY MEDICAL DEVELOPMENT
CANDIDATE (DESIGNATED GENE) INDICATION STATUS
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Stable exertional
Angiogenesis angina due to
(FGF-4) coronary artery
GENERX-TM- disease Phase 1/2
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Stable exertional
Angiogenesis angina due to
(VEGF) coronary artery
GENEVX-TM- disease Preclinical
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Angiogenesis Peripheral vascular
GENVASCOR-TM- (FGF-4) disease Preclinical
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Congestive heart
GENECOR-TM- Angiogenesis failure Preclinical
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Myocardial adrenergic
signaling Congestive heart
CORGENIC-TM- (AC-6) failure Preclinical
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Heart muscle Heart attack
MYOCOR-TM- regeneration Research
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We intend to focus on research and development of products, while
leveraging our technology through the establishment of product development,
manufacturing and marketing collaborations with select pharmaceutical and
biotechnology companies. In May 1996, we entered into a strategic
collaboration with Schering AG, covering gene therapy products for the
promotion and enhancement of angiogenesis. Schering AG has made equity
investments in Collateral in connection with this collaboration agreement.
The Schering AG collaboration provides us with the financial resources
and product development support to allow us to develop particular gene
therapy products to promote and enhance angiogenesis. For other products, we
intend to select development and/or commercialization partners after we have
completed preclinical and, possibly, clinical studies for each product. We
expect that, in the event of successful commercialization of our products,
royalties on worldwide sales of such products would generate significant
revenues in the long-term.
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BUSINESS STRATEGY
Our objective is to become the leader in the development and
commercialization of non-surgical cardiovascular gene therapy products for
sale to worldwide markets. The key elements of our strategy are as follows:
DEVELOP A NEW PARADIGM FOR THE TREATMENT OF CARDIOVASCULAR DISEASES. In
1999, the American Heart Association estimated that the U.S. healthcare
system spends approximately $178.2 billion annually on the care and treatment
of patients with cardiovascular diseases. We believe that our products under
development hold the potential to revolutionize the treatment of
cardiovascular diseases. We believe that these products could provide a new
standard of care, by offering patients simpler, more cost-effective and
lower-risk alternatives to currently available treatments.
MAINTAIN LEADERSHIP IN CARDIOVASCULAR GENE THERAPY. We believe that we
have established a leadership position in the field of cardiovascular gene
therapy, based on:
- the depth and breadth of our technology, including our methods of gene
therapy and our gene portfolio,
- the first successful demonstration of gene therapy to promote and
enhance angiogenesis in controlled animal studies, and
- the filing of a commercial investigational new drug application and
initiation of Phase 1/2 clinical trials with respect to our first gene
therapy product for the promotion and enhancement of angiogenesis.
In addition, we have five other gene therapy products in various stages of
development that focus on cardiovascular diseases. We intend to continue to
focus our resources exclusively on the field of cardiovascular gene therapy
in order to maintain our leadership position.
EXPAND, ENHANCE AND PROTECT OUR INTELLECTUAL PROPERTY POSITIONS. We
have developed non-surgical methods of gene therapy which enable efficient
delivery of genes to the heart. Our methods for delivering angiogenic genes
to the heart are the subject of a U.S. patent which was issued in August
1998. We have assembled a broad portfolio of human genes to promote and
enhance angiogenesis including fibroblast growth factor or FGF genes, and
vascular endothelial growth factor or VEGF genes, and other human genes for
use with our methods of cardiovascular gene therapy. We intend to leverage
the depth of this portfolio in the development of our future products. In
conjunction with our scientific collaborators, we have developed significant
expertise with respect to the design and delivery of adenovirus vectors in
gene therapy. We are seeking to refine and enhance our methods of gene
therapy to include, for example, adeno-associated viral and other gene
delivery vectors. We expect to broaden the application of such methods to the
treatment of other cardiovascular diseases. We intend to continue to pursue a
strategy of internal development and in-licensing of technologies and genes
to broaden our product development programs. In addition, we intend to
vigorously protect our intellectual property position.
ESTABLISH STRATEGIC COLLABORATIONS TO ENHANCE PRODUCT DEVELOPMENT AND
COMMERCIALIZATION. We intend to focus on research and development of products
while leveraging our technology through the establishment of collaborations
with pharmaceutical and
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biotechnology companies primarily in the areas of product development,
manufacturing and marketing. We have an exclusive arrangement with Schering
AG covering gene therapy products to promote and enhance angiogenesis. For
other products, we intend to select potential development and/or
commercialization partners after we have completed preclinical research and,
in some cases, clinical studies. We believe that this will allow us to assess
more accurately the potential commercial value of our products, select a
partner on more favorable terms than would otherwise be available at earlier
stages, and minimize the financial burden to fund development programs by
obtaining up-front and milestone payments, technology access fees and
development funding. We expect that in the event of successful
commercialization of our products, royalties on worldwide sales of such
products would generate significant revenues in the long-term.
CARDIOVASCULAR DISEASE AND CURRENT TREATMENTS
Cardiovascular disease is the leading cause of death in the U.S. We are
focusing on the following types of cardiovascular disease:
CORONARY ARTERY DISEASE. The coronary arteries supply blood to the
heart muscle. When insufficient oxygen reaches the heart muscle as a result
of restricted blood flow, a condition called myocardial ischemia develops
that may result in a heart attack or death. Brief episodes of ischemia often
result in chest pain or angina. Nearly all ischemic heart disease is due to
atherosclerotic disease of the coronary arteries. Atherosclerosis is a
general term for the build-up of fatty and cholesterol plaque deposits on the
inside lining of arterial walls thereby restricting blood flow. Restoring
blood flow is the most effective method to relieve painful ischemic symptoms
and to reduce the long-term risk of a heart attack. When blood flow through
coronary arteries is insufficient, myocardial ischemia occurs and ischemic
injury signals are generated. In response to these signals, the body's
natural healing process is initiated and the heart may develop limited
collateral circulation in an effort to restore blood flow. Research has shown
that the extent of natural collateral vessel formation in the heart is often
inadequate to provide full restoration of blood flow to ischemic tissue. The
American Heart Association reported in 1999 that an estimated 12 million
patients in the U.S. had coronary artery disease, including approximately 6.2
million patients with angina. Current treatments for coronary artery disease
include drug therapy, coronary artery bypass surgery and catheter-based
treatments, including angioplasty, atherectomy and coronary stenting.
Cardiovascular drug therapy represents the largest component of the
worldwide pharmaceutical market; however, this therapy, in many cases:
- - only treats symptoms,
- - is not a cure for coronary artery disease,
- - requires long-term administration,
- - has adverse side effects, and
- - is costly.
Coronary artery bypass surgery is highly invasive and traumatic to the
patient. However, it is often considered the most effective and long-lasting
treatment currently available for severe coronary artery disease. While
current catheter-based treatments such as angioplasty and coronary stents are
less invasive, they are limited by restenosis, a narrowing of the treated
coronary artery, which often requires additional interventions. The American
Heart Association has estimated that in 1996 the number of surgical
procedures in the U.S. for the treatment of
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coronary artery disease totaled 1.2 million. These procedures included
approximately 598,000 coronary artery bypass surgeries and approximately
666,000 angioplasty procedures.
PERIPHERAL VASCULAR DISEASE. Peripheral vascular disease results from
decreased blood flow in patients with atherosclerosis, usually in the lower
limbs. Based on an IMS Health marketing report which was prepared in 1996,
there were an estimated 726,000 patients in the U.S. suffering from
peripheral vascular disease, of whom over 100,000 would require a limb
amputation. Current treatments for patients with peripheral vascular disease
include drug therapy in the initial stages of the disease and surgery if the
disease has progressed or is incapacitating. If drug therapy is selected,
agents designed to improve blood flow by decreasing blood viscosity and low
dose aspirin are therapies of choice. When these agents are used in
combination with a program of daily walking and ceasing smoking, improved
function may be obtained and the need for invasive surgical therapies may be
postponed or eliminated. Surgical intervention includes arterial grafting,
surgical removal of the fatty plaque deposits and endovascular treatments
such as angioplasty.
CONGESTIVE HEART FAILURE. Congestive heart failure is caused when the
heart is unable to contract adequately to pump blood throughout the body. The
normal physiological stimulation of heart function is generated when chemical
transmitters known as catecholamines bind with certain receptors on the
surfaces of heart cells, triggering a series of events that result in
increased heart rate and force of contraction. In congestive heart failure,
the heart is unable to respond adequately to catecholamines. According to the
American Heart Association, in 1999 there are an estimated 4.6 million
patients in the U.S. who have congestive heart failure which is the single
most frequent cause of hospitalization for people 65 and older. According to
the American Heart Association, approximately 50% of patients with congestive
heart failure die within five years of diagnosis. Current treatments for
congestive heart failure include drug therapy, and rarely, heart
transplantation. Currently available drug treatments generally only treat
symptoms and have a limited effect on the progression of the disease.
HEART ATTACK. A heart attack occurs when a blockage in a coronary
artery severely restricts or completely stops blood flow to a portion of the
heart. When blood supply is greatly reduced or stopped for more than a short
time, heart muscle cells die. Heart muscle cells do not have the capacity to
multiply to replace the dead cells. In the healing phase after a heart
attack, white blood cells migrate into the area and remove the dead heart
muscle cells, and fibroblast cells proliferate and form a fibrous collagen
scar in the affected region of the heart. Following a heart attack, the
heart's ability to maintain normal function will depend on the location of
the damage and the amount of damaged tissue. The American Heart Association
estimated that in 1999 approximately 1.1 million patients would have a heart
attack and an estimated 350,000 patients would die as a direct result of a
heart attack. Current therapeutic treatments for heart attack focus on acute
care upon the onset of a heart attack and on long-term care to limit the
development of heart failure and recurrent heart attack. A form of drug
therapy may be used to dissolve a blood clot immediately following a heart
attack. After a heart attack, patients generally are required to take
medicines to alleviate symptoms and to make certain lifestyle changes, such
as altering their diet, increasing their exercise levels and ceasing smoking.
GENE THERAPY
Gene therapy is an approach to the treatment and prevention of genetic
and acquired diseases. This approach involves the insertion of genetic
information into target cells to cause the cells to produce specific proteins
needed to correct or modulate disease conditions.
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Proteins are fundamental components of all living cells and are essential for
cellular structure, growth and function. By directing the cells to produce
specific proteins, gene therapy offers the opportunity to correct defects or
diseases that could not formerly be treated.
A key factor in the progress of gene therapy is the development of safe
and efficient methods of transferring genes into cells. The most common gene
delivery approach relies on viral gene transfer, in which modified viruses
are used to transfer the desired genetic material into cells. This method
involves the incorporation of a target gene into a delivery system called a
vector. A number of different viral vectors, including adenovirus,
adeno-associated virus and retrovirus, are being used for potential gene
therapy applications.
The use of viruses takes advantage of their ability to introduce genes
into host cells and to use the host's metabolic machinery to produce proteins
essential for the survival and function of the virus. Viruses used as vectors
are genetically modified: (1) to remove the DNA necessary for the virus to
reproduce, and (2) to contain the desired gene. In order to achieve a
therapeutic effect, the viral vector must carry the desired gene and transfer
that gene into a sufficient number of target cells.
COLLATERAL'S APPROACH
Our non-surgical cardiovascular gene therapy approach is focused on
angiogenesis, myocardial adrenergic signaling, and heart muscle regeneration.
ANGIOGENESIS. We are developing non-surgical gene therapy treatments to
enhance and promote angiogenesis for the treatment of coronary artery
disease, peripheral vascular disease and congestive heart failure.
GENERX-TM-, our initial angiogenic product candidate, is presently in Phase
1/2 human clinical trials.
Our methods of gene therapy are based on intravascular delivery of a
gene designed to enhance and promote angiogenesis. This delivery of genetic
information into the heart cells produces a specific protein to stimulate
site-specific angiogenesis. We have designed our initial gene therapy
products for non-surgical administration by an interventional cardiologist
using our methods of gene therapy. These methods involve a one-time
intra-coronary infusion of the product through a standard cardiac catheter,
which could be administered at the time of initial angiography, on an
out-patient basis. Gene transfer is accomplished using a human adenovirus
vector which has been rendered replication-deficient and made incapable of
causing a typical infection.
Our chief scientist led animal studies which demonstrated that gene
therapy with human angiogenic growth factor genes resulted in efficient gene
transfer to the heart. In addition, the studies demonstrated in an animal
model that gene therapy, for the first time, fully restored regional blood
flow and heart function in an ischemic region of the heart. The results were
achieved within two weeks of a one-time treatment and the effects persisted
over the study period of 12 weeks following the administration of gene
therapy, without any significant side effects such as inflammation or immune
response. Longer term preclinical studies are in progress.
MYOCARDIAL ADRENERGIC SIGNALING. We are also developing methods of gene
therapy to enhance myocardial adrenergic signaling in patients with advanced
congestive heart failure by increasing the heart's ability to contract in
response to catecholamine stimulation, an aspect of the heart's normal
physiological response. In severe heart failure, the ability of the heart to
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respond to catecholamines is markedly impaired. In our preclinical research,
investigators demonstrated that gene therapy could be used to produce the
protein adenylylcyclase in heart muscle cells. Production of this protein in
animals caused an increase in the response to catecholamine stimulation which
in turn enhanced the heart's ability to contract.
HEART MUSCLE REGENERATION. We are also developing methods of gene
therapy for the treatment of heart attack. Our research on the treatment of
heart attack is focused on the regeneration of heart muscle to reduce the
effects of muscle cell death and possibly improve heart performance following
a heart attack. We are sponsoring discovery research to identify genes that
may have the capacity to reduce the formation of scar tissue in the heart. If
these genes are confirmed to have the capacity to reduce scar formation, we
plan to develop a non-surgical gene therapy product that could be delivered
by intra-coronary administration following heart attack using our methods of
gene therapy.
CORE TECHNOLOGIES
Collateral's non-surgical gene therapy products use technology which
includes methods of gene therapy, therapeutic genes, and gene delivery
vectors.
METHODS OF GENE THERAPY. Our core technologies are focused on the
administration of therapeutic genes to patients through the use of
non-surgical, intravascular delivery. The products are being developed to be
administered by an interventional cardiologist through a standard cardiac
catheter. We intend to use this technology to provide a means to increase
production of a specific protein in living cells and thereby alter cell
function as a therapy to treat a disease condition. Our method for delivering
angiogenic genes to the heart is the subject of a U.S. patent which was
issued in August 1998. Please see "Risks Related to Our Business--Our
Products May Not Successfully Complete Clinical Trials Required for
Commercialization" and "Risks Related to Patents and Proprietary Information"
for further information regarding these methods.
PORTFOLIO OF THERAPEUTIC GENES. Genes which regulate biological
activity in the cardiovascular system are key enabling components of our core
technologies. Our portfolio consists of genes which we either discovered or
exclusively licensed for use in the development of cardiovascular gene
therapy products. Most of the genes in our portfolio are subject either to
issued patents or pending patent applications. These genes include numerous
human genes in the FGF and VEGF families which may be used in our products
which promote or enhance angiogenesis. In addition, we have filed U.S. and
international patent applications for the human adenylylcyclaseVI or the AC-6
gene which may be used with our CORGENIC-TM- gene therapy product. Please see
"Risks Related to Our Business--Risks Related to Patents and Proprietary
Information" for further information regarding our patents.
GENE DELIVERY VECTORS. We are using the human adenovirus gene delivery
vector, rendered replication-deficient by deleting specific portions of its
DNA and incorporating a particular therapeutic gene. We believe that the
following features of adenovirus vectors make them particularly well-suited
for the treatment of a number of human diseases:
- Unlike some other types of viral systems, adenovirus vectors can
introduce genes into non-dividing cells, such as heart muscle cells,
or slowly dividing cells;
- Adenoviruses can be rendered replication-deficient;
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- Naturally occurring adenoviruses usually result in no more than mild
self-limited viral symptoms; and
- Adenovirus vectors can be easily and efficiently manufactured.
We are attempting to build our position in gene delivery vectors
through the development and acquisition of exclusive rights to inventions
that provide important enhancements to currently available adenovirus
vectors. We are seeking to refine and enhance our proprietary methods of gene
therapy to include, for example, adeno-associated viral and other gene
delivery vectors, and to broaden the application of our methods of gene
therapy to treat other cardiovascular diseases.
PRODUCT DEVELOPMENT PROGRAMS
GENERX-TM-, which uses the FGF-4 gene in an adenovirus vector, is our
initial angiogenic product for the treatment of coronary artery disease and
is designed to relieve stable exertional angina. In May 1998, Berlex
Laboratories, Inc., a subsidiary of our partner Schering AG, initiated a
Phase 1/2 clinical trial for GENERX-TM- in collaboration with us. The trial,
which is placebo-controlled and double-blind, will enroll up to 100 patients
and is being conducted in approximately 10 major cardiovascular centers in
the U.S. This trial will evaluate safety and efficacy at up to six dose
levels of GENERX-TM- in patients with chronic stable exertional angina due to
atherosclerosis.
GENEVX-TM-, which uses a VEGF gene in an adenovirus vector, is our
second product for the promotion and enhancement of angiogenesis for the
treatment of coronary artery disease and is also designed to relieve stable
exertional angina. We are currently conducting preclinical studies in order
to support an investigational new drug application for this product in
collaboration with Schering AG. We believe that this product has the
potential to stimulate the growth of collateral blood vessels that will
increase blood flow and improve heart function in an ischemic region of the
heart.
GENVASCOR-TM-, which uses the FGF-4 gene in an adenovirus vector, is
our first product for the promotion and enhancement of angiogenesis for the
treatment of peripheral vascular disease. We are currently conducting
preclinical studies in order to support an investigational new drug
application for this product in collaboration with Schering AG. We believe
that this product has the potential to stimulate the growth of collateral
blood vessels which will increase blood flow and function in ischemic regions
of the lower limbs.
We are developing two products for the treatment of congestive heart
failure. GENECOR-TM- is based on our angiogenesis technology and its
application to the treatment of certain types of congestive heart failure.
CORGENIC-TM- is our first product being developed to enhance the heart's
ability to contract. We are presently conducting preclinical studies of
CORGENIC-TM- to support an investigational new drug application.
We are conducting discovery research to develop a potential product,
MYOCOR-TM-, for the treatment of heart attack. MYOCOR-TM- is intended to
cause the regeneration of heart muscle to reduce the effects of muscle cell
death and possibly improve heart performance following a heart attack.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION
TO OTHER INFORMATION IN THIS REGISTRATION STATEMENT, BEFORE PURCHASING SHARES
OF OUR COMMON STOCK. EACH OF THESE RISK FACTORS COULD ADVERSELY AFFECT OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION, AS WELL AS ADVERSELY
AFFECT THE VALUE OF AN INVESTMENT IN OUR COMMON STOCK.
RISKS RELATED TO OUR BUSINESS
ALL OF OUR PRODUCTS ARE IN AN EARLY STAGE OF DEVELOPMENT AND MAY NEVER
BE SUCCESSFULLY COMMERCIALIZED WHICH WOULD HAVE AN ADVERSE IMPACT ON YOUR
INVESTMENT AND OUR BUSINESS. All of our potential products are in the early
stages of development. Even if they advance in development we cannot be sure
that we or our partners could obtain regulatory product approvals. Before we
can sell our products, we must undertake the time-consuming and costly
process of developing, testing and obtaining regulatory approval for each
product. To date, only one of our products, GENERX-TM-, has advanced to
clinical trials. To date, regulatory authorities have not reviewed or
approved any of our products.
After developing, testing and obtaining regulatory product approval, we,
alone or with others, must market and sell our products to achieve profitable
operations. We do not expect our products to be available for sale for a number
of years, if at all. There are many reasons that we may fail in our efforts to
develop our products, including the possibility that:
- our products will be ineffective, toxic or will not receive regulatory
clearances;
- our products will be too expensive to manufacture or market or will
not achieve broad market acceptance;
- others will hold proprietary rights that will prevent us from
marketing our products; or
- others will market equivalent or superior products.
The success of our business depends on our ability to successfully develop
and market our products.
OUR PRODUCTS MAY NOT SUCCESSFULLY COMPLETE CLINICAL TRIALS REQUIRED FOR
COMMERCIALIZATION.
IF OUR PRODUCT CANDIDATES DO NOT SUCCESSFULLY COMPLETE THE CLINICAL
TRIAL PROCESS, WE WILL NOT BE ABLE TO MARKET THEM. We cannot be certain that
we will successfully complete clinical trials necessary to receive regulatory
product approvals. This process is lengthy and expensive. To obtain
regulatory approvals, we must demonstrate through preclinical studies and
clinical trials that our products are safe and effective for use in at least
one medical indication. Promising results in preclinical studies and initial
clinical trials do not ensure successful results in later clinical trials,
which test broader human use of our products. Many companies in our industry
have suffered significant setbacks in advanced clinical trials, despite
promising results in earlier trials. Clinical trials may not result in a
marketable product.
Many factors may adversely affect clinical trials. For example,
clinical trials are often conducted with patients who have the most advanced
stages of disease. During the course of treatment, these patients can die or
suffer other adverse conditions for reasons that may not be
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related to the proposed product being tested. These reactions may
nevertheless adversely affect our clinical trial results and our business.
In addition, our ability to complete clinical trials depends on many
factors, including obtaining adequate clinical supplies and having a
sufficient rate of patient recruitment. For example, patient recruitment is a
function of many factors, including:
- the size of the patient population,
- the proximity of patients to clinical sites, and
- the eligibility criteria for the trial.
Even if patients are successfully recruited, we cannot be sure that
they will complete the treatment process. Delays in patient enrollment or
treatment in clinical trials may result in increased costs, program delays or
both, which could adversely affect us.
With respect to foreign markets, we or our partner will also be subject
to foreign regulatory requirements governing clinical trials. Even if we
complete clinical trials, we may not be able to submit a marketing
application. If we submit an application, the regulatory authorities may not
review or approve it in a timely manner, if at all.
OUR COLLABORATORS MAY CONTROL ASPECTS OF OUR CLINICAL TRIALS WHICH
COULD RESULT IN DELAYS OR OTHER OBSTACLES TO THE COMMERCIALIZATION OF THESE
PRODUCTS. Our collaborative partners may have or acquire rights to control
aspects of our product development and clinical programs. For example,
Schering AG has rights to control the planning and implementation of product
development and clinical programs related to angiogenic gene therapy
products. As a result, we may not be able to conduct these programs in the
manner or on the time schedule we currently contemplate.
OUR PRODUCTS MAY HAVE UNACCEPTABLE SIDE EFFECTS WHICH COULD DELAY
OR PREVENT PRODUCT APPROVAL. Possible side effects of gene therapy
technologies may be serious and life-threatening. The occurrence of any
unacceptable side effects during or after preclinical and clinical testing of
our potential products could delay approval of our products and adversely
affect our business. For example, possible serious side effects of viral
vector-based gene transfer include viral infections resulting from
contamination with replication-competent viruses and inflammation or other
injury to the heart or other parts of the body. In addition, the development
of cancer in a patient is a possible side effect of all methods of gene
transfer. Furthermore, there is a possibility of side effects or decreased
effectiveness associated with an immune response toward any viral vector or
gene used in gene therapy. The possibility of such response may increase if
there is a need to deliver the viral vector more than once.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND MAY NEVER BE PROFITABLE.
We formed Collateral in 1995 and have only a limited operating history to
review in evaluating our business and prospects. We have incurred operating
losses since our inception in 1995. As of June 30, 1999, our accumulated
deficit was approximately $11.0 million. We expect to incur additional losses
for the foreseeable future. We also expect our losses to increase as our
research and development efforts and clinical trials progress.
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Our revenues to date have consisted of payments under our
collaborative arrangements and interest income. To date, we have not
generated any revenue from product sales. We do not expect to generate any
revenue from our products for a number of years, if at all. If we, alone or
with our collaborators, do not successfully develop, manufacture and
commercialize our products, we may never achieve profitability. Even if we do
achieve profitability, we cannot predict the level of such profitability.
RISKS RELATED TO PATENTS AND PROPRIETARY INFORMATION.
IF OUR PRODUCTS ARE NOT EFFECTIVELY PROTECTED BY VALID ISSUED
PATENTS OR IF WE ARE NOT OTHERWISE ABLE TO PROTECT OUR PROPRIETARY
INFORMATION IT COULD HARM OUR BUSINESS. Our business success will depend in
part on our ability and that of our licensors to:
- obtain patent protection for our methods of gene therapy, therapeutic
genes and/or gene-delivery vectors both in the U.S. and in foreign
countries,
- defend patents once obtained,
- maintain trade secrets and operate without infringing upon the
patents and proprietary rights of others, and
- obtain appropriate licenses to patents or proprietary rights held by
others with respect to our technology, both in the U.S. and in
foreign countries.
IF WE ARE NOT ABLE TO MAINTAIN ADEQUATE PATENT PROTECTION FOR OUR
PRODUCTS, WE MAY BE UNABLE TO PREVENT OTHER COMPANIES FROM USING OUR
TECHNOLOGY IN COMPETITIVE PRODUCTS. We cannot be certain that we or our
collaborators will have adequate patent protection for our products. To date,
we have exclusively licensed specific rights covered by two issued U.S.
patents. We have also filed or have licensed rights to more than 10 currently
pending patent applications in the U.S. relating to our technology, as well
as various foreign counterparts of these applications. We intend to continue
filing applications for patents covering our methods of gene therapy,
therapeutic genes and gene delivery vectors. We cannot be certain that
patents will issue from any of these applications. Even if patents are issued
to us or to our licensors, these patents may be challenged, held
unenforceable, invalidated or circumvented. In addition, the rights granted
may provide insufficient proprietary protection or commercial advantage.
The patent positions of pharmaceutical and biotechnology companies,
including our own, are often uncertain and involve complex legal and factual
questions. In addition, the coverage claimed in a patent application can be
significantly reduced before, and in some cases after, a patent is issued. We
do not know whether any patent applications will result in the issuance of
patents. If any patents are issued, we do not know whether the patents will
be subjected to further proceedings limiting their scope, whether they will
provide significant proprietary protection or will be held unenforceable,
circumvented or invalidated. Patent applications in the U.S. are maintained
in secrecy until patents issue. Patent applications in other countries
generally are not published until up to 18 months after they are first filed.
Further, publication of discoveries in scientific or patent literature often
lags behind actual discoveries. As a result, we cannot be certain that we
were or any licensor was the first creator of inventions covered by our
patents or applications or that we were or our licensor was the first to file
such patent applications. Changes in patent laws may also adversely affect
the scope of our patent protection and our operations.
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A number of pharmaceutical and biotechnology companies and research
and academic institutions have developed technologies, filed patent
applications or received patents on various technologies that may be related
to our business. Some of these technologies, applications or patents may
conflict with our technologies or patent applications. A conflict could limit
the scope of the patents, if any, that we may be able to obtain or result in
denial of our or our licensors' patent applications. In addition, if patents
that cover our activities are issued to other companies, we cannot be sure
that we could develop or obtain alternative technology.
In addition, some of our products rely on patented inventions
developed using U.S. government resources. The U.S. government retains rights
in such patents, and may choose to exercise its rights.
WE MAY BE SUBJECT TO COSTLY CLAIMS AND IF WE ARE UNSUCCESSFUL IN
RESOLVING CONFLICTS REGARDING PATENT RIGHTS, WE MAY BE PREVENTED FROM
DEVELOPING OR COMMERCIALIZING OUR PRODUCTS. Numerous patent applications and
patents related to our business could result in third party claims against
us. As the biotechnology industry expands and more patents are issued, the
risk increases that our processes and potential products may give rise to
claims that they infringe on the patents of others. Others could bring legal
actions against us claiming damages and seeking to stop clinical testing,
manufacturing and marketing of the affected product or use of the affected
process. Litigation may be necessary to enforce our proprietary rights or to
determine the enforceability, scope and validity of proprietary rights of
others. If we become involved in litigation, it could be costly and divert
our efforts and resources. In addition, if any of our competitors file patent
applications in the U.S. claiming technology also invented by us, we may need
to participate in interference proceedings held by the U.S. Patent and
Trademark Office to determine priority of invention and the right to a patent
for the technology. Like litigation, interference proceedings can be lengthy
and often result in substantial costs and diversion of resources.
If there were an adverse outcome of any litigation or interference
proceeding we could have potential liability for significant damages. In
addition, we could be required to obtain a license to continue to make or
market the affected product or use the affected process. Costs of a license
may be substantial and could include ongoing royalties. We may not be able to
obtain such a license on acceptable terms.
WE MAY NOT HAVE ADEQUATE PROTECTION FOR OUR UNPATENTED PROPRIETARY
INFORMATION WHICH COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION. We also
rely on trade secrets, know-how, continuing technological innovations and
licensing opportunities to develop and maintain our competitive position.
However, others may independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to our trade
secrets or disclose our technology. To protect our trade secrets, we require
confidentiality agreements upon beginning employment, consulting or
collaboration with us. Agreements with employees also provide that all
inventions resulting from work performed by them while in our employ will be
our exclusive property. However, these agreements may not provide meaningful
protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of such information. Likewise, our trade
secrets or know-how may become known through other means or be independently
discovered by our competitors. Any of these events could adversely affect our
business.
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RISKS RELATED TO OUR RELIANCE ON COLLABORATIVE RELATIONSHIPS AND LICENSING
ARRANGEMENTS.
WE MAY NOT BE ABLE TO SUCCESSFULLY ESTABLISH AND MAINTAIN
COLLABORATIVE AND LICENSING ARRANGEMENTS WHICH COULD HINDER OR PREVENT OUR
ABILITY TO DEVELOP AND COMMERCIALIZE OUR POTENTIAL PRODUCTS. Our strategy for
the development, testing, manufacturing and commercialization of our
potential products relies on our establishing and maintaining collaborations
with corporate partners, licensors, licensees and others. At present we have
a collaboration with Schering AG in the area of angiogenic gene therapy. We
may not be able to maintain or expand this collaboration or establish
additional collaborations or licensing arrangements necessary to develop and
commercialize potential products based on our technology. If we are
successful in establishing additional collaborations or licensing
arrangements, they may not be on favorable terms. Any failure to enter into
additional collaborative or licensing arrangements on favorable terms would
adversely affect our business. The development programs contemplated by the
collaborations or licensing arrangements also may not ultimately be
successful.
Under our current strategy, and for the foreseeable future, we will
rely on our collaborative partners to develop and/or market our products. As
a result, we will depend on collaborators to perform the following activities:
- fund preclinical studies,
- fund clinical development,
- obtain regulatory approval, and
- manufacture and market any successfully developed products.
IF WE ARE NOT ABLE TO CONTROL THE AMOUNT AND TIMING OF RESOURCES
OUR CURRENT AND FUTURE COLLABORATORS DEVOTE TO OUR PROGRAMS OR POTENTIAL
PRODUCTS, OUR PRODUCT DEVELOPMENT COULD BE DELAYED OR TERMINATED, WHICH WOULD
ADVERSELY AFFECT OUR BUSINESS. Our collaborators may have significant
discretion over whether or not to pursue development activities with us. We
also cannot be certain that our collaborators will not pursue alternative
technologies, on their own or with others, to develop competitive gene
therapy products. If our collaborators develop competitive products, they may
withdraw support for our programs. Our collaborative partners also may breach
or terminate our agreements or otherwise fail to conduct their collaborative
activities successfully. As a result, our product development could be
delayed or terminated, which would adversely affect our business. In
addition, revenues we receive from marketed products under our collaborations
may depend on the marketing and sales efforts of our collaborators.
Disputes may arise with our collaborators about who has ownership
rights to any technology developed. These disputes could have the following
results:
- delay achievement of milestones or receipt of milestone payments,
- adversely affect collaborative research, development and
commercialization of potential products, or
- lead to litigation or arbitration.
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Any of these results could be time consuming, expensive and adversely affect
our business.
IF SCHERING TERMINATES OUR COLLABORATION AGREEMENT OR DEVELOPMENT
PROGRAMS, WE MAY NOT BE ABLE TO DEVELOP OUR PRODUCTS ON COMMERCIALLY
REASONABLE TERMS, IF AT ALL. We have entered into a research and development
collaboration with Schering AG in the field of angiogenic gene therapy. Under
this agreement, Schering AG has the following rights that could adversely
affect the development of potential products under our collaboration:
- discretion to pursue or not to pursue any development programs
with us,
- the right to terminate the agreement at any time if we materially
breach the agreement or on 60 days written notice subject to the
payment of a termination fee, and
- the right to terminate the agreement upon 90 days written notice,
without payment of a termination fee, if a competitor of Schering AG
or us acquires substantially all of our assets or 49% or more of our
voting stock.
We cannot be certain that this collaboration will continue or will be
successful.
We also intend to rely on our collaboration with Schering AG for
significant continued funding of our angiogenic gene therapy research
efforts. We cannot be certain Schering AG will continue to fund this
research, especially if they develop competitive products. If they reduce or
terminate this funding, we may have to fund clinical trials, product
development and commercialization ourselves by using additional resources or
by scaling back or terminating other research and development programs. If
Schering AG withdraws support for our programs, it could have a material
adverse effect on our business. We also may need to seek alternative
collaborations or financing sources or sell or license rights to some of our
proprietary technology.
IF WE NEED ADDITIONAL FUNDS AND ARE UNABLE TO RAISE THEM, WE WOULD
HAVE TO CURTAIL OR CEASE OPERATIONS. We will need substantial additional
resources to develop our products. Our future capital requirements will
depend on many factors, including:
- the pace of scientific progress in our research and development
programs,
- the magnitude of our research and development programs,
- the scope and results of preclinical studies and clinical trials,
- the time and costs involved in obtaining regulatory approvals,
- the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims,
- the costs involved in any potential litigation,
- competing technological and market developments,
- our ability to establish additional collaborations,
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- changes in existing collaborations,
- our dependence on others for development and commercialization of our
potential products,
- the cost of manufacturing, and
- the effectiveness of our commercialization activities.
We believe that our cash and anticipated sources of funding, including
Schering AG and the net proceeds of this offering, will be adequate to
satisfy our anticipated capital needs for at least the next two years. If our
plans change, we may need to raise additional funds through new or existing
collaborations or through private or public equity or debt financings.
However, additional financing may not be available on acceptable terms or at
all.
IF OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, IT COULD MATERIALLY
ADVERSELY AFFECT YOUR INVESTMENT AND OUR BUSINESS. We expect that our
operating results will fluctuate from quarter to quarter based on when we
incur expenses and receive revenues from our collaborative arrangements and
other sources. We believe that some of these fluctuations may be significant.
The level of funding by Schering AG may vary or they may withdraw funding
altogether from one or more of our products. If Schering AG were to withdraw
funding, it could have a material adverse affect on our business.
WE DEPEND ON THIRD-PARTY MANUFACTURERS OR COLLABORATORS TO MANUFACTURE
OUR PRODUCTS WHICH MAY DELAY OR IMPAIR OUR ABILITY TO DEVELOP AND
COMMERCIALIZE PRODUCTS ON A TIMELY AND COMPETITIVE BASIS OR ADVERSELY AFFECT
OUR POTENTIAL FUTURE PROFITABILITY. We do not have internal manufacturing
capabilities. Our current strategy is to establish relationships with our
collaborators and others to manufacture our products for clinical trials and
commercial sales. To date, we have established a manufacturing relationship
as part of our collaboration with Schering AG. The agreement provides that
Schering AG is solely responsible for manufacturing gene therapy products
developed under our collaboration. We cannot be certain, however, that we
will be able to maintain our relationship with Schering AG or establish
relationships with other manufacturers on commercially acceptable terms. Any
failure to do so would adversely affect our business.
Further, our manufacturers may experience a variety of problems in
manufacturing our products, including:
- an inability to manufacture commercial quantities of our products on a
cost-effective basis,
- non-compliance with Good Manufacturing Practices mandated by the FDA
or by any foreign regulatory authority,
- manufacturing or quality control problems, or
- an inability to obtain or maintain the governmental licenses and
approvals required to manufacture our products.
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We will need to rely on third parties to market, sell and distribute
our products and those third parties may not perform successfully. We do not
have internal marketing and sales capabilities and may not be able to
successfully market and sell our products. Our current strategy is to market
and sell our products through our collaborative partners. For example, our
collaboration with Schering AG provides that they will be solely responsible
for marketing and selling gene therapy products we develop together. We
cannot be certain, however, that we will be able to maintain our relationship
with Schering AG or establish relationships with other drug or healthcare
companies with distribution systems and direct sales forces on commercially
acceptable terms. If we are required to market and sell our products
directly, we will need to develop a marketing and sales force with technical
expertise and distribution capability. Creating a marketing and sales
infrastructure is expensive and time-consuming and thus could divert
resources from other aspects of our business. In addition, to the extent we
enter into co-promotion or other licensing arrangements, any revenues we
receive will be dependent on the efforts of others, and we cannot be certain
that their efforts will be successful.
OUR PRODUCTS MAY NOT BE COMMERCIALLY SUCCESSFUL BECAUSE PHYSICIANS AND
PATIENTS MAY NOT ACCEPT THEM. Our success will depend on the market
acceptance of our products. Failure to achieve or maintain significant market
acceptance would adversely affect our business. The degree of market
acceptance will depend upon a number of factors, including:
- the receipt and scope of regulatory approval,
- the establishment and demonstration in the medical community of the
safety and effectiveness of our products and their potential
advantages over other treatments, and
- reimbursement policies of government and healthcare payors.
In the past, parts of the medical community have been concerned with
the potential safety and effectiveness of gene therapy products derived from
disease-causing viruses, such as adenoviruses, which we use in our proposed
gene therapy products. Physicians, patients, payors or the medical community
in general may not accept our products as safe or may not use any product
that we may develop.
IF WE ARE NOT ABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND ADVISORS,
IT MAY ADVERSELY AFFECT OUR ABILITY TO OBTAIN FINANCING OR DEVELOP OUR
PRODUCTS. Our success depends on the key members of our scientific and
management staff. The loss of one or more of these key members could impede
our development objectives. We do not have employment agreements with our
scientific or management staff. Certain key scientific staff members have
entered into scientific advisory consulting agreements with us. However,
these agreements may be terminated at any time by either party.
Our future success also depends on recruiting additional qualified
management, operations and scientific personnel. To pursue our research and
development programs, we will need to hire additional qualified scientists
and managers. There is intense competition for these qualified personnel
among numerous pharmaceutical and biotechnology companies, universities and
other research institutions. We may not be able to continue to attract and
retain the personnel necessary to develop our business. Any failure to
attract and retain key personnel could adversely affect our business.
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In addition, we rely on the members of our scientific advisory board
to help formulate our research and development strategy. All of our
scientific advisors are employed by others and may have commitments to, or
consulting contracts with, other entities that may limit their availability
to us. Each scientific advisor has agreed not to perform services for us that
might conflict with services the advisor performs for another entity.
However, a conflict of interest could result from these services and could
adversely affect our business.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, IT MAY RESULT IN
REDUCED DEMAND FOR OUR PRODUCTS OR DAMAGES THAT EXCEED OUR INSURANCE
LIMITATIONS. Our business exposes us to potential product liability risks
that are inherent in the testing, manufacture and sale of human healthcare
products. We have some product liability insurance for our Phase 1/2 human
clinical trial for GENERX-TM-. As it becomes necessary, we intend to expand
our insurance coverage to include clinical trials of other products under
development and the manufacture and commercial sale of our potential
products. We may be unable to obtain additional product liability insurance
on commercially acceptable terms. Failure to obtain product liability
insurance or to otherwise protect against product liability claims could
prevent or delay the commercialization of our products. If we do not have
insurance or adequate insurance, a successful product liability claim or
series of claims could adversely affect our business. In addition, a product
recall could adversely affect our business.
WE MAY INCUR SUBSTANTIAL COSTS RELATED TO OUR USE OF HAZARDOUS
MATERIALS. We are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials. Although we believe that our activities currently comply with
these laws and regulations, the risk of contamination or injury still exists.
For example, if an accident occurs we could be responsible for any damages
and the amount of the damages could exceed our resources. In addition, we may
incur significant costs to comply with environmental laws and regulations in
the future.
OUR STOCK PRICE IS SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH COULD
ADVERSELY AFFECT OUR ABILITY TO RAISE ADDITIONAL CAPITAL WHICH COULD IN TURN
DELAY COMMERCIALIZATION OF OUR PRODUCTS. The market prices and trading
volumes for securities of emerging companies in our industry have
historically been highly volatile and have experienced significant
fluctuations. Often, these fluctuations have been unrelated or
disproportionate to the operating performance of companies. The market price
of our common stock may be affected by announcements regarding:
- results of research,
- development testing,
- technological innovations,
- new commercial products,
- government regulation,
- developments concerning proprietary rights,
- litigation, or
- public perception regarding the safety of our products,
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- securities analysts' expectations.
Since our common stock is thinly traded, its price can also fluctuate
significantly as a result of large stock transactions.
OUR CHARTER AND BYLAWS CONTAIN PROVISIONS THAT MAY PREVENT
TRANSACTIONS THAT COULD BE BENEFICIAL TO STOCKHOLDERS. Our charter and bylaws
restrict how our stockholders can act to affect us. For example:
- Our stockholders can only act at a duly called annual or special
meeting and they may not act by written consent;
- Special meetings can only be called by our chief executive officer,
president, or chairman of the board or by our president or secretary
at the written request of a majority of the board of directors; and
- Stockholders also must give advance notice to the secretary of any
nominations for director or other business to be brought by
stockholders at any stockholders' meeting.
Some of these restrictions can only be amended by a super-majority
vote of members of the board and/or the stockholders. These and other
provisions of our charter and bylaws, as well as provisions of Delaware law,
could prevent changes in our management and discourage, delay or prevent a
merger, tender offer or proxy contest, even if the events could be beneficial
to our stockholders. These provisions could also limit the price that
investors might be willing to pay for our stock.
In addition, our charter authorizes our board of directors to issue
shares of undesignated preferred stock without stockholder approval on terms
that the board may determine. The issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to our other
stockholders or otherwise adversely affect their rights and powers, including
voting rights. Moreover, the issuance of preferred stock may make it more
difficult for another party to acquire, or may discourage another party from
acquiring, voting control of us.
IF WE FAIL TO BE YEAR 2000 COMPLIANT IT COULD DISRUPT OUR BUSINESS
ACTIVITIES. The Y2K issue refers to the inability of date-sensitive computer
chips, software and systems to accept other than two-digit entries in the
date field. As a result, in the Y2K, many systems could mistake "00" for 1900
or any other incorrect year, resulting in system failures or miscalculations.
These failures or miscalculations could disrupt operations, including
manufacturing, the processing of transactions and other normal business
activities. This is a significant issue for most, if not all companies. The
ramifications cannot be predicted with any degree of certainty. Our failures
or the failures of any of our collaborators', clinical trial sites',
suppliers' or any other third parties' computers systems could have a
material adverse impact on our operations.
STATE OF READINESS. We recognize the need to minimize the potential
adverse impact of Y2K issues on our operations. We have developed a
three-phase program for Y2K systems compliance. The first phase is to assess
our key systems for Y2K readiness. This phase includes assessing the impact
of third parties whose systems may not be Y2K compliant. The second phase
involves the testing of key systems for Y2K deficiencies. The final phase
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involves the development of contingency plans for unresolved Y2K
deficiencies, such as our suppliers and service providers failing to
adequately address their Y2K problems.
ASSESSMENT. Since we are a relatively new company, the majority of our
information technology and non-information technology systems were acquired
during 1998. We have purchased only well-known hardware and software believed
to be Y2K compliant. We do not develop or customize any key software. To
further confirm the readiness of critical systems, we obtained documentation
from hardware and software manufacturers. This documentation indicated that
all such systems were Y2K compliant. Our main systems do not interface
directly with those of third parties. We have contacted and will continue to
contact key suppliers of goods and services to assess their readiness.
However, we are unable to control whether our current and future
collaborative partners', clinical trial sites', or suppliers' systems are Y2K
compliant. The assessment phase was completed in the first quarter of 1999.
TESTING. In the first quarter of 1999, we completed testing our
workstations in a Y2K environment to ensure systems perform properly.
However, we do not intend to test recently purchased software and hardware
that have been certified as Y2K compliant by the manufacturers.
COSTS TO ADDRESS OUR Y2K ISSUES. We are expensing Y2K compliance costs
as incurred. We do not expect these costs to be material to our financial
position or results of operations. To date the costs related to Y2K issues
have been minimal, consisting only of time spent by existing personnel to
review systems, to obtain documentation, and to carry out other procedures
discussed above. We have not needed to incur capital expenditures to address
Y2K problems. We expect our total cost of reviewing and achieving Y2K
compliance to be less than $25,000, most of which has been incurred to date.
This estimate is based on currently available information and will be updated
as we continue our assessment of third party relationships, and proceed with
implementation and design contingency plans.
THE RISKS OF OUR Y2K ISSUES. If any key information technologies or
embedded microprocessor technology systems are overlooked, our business could
be materially disrupted, for example, our operations could be disrupted to
the extent that our suppliers, collaborators, or clinical trial sites are
adversely impacted by Y2K.
Further, if our vendors or the suppliers of our necessary energy,
telecommunications and transportation needs fail to provide us with (1) the
materials and services which are necessary to develop our products, (2) the
electrical power and other utilities necessary to sustain our operations, or
(3) reliable means of transporting supplies to us, such failure could have a
material adverse effect on our business.
OUR CONTINGENCY PLAN. Our contingency plan includes identifying
alternatives for all key laboratory suppliers and services. Further, we
maintain a short-term back-up power generation system for key scientific
equipment at our preclinical research center. The back-up power system is
expected to be adequate to sustain our preclinical research center for at
least several days. However, we do not maintain a back-up power generation
system for our administrative office. Although our contingency plan is
essentially complete, we intend to update it on an ongoing basis as needed.
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RISKS RELATED TO OUR INDUSTRY
WE FACE INTENSE COMPETITION IN OUR INDUSTRY WHICH COULD RENDER OUR
POTENTIAL PRODUCTS LESS COMPETITIVE OR OBSOLETE AND COULD HARM OUR
COMPETITIVE POSITION. In light of the intense competition in our industry, we
may not successfully manufacture and market any potential products. We
compete with several different types of entities, including early-stage gene
therapy companies, fully integrated pharmaceutical companies, universities,
research institutions, governmental agencies and other healthcare providers,
as well as medical device companies.
A number of companies and institutions are developing technologies,
therapies and/or products that could compete with our potential products. For
example, there are a number of potential gene therapy, cell therapy
treatments and angiogenic protein infusion therapies which could compete with
our potential products. Our products could also compete with drugs or other
pharmaceutical products. In addition, a number of new surgical procedures
could compete with our potential products, including:
- laser-based systems to stimulate angiogenesis in the heart, and
- catheter-based treatments including balloon angioplasty, atherectomy
and coronary stenting.
Many of our competitors have larger research and development staffs
and substantially more financial and other resources. These competitors also
have more experience and capability in researching, developing and testing
products in clinical trials, in obtaining FDA and other regulatory approvals
and in manufacturing, marketing and distribution.
In addition, the competitive positions of other early stage companies
may be enhanced significantly through their collaborative arrangements with
large pharmaceutical companies, biotechnology companies or academic
institutions, which may be more beneficial than our collaborative
arrangements. Our competitors may succeed in developing, obtaining patent
protection for, receiving regulatory approvals for, or commercializing
products at a more rapid pace. If we are successful in commercializing our
products, we will be required to compete with respect to manufacturing
efficiency and marketing capabilities, areas in which we have no experience.
We also compete with others in acquiring products or technology from
research institutions, universities or others. Our competitors may develop or
acquire new technologies and products that are available for sale before our
potential products or are more effective than our potential products.
Any of these developments could render our potential products less
competitive or obsolete, and could have a material adverse effect on our
business. Further, gene therapy in general is a new and rapidly developing
technology. We expect this technology to undergo significant change in the
future. If there is rapid technological development, our current and future
products or methods may become obsolete before we can successfully
commercialize them.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION IN OUR INDUSTRY AND
MAY FAIL TO RECEIVE REGULATORY APPROVAL WHICH COULD PREVENT OR DELAY THE
COMMERCIALIZATION OF OUR PRODUCTS.
-21-
<PAGE>
We and our collaborators are subject to extensive government regulation. The
FDA and foreign regulatory authorities require rigorous preclinical testing,
clinical trials and other product approval procedures. Numerous regulations
also govern the manufacturing, safety, labeling, storage, record keeping,
reporting and marketing of our drug products. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary
greatly from country to country. The process of obtaining these approvals and
complying with applicable government regulations is time consuming and
expensive. The time required to complete testing and obtain approvals is
uncertain, and approval may not be obtained. If product modification is
needed, the test period could be substantially extended which could adversely
affect our business.
In addition, changes in regulatory policy or additional regulations
adopted during product development could also result in delays or rejections.
For example, gene therapy is relatively new and is only beginning to be
extensively tested in humans. Regulatory authorities may significantly modify
the requirements governing gene therapy.
Even after substantial time and expense, we may not be able to obtain
regulatory product approval by the FDA or any equivalent foreign authorities.
Moreover, the regulatory authorities may require us or our partners to
demonstrate that our products are improved treatments relative to other
therapies. If we obtain regulatory product approval, the approval may limit
the uses for which we may market the product. After regulatory approval is
obtained, our product, its manufacturer and related manufacturing facilities
will be subject to continual review and periodic inspections. Any subsequent
discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on the product or manufacturer, including
withdrawal of the product from the market.
We are also subject to regulation under the Occupational Safety and
Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act and other present and
potential future federal, state or local laws and regulations. We or our
partners may also be subject to similar regulations in other countries.
Failure to comply with such regulatory requirements or to obtain product
approvals could impair our ability to market our products and adversely
affect our business.
IF THE COST OF OUR PRODUCTS IS NOT REIMBURSED BY THIRD PARTIES, IT
COULD HARM OUR COMMERCIAL SUCCESS. Our commercial success will depend heavily
upon whether consumers will be reimbursed for the use of our products.
Third-party payors, such as government and private insurance plans, may not
authorize or otherwise budget reimbursement for our products. Additionally,
third-party payors, including Medicare, are increasingly challenging the
prices charged for medical products and services. We may be required to
provide substantial cost-benefit data to demonstrate that our products are
cost-effective. Third-party payors may not pay the prices set for our
products or reimburse consumers for the use of our products. Federal and
state regulations also affect the reimbursement to healthcare providers of
fees and capital equipment costs in connection with medical treatment.
HEALTHCARE REFORM MEASURES ARE UNCERTAIN AND MAY ADVERSELY IMPACT THE
COMMERCIALIZATION OF OUR PRODUCTS. The efforts of governments and third-party
payors to contain or reduce the cost of healthcare will continue to affect
our business and financial condition as a biotechnology company. In foreign
markets, pricing or profitability of medical products and services may be
subject to government control. In the U.S., we expect that there will
continue to be federal and state proposals for government control of pricing
and profitability. In addition, increasing emphasis on managed healthcare has
increased pressure on pricing of medical
-22-
<PAGE>
products and will continue to do so. These cost controls may have a material
adverse effect on our revenues and profitability and may affect our ability
to raise additional capital. Cost control initiatives could also adversely
affect our business in a number of ways, including:
- decreasing the price we, or any of our partners or licensees, receive
for any of our products,
- preventing the recovery of development costs, which could be
substantial, and
- minimizing profit margins.
Further, our commercialization strategy depends on our collaborators. As a
result, our ability to commercialize our products and realize royalties may
be hindered if cost control initiatives adversely affect our collaborators.
OUR MANAGEMENT AND CONTROLLING STOCKHOLDERS WHICH TOGETHER CONTROL A
LARGE PORTION OF OUR COMMON STOCK MAY CONTROL OUR OPERATIONS AND MAKE
DECISIONS WHICH YOU DO NOT CONSIDER IN YOUR BEST INTEREST. Our present
directors, executive officers and principal stockholders and their affiliates
beneficially own approximately 72.6% of our outstanding common stock. As a
result, if all or some of these stockholders were to act together, they would
be able to exercise significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in our control that may be
favored by other stockholders.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD LOWER OUR
STOCK PRICE AND IMPAIR OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS. The
market price of our common stock could drop due to sales of a large number of
shares of our common stock or the perception that these sales could occur.
Such sales also might make it more difficult for us to sell equity securities
in the future at a price that we deem appropriate.
WHERE YOU CAN FIND MORE INFORMATION
We 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 rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public on the SEC's website at
http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later information
filed with the SEC will update and supersede this information. We incorporate
by reference the documents listed below and any future filings we make with
the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange
Act of 1934 until our offering is completed.
-23-
<PAGE>
1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998, file no. 000-24505, including certain information in
our Definitive Proxy Statement in connection with our 1999 Annual
Meeting of Stockholders;
2. Our Quarterly Reports on Form 10-Q for the quarterly period ended
March 31, 1999 and June 30, 1999, file no. 000-24505; and
3. The description of Collateral's common stock in its registration
statement on Form 8-A filed on June 22, 1998, file no. 000-24505,
including any amendments or reports filed for the purpose of
updating such description.
4. Our report on Form 8-K filed on August 12, 1999 including an
exhibit.
The reports and other documents that we file after the date of this
prospectus will update and supersede the information in this prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
Collateral Therapeutics, Inc.
11622 El Camino Real
San Diego, California 92130
(858) 794-3400
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS ARE NOT AUTHORIZED TO
MAKE AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
Collateral Therapeutics is our registered trademark. This prospectus
also includes other trademarks owned by us.
USE OF PROCEEDS
Collateral will not receive any of the proceeds from the sale of the
shares by the selling stockholders.
PLAN OF DISTRIBUTION
Collateral is registering all 2,150,000 shares on behalf of certain
selling stockholders. We issued all of the shares to the selling stockholders
in a private placement transaction. The selling stockholders named in the
table below or pledgees, donees, transferees or other successors-in-interest
selling shares received from a named selling stockholder as a gift,
partnership distribution or other non-sale related transfer after the date of
this prospectus (collectively, the selling stockholders) may sell the shares
from time to time. The selling stockholders will act independently of us in
making decisions regarding the timing, manner and size of each sale. The
sales may be made on the Nasdaq National Market or in the over-the-counter
market or otherwise, at prices and at terms then prevailing or at prices
related to the then current market price, or in negotiated transactions. The
selling stockholders may effect these transactions by selling the shares to
or through broker-dealers. The shares may be sold by one or more of, or a
combination of, the following:
-24-
<PAGE>
- a block trade in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction,
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its account under this prospectus,
- an exchange distribution in accordance with the rules of the
respective exchange,
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in the resales.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise.
In these transactions, broker-dealers may engage in short sales of the shares
in the course of hedging the positions they assume with selling stockholders.
The selling stockholders also may sell shares short and redeliver the shares
to close out such short positions. The selling stockholders may enter into
option or other transactions with broker-dealers which require the delivery
to the broker-dealer of the shares. The broker-dealer may then resell or
otherwise transfer such shares covered by this prospectus. The selling
stockholders also may loan or pledge the shares to a broker-dealer. The
broker-dealer may sell the shares so loaned, or upon a default the
broker-dealer may sell the pledged shares under this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders.
Broker-dealers or agents may also receive compensation from the purchasers of
the shares for whom they act as agents or to whom they sell as principals, or
both. Compensation as to a particular broker-dealer might be in excess of
customary commissions and will be in amounts to be negotiated in connection
with the sale. Broker-dealers or agents and any other participating
broker-dealers or the selling stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 in
connection with sales of the shares. Accordingly, any such commission,
discount or concession received by them and any profit on the resale of the
shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. Because selling stockholders may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, the selling stockholders will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities
covered by this prospectus which qualify for sale in compliance with Rule 144
promulgated under the Securities Act may be sold under Rule 144 rather than
under this prospectus. The selling stockholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There
is no underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold
-25-
<PAGE>
unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions
may limit the timing of purchases and sales of shares of our common stock by
the selling stockholders. Collateral will make copies of this prospectus
available to the selling stockholders and has informed them of the need to
deliver copies of this prospectus to purchasers at or prior to the time of
any sale of the shares.
Collateral will file a supplement to this prospectus, if required, to
comply with Rule 424(b) under the Securities Act, upon being notified by a
selling stockholder that any material arrangements have been entered into
with a broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer. Such supplement will disclose:
- the name of each such selling stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus, and
- other facts material to the transaction.
In addition, upon being notified by a selling stockholder that a donee
or pledgee intends to sell more than 500 shares, Collateral will file a
supplement to this prospectus.
Collateral will bear all costs, expenses and fees in connection with
the registration of the shares, other than fees and expenses, if any, of
counsel or other advisers to the selling stockholders. In addition, the
selling stockholders will bear all commissions and discounts, if any,
attributable to the sales of the shares. The selling stockholders may agree
to indemnify any broker-dealer or agent that participates in transactions
involving sales of the shares against various liabilities, including
liabilities arising under the Securities Act. The selling stockholders have
agreed to indemnify Collateral, its directors, officers who sign the
Registration Statement, and control persons against various liabilities in
connection with the offering of the shares, including liabilities arising
under the Securities Act.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares owned by each of
the selling stockholders. This registration statement also shall cover any
additional shares of common stock which become issuable in connection with
the shares registered for sale hereby by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of
Collateral's outstanding shares of common stock.
None of the selling stockholders has had a material relationship with
Collateral within the past three years other than as a result of the
ownership of the shares or other securities of Collateral. No estimate can be
given as to the amount of shares that will be held by the selling
stockholders after completion of this offering because the selling
stockholders may offer all or some of the shares they hold and because there
currently are no agreements, arrangements or understandings with respect to
the sale of any of the shares. The shares offered by this prospectus may be
offered from time to time by the selling stockholders named below.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY PERCENT OF REGISTERED
NAME OF SELLING STOCKHOLDER OWNED OUTSTANDING SHARES FOR SALE HEREBY
------------------------------------------------- ----------------- -------------------- ------------------
<S> <C> <C> <C>
Eagle Asset Management 225,500 1.7% 150,000
Franklin Biotechnology Discovery Fund (#402) 63,000 * 63,000
Franklin California Growth Fund (#180) 125,000 1.0% 125,000
Franklin Small Cap Fund (#198) 312,000 2.4% 312,000
Howard J. Leonhardt 68,000 * 60,000
Invesco Funds Group, Inc. 200,000 1.6% 200,000
Moore Global Investments Ltd. 109,500 * 109,500
Nordbanken Fonder AB 40,000 * 40,000
Remington Investments Strategies, L.P. 24,000 * 24,000
SEB Fondforvaltning 85,000 * 85,000
SEB Private Bank Luxemburg 15,000 * 15,000
SL Holdings Ltd. 16,500 * 16,500
State of Wisconsin Investment Board 1,583,000 12.3% 750,000
T. Rowe Price New Horizons Fund, Inc. 222,000 1.7% 200,000
------------------ --------------------
TOTAL 3,088,500 2,150,000
------------------ --------------------
------------------ --------------------
</TABLE>
*Represents beneficial ownership of less than 1%.
-27-
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by
Brobeck, Phleger & Harrison LLP, San Diego, California. Members of Brobeck,
Phleger & Harrison LLP own a total of 259,455 shares of Collateral's common
stock.
EXPERTS
The financial statements incorporated in this prospectus by reference
to our Annual Report on Form 10-K for the year ended December 31, 1998, have
been included in this prospectus in reliance on the report of Ernst & Young
LLP, independent auditors, given on the authority of that firm as experts in
auditing and accounting.
-28-
<PAGE>
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT
IS IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM
WHAT IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT
AN OFFER TO SELL, NOR IS IT AN OFFER TO BUY, THESE SECURITIES IN ANY STATE IN
WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS
IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER
THAT DATE.
2,150,000 SHARES
COLLATERAL
THERAPEUTICS, INC.
COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
_________ __, 1999
-i-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the common stock being registered. All the amounts shown are
estimates, except for the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee................................... $ 10,983
Printing and engraving expenses........................ 5,000
Legal fees and expenses................................ 5,000
Accounting fees and expenses........................... 10,000
Transfer Agent and Registrar Fees...................... 5,000
Miscellaneous Expenses................................. 10,000
-------------------
TOTAL $ 45,983
-------------------
-------------------
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits
indemnification of our officers and directors under certain conditions and
subject to certain limitations. Section 145 of the Delaware General
Corporation Law also provides that a corporation has the power to purchase
and maintain insurance on behalf of its officers and directors against any
liability asserted against such person and incurred by him or her in such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liability under the provisions of Section 145 of the Delaware General
Corporation Law.
Article VII, Section 1 of our Restated Bylaws provides that we shall
indemnify our directors, officers, employees and agents to the fullest extent
not prohibited by the Delaware General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and inure to the benefit of the heirs, executors
and administrators of the person. In addition, expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or she
is or was a director or officer of Collateral (or was serving at Collateral's
request as a director or officer of another corporation) shall be paid by
Collateral in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by Collateral as authorized by the
relevant section of the Delaware General Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation
Law, Article V, Section (A) of Collateral's Certificate of Incorporation
provides that a director of Collateral shall not be personally liable for
monetary damages or breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Collateral
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived any improper personal benefit.
II-1
<PAGE>
Collateral has directors and officers liability insurance now in
effect which insures our directors and officers.
We have entered into indemnification agreements under Delaware Law
with each of our directors and executive officers. Generally, the
indemnification agreements attempt to provide the maximum protection
permitted by Delaware law as it may be amended from time to time. Moreover,
the indemnification agreements provide for additional indemnification for
certain amounts not otherwise covered by directors and officers liability
insurance. Under such additional indemnification provisions, however, such
director or executive officer will not be indemnified for settlements not
approved by us. The indemnification agreements provide for Collateral to
advance to the individual any and all reasonable expenses (including legal
fees and expenses) incurred in investigating or defending any such action,
suit or proceeding. Also, the individual must repay such advances upon a
final judicial decision that he or she is not entitled to indemnification.
Collateral's obligations under these indemnification agreements shall
continue during the period that such director or officer is serving
Collateral as such and shall continue for so long thereafter as such director
or officer shall be subject to any possible claim, action, suit or
proceeding. For six years after the effective time of the acquisition of
Collateral by another entity or the sale of all or substantially all of our
assets, Collateral shall cause the acquiring or surviving corporation to
indemnify such director or officer in accordance with the terms of this
indemnification agreement and use such acquiring or surviving corporation's
best efforts to provide director's and officer's liability insurance on terms
substantially similar to ours.
The underwriters of our initial public offering have agreed to
indemnify Collateral, each person, if any, who controls Collateral within the
meaning of Section 15 of the Securities Act, each director of Collateral, and
each officer of Collateral who signs this Registration Statement, with
respect to information furnished in writing by or on behalf of such
underwriters specifically for use in our S-1 Registration Statement. The
selling stockholders have agreed to indemnify us, each of our directors,
each of our officers who signed the Registration Statement and each person,
if any, who controls Collateral within the meaning of the Securities Act,
with respect to (i) any failure by such selling stockholder to comply with
covenants and agreements respecting the sale of the Shares pursuant to this
Registration Statement or (ii) the inaccuracy of any representation made by
such selling stockholder in connection therewith or (iii) with respect to
written information furnished to us by or on behalf of such selling
stockholder expressly for use in this Registration Statement and Prospectus.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
(a) EXHIBITS. DESCRIPTION
EXHIBIT NO. -----------
- ------------
<S> <C>
4.1 Instruments defining the rights of stockholders.
Reference is made to the Registration Statement
on Form 8-A, filed June 22, 1998.
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of Brobeck, Phleger & Harrison LLP. Included
in the Opinion of Brobeck, Phleger & Harrison LLP
filed as Exhibit 5.1.
24.1 Power of Attorney. Included on page II-4 of this
registration statement.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-K at the state of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the Act
need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (4) and other information necessary to
ensure that all other information in the prospectus is at least as current as
the date of those financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post-effective amendment
need not be filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver,
or cause to be
II-3
<PAGE>
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons 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 hereunder, 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 of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Diego, California, on the 13th
day of August 1999.
COLLATERAL THERAPEUTICS, INC.
By: /s/ Jack W. Reich
-------------------------------------
Jack W. Reich
President and Chief Executive Officer
By: /s/ Christopher J. Reinhard
------------------------------------
Christopher J. Reinhard
Chief Operating and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Jack W. Reich and Christopher
J. Reinhard, and each of them acting individually, as his attorney-in-fact,
each with full power of substitution and resubstitution, for him or her in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C> <C>
/s/ Jack W. Reich, Ph.D. President and Chief Executive Officer August 13, 1999
- --------------------------------------- (Principal Executive Officer)
Jack W. Reich
/s/ Christopher J. Reinhard Chief Operating and Chief Financial Officer August 13, 1999
- --------------------------------------- (Principal Financial and Accounting Officer)
Christopher J. Reinhard
/s/ Craig S. Andrews Director August 13, 1999
- ---------------------------------------
Craig S. Andrews
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert L. Engler Director August 13, 1999
- ---------------------------------------
Robert L. Engler
/s/ H. Kirk Hammond, M.D. Director, Vice President, Research August 13, 1999
- ---------------------------------------
H. Kirk Hammond, M.D.
/s/ Charles J. Aschauer Director August 13, 1999
- ---------------------------------------
Charles J. Aschauer
/s/ Ronald I. Simon, Ph.D. Director August 13, 1999
- ---------------------------------------
Ronald I. Simon, Ph.D.
/s/ Dale A. Stringfellow, Ph.D. Director August 13, 1999
- ---------------------------------------
Dale A. Stringfellow, Ph.D.
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.1 Instruments defining the rights of stockholders.
Reference is made to the Registration Statement on
Form 8-A, filed June 22, 1998.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP. Included
in the Opinion of Brobeck, Phleger & Harrison LLP
filed as Exhibit 5.1.
24.1 Power of Attorney. Included on page II-4 of this
registration statement.
</TABLE>
S-2
<PAGE>
Exhibit 5.1
Opinion of Brobeck, Phleger & Harrison LLP
August 13, 1999
Collateral Therapeutics, Inc.
11622 El Camino Real
San Diego, California 92130
Re: Collateral Therapeutics, Inc. Registration Statement on Form S-3
for Resale of 2,150,000 Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to Collateral Therapeutics, Inc., a Delaware
corporation (the "Company"), in connection with the registration for resale
of 2,150,000 shares of Common Stock (the "Shares"), as described in the
Company's Registration Statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of
Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents, the corporate
proceedings taken by the Company in connection with the original issuance and
sale of the Shares, and a certificate of a Company officer regarding (among
other things) the Company's receipt of consideration upon the original
issuance and sale of the Shares. Based on such review, we are of the opinion
that the Shares are duly authorized, validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the Act,
the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, or Item 509 of Regulation S-K.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company or the Shares.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of Collateral Therapeutics, Inc. for the
registration of 2,150,000 shares of its common stock, and to the
incorporation by reference therein of our report dated February 12, 1999,
with respect to the financial statements of Collateral Therapeutics, Inc.,
included in the Annual Report (Form 10-K) for the year ended December 31,
1998.
/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP
San Diego, California
August 10, 1999
