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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 2000
REGISTRATION STATEMENT 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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CELL PATHWAYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 23-2969600
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARTHA E. MANNING, ESQUIRE
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STEPHEN A. JANNETTA, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103-2921
(215) 963-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
investment 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 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. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SHARES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share(3).......................... 7,703,249 shares $6.125 $47,182,400 $12,457
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</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this registration statement
also covers such additional shares as may hereafter be offered or issued to
prevent dilution resulting from stock splits, stock dividends,
recapitalizations or certain other capital adjustments.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(c) under the Securities Act on the
basis of the average of the high and low sales prices for a share of Common
Stock on November 20, 2000 as reported on The Nasdaq National Market.
(3) Includes rights to purchase shares of our Series A Junior Participating
Stock pursuant to our Preferred Stock Purchase Rights Plan. No separate
consideration is paid for these rights and, as a result, the registration
fee for these rights is included in the fee for the common stock.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED OR
SUPPLEMENTED. THE SELLING STOCKHOLDERS CANNOT SELL ANY OF THE SECURITIES
DESCRIBED IN THIS PROSPECTUS UNTIL THE REGISTRATION STATEMENT THAT WE
HAVE FILED TO COVER THE SECURITIES HAS BECOME EFFECTIVE UNDER THE RULES
OF THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THE SECURITIES, NOR IS IT A SOLICITATION OF AN OFFER TO BUY
THE SECURITIES, IN ANY STATE WHERE AN OFFER OR SALE OF THE SECURITIES IS
NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 22, 2000
PROSPECTUS
7,703,249 SHARES
CELL PATHWAYS, INC.
COMMON STOCK
The shares of our common stock offered by this prospectus are being offered
by the selling stockholders named in the section entitled "Selling
Stockholders." We will not receive any of the proceeds from the sale of the
shares by the selling stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"CLPA." On November 21, 2000, the last reported sale price for our common stock
on the Nasdaq National Market was $5.5625 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A DESCRIPTION
OF RISKS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES DESCRIBED IN THIS
PROSPECTUS 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 , 2000.
<PAGE> 3
References in this prospectus to "we," "us," "our," the "Company," and
"Cell Pathways" refer to Cell Pathways, Inc. and its subsidiaries.
WHERE TO FIND ADDITIONAL INFORMATION
Before you decide whether to invest in the common stock, you should read
this prospectus and the information we otherwise file with the Securities and
Exchange Commission (SEC).
We are required by federal securities laws to file certain information with
the SEC. You can access this material on the SEC's Internet website, at
http://www.sec.gov. You can also read and copy this material at the SEC's public
reference room, located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at (800) 732-0330 for information on how the public
reference room operates. In addition, the common stock is included for listing
in the Nasdaq National Market, and you can obtain our reports, proxy statements
and other information about us at the offices of The Nasdaq Stock Market,
located at 1735 K Street, N.W., Washington, D.C. 20006.
We will also send you copies of the material we file with the SEC, free of
charge, upon your request. Please call or write our Investor Relations
department at:
702 Electronic Drive
Horsham, Pennsylvania 19044
Telephone No.: (215) 706-3800
The SEC allows us to "incorporate by reference" into this prospectus
certain important information about us. This means that the information in this
prospectus is not complete, and you should read the information incorporated by
reference for more detail. We incorporate by reference in two ways. First, we
list certain documents that we have already filed with the SEC. The information
in these documents is considered part of this prospectus. Second, we may in the
future file additional documents with the SEC. When filed, the information in
these documents will update and supercede the current information in, and
incorporated by reference in, this prospectus.
We incorporate by reference the documents listed below, and any other
documents we file with the SEC under Section 13(a), 13(c), 14 or 15 of the
Securities Exchange Act of 1934 until the offering described in this prospectus
is completed:
(a) Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
(b) Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2000 June 30, 2000 and September 30, 2000;
(c) Our current report on Form 8-K filed with the SEC on September 29,
2000;
(d) The description of our common stock contained in our Registration
Statement on Form 8-A registering the common stock under Section 12 of
the Securities Exchange Act of 1934; and
(c) The description of our preferred stock purchase rights contained in our
Registration Statement on Form 8-A registering the preferred stock
purchase rights under Section 12 of the Securities Exchange Act of
1934.
This prospectus is part of our registration statement. We have filed the
registration statement with the SEC under the Securities Act to register the
common stock that the selling stockholders are offering by this prospectus. Not
all of the information in the registration statement appears in this prospectus.
For more detail, you can read the entire registration statement, and all of the
exhibits filed with it, at the SEC's offices or website as described above.
You should rely on the information that is in this prospectus, or
incorporated by reference. You should not, however, assume that the information
that appears directly in this prospectus is accurate or complete as of any date
other than the date on the front cover.
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FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are those which express plan, anticipation, intent, contingency or
future development and/or otherwise are not statements of historical fact. These
statements are subject to risks and uncertainties, known and unknown, which
could cause actual results and developments to differ materially from those
expressed or implied in such statements. Such risks and uncertainties relate to,
among other factors, the absence of approved products; history of operating
losses; early stage of development; the costs, delays and uncertainties inherent
in basic pharmaceutical research, drug development, clinical trials and the
regulatory approval process, with respect to both our current product candidates
and our future product candidates, if any; dependence on the development and
market acceptance of Aptosyn(TM) (exisulind) for one or more significant disease
indications; the limitations on, or absence of, the predictive value of data
obtained in laboratory tests, animal models and human clinical trials when
planning additional steps in product development; the uncertainty of obtaining
regulatory approval of any compound for any disease indication; the delay,
uncertainty and adversity arising from the recent action of the U.S. Food and
Drug Administration, or FDA, in issuing a "not approvable" letter with respect
to the New Drug Application, or NDA, submitted for Aptosyn(TM) for the orphan
drug condition of familial adenomatous polyposis, or FAP, a rare disease that
puts those afflicted at high risk of developing colon cancer; the uncertainty of
the effect of product approval, if achieved, on the market price of the common
stock; the timing and scope of any approval which might be received for any
compound for any indication in the future; acceptance by providers of healthcare
reimbursement; the validity, scope and enforceability of patents; the actions of
competitors; dependence upon third parties; product liability; and the need for
further financing.
These and other risks are detailed in our reports filed from time to time
under the Securities Act and/or the Securities Exchange Act, including the
sections entitled "Business," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Other Events" in
the Company's reports on Form 10-K for the year ended December 31, 1999 and
Forms 10-Q and 8-K during 2000 and in such registration statements on Form S-3
as may be filed from time to time. You are encouraged to read these filings as
they are made. They are available over the Internet from the SEC in its EDGAR
database.
Given the uncertainties affecting pharmaceutical companies in the
development stage, current and prospective investors are cautioned not to place
undue reliance on any such forward-looking statements, any of which may turn out
to be wrong due to inaccurate assumptions, unknown risks, uncertainties or other
factors. No forward-looking statement can be guaranteed; actual future results
may vary materially. Both forward-looking statements and statements of historic
fact must be understood in the context of the risks referred to above which
characterize the Company's development-stage business. The Company undertakes no
obligation to update or revise the statements made herein or the risk factors
that may relate thereto.
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RISK FACTORS
Prospective investors should carefully consider the following risk factors
and the other information included in this prospectus, including the documents
incorporated by reference in this prospectus, before deciding to invest in the
common stock.
WE HAVE A HISTORY OF NET LOSSES AND MAY NEVER BECOME PROFITABLE.
We are a development-stage pharmaceutical company. Our business has
experienced significant operating losses since its inception in 1990. We have
not received any revenue from the sale of products and none of our product
candidates has been approved for marketing. As of September 30, 2000, we had an
accumulated deficit of approximately $86.1 million. We expect to incur
additional operating losses for at least the next several years and expect
cumulative losses to increase substantially as research and development efforts
and preclinical and clinical testing expand. If we succeed in obtaining
marketing approval for any of our product candidates, we will incur significant
manufacturing and marketing costs. Among other things, our ability to achieve
profitability is dependent on our ability, alone or with others, to:
- successfully complete the development of our product candidates;
- obtain the required regulatory approvals;
- successfully manufacture and market, or have others successfully
manufacture and market, our product candidates; and
- gain market acceptance for our product candidates.
We may never achieve profitability.
WE ARE AT AN EARLY STAGE OF DEVELOPMENT, AND HAVE NO PRODUCTS APPROVED FOR SALE;
ONLY TWO OF OUR PRODUCT CANDIDATES HAVE BEEN SUBJECT TO CLINICAL STUDIES, AND
THE FDA HAS ISSUED A "NOT APPROVABLE" LETTER WITH RESPECT TO OUR NEW DRUG
APPLICATION, OR NDA, FOR USE OF APTOSYN(TM) (EXISULIND) IN FAMILIAL ADENOMATOUS
POLYPOSIS, OR FAP; OUR LONG-TERM VIABILITY WILL BE IMPAIRED IF WE ARE UNABLE TO
OBTAIN REGULATORY APPROVAL FOR, OR SUCCESSFULLY MARKET, OUR PRODUCT CANDIDATES.
We have only two product candidates that have been subject to clinical
trials: Aptosyn(TM) and CP 461. Our business is significantly dependent upon the
successful development and approval of these product candidates for one or more
cancerous or pre-cancerous disease conditions.
The first disease condition for which we have been clinically testing
Aptosyn(TM) is familial adenomatous polyposis, or FAP, an inherited disease
characterized by the development of hundreds to thousands of polyps in the colon
and the progression of colon cancer if left untreated. In August 1999, we
submitted a New Drug Application, or NDA, to the U.S. Food and Drug
Administration, or FDA, for Aptosyn(TM) in the treatment of FAP. On September
25, 2000 the FDA issued a "not approvable" letter noting deficiencies and
finding that the information presented as to the safety and efficacy of
Aptosyn(TM) for the treatment of FAP was inadequate.
We have notified the FDA that we intend to amend the NDA and meet with the
FDA to discuss the deficiencies noted and the need for additional data,
including the possible requirements for additional clinical data. If the FDA
requires that we conduct additional clinical trials, we may have difficulty
enrolling sufficient patients that meet the study eligibility criteria. Even if
we conduct additional clinical trials, we cannot be sure that we will be able to
provide the FDA with the information it requires, or that the FDA will ever
approve the NDA for FAP. The approval of Celebrex for use in FAP patients may
make it more difficult for us to achieve regulatory approval of Aptosyn(TM) for
use in FAP.
Even if the FDA were to approve the NDA for FAP, the commercial potential
of Aptosyn(TM) would be limited, because persons with FAP represent only a
relatively small market.
In order to market Aptosyn(TM) for other indications, it will be necessary
for us to file NDAs for the additional indications. However, in order to receive
FDA approval to market the drug for each indication, we must successfully
complete lengthy clinical trials demonstrating the safety and efficacy of the
drug for that
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particular indication. We may not successfully complete these clinical trials or
receive appropriate regulatory approval. If we are not able to obtain FDA
approval for any indication with substantial market potential, our ability to
ever become profitable would be impaired.
We are conducting early stage clinical trials of CP 461. These clinical
trials may fail to yield data that are favorable or useful for purposes of
further developing this product candidate and ultimately seeking regulatory
approval for marketing it. We have not developed any other compound to the
extent necessary to commence clinical trials.
Pre-clinical and clinical studies of our product candidates may not display
the safety and efficacy necessary to obtain regulatory approvals. Drug
development is a highly uncertain process. Pharmaceutical and biotechnology
companies have suffered significant setbacks in advanced clinical trials, even
after experiencing promising results in earlier trials. Data obtained from tests
are susceptible to varying interpretations which may delay, limit or prevent
regulatory approval. Regulatory authorities may refuse or delay approval as a
result of many other factors, including changes in regulatory policy during the
period of product development. Product candidates that appear to be promising at
earlier stages of development may not reach the market or be marketed
successfully for a number of reasons, including the following:
- researchers may find during later pre-clinical testing or clinical trials
that the product candidate is ineffective or has harmful side effects;
- variability in the number and types of patients available for clinical
studies;
- new information about the mechanisms by which a drug candidate works may
adversely affect its development;
- the product candidate may fail to receive necessary regulatory approval
or clearance;
- the product candidate may be too difficult to manufacture on a large
scale;
- the product candidate may be too expensive to manufacture or market;
- the product candidate may not achieve broad market acceptance;
- others may hold proprietary rights that will prevent the product
candidate from being marketed; or
- others may market equivalent or superior products.
Our ability to market Aptosyn(TM) in a disease indication is dependent on
our ability to provide the FDA with sufficient data to support approval of an
NDA for that disease indication. We cannot assure that we will ever be able to
provide such information. With respect to CP 461, and any other compound that we
may decide to develop, development may not be complete and marketing of such
product candidates may not occur for at least several years, if at all. We have
limited experience in managing clinical trials, and delays or terminations of
clinical trials we undertake in the future could impair our development of
product candidates. Delays or terminations could result from a number of
factors, including stringent enrollment criteria, slow rate of enrollment, size
of the patient population and geographical considerations.
One area of our focus, cancer prevention, is not thoroughly understood.
With limited exceptions, the FDA has not approved any drug for the prevention of
precancerous lesions or cancer. The FDA sometimes revises its views as to the
prerequisites for drug approvals in these areas, and such revisions could
adversely affect our programs. The FDA may require that a drug candidate
intended to treat precancerous lesions or prevent cancer be shown to be
effective not only in reducing precancerous lesions or other precancerous
symptoms, but also in preventing actual cancer, which may require clinical
trials following large numbers of patients over longer periods of time.
We and our collaborators may not succeed in our research and product
development efforts and we may not be successful in marketing any approved
products. Moreover, after commercial introduction of a new product, discovery of
problems through adverse event reporting could result in restrictions on the
product, including recall or withdrawal from the market and, in certain cases,
civil or criminal penalties resulting from actions by regulatory authorities or
damages from product liability judgments. If we are unable to complete
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clinical trials, obtain regulatory approval or successfully market our products,
our long term viability will be threatened.
OUR BUSINESS WILL BE HARMED IF WE FAIL TO OBTAIN THE CAPITAL NECESSARY TO FUND
OUR OPERATIONS.
We believe that our available cash, including net proceeds of approximately
$23 million received in the private placement of our common stock on November 9,
2000, will be sufficient to fund operations into the second half of 2002, and we
will need to raise substantial additional funds to continue our business
activities. Among other things, we anticipate that we will devote expenditures
to the following:
- additional clinical studies relating to Aptosyn(TM) in connection with
our attempt to obtain FDA approval of Aptosyn(TM) in one or more
cancerous or precancerous disease indications;
- additional clinical trials for CP 461;
- pre-clinical studies and clinical trials relating to additional compounds
for cancerous and pre-cancerous disease conditions;
- regulatory approval processes;
- production of product candidates for clinical trials;
- basic research; and
- establishment of sales, marketing and distribution capabilities.
The amount of capital we may need depends on many factors, including:
- whether the FDA approves the NDA for Aptosyn(TM) for the FAP indication;
- whether the FDA approves any future NDA for Aptosyn(TM) with regard to
any other indication;
- the progress of our research and development programs;
- the progress of pre-clinical testing;
- the progress of clinical testing for CP 461;
- the time and costs involved in obtaining regulatory approvals;
- the costs relating to patents and other intellectual property;
- our ability to establish collaborative arrangements;
- the effect of any changes or development in our existing collaborative
relationships;
- the effect of competing technological and market developments; and
- our ability to successfully commercialize an approved product candidate.
We do not know whether additional financing will be available on acceptable
terms when needed. We may seek to raise funds through public or private equity
offerings or debt financings or through corporate collaborations and licensing
arrangements.
If we raise additional capital by issuing equity securities, our
stockholders' percentage ownership will be reduced, and our stockholders may
experience substantial dilution. Any equity securities issued may also provide
rights, privileges or preferences superior to the common stock. If we raise
additional funds by issuing debt securities, we may be subject to significant
restrictions on our operations. If we raise additional funds through
collaborations and licensing arrangements, we may be required to relinquish some
rights to our technologies or product candidates, or grant licenses on terms
that are not favorable to us.
If adequate funds are not available on acceptable terms, our ability to
fund our operations, develop products or technologies or otherwise respond to
competitive pressures could be significantly delayed or limited and we may have
to reduce or cease our operations. If additional funds become available, there
can be
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no assurance that we can accurately predict the time and costs required to
complete development programs or that we will not substantially exceed our
budgets or that revenue forecasts, if made, will not prove inaccurate.
OUR BUSINESS MAY BE HARMED BY PENDING LITIGATION.
Following our announcement on February 1, 1999 that we anticipated a delay
in filing the NDA for Aptosyn(TM) for FAP, five stockholder class actions were
filed against us and certain of our officers and directors. These actions were
consolidated into one action and, in June 1999, a consolidated amended complaint
was filed on behalf of a class of all purchasers of our common stock between
October 7, 1998 and February 2, 1999. The complaint alleged that we violated
antifraud and other provisions of the federal securities laws by making
materially false and misleading statements relating to, among other things, the
progress of our clinical trials. This action is in preliminary stages and is
pending in the United States District Court for the Eastern District of
Pennsylvania. We filed a motion to dismiss the complaint, which motion has been
denied by the District Court. Our request to the United States Third Circuit
Court of Appeals to review the District Court's denial of our motion to dismiss
was denied by the Circuit Court. While we are vigorously defending the
litigation, we cannot be sure that we will prevail. The costs of this
litigation, particularly if a judgment is rendered in favor of the plaintiffs,
may be harmful to our business.
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, OR TO AVOID INFRINGING
THE RIGHTS OF OTHERS, OUR ABILITY TO COMPETE EFFECTIVELY WILL BE IMPAIRED.
Our intellectual property consists of patents, licenses, trade secrets and
trademarks. Our success depends in part on our ability to:
- obtain and maintain patents and other intellectual property;
- establish and maintain trademarks;
- maintain our trade secrets;
- operate without infringing the proprietary rights of others; and
- otherwise maintain adequate protection of our intellectual property for
our technologies and products in the United States and other countries.
We have several patents and pending United States patent applications
relating to the therapeutic uses of Aptosyn(TM). However, the composition of
matter patent for Aptosyn(TM), which is desirable because it gives patent
protection for a drug's chemical compound, is not available because Aptosyn(TM)
was described in scientific and patent literature over 20 years ago. Therefore,
if clinical uses of Aptosyn(TM) are discovered beyond those covered by our
patent claims, we may not be able to enforce our patent rights against companies
marketing the compound with respect to these other clinical uses. In general,
patent protection currently lasts only approximately 17-20 years, depending on
the filing date of the patent application, the issuance date of the patent and,
sometimes, the time required for FDA approval. However, it can take many more
years than offered by patent protection to transform a drug discovery through
testing and development into a commercially viable product. Moreover, patent
applications filed by us or on our behalf may not result in patents being issued
to us. Even if a patent is issued, the patent may not afford protection against
competitors with similar technology. Others may independently develop similar
technologies or duplicate our technology. It is possible that before any of our
potential product candidates can be commercialized, the related patents may
expire, or remain in existence for only a short period following
commercialization, thus reducing the advantage of the patent.
Our commercial success depends in part on avoiding infringing patents and
proprietary rights of third parties and developing and maintaining a proprietary
position with regard to our own technologies and product candidates. The patent
positions of pharmaceutical companies, including our patent position, involve
complex legal and factual questions. Whether a company will be able to enforce
its patent cannot always be predicted with certainty. Even if we obtain patents,
we may lose part or all of them as a result of challenges by competitors. We
cannot be sure that relevant patents have not been issued, or that relevant
publications or
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actions by others have not occurred, that could block our ability to obtain
patents or to operate as we would like. Others may develop similar technologies
or duplicate technologies that we have developed or claim that we are infringing
their patents. As a result of these factors, we may need to obtain patent
licenses from others. However, we may be unable to obtain patent licenses on
acceptable terms. Moreover, our rights under any patent licenses depend on
maintaining our obligations to the licensor under the applicable license
agreement, and we may be unable to do so.
Extensive litigation regarding patents and other intellectual property
rights characterizes our industry. We may become involved in litigation or
interference proceedings declared by the United States Patent and Trademark
Office, or oppositions or other intellectual property proceedings outside of the
United States. If any of our competitors have filed patent applications or
obtained patents that claim inventions that we also claim, we may have to
participate in an interference proceeding to determine priority of invention
and, therefore, who has the right to a patent for these inventions or
discoveries in the United States. If a litigation or interference proceeding is
initiated, we may have to spend significant amounts of time and money to defend
our intellectual property rights or to defend infringement claims of others.
Litigation or interference proceedings could divert our management time and
effort. Even unsuccessful claims against us could result in significant legal
fees and other expenses, diversion of management time and disruption in our
business. Any of these events could harm our ability to compete and adversely
affect our business.
An adverse ruling arising out of any intellectual property dispute could
invalidate or diminish our intellectual property position. An adverse ruling
could also subject us to significant liability for damages, prevent us from
using processes or products, or require us to license disputed rights from third
parties. Costs associated with licensing arrangements entered into to resolve
litigation or an interference may be substantial and could include ongoing
royalties. We may not be able to obtain any necessary licenses on satisfactory
terms.
In addition, we rely on trade secrets to protect technology. We attempt to
protect our proprietary technology by requiring our employees to execute
confidentiality and assignment of invention agreements. We also require our
consultants and certain contractors to execute confidentiality agreements.
However, these agreements could be breached and, in the event they are breached,
our remedies may be inadequate. In addition, our trade secrets may otherwise
become known or independently discovered by our competitors. Our business
requires the use of consultants and research collaborators in connection with
the development of our product candidates. These arrangements involve the
exposure of our trade secrets to the scrutiny of others, which increases the
risk that we may lose our trade secrets. If we lose any of our trade secrets,
our business and ability to compete could be harmed.
WE MAY NOT BE ABLE TO KEEP PACE WITH TECHNOLOGICAL CHANGES IN THE
BIOPHARMACEUTICAL INDUSTRY, WHICH MAY PREVENT US FROM COMMERCIALIZING OUR
PRODUCT CANDIDATES.
Our business is characterized by extensive research efforts and rapid
technological progress. New developments in molecular biology, medicinal
chemistry and other fields of biology and chemistry are expected to continue at
a rapid pace in both industry and academia. Research and discoveries by others
may render some or all of our programs or product candidates non-competitive or
obsolete. Our business strategy is based, in part, upon the application of our
technology platform to discover and develop pharmaceutical products to prevent
cancer or treat cancer through the use of selective apoptosis, which means
causing cell death in pre-cancerous and cancerous cells. This strategy is
subject to the risks inherent in the development of new products using new and
emerging technologies and approaches.
Unforeseen problems may develop with our technologies or applications. We
may not be able to successfully address technological challenges that we
encounter in our research and development programs and may not ultimately
develop to commercially feasible products.
WE FACE INTENSE COMPETITION WHICH COULD HARM OUR BUSINESS AND OPERATING RESULTS.
Our industry is very competitive. It is characterized by extensive research
and development efforts and rapid technological progress. Discoveries and
commercial developments by our competitors may render some
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or all of our product candidates obsolete. Many of our potential competitors
have far greater resources and experience than we do. These competitors may
succeed in discovering and developing pharmaceutical products more rapidly than
we do or pharmaceutical products that are safer, more effective or less costly
than any that we may develop. Competing products may obtain regulatory approval
sooner and may be marketed more successfully than our product candidates.
There are many entities, both public and private, including well-known,
large pharmaceutical companies, chemical companies, biotechnology companies,
government agencies and research institutions, engaged in developing
pharmaceuticals for applications similar to those targeted by us. We also
compete with these organizations in recruiting and retaining qualified
scientific and management personnel.
In the fields of cancer therapy and the prevention of precancerous and
cancerous lesions, other products and procedures are in use or in development
that may compete directly with the products that we are seeking to develop and
market for cancer treatment or cancer prevention. Surgery, radiation,
chemotherapeutic agents and compounds that interfere with hormone activities
have been in use for years in the treatment of cancer. Nolvadex(R) (tamoxifen)
has been granted approval for reducing the incidence of breast cancer in women
at high risk for breast cancer. Celebrex(R) (celecoxib) has been granted
approval for use in the reduction in the number of adenomatous (or precancerous)
colorectal polyps in FAP patients as an addition to usual care (e.g., endoscopic
surveillance, surgery, etc.). A number of other pharmaceutical and nutritional
agents are being examined for their potential usefulness in the treatment of
precancerous lesions and cancer. The manufacturers of many of these products
have far greater resources and experience than we do.
OUR BUSINESS WOULD BE ADVERSELY AFFECTED IF THIRD PARTIES UPON WHOM WE PLACE
SUBSTANTIAL RELIANCE FAIL TO PERFORM THEIR OBLIGATIONS PROPERLY.
We depend on third-party contractors to perform activities on our behalf,
such as the following:
- basic laboratory research studies;
- animal toxicology studies;
- animal efficacy studies;
- human clinical trials;
- bulk drug manufacture;
- drug assay and characterization;
- product formulation and finishing;
- strategic consulting;
- commercialization planning; and
- planned product distribution.
Subject to limited exceptions in foreign markets, we do not have any
relationships with other pharmaceutical companies for the commercialization of
products. We cannot assure that we will be able to negotiate cooperative
arrangements relating to commercialization or any other aspect of our
development and marketing of products in the future should we choose to do so.
To the extent that we do not make arrangements with third parties, we must rely
on our own limited resources. Any arrangements that we enter into may not be
maintained, may not be performed properly by the third parties or may not prove
to be successful. The failure of any third party to comply with applicable
government regulations could substantially harm our development and marketing
efforts and delay or prevent regulatory approval of our product candidates. If
these third parties fail to perform their obligations properly, we may be
compelled to delay our development efforts, and our business could be harmed.
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<PAGE> 11
WE MUST OBTAIN REGULATORY APPROVAL TO MARKET OUR PRODUCT CANDIDATES IN THE U.S.
AND FOREIGN JURISDICTIONS.
We must obtain regulatory approval before marketing or selling our product
candidates. In the United States, we must obtain approval from the FDA for each
product candidate that we intend to commercialize. The drug development process
is typically lengthy and expensive, and FDA approval is highly uncertain.
Clinical studies which show favorable results may not be adequate for regulatory
approval. We or our third-party manufacturers must pass a preapproval inspection
of manufacturing facilities by the FDA before the product can obtain marketing
approval. Products distributed outside the United States are also subject to
foreign government regulation.
On September 25, 2000, the FDA issued a "not approvable" letter with
respect to the NDA that we submitted in August 1999 for Aptosyn(TM) for the FAP
indication. We have notified the FDA that we intend to amend the NDA and meet
with the FDA to discuss the deficiencies noted in the letter and the need for
additional data, including the possible requirement for additional clinical
data. Regardless of any additional activities we undertake, the NDA for FAP may
never be approved. The FDA may require additional clinical tests or other data
as a condition of approval, and these requirements may make it impractical for
us to continue to seek approval for this NDA.
None of our other product candidates has received regulatory approval to be
commercially marketed and sold. If we fail to obtain regulatory approval we will
be unable to market and sell any of our product candidates. Because of the risks
and uncertainties in biopharmaceutical development, our product candidates could
take a significantly longer time to gain regulatory approval than we expect or
may never gain approval. If regulatory approval is delayed, our business would
be harmed.
The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, often takes many years and can vary substantially
based upon the type, complexity and novelty of the product candidates involved.
This approval process is extremely expensive and uncertain. We cannot guarantee
that any of our product candidates will be approved for marketing by the FDA.
Even if regulatory approval of a product candidate is granted, we cannot be
certain that we will be able to obtain the labeling claims necessary or
desirable for the promotion of that product candidate.
EVEN IF OUR PRODUCT CANDIDATES RECEIVE REGULATORY APPROVAL, WE MAY STILL FACE
DEVELOPMENT AND REGULATORY DIFFICULTIES RELATING TO THE DRUG PRODUCTS IN THE
FUTURE.
If we receive regulatory approval of any of our product candidates, the FDA
or a comparable foreign regulatory agency may grant such approval only for a
limited indication. In addition, a marketed product, its manufacturer and the
manufacturer's facilities are subject to continual review and periodic
inspections by regulatory agencies. The discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on the
product or manufacturer, including withdrawal of the product from the market.
The failure to comply with applicable regulatory requirements can, among other
things, result in:
- warning letters;
- fines and other civil penalties;
- suspended regulatory approvals;
- refusal to approve pending applications or supplements to approved
applications;
- refusal to permit exports from the United States;
- product recalls;
- seizure of products;
- injunctions;
- operating restrictions;
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<PAGE> 12
- total or partial suspension of production; and
- criminal prosecutions.
Even if we obtain regulatory approval, we may be required to undertake
post-approval trials. In addition, side effects identified or better understood
after a drug is on the market or the occurrence of manufacturing problems could
result in withdrawal of approval, or require reformulation of the drug,
additional preclinical testing or clinical trials, changes in labeling of the
product, and/or additional marketing applications.
If we receive FDA approval, we will be subject to ongoing FDA obligations
and continued regulatory review. In particular, we or third-party manufacturers
that we use will be required to adhere to requirements pertaining to the FDA's
current Good Manufacturing Practices requirement, commonly known as GMP. Under
current GMP, we are required to manufacture our products and maintain our
records in a prescribed manner with respect to manufacturing, testing and
quality control activities. We will also be subject to ongoing FDA requirements
for submission of safety and other post-market information. Similar regulatory
requirements are in place in foreign countries for similar products approved in
those countries. Our failure, or our third-party manufacturer's failure, to
comply with the FDA and other applicable regulators could cause our business to
be significantly harmed.
REIMBURSEMENT FOR ANY OF OUR FUTURE PRODUCTS MAY NOT BE AVAILABLE, WHICH MAY
HARM OUR RESULTS OF OPERATIONS.
Our ability to commercialize our products successfully will depend, in
part, on the extent to which reimbursement for the cost of our products and
related treatments will be available from government health administration
authorities, such as Medicare and Medicaid in the United States, private health
insurers and other organizations. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, particularly for
indications for which there is no current effective treatment or for which
medical care typically is not sought. Adequate third-party coverage may not be
available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product research and development. If
adequate coverage and reimbursement levels are not provided by government and
third-party payors for use of our products, our products may fail to achieve
market acceptance and our results of operations will be harmed.
Our future revenues, profitability and access to capital will also be
affected by the continuing efforts of governmental and private third-party
payors to contain or reduce the costs of health care through various means.
There have been a number of federal, state and foreign proposals to control the
cost of drugs through legislation or regulation. We are unsure of the form that
any legislation on the subject may have or what actions federal, state, foreign,
and private payors may take in response to any enacted legislation. Therefore,
we cannot predict the effect of any implemented reform on our business.
IF WE ARE UNABLE TO MANUFACTURE OR CONTRACT WITH THIRD PARTIES TO MANUFACTURE
PRODUCT CANDIDATES
IN SUFFICIENT QUANTITIES AND AT AN ACCEPTABLE COST, WE MAY BE UNABLE TO COMPLETE
CLINICAL TRIALS AND COMMERCIALIZE THESE PRODUCT CANDIDATES.
Our completion of any pre-clinical trials for our product candidates
involving large quantities of chemical compounds, or any future clinical trials
and commercialization of product candidates, will require access to, or
development of, facilities to manufacture a sufficient supply of our product
candidates. We do not have the facilities or experience to manufacture the
quantities of product candidates necessary for any such trials or commercial
purposes on our own and do not intend to develop or acquire facilities for the
manufacture of such quantities of product candidates in the foreseeable future.
We have entered into agreements with third-party manufacturers for the
manufacture of Aptosyn(TM) and intend to rely on third-party contract
manufacturers for our other product candidates. However, except with respect to
Aptosyn(TM) and CP 461, we have not tested the manufacturing processes for our
product candidates in quantities needed for clinical trials or commercial sales.
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<PAGE> 13
Our manufacturing strategy presents the following risks:
- we may not be able to locate acceptable manufacturers or enter into
favorable long-term agreements with them;
- third parties may fail to successfully manufacture our product candidates
or to manufacture them in a cost effective and/or timely manner;
- delays in scale-up to commercial quantities could delay clinical studies,
regulatory submissions and commercialization of product candidates;
- we may not have intellectual property rights, or may have to share
intellectual property rights, to many improvements in the manufacturing
processes or new manufacturing processes for our product candidates;
- our product candidates require a long lead time to manufacture and the
manufacturing process is complex; and
- manufacturers of our product candidates are subject to current GMPs, and
similar foreign standards, and we do not have control over compliance
with these regulations by third-party manufacturers.
Any of these factors could delay clinical trials or commercialization of
our product candidates, entail higher costs and result in our being unable to
effectively sell any products.
IF WE ARE UNABLE TO OBTAIN RAW AND INTERMEDIATE MATERIALS NEEDED TO MANUFACTURE
OUR PRODUCTS IN SUFFICIENT AMOUNTS OR ON ACCEPTABLE TERMS, OUR BUSINESS WOULD
SUFFER.
We, or the manufacturers with whom we contract, may not be able to maintain
adequate relationships with current or future suppliers of raw or intermediate
materials for use in manufacturing our products. If our current manufacturing
sources and suppliers are unable or unwilling to make these materials available
to us in required quantities or on acceptable terms, we would likely incur
significant costs and delays to qualify alternative manufacturing sources and
suppliers. If we are unable to identify and contract with alternative contract
manufacturers when needed, our business could be harmed.
IF WE ARE UNABLE TO BUILD SALES, MARKETING AND DISTRIBUTION CAPABILITIES OR
ENTER INTO AGREEMENTS WITH THIRD PARTIES TO PERFORM THESE FUNCTIONS, WE WILL NOT
BE ABLE TO COMMERCIALIZE ANY OF OUR PRODUCT CANDIDATES.
We currently have limited sales and marketing capabilities. In September
2000, we began marketing and promoting the product Nilandron(R) (nilutamide), a
hormonal therapy for advanced prostate cancer, under an agreement with Aventis
Pharmaceuticals Inc. However, we do not expect revenues from these activities to
be significant. In order to commercialize any of our product candidates, we must
either internally develop more extensive sales, marketing and distribution
capabilities or make arrangements with third parties to perform these services.
To market any of our drug products directly, we will have to develop a
marketing and sales force with technical expertise and supporting distribution
capabilities successfully develop a sales and marketing force or our business
prospects would be impaired. To promote any of our drug products through third
parties, we would have to locate suitable third parties for these functions and
enter into agreements with them on acceptable terms. If we enter into
co-promotion or other licensing arrangements, any product revenues would likely
be lower than if we directly marketed and sold our products, and any revenues we
may receive would depend upon the efforts of third parties, which efforts may
not be successful. If these third parties do not succeed in carrying out their
contractual duties, our business would suffer.
WE DEPEND ON KEY PERSONNEL; IF WE ARE NOT ABLE TO RETAIN THESE EMPLOYEES OR
RECRUIT ADDITIONAL QUALIFIED PERSONNEL, OUR BUSINESS WOULD BE HARMED.
Because of the specialized scientific nature of our business, we are highly
dependent upon qualified scientific, technical and managerial personnel. We also
rely on consultants and advisors to assist us in
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<PAGE> 14
formulating our research and development strategy. There is intense competition
for qualified personnel in the pharmaceutical field. Therefore, we may not be
able to attract and retain the qualified personnel or consultants necessary for
the development of our business. The loss of the services of existing personnel,
as well as the failure to recruit additional key scientific, technical and
managerial personnel in a timely manner, would harm our research and development
programs and our business. The law provides only limited protection against
competition by key employees who leave the company. We do not maintain key man
life insurance on any of our employees.
IF WE ENGAGE IN ANY ACQUISITION OR BUSINESS COMBINATION, WE WILL INCUR A VARIETY
OF RISKS THAT COULD ADVERSELY AFFECT OUR BUSINESS OPERATIONS.
From time to time we have considered, and we will continue to consider in
the future, if and when any appropriate opportunities become available,
strategic business initiatives intended to further the development of our
business. These initiatives may include acquiring businesses, technologies or
products or entering into a business combination with another company. If we do
pursue such a strategy, we could, among other things:
- issue equity securities that would dilute our stockholders' percentage
ownership;
- incur substantial debt, which may place constraints on our operations;
- spend substantial operational, financial and management resources in
integrating new businesses, technologies and products;
- assume substantial actual or contingent liabilities; or
- merge with, or otherwise enter into a business combination with, another
company, in which our stockholders would receive cash or shares of the
other company, or a combination of both, on terms that our stockholders
might not deem desirable.
WE MAY BE SUED FOR PRODUCT LIABILITY.
Because we are involved in the drug discovery and development process, our
business exposes us to potential product liability risks as our product
candidates are clinically tested and when and if our drug candidates are
commercialized. We may not be able to avoid product liability claims. This
applies not only to our own products but also to products that we may market for
others, including Nilandron(R) (nilutamide), which we market for Aventis
Pharmaceuticals Inc. Product liability insurance for the pharmaceutical industry
is generally expensive, if it is available at all. If we are unable to obtain
sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims, we may be unable to commercialize
our product candidates. We currently have clinical trial liability insurance in
the amount of $10 million, but there can be no assurance that we will be able to
maintain such insurance or that such insurance is adequate. If a plaintiff
brings a successful product liability claim against us in excess of our
insurance coverage, if any, our business could be harmed.
WE MAY BE SUBJECT TO SUBSTANTIAL LIABILITIES IN CONNECTION WITH THE HANDLING AND
DISPOSAL OF HAZARDOUS MATERIALS.
Our research and development involve the controlled use of hazardous
materials, chemicals and various radioactive compounds. We cannot completely
eliminate the risk of accidental contamination or injury from these materials.
In the event of contamination or injury, for which we do not have liability
insurance coverage, we could be held liable for resulting damages, which could
exceed our resources. In addition, if we develop manufacturing capacity, we may
incur substantial costs in complying with environmental regulations.
Furthermore, we do not have mass tort insurance coverage or environmental
insurance coverage, so that liabilities resulting from claims involving our
handling or disposal of hazardous materials could severely damage our business.
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<PAGE> 15
OUR COMMON STOCK PRICE WILL LIKELY CONTINUE TO BE HIGHLY VOLATILE.
Our stock price, like the market price of the stock of other
development-stage pharmaceutical companies, has been highly volatile. Companies
may be sued when their stock price drops. Our stock price dropped substantially
after we made an announcement on February 1, 1999 that we anticipated a delay in
filing the NDA for Aptosyn(TM) for FAP. Our stock price also dropped
substantially on September 25, 2000 after we announced that the FDA had informed
us that the FDA was issuing a "not approvable" letter in connection with the
pending NDA for FAP. Our stock price has also fluctuated substantially in
response to statements which have appeared in the media. Other factors that may
have a significant impact on our stock price include:
- announcements of technical innovations or new commercial products by us
or our competitors;
- regulatory events relating to our product candidates;
- public concern as to the safety or other implications of pharmaceutical
products;
- patent or proprietary rights developments;
- results of preclinical studies or clinical trials;
- conditions affecting the pharmaceutical industry; and/or
- stock market conditions.
WE DO NOT INTEND TO PAY CASH DIVIDENDS.
We have never paid any cash dividends and do not anticipate paying cash
dividends in the foreseeable future.
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND STOCKHOLDER RIGHTS PLAN, AND
CERTAIN PROVISIONS OF DELAWARE LAW, COULD DISCOURAGE A THIRD PARTY FROM MAKING A
TAKEOVER OFFER THAT COULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Various provisions of our certificate of incorporation and bylaws and
Delaware law could delay or prevent a third party from acquiring shares of our
common stock or replacing members of our board of directors. Our certificate of
incorporation provides for the division of our board of directors into three
classes and for the ability of the board of directors to issue preferred stock
without stockholder approval. Under this authority, the board of directors
adopted, in December 1998, a stockholder rights plan, which could have the
effect of delaying or preventing us from consummating a transaction that would
result in a change of control, even if a change of control were in the best
interests of our stockholders. In addition, Delaware law restricts the ability
of stockholders to take action to acquire control of us through specified
business combination transactions.
These provisions may discourage a future acquisition of our company even if
our stockholders would receive an attractive value for their shares or if a
significant number of our stockholders believed such a proposed transaction to
be in their best interest. As a result, stockholders who desire to participate
in such a transaction may not have the opportunity to do so.
ABOUT CELL PATHWAYS
Cell Pathways, Inc. was incorporated in Delaware in July 1998 as a
subsidiary of, and as of November 3, 1998, successor to, a Delaware corporation
of the same name.
We are a development-stage pharmaceutical company focused on the research,
development and commercialization of unique and novel medications to prevent and
treat cancer. Our technology is based upon our discovery of a novel mechanism
which we believe, based on our research, can be targeted to induce selective
apoptosis, or programmed cell death, in precancerous and cancerous cells without
affecting normal cells. We have created a new class of selective apoptotic
anti-neoplastic drugs ("SAANDS") and have synthesized approximately 500 new
chemical compounds in this new class. From the inception of our business in
1990, operating activities have related primarily to conducting research and
development, raising capital and recruiting personnel. Our initial
investigational new drug application ("IND") was filed with the U.S. Food
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and Drug Administration ("FDA") in December 1993 for human clinical trials of
Aptosyn(TM). We filed an IND for our second product candidate, CP 461, in
December 1998. In August 1999, we submitted to the FDA an NDA for Aptosyn(TM) in
FAP, an indication for which we had received orphan drug designation from the
FDA. On September 25, 2000, the FDA issued a "not approvable" letter noting
deficiencies and finding that the information presented as to the safety and
efficacy of Aptosyn(TM) for the treatment of FAP was inadequate. We have
notified the FDA that we intend to amend the NDA, and meet with the FDA to
discuss the deficiencies noted and the need for additional data, including the
possible requirements for additional clinical data. We are continuing to conduct
clinical trials of Aptosyn(TM) and CP 461 for the prevention and treatment of
various precancer and cancers.
In November 2000, we issued 3.2 million shares of common stock, for net
proceeds of approximately $23 million, to the selling stockholders whose shares
are being registered herein. This increased our common stock outstanding to
approximately 31 million shares.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. We will not
receive any proceeds from the sale of these shares of common stock by the
selling stockholders. However, because some of the shares that may be offered
pursuant to this prospectus by the selling stockholders may be acquired pursuant
to the exercise of warrants by the selling stockholders, we would receive
proceeds from the selling stockholders upon the exercise by a selling
stockholder of any portion of the warrant issued to it. See "Selling
Stockholders." We will use the proceeds, if any, from the exercise of the
warrants for working capital and other general corporate purposes.
SELLING STOCKHOLDERS
Pursuant to purchase agreements, dated as of November 9, 2000, we issued
(i) 3,200,000 shares of our common stock at a purchase price of $7.375 per
share, and (ii) warrants to purchase 4,320,000 shares of our common stock, to
the selling stockholders in private placement transactions. The warrants are
exercisable at any time in whole or in part until June 30, 2002, and the
warrants entitle the holder to purchase our common stock at a purchase price
equal to $12.00 per share, as appropriately adjusted pursuant to the terms of
the warrants. In addition, we have paid to Janney Montgomery Scott LLC
("Janney") cash in the amount of $413,811, in connection with these private
placement transactions, as compensation for the placement of 1,122,200 shares of
our common stock and warrants to purchase 1,514,970 shares of our common stock.
Janney will also receive warrants to purchase that number of shares of our
common stock, also at an exercise price of $12.00 per share, which is equal to
5.0% of the number of shares of common stock issued upon exercise of warrants by
purchasers in the private placement who were identified to the Company by
Janney. Further, we have issued to Jackson Boulevard Ventures, L.P. ("Jackson")
warrants to purchase up to an additional 73,750 shares of our common stock, in
connection with these private placement transactions, as compensation for the
placement of 500,000 shares of our common stock and warrants to purchase 675,000
shares of our common stock. Jackson will also receive warrants to purchase that
number of shares of our common stock, also at an exercise price of $12.00 per
share, which is equal to 5.0% of the number of shares of common stock issued
upon exercise of warrants by purchasers in the private placement who were
identified to the Company by Jackson. Both Janney and Jackson are entitled to
exercise their warrants upon the later of June 30, 2002 or 30 days after the
exercise of the warrants by the purchasers in the private placement. The
exercise price and the number of warrant shares of the warrantholders, Janney
and Jackson are subject to adjustment upon the following events:
- The subdivision, split or combination of shares of our common stock; and
- The issuance of dividends in the form of common stock.
The shares issued upon exercise of the warrants are sometimes referred to
as the warrant shares. After the exercise of the warrants, the selling
stockholders may also offer or sell the warrant shares from time to time in the
manner contemplated under the "Plan of Distribution." Under the terms of the
purchase agreements for
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the shares of common stock and the warrants, we are obligated to use our best
efforts to maintain an effective registration statement for the period from the
effectiveness of the registration statement of which this prospectus forms a
part and the earlier of (i) such date when either all of the shares and the
warrant shares have been sold pursuant to the registration statement, or by
reason of Rule 144(k) under the Securities Act or any other rule of similar
effect, the shares and warrant shares are no longer required to be registered
for the resale thereof by the holders in ordinary market transactions without
imposition of any volume restrictions, or (ii) the second anniversary of the
expiration of the warrants.
The following table sets forth certain information known to us regarding
the beneficial ownership of the common stock of each selling stockholder as of
November 13, 2000 and as adjusted to give effect to the sale of the shares
offered hereby. As of November 13, 2000, there were 31,073,457 shares of the
common stock outstanding. The following table states the maximum number of
shares each selling stockholder may offer under this prospectus assuming that
each selling stockholder chooses to (a) sell all shares purchased in the private
placement in November 2000 and (b) exercise all its warrants and sell the
warrant shares it acquired upon exercise of the warrants. The shares are being
registered to permit public secondary trading of the shares, and the selling
stockholders may offer the shares for resale from time to time. See "Plan of
Distribution." We cannot assure you that the selling stockholders will sell any
or all of the shares.
<TABLE>
<CAPTION>
PRE-OFFERING POST-OFFERING
-------------------------------------- -----------------------------
TOTAL NUMBER TOTAL NUMBER
OF SHARES OF OF SHARES OF
COMMON COMMON
STOCK COMMON STOCK
BENEFICIALLY PERCENTAGE SHARES BENEFICIALLY PERCENTAGE
SELLING STOCKHOLDER OWNED(1) OF CLASS(2) OFFERED OWNED(3) OF CLASS(2)(3)
------------------- ------------ ----------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
MAS Funds Small Cap Value Portfolio(4)...... 1,240,330 3.90 1,240,330 0 0
MSDW SICAV Small Cap Value(4)............... 94,000 * 94,000 0 0
MSDW SICAV Global Small Cap US(4)........... 21,620 * 21,620 0 0
Van Kampen American Value Fund(4)........... 822,500 2.61 822,500 0 0
Coutts Funds Managers LTD.(4)............... 58,150 * 54,050 4,100 *
Zeke, LP.................................... 404,670 1.29 404,670 0 0
Acqua Wellington Value Fund Ltd. ........... 352,500 1.13 352,500 0 0
Larry Rawson................................ 207,724 * 141,000 66,724 0
Oak Street Investment, LP................... 470,000 1.50 470,000 0 0
Jackson Boulevard Ventures, L.P.(5)......... 2,641,583 8.14 1,987,500 654,083 2.01
Private Investment, LP...................... 705,000 2.24 705,000 0 0
Vulcan Ventures Inc......................... 1,592,139 5.01 1,175,000 417,139 1.31
Alan Fields(6).............................. 176,709 * 159,330 17,379 0
Janney Montgomery Scott LLC(7).............. 75,749 * 75,749 0 0
</TABLE>
---------------
* Indicates less than one percent.
(1) This number includes the unexercised warrants of the respective selling
stockholder.
(2) Both the numerator and the denominator of the fraction used to arrive at
this percentage include the number of warrant shares held by the selling
stockholder whose percent ownership of common stock is being calculated.
(3) These figures assume that all shares of common stock and shares of common
stock underlying the warrants received by the selling stockholders in the
November 9, 2000, private placement have been sold.
(4) Morgan Stanley Dean Witter & Co. and/or its affiliates, including, among
others, Morgan Stanley Dean Witter Investment Management Inc., Miller,
Anderson & Sherrerd, LLP and Morgan Stanley Dean Witter Investment
Management, Ltd. (collectively, "MSDW"), may be deemed to control, or own an
interest in, the following selling stockholders: MAS Funds Small Cap Value
Portfolio, Fund, MSDW SICAV Small Cap Value, MSDW SICAV Global Small Cap US
and Van Kampen - American Value. In addition to the shares disclosed in this
table for each of these selling stockholders, MSDW, directly or indirectly,
had, as of November 13, 2000, voting and/or dispositive power over an
additional 1,978,331
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shares held in discretionary trading accounts at MSDW for the benefit of
individuals, institutions and other entities.
(5) This amount includes, as of November 13, 2000, 280,260 shares beneficially
owned by Jackson Boulevard Partners and warrants to purchase 200,000 shares
beneficially owned by Jackson Boulevard Partners, 67,951 shares beneficially
owned by Jackson Boulevard Equities, L.P., 809,527 shares and warrants to
purchase 1,187,500 shares beneficially owned by Jackson Boulevard Ventures,
L.P., 39,218 shares beneficially owned by Jackson Boulevard Investments,
L.P., 12,998 shares beneficially owned by Paul J. Duggan, 29,331 shares
beneficially owned by Jackson Offshore Fund, Ltd., and 14,798 shares
beneficially owned by Deborah Gemini. Jackson Boulevard Capital Management,
Ltd. f/k/a Jackson Boulevard Fund, Ltd. is the General Partner of Jackson
Boulevard Equities, L.P., Jackson Boulevard Ventures, L.P., Jackson
Boulevard Investments, L.P., and the investment manager of Jackson Offshore
Fund, Ltd. The President and sole stockholder of Jackson Boulevard Capital
Management, Ltd. is Paul J. Duggan, who is the General Partner of Jackson
Boulevard Partners and the spouse of Deborah Gemini. Mr. Duggan may be
deemed to share voting and investment power with these entities and
individuals; however, Mr. Duggan disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(6) Includes 1,150 shares beneficially owned by Ann Fields, Mr. Field's spouse.
(7) Janney makes a market in the stock of Cell Pathways. The ownership interest
of Janney set forth in this table does not include any shares of Common
Stock that Janney may hold in its role as a market maker on behalf of Cell
Pathways.
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholders, or their respective
pledgees, donees, transferees or other successors in interest, will be sold in
one or more transactions (which may involve block transactions) on The Nasdaq
National Market, or on such other market on which the common stock may from time
to time be trading, in privately negotiated transactions, through the writing of
options on the shares, short sales or any combination thereof. The sale price to
the public may be the market price prevailing at the time of sale, a price
related to such prevailing market price or such other price as the selling
stockholders determine from time to time. The shares may also be sold pursuant
to Rule 144 of the Securities Act. The selling stockholders shall have the sole
and absolute discretion not to accept any purchase offer or make any sale of
shares if they deem the purchase price to be unsatisfactory at any particular
time.
The selling stockholders, or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the selling
stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the shares will
do so for their own account and at their own risk. It is possible that the
selling stockholders will attempt to sell shares of common stock in block
transactions to market makers or other purchasers at a price per share which may
be below the then market price. There can be no assurance that all or any of the
shares offered hereby will be issued to, or sold by, the selling stockholders.
The selling stockholders and any brokers, dealers or agents, upon effecting the
sale of any of the shares offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Securities Exchange Act, or the
rules and regulations thereunder.
The selling stockholders, alternatively, may sell all or any part of the
shares offered hereby through an underwriter. The selling stockholders have not
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If the selling
stockholders enter into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this prospectus.
Upon our being notified by the selling stockholders that any material
arrangement has been entered into with a broker or dealer for the sale of shares
through a block trade, special offering, exchange distribution or
17
<PAGE> 19
secondary distribution or a purchase by a broker or dealer, a supplemented
prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing:
- the name of each such broker-dealer,
- 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,
as supplemented, and
- other facts material to the transaction.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the shares by the selling
stockholders or any other such person. The foregoing may affect the
marketability of the shares.
We have agreed to indemnify the selling stockholders, or their transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling stockholders or their
respective pledgees, donees, transferees or other successors in interest, may be
required to make in respect thereof.
We are bearing all costs relating to the registration of the shares (other
than fees and expenses, if any, of counsel or other advisers to the selling
stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the shares will be borne by the
selling stockholders.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
18
<PAGE> 20
---------------------------------------------------------
---------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK OFFERED HEREBY IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN OUR AFFAIRS
SINCE THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Where to Find Additional Information..... 2
Forward-Looking Statements............... 3
Risk Factors............................. 4
About Cell Pathways...................... 14
Use of Proceeds.......................... 15
Selling Stockholders..................... 15
Plan of Distribution..................... 17
Legal Matters............................ 18
Experts.................................. 18
</TABLE>
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
7,703,249 SHARES
CELL PATHWAYS, INC.
COMMON STOCK
------------------------
PROSPECTUS
NOVEMBER , 2000
------------------------
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 21
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses of the sale and
distribution of the securities being registered, all of which are being borne by
the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $12,457
Nasdaq listing fee.......................................... 17,500
Legal fees and expenses..................................... 30,000
Printing and engraving expenses............................. 7,000
Accounting fees and expenses................................ 6,000
Miscellaneous............................................... 5,000
-------
Total....................................................... $77,957*
=======
</TABLE>
---------------
All expenses, except the Securities and Exchange Commission registration fee,
are estimated.
* Excludes an amount of $413,811, as well as the fair market value of warrants
to purchase up to 183,249 shares of common stock that the Company may issue to
Janney and Jackson as compensation for the placement of common stock and
warrants in connection with the November 2000 private placement of an
aggregate of 1,622,200 shares of common stock and warrants to purchase an
aggregate of 2,189,970 shares of common stock.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Section
145 empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer or agent of the
corporation or another enterprise if serving at the request of the corporation.
Depending on the character of the proceeding, a corporation may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he reasonably believed to be in or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
by or in the right of the corporation, no indemnification may be made with
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. Section 43 of Article XI of the Company's Bylaws provides, to the
fullest extent permitted by Section 145 of the Delaware General Corporation Law,
for the indemnification of each person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or executive officer of the
corporation, or is or was serving at the request of the corporation, as a
director, executive officer or trustee of, or in a similar capacity with,
another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan) against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person or on such person's behalf in connection with such
action, suit or proceeding and any appeal therefrom.
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<PAGE> 22
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
ITEM DESCRIPTION
---- -----------
<S> <C>
4 Form of Warrant, dated November 9, 2000, issued to MAS Funds
Small Cap Value Portfolio, MSDW SICAV Small Cap Value, MSDW
SICAV Global Small Cap US, Van Kampen American Value Fund,
Coutts Fund Managers LTD., Zeke, LP, Acqua Wellington Value
Fund Ltd., Larry Rawson, Jackson Boulevard Ventures L.P.,
Oak Street Investment, LP, Private Investment, LP, Vulcan
Ventures Inc. and Alan Fields pursuant to Purchase
Agreements, dated as of November 9, 2000.
5 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and MAS Funds Small Cap Value Portfolio,
MSDW SICAV Small Cap Value, MSDW SICAV Global Small Cap US,
Van Kampen American Value Fund, Coutts Fund Managers LTD,
and Zeke, LP.
10.2 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and Acqua Wellington Value Fund Ltd.
10.3 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and Jackson Boulevard Ventures, L.P.,
Oak Street Investment, LP and Private Investment, LP.
10.4 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and Larry Rawson.
10.5 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and Alan Fields.
10.6 Purchase Agreement, dated as of November 9, 2000, between
Cell Pathways, Inc. and Vulcan Ventures Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit
5).
24 Powers of Attorney (included on signature pages included in
this registration statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (i) and (ii) of this paragraph do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
II-2
<PAGE> 23
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to trustees, officers or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities 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 trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 24
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
undersigned 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 Horsham, Commonwealth of Pennsylvania, on the
22nd day of November, 2000.
CELL PATHWAYS, INC.
By: /s/ ROBERT J. TOWARNICKI
------------------------------------
Robert J. Towarnicki
President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert J. Towarnicki and Martha E.
Manning, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this registration statement (including post-effective
amendments to the registration statement and any such related registration
statements), and to file the same, with all exhibits thereto, and any other
documents in connection therewith, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, 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, as amended,
this registration statement has been signed below by the following persons in
the capacities with the above Registrant and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT J. TOWARNICKI President, Chief Executive November 22, 2000
--------------------------------------------------- Officer and Chairman of the
Robert J. Towarnicki Board of Directors
(Principal Executive
Officer)
/s/ BRIAN J. HAYDEN Chief Financial Officer, Vice November 22, 2000
--------------------------------------------------- President -- Finance
Brian J. Hayden (Principal Financial and
Accounting Officer)
/s/ WILLIAM A. BOEGER Director November 22, 2000
---------------------------------------------------
William A. Boeger
/s/ JOHN J. GIBBONS Director November 22, 2000
---------------------------------------------------
John J. Gibbons
/s/ THOMAS M. GIBSON Director November 22, 2000
---------------------------------------------------
Thomas M. Gibson
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JUDITH A. HEMBERGER Director November 22, 2000
---------------------------------------------------
Judith A. Hemberger
/s/ BRUCE R. ROSS Director November 22, 2000
---------------------------------------------------
Bruce R. Ross
/s/ RIFAT PAMUKCU Director, Executive Vice November 22, 2000
--------------------------------------------------- President -- Chief
Rifat Pamukcu Scientific Officer
/s/ LOUIS M. WEINER Director November 22, 2000
---------------------------------------------------
Louis M. Weiner
</TABLE>
II-5
