<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GMP COMPANIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8731 58-2466899
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
ONE EAST BROWARD BOULEVARD
SUITE 1701
FORT LAUDERDALE, FLORIDA 33301
(954) 745-3510
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
BART CHERNOW, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ONE EAST BROWARD BOULEVARD
SUITE 1701
FORT LAUDERDALE, FLORIDA 33301
(954) 745-3510
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies To:
IRA N. ROSNER, ESQ. JOHN W. WHITE, ESQ.
GREENBERG TRAURIG, P.A. CRAVATH, SWAINE & MOORE
1221 BRICKELL AVENUE WORLDWIDE PLAZA
MIAMI, FLORIDA 33131 825 EIGHTH AVENUE
(305) 579-0500 NEW YORK, NEW YORK 10019
(212) 474-1000
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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 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, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE(2)
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<S> <C> <C>
Common Stock, $.001 par value per share.................... $172,500,000 $45,540
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</TABLE>
(1) Includes shares of common stock that the underwriters have the option to
purchase from GMP to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE 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. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 7 , 2000
PROSPECTUS
SHARES
GMP/COMPANIES, INC.
COMMON STOCK
------------------
We are selling shares of our common stock. We have granted
the underwriters an option to purchase up to additional shares of
common stock to cover over-allotments.
This is the initial public offering of our common stock. We currently
expect that the initial public offering price will be between $ and
$ per share. We have applied to have our common stock included for
quotation on the Nasdaq National Market under the symbol "GMPC."
------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to GMP/Companies, Inc. (before expenses) $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 2001.
------------------
SALOMON SMITH BARNEY CREDIT SUISSE FIRST BOSTON
, 2001
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 5
Information Regarding Forward-Looking Statements............ 20
Use of Proceeds............................................. 21
Our Policy Regarding Dividends.............................. 21
Capitalization.............................................. 22
Dilution.................................................... 23
Selected Consolidated Financial Data........................ 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 31
Management.................................................. 57
Relationships and Related Party Transactions................ 65
Principal Stockholders...................................... 68
Description of Capital Stock................................ 70
Shares Eligible for Future Sale............................. 74
U.S. Tax Consequences to Non-U.S. Holders................... 76
Underwriting................................................ 78
Legal Matters............................................... 80
Experts..................................................... 80
Where You Can Find More Information......................... 80
Index to Financial Statements............................... F-1
</TABLE>
Until , 2001, all dealers that buy, sell or trade
our common stock, whether or not participating in this offering, may be required
to deliver a prospectus. This requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
i
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information you should consider before
buying shares in this offering. Therefore, you should read this entire
prospectus carefully, including the risks of purchasing our common stock
discussed under the "Risk Factors" section and our consolidated financial
statements and the related notes.
OUR COMPANY
We identify, acquire, develop and commercialize innovative medical
technologies for the health care market. We acquire our technologies through
operating subsidiaries which are focused on a particular product candidate or
group of related product candidates. Each of our subsidiaries is a business unit
that we operate and manage. Since our inception in May 1999, we have acquired
rights to more than 20 different technologies and have established twelve
subsidiaries to develop and commercialize these technologies. These subsidiaries
are organized into three operating divisions: therapeutics, diagnostics and
devices.
Our business model is designed to overcome what we perceive to be the
challenges facing small, single-product health care companies. We believe some
of the most innovative health care technologies are found in medical schools,
universities and other institutions, which lack the necessary infrastructure and
resources to commercialize these innovations. In order to develop and
commercialize these technologies, we have assembled an experienced management
team and board of directors and have created a corporate infrastructure that
provides medical, scientific, legal, business, regulatory and other management
and operational functions to our three operating divisions. To date, we have
licensed or acquired health care technologies from institutions such as
Children's Hospital at Harvard Medical School, Eastern Virginia Medical School,
Johns Hopkins University, Massachusetts Institute of Technology, Mayo Clinic,
Mayo Foundation for Medical Research and Education, McGill University, and
Universite Louis Pasteur. We have also licensed technologies from our strategic
partner, Motorola, Inc., and have established additional strategic relationships
with Myriad Genetics Laboratory, Inc. and NOVA Biomedical Corporation. We have
also received equity investments from Medtronic, Inc. and Quest Diagnostics
Incorporated.
In September 2000, we commercially launched our first health care
technology product, GMP Conversion Technology, at our molecular genetics
facility in Waltham, Massachusetts. GMP Conversion Technology is a new,
proprietary gene separation process that is designed to significantly improve
the accuracy of genetic analysis and testing. Our technology is based on
discoveries made in the laboratories of Bert Vogelstein, M.D. and Kenneth
Kinzler, Ph.D. at Johns Hopkins University. We licensed this technology from
Johns Hopkins University in January 2000. Subsequent to that time, both Drs.
Vogelstein and Kinzler became research and scientific advisors to us.
In order to maximize stockholder value, we evaluate possible means of
optimizing the financial return from each of our technologies. Options that we
may consider for realizing the value of our subsidiaries include:
- marketing and selling the subsidiary's products with our own sales staff;
- seeking a strategic partner for the development, marketing, distribution
and sale of the subsidiary's products;
- an initial public offering of the subsidiary's securities; or
- a sale of the stock or assets of the subsidiary to a third party.
<PAGE> 5
OUR SUBSIDIARY COMPANIES
We have formed, and plan to form, additional subsidiaries for each product
candidate or group of related product candidates that we develop. Once we
identify a particular health care technology, we then evaluate the potential
commercial value of that technology. If, after careful review, we choose to
license or acquire the technology, we negotiate for its acquisition and then
establish or use an existing subsidiary company to license or purchase the
technology. Our subsidiary companies are structured to provide equity ownership
to the institutions, inventors or collaborating scientists that are associated
with each technology. We believe that this equity structure enhances our ability
to acquire promising medical technologies. We own a substantial majority of the
equity, and have management control of these subsidiaries. The following table
summarizes the health care technologies that we are developing or
commercializing:
<TABLE>
<CAPTION>
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SUBSIDIARY COMPANY POTENTIAL PRODUCT APPLICATION STAGE OF DEVELOPMENT
<S> <C> <C>
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THERAPEUTICS DIVISION
GMP/Endotherapeutics Drug therapy to generate new Preclinical
pancreatic islet cells to treat
diabetes
GMP/OxyCell Treatment that improves oxygen Preclinical
delivery to tissues
GMP/Tissue Engineering Tissue engineered treatment for Preclinical
spinal cord and other nerve injuries
DIAGNOSTICS DIVISION
GMP/Genetics GMP Conversion Technology that Commercially launched
improves the accuracy of genetic in September 2000
analysis and testing
GMP/Thromboflex Device to perform quantitative Prototype in development
evaluation of blood clotting and
platelet activity
GMP/Diagnostic/Prognostic Markers Blood and urine analyses to detect Human tests ongoing
cancer and its spread
DEVICES DIVISION
GMP/Wireless Medicine Multiple wireless sensor products Prototype stage
for hospital and outpatient uses
GMP/Vision Solutions Polymer device and surgical method Preclinical
to reduce intraocular pressure
related to glaucoma
GMP/Cardiac Care Coronary stent and devices for heart Prototype stage
disease
GMP/Drug Delivery Devices to enable local tissue drug Preclinical
delivery by electrical impulse
catheters and patches
GMP/Vascular Anti-embolism stocking that allows Prototype stage
patient mobility
GMP/Surgical Solutions Devices and products for use in Prototype stage
operating rooms
</TABLE>
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<PAGE> 6
THE OFFERING
Common stock offered........................ shares
Common stock outstanding after this
offering.................................... shares
Use of proceeds............................. We expect to use the net
proceeds of this offering to
fund research and
development, commercialization
of our products, the acquisition
of new technologies and for
other general corporate
purposes.
Proposed Nasdaq National Market symbol...... "GMPC"
Unless otherwise indicated, all information contained in this prospectus:
- assumes no exercise of the underwriters' option to purchase up to
additional shares of common stock to cover
over-allotments;
- reflects a -for-one split of our common stock to be
effected immediately prior to the completion of this offering; and
- reflects the automatic conversion of all of our convertible preferred
stock into 10,450,000 shares of our common stock upon completion of this
offering.
The number of shares of common stock to be outstanding immediately after
the offering:
- is based upon 16,437,227 shares outstanding as of September 30, 2000,
including the conversion of our convertible preferred stock;
- does not take into account 2,163,000 shares of common stock issuable upon
the exercise of options outstanding as of September 30, 2000, at a
weighted average exercise price of $10.41 per share; and
- does not include an additional 830,968 shares of common stock reserved
for future issuance under our 1999 Stock Option Plan.
---------------------
We were incorporated in Georgia in May 1999 under the name Global Medical
Products, Inc. In March 2000, we reincorporated in Delaware and changed our name
to GMP/Companies, Inc. Our principal executive offices are located at One East
Broward Boulevard, Suite 1701, Fort Lauderdale, Florida 33301, and our telephone
number is (954)745-3510.
We own or have rights to the trade names and trademarks that we use in
conjunction with the sale of our products. This prospectus also contains
trademarks, trade names and service marks of other companies, which are the
property of their respective owners. GMP Conversion Technology is a trademark of
ours.
Any discussion in this prospectus regarding our affiliation or
collaboration with a faculty member or scientist associated with an academic or
other institution does not constitute or imply an endorsement by that
institution of us, our products or the technologies upon which those products
are based, nor does it imply endorsement by the faculty member or scientist of
us or our products.
3
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MAY 17, 1999 MAY 17, 1999
(INCEPTION) NINE MONTHS (INCEPTION)
TO ENDED TO
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1999 2000 2000
------------ ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................................. $ -- $ 15 $ 15
Operating expenses:
Research and development............................... 1,122 11,612 12,734
Selling, general and administrative.................... 3,474 8,262 11,736
-------- -------- --------
Total operating expenses............................ 4,596 19,874 24,470
-------- -------- --------
Loss from operations..................................... (4,596) (19,859) (24,455)
Interest income, net..................................... 436 3,518 3,954
-------- -------- --------
Net loss................................................. $ (4,160) $(16,341) $(20,501)
======== ======== ========
Net loss per share -- basic and diluted.................. $ (0.87) $ (3.15) $ (4.10)
======== ======== ========
Shares used in computing net loss per share -- basic and
diluted................................................ 4,762 5,191 4,996
Pro forma net loss per share -- basic and diluted........ $ (0.53) $ (1.14) $ (2.01)
======== ======== ========
Shares used in computing pro forma net loss per
share -- basic and diluted............................. 7,804 14,356 10,216
</TABLE>
Pro forma net loss per share -- basic and diluted has been calculated
assuming the conversion of all outstanding shares of convertible preferred stock
into 10,450,000 shares of common stock as if the stock had been converted
immediately upon its issuance.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ $114,557 $114,557
Working capital.......................................... 111,609 111,609
Total assets............................................. 121,072 121,072
Deficit accumulated during the development stage......... (20,501) (20,501)
Total stockholders' equity............................... 115,128 115,128
</TABLE>
The pro forma balance sheet data reflect the automatic conversion of
outstanding shares of convertible preferred stock into 10,450,000 shares of
common stock as if the stock had been converted immediately upon its issuance.
The pro forma as adjusted balance sheet data further reflect this automatic
conversion and the sale of shares of common stock in this offering at
an assumed initial public offering price of $ per share, after
deducting estimated underwriting discounts, commissions and offering expenses.
4
<PAGE> 8
RISK FACTORS
An investment in our common stock involves significant risks. You should
carefully consider the risks described below and the other information in this
prospectus including our consolidated financial statements and related notes
before you decide to buy our common stock. The trading price of our common stock
could decline due to any of these risks, and you could lose all or part of your
investment.
BECAUSE WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A LIMITED OPERATING HISTORY
ON WHICH TO BASE AN INVESTMENT DECISION, IT MAY BE DIFFICULT FOR YOU TO EVALUATE
OUR BUSINESS AND PROSPECTS
We are a development stage company, were incorporated in May 1999 and
licensed the rights to our first product candidate in January 2000. Since our
inception, we have recognized minimal revenue from our operations, all of which
is attributable to GMP/Genetics and media development services provided to third
parties by us. Therefore, we have a limited operating history upon which an
evaluation of us and our prospects can be based. Our prospects must be evaluated
with a view to the risks encountered by an early-stage health care technology
company that is developing product candidates based on unproven technology and
with unknown commercial potential. Because of the early stage of development of
most of our products, we will not achieve profitability before these products
undergo substantial research and development, a lengthy regulatory review and
successful sales and marketing. To date, we have been engaged primarily in
acquiring and developing technologies, obtaining financing, hiring employees,
establishing facilities and beginning to commercialize and market our first
products.
WE HAVE A HISTORY OF LOSSES, WE ANTICIPATE FUTURE LOSSES, AND WE CANNOT
GUARANTEE THAT WE WILL EVER BE PROFITABLE
Since our inception in May 1999, we have not been profitable, and we cannot
be certain that we will ever achieve or sustain profitability. We incurred net
losses of approximately $4.2 million for the period from our inception on May
17, 1999 to December 31, 1999 and net losses of approximately $16.3 million for
the nine months ended September 30, 2000. At September 30, 2000, we had an
accumulated deficit of approximately $20.5 million. Only one of our twelve
subsidiaries formed to develop and commercialize health care technology products
has products or services available for sale and has generated only limited
revenues. Our current and future products or services may not be commercially
viable. Further, we will be incurring costs to:
- invest in the research and development of our current and future product
candidates;
- acquire or license new products or technologies;
- increase our marketing and selling activities for GMP/Genetics;
- prosecute patents and continue to protect our intellectual property
rights;
- obtain regulatory approvals, including conducting animal studies and
human trials;
- establish strategic partnerships and marketing and distribution
relationships; and
- develop additional infrastructure and hire additional management and
other employees to keep pace with our growth.
We expect that these activities will result in operating losses for the
foreseeable future, particularly due to the extended time period before we
commercialize most of our products.
IF OUR SMALL AND LARGE ANIMAL STUDIES AND HUMAN TRIALS ARE NOT SUCCESSFUL, WE
WILL NOT BE ABLE TO COMMERCIALIZE OUR PRODUCTS AND WILL CONTINUE TO INCUR
INCREASING OPERATING LOSSES
The development and sale of a substantial majority of our products requires
approval from the Food and Drug Administration, or FDA, or other regulatory
authorities. To gain regulatory approval from the authorities for the commercial
sale of most of our products, we must demonstrate the safety and efficacy of the
product in human trials. Therefore, the commercial success of our products
depends on positive results from animal studies and human trials. For products
that we may develop to treat life-long diseases, such as
5
<PAGE> 9
diabetes, we must gather data over an extended period of time on multiple study
participants. There are many risks associated with our clinical trials. For
example, we may be unable to achieve the same level of success in later trials
as we do in earlier ones. Moreover, the results of initial preclinical studies
and clinical trials of products under development are not necessarily indicative
of results that will be obtained from subsequent or more extensive studies and
tests. Additionally, data we obtain from preclinical and clinical activities are
susceptible to varying interpretations that could impede regulatory approval.
Further, some patients in our testing programs may have a risk of other
unforeseen adverse medical events not related to our products. These events may
affect the statistical analysis of the safety and efficacy of our products.
In addition, many factors could delay or terminate our ongoing or future
clinical trials. For example, a clinical trial may experience slow patient
enrollment or lack of sufficient drug supplies. Patients may experience adverse
medical events or side effects, including death, and there may be a real or
perceived lack of effectiveness of the drug we are testing. Future governmental
action or inaction or changes in FDA policy may also result in delays or
rejection of the results of our trials. Accordingly, we may not be able to
obtain product registration or marketing approval for any of our products, based
on the results of our clinical trials.
OUR PRODUCT CANDIDATES MAY NEVER ACHIEVE MARKET ACCEPTANCE
Our ability to grow our business will be dependent on market acceptance of
our products in the United States and, eventually, in international markets.
Because we have not yet begun to offer most of our products for sale in the
United States or elsewhere, we have no basis to predict whether any of our
products will achieve market acceptance, either in the United States or abroad.
A number of factors may limit the market acceptance of any of our products,
including:
- the timing of regulatory approvals of our products and market entry
compared to competitive products;
- the effectiveness of our products, including any potential side effects,
as compared to alternative treatments;
- the rate of adoption of our products by hospitals, doctors and nurses and
acceptance by the health care community;
- the product labeling or product inserts required by the FDA for each of
our products;
- the competitive features of our products, including price, as compared to
other similar products;
- the availability of insurance or other third-party reimbursement, in
particular Medicare, for patients using our products;
- the extent and success of our marketing efforts and those of our
collaborators; and
- unfavorable publicity concerning our products or any similar products.
If our products are not commercially successful, we may not become profitable.
WE MAY NOT BE ABLE TO EFFECTIVELY EXECUTE OUR BUSINESS STRATEGY OF CONCURRENTLY
MANAGING MULTIPLE SUBSIDIARIES AND DIVERSE PRODUCTS
Our management team may not be able to manage effectively the logistics of
maintaining the requisite corporate, operational, administrative and financing
functions for each of our subsidiaries. Our business strategy is to establish
multiple subsidiary companies, each focused generally on the development and
commercialization of a specific product or group of related products, but which
share common management and administrative infrastructure. Currently, we have
twelve operating subsidiaries with health care technology product candidates
primarily in an early stage of development. This is a business strategy which is
typically employed by larger, diversified companies which have greater
management and operational expertise and infrastructure. We may not be able to
successfully execute our business strategy because our management team has
little experience in managing the concurrent development and commercialization
of multiple products of a diverse nature. If we cannot execute our business
strategy effectively, we may be subject to operating difficulties, additional
expenditures, reduced revenues and poor operating results.
6
<PAGE> 10
OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO MANAGE OUR GROWTH
If we fail to effectively manage our growth, our ability to execute our
business strategy could be impaired. We were incorporated in May 1999 and had
only 63 full-time and 8 part-time employees as of September 30, 2000.
Additionally, we had 29 consultants as of September 30, 2000. We anticipate
adding a substantial number of new employees. Further, we currently have
multiple subsidiaries which are developing and commercializing multiple product
lines and anticipate that additional subsidiaries and product lines will be
established in the near term. The rapid growth of our business may place a
strain on our management, operations and financial systems. We need to improve
existing systems and controls or implement new systems and controls in response
to anticipated growth. Management of our operations and our strategic
relationships with institutions in different geographic locations may also
complicate the task of managing our growth.
IF WE ARE UNABLE TO SUCCESSFULLY LICENSE OR ACQUIRE INNOVATIVE TECHNOLOGIES AT
ATTRACTIVE VALUATIONS, OUR POTENTIAL FOR GROWTH WILL BE LIMITED
We compete to acquire rights to promising pharmaceutical, diagnostic,
device and other biotechnology products and technologies. We acquire many of
these products and technologies from medical schools, universities, hospitals
and other companies, as well as from scientists, physicians and researchers in
academic institutions and other research facilities. Other companies, many of
which have greater resources than we do, are seeking to acquire rights to the
same products and technologies. This competition could increase the cost of
acquisition or reduce the number and quality of potential products and
technologies for us to develop.
In addition, we may be unable to acquire rights to products or technologies
for other reasons, including:
- the inability to agree on terms, such as price, ownership percentages and
royalty arrangements;
- incompatibility between us and the product or technology owner;
- contractual restrictions on the transfer of rights in or to the product
or technology; and
- lack of access to sufficient funding.
WE DEPEND ON PATENTS AND OTHER PROPRIETARY RIGHTS, SOME OF WHICH ARE UNCERTAIN
AND UNPROVEN, AND WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY INFORMATION
Because we are developing product candidates that rely on advanced and
innovative technology, our success will depend in large part on our ability to
obtain and effectively use patents, license patent rights, preserve trade
secrets and operate without infringing upon the proprietary rights of others.
The patent position of pharmaceutical, diagnostic, medical device and
biotechnology companies in general is highly uncertain and involves complex
legal and factual questions. Further, effective intellectual property protection
may be unavailable or limited in some foreign countries. In addition, both in
the United States and abroad, it is often costly to enforce intellectual
property rights against infringing parties. Many of our intellectual property
rights are based on licenses that we have entered into with the owner of the
patent. Risks related to our patent rights and other proprietary rights include
the following:
- challenge, invalidation or circumvention of issued patents already owned
by or licensed to us;
- rejection by the Patent and Trademark Office or foreign patent
authorities of our pending patent applications;
- failure of the rights granted under our patents to provide sufficient
protection;
- failure by us to obtain additional patents;
- independent development of similar products by third parties;
- infringement by one or more of our products on the intellectual property
rights of others;
- ability of third parties to design around patents issued or licensed to
us;
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<PAGE> 11
- claims by our licensors or other third parties that we have exceeded the
scope of our permitted use or field of use that is specified for some of
our intellectual property rights;
- claims by our consultants, key employees or other third parties that our
products or technologies are the result of technological advances
independently developed by them and, therefore, not owned by us;
- failure by us to pay product development costs, license fees, royalties,
milestone payments or other compensation required under our technology
license and technology transfer agreements, and the subsequent
termination of those agreements;
- failure by our licensors to comply with the terms of our license
agreements;
- the misrepresentation by technology owners of the extent to which they
have rights to the technologies that we purport to acquire or license
from them;
- a potentially shorter patent term as a result of legislation which sets
the patent termination date at 20 years from the earliest effective
filing date of the patent application instead of 17 years from the date
of the grant; and
- the loss of rights that we have licensed due to our failure or decision
not to fund further research or failure to achieve required milestones or
otherwise comply with our obligations under the license and technology
transfer agreements.
If any of these risks materialize, it will be difficult for us to
commercialize, and generate revenues from, an affected product.
WE MAY NOT BE ABLE TO PROTECT OUR TRADE SECRETS AND CONFIDENTIAL AND PROPRIETARY
INFORMATION AND, THEREFORE, MAY LOSE ANY COMPETITIVE ADVANTAGE THAT OUR
PROPRIETARY RIGHTS PROVIDE
In the operation of our business and development of our products, we rely
on trade secret protection for our confidential and proprietary information.
However, trade secrets are difficult to protect and we cannot guarantee that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets or
disclose our technology, or that we can meaningfully protect our rights to
unpatented trade secrets. We cannot guarantee that our agreements with our
employees, consultants, advisors and strategic partners restricting the
disclosure and use of trade secrets, inventions and confidential information
owned by us or developed for us will provide meaningful protection for our
proprietary information in the event of unauthorized use or disclosure of the
information. In many instances, our research collaborators may have
relationships with other commercial entities, which could or do compete with us.
Therefore, these collaborators could quickly disseminate our proprietary
information to our competitors. The dissemination of our confidential
information could have a material adverse effect on our business and may allow
others to gain a competitive advantage over us or with respect to our products
or otherwise jeopardize any competitive advantage our products currently have.
INFRINGEMENT CLAIMS BY THIRD PARTIES COULD RESULT IN COSTLY LITIGATION, DIVERT
MANAGEMENT'S ATTENTION AND OTHERWISE HARM OUR BUSINESS
From time to time, third parties may assert that our products infringe upon
the proprietary rights of these third parties. It is virtually impossible for us
to be certain that no infringement exists, particularly where, as is the case
with most of our subsidiary companies, the specific products and processes to be
commercialized have not yet been fully developed. These claims of infringement
may result in:
- a loss of our license rights with respect to the intellectual property
for which infringement is claimed;
- protracted and costly litigation which could require us to pay
substantial damages and indemnify our customers and licensors;
- the issuance of an injunction halting sales or use of our products;
- product shipment delays; or
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- a need to redesign our products or enter into royalty or licensing
agreements with the third parties.
Any of the results described above would harm our business. Any claims
against us, with or without merit, can be time-consuming, requiring our
management team to dedicate substantial time to addressing the issues presented,
and substantial funds to defend our rights. Furthermore, many of the parties
bringing claims may have greater resources than we do. In addition, to date, we
have licensed or acquired our intellectual property utilized in our business
from third parties. Any misrepresentation made by these third parties about the
origin and ownership of their intellectual property could contribute to our
infringement exposure. This exposure would jeopardize our business and require
us to incur indemnification costs.
IF WE ARE NOT ABLE TO MAINTAIN RELATIONSHIPS WITH SCIENTIFIC AND CORPORATE
COLLABORATIVE PARTNERS OR ENTER INTO NEW COLLABORATIVE ARRANGEMENTS, WE MAY NOT
BE ABLE TO SUCCESSFULLY DEVELOP, MARKET, DISTRIBUTE OR SELL SOME OF OUR PRODUCTS
We currently depend and expect to continue to depend on third parties for
support in product research and development. Part of our current business
strategy is to form collaborative arrangements with institutions, including
medical schools, research facilities, corporations and other strategic partners,
to develop and commercialize our products. In some instances, we intend to use
strategic partners or collaborators, contract research organizations or academic
institutions to design and conduct our laboratory testing, preclinical animal
studies and human clinical trials. We also will rely on them in some instances
to help us obtain regulatory approval for our products and to manufacture,
market, distribute or sell our products. We have limited control over the amount
and timing of resources that our corporate and scientific collaborators devote
to our programs or potential products. In addition, if we cannot contract for
testing activities on acceptable terms, or at all, we may not complete our
product development efforts in a timely manner. We may not be able to maintain
our current collaborative arrangements or negotiate additional acceptable
collaborative arrangements in the future. Scientists, physicians and other
researchers who are affiliated with, or employed by, our scientific and
corporate collaborators are not our employees. As a result, we have limited
control over their activities and, except as otherwise required by our
collaboration agreements, can expect only limited amounts of their time to be
dedicated to our activities.
We cannot assure you that any of our present or future collaborators will
meet their obligations to us under the collaboration agreements. If a
collaborator terminates its agreements with us or fails to perform its
obligations, it may delay the development or commercialization of the potential
product or research program, which could result in a decline in our stock price.
As a result, we would have to devote unforeseen additional resources to
development and commercialization or terminate one or more of our product
development programs. Due to increased operating costs and lost revenue
associated with the termination of a collaboration agreement, we may have to
seek funds in addition to the net proceeds of this offering to meet our capital
requirements. We cannot assure you that we would be able to raise the necessary
funds or negotiate additional corporate and scientific collaborations on
acceptable terms, if at all, and we may have to curtail or cease operations.
WE OR OUR THIRD-PARTY MANUFACTURERS MAY NOT HAVE THE MANUFACTURING AND
PROCESSING CAPACITY TO MEET THE PRODUCTION REQUIREMENTS OF CLINICAL TESTING OR
CONSUMER DEMAND IN A TIMELY MANNER
Our capacity to conduct clinical trials and commercialize our products will
depend in part on our ability to manufacture or provide our products on a large
scale, at a competitive cost and in accordance with regulatory requirements. We
must establish and maintain a commercial scale formulation and manufacturing
process for all of our potential products to complete clinical trials. We or our
third-party manufacturers may encounter difficulties with these processes at any
time that could result in delays in clinical trials, regulatory submissions or
the commercialization of potential products.
For some of our potential products, we or our third-party manufacturers
will need to have sufficient production and processing capacity in order to
conduct human clinical trials, to produce products for commercial sale or
process diagnostic tests at an acceptable cost. We have no experience in
large-scale product manufacturing, nor do we have the resources or facilities to
manufacture most of our products on a
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commercial scale. We cannot guarantee that we or our third-party manufacturers
will be able to increase capacity in a timely or cost-effective manner, or at
all. Delays in providing or increasing production or processing capacity could
result in additional expense or delays in our clinical trials, regulatory
submissions and commercialization of our products.
The manufacturing processes for our product candidates have not yet been
tested at commercial levels, and it may not be possible to manufacture or
process these materials in a cost-effective manner. In particular, our
GMP/Genetics subsidiary, which performs the GMP Conversion Technology gene
separation process, may not be able to handle the volume of requests that may
develop for this procedure.
WE WILL BE DEPENDENT ON THIRD-PARTY MANUFACTURERS IF WE CHOOSE NOT TO DIRECTLY
MANUFACTURE OUR PRODUCTS
We may choose not to directly manufacture some or all of our products.
Rather, we may rely on third parties to manufacture our products. For example,
we intend to rely upon a contract manufacturer to produce the protein INGAP for
small and large animal studies and human trials and commercial purposes related
to our proposed diabetes treatment. If our manufacturing and distribution
agreements are not satisfactory, we may not be able to develop or commercialize
potential products as planned. In addition, we may not be able to contract with
third parties to manufacture our products in an economical manner. Furthermore,
third-party manufacturers may not adequately perform their obligations, may
delay clinical development or submission of products for regulatory approval or
otherwise may impair our competitive position. We may not be able to enter into
or maintain relationships with manufacturers that comply with good manufacturing
practices. If a product manufacturer fails to comply with good manufacturing
practices, we could experience significant time delays or we may be unable to
commercialize or continue to market the products. Changes in our manufacturers
could require costly new product testing and facility compliance inspections. In
the United States, failure to comply with good manufacturing practices or other
applicable legal requirements can lead to federal seizure of violative products,
injunctive actions brought by the federal government, and potential criminal and
civil liability on the part of a company and its officers and employees. Because
of these and other factors, we may not be able to replace our manufacturing
capacity quickly or efficiently in the event that our manufacturers are unable
to manufacture our products at one or more of their facilities. As a result, the
sale and marketing of our products could be delayed or we could be forced to
develop our own manufacturing capacity, which would require substantial
additional funds and personnel and compliance with extensive regulations.
WE MAY BE DEPENDENT ON THE SALES AND MARKETING EFFORTS OF THIRD PARTIES IF WE
CHOOSE NOT TO DEVELOP AN EXTENSIVE SALES AND MARKETING STAFF
At this time, we have a limited sales and marketing staff. Therefore, we
may depend on the efforts of third parties for the sale and marketing of our
products. We anticipate that each third party will control the amount and timing
of resources generally devoted to these activities. However, these third parties
may not be able to generate demand for our products. In addition, there is a
risk that these third parties will develop products competitive to ours, which
would likely decrease their incentive to vigorously promote and sell our
products. If we are unable to enter into co-promotion agreements or to arrange
for third-party distribution of our products, we will be required to expend time
and resources to develop an effective internal sales force. However, it may not
be economical for us to market our own products or we may be unable to
effectively market our products. Therefore, our business could be harmed if we
fail to enter into arrangements with third parties for the sales and marketing
of our products or otherwise fail to establish sufficient marketing
capabilities.
WE HAVE LIMITED EXPERIENCE SELLING AND MARKETING OUR GMP CONVERSION TECHNOLOGY,
AND OUR FAILURE TO BUILD AND MANAGE OUR SALES FORCE OR TO EFFECTIVELY MARKET
THIS TECHNOLOGY WILL ADVERSELY AFFECT OUR FINANCIAL RESULTS
Because we only began marketing our GMP Conversion Technology process in
September 2000, our sales force has little experience marketing this technology,
and they may not be successful at selling this service. In order to successfully
introduce and build demand for our GMP Conversion Technology process, we
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must market our conversion services to hospitals, doctors, researchers and other
companies performing genetic analysis and testing.
We intend to market almost all of our conversion services in the United
States through a small direct sales force. We may have to expand our sales force
over the next couple of years in order to effectively market these services.
There are significant risks involved in building and managing our sales force
and marketing our products, particularly given our limited experience. For
example, we may be unable to hire a sufficient number of qualified sales people
with the skills and training to sell our conversion services effectively. If we
are unable to market our conversion services effectively, or hire a sufficient
number of sales people, we may have to enter into collaborative marketing
agreements with third parties, which would require us to make payments to those
third parties, possibly in the form of equity of our GMP/Genetics subsidiary,
thus reducing the portion of the revenue we retain.
OUR COMPETITORS GENERALLY ARE LARGER THAN WE ARE, HAVE GREATER FINANCIAL
RESOURCES AVAILABLE TO THEM THAN WE DO AND MAY BE BETTER ABLE THAN WE ARE TO
DEVELOP AND COMMERCIALIZE COMPETITIVE PRODUCTS
The health care industry is intensely competitive and we expect competition
from other companies and other research and academic institutions to continue to
increase. Many of these potential competitors have substantially longer
operating histories and greater financial, research and development and
marketing capabilities than we do. They also have substantially greater
experience than we have in undertaking preclinical and clinical testing,
obtaining regulatory approvals and manufacturing and marketing products. We may
not be able to develop products that are more effective or achieve greater
market acceptance than our competitors' products. In addition, any company that
brings competitive products to market first may achieve a significant
competitive advantage over us and our products.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical
companies. In addition, academic institutions, government agencies and other
public and private research organizations also conduct research, seek patent
protection and establish collaborative arrangements for product development and
marketing. Furthermore, because of the rapidly changing landscape of the health
care industry, we may face competition from other sources, institutions,
technologies or products which are currently unknown to us or currently
unforeseeable.
WE HAVE ENTERED INTO, AND EXPECT TO CONTINUE TO ENTER INTO, AGREEMENTS WITH
PARTIES AFFILIATED WITH OUR COMPANY THAT MAY BE LESS FAVORABLE THAN AGREEMENTS
THAT COULD BE OBTAINED FROM UNAFFILIATED PERSONS
To date, we have completed several transactions with directors, officers
and other affiliates. For example, in August 1999, we acquired Global Vascular
Concepts, Inc., the predecessor company to GMP/Drug Delivery and GMP/Vascular,
which at the time was substantially owned by four of our then directors,
including three current directors. We have also entered into agreements with
NOVA Biomedical Corporation, whose principal stockholder was formerly one of our
directors, including an agreement to build our molecular genetics facility. In
addition, we have entered into several agreements with Motorola, Inc., one of
our principal stockholders. For instance, we have entered into a license
agreement with Motorola for the technology utilized by our GMP/Wireless Medicine
subsidiary. Pursuant to the terms of a related agreement, upon satisfaction of
regulatory milestones and the occurrence other events, Motorola has the right to
acquire up to 85% of the outstanding stock of GMP/Wireless Medicine for a
premium to fair market value at the time of the exercise of the right. In
addition, we have entered into a technology development agreement with Motorola
to further develop the application of our wireless sensor technologies. Finally,
we have also entered into an agreement with Motorola whereby we agreed to
process, on a preferential basis, genetic specimens using our GMP Conversion
Technology for customers of Motorola's BioChip systems. Further, we have agreed
not to process samples from commercial customers using biological microarray
technologies other than Motorola's systems. No competitive bids or independent
valuation of the rights and obligations of the parties or evaluation of the
fairness of the terms of the transactions were obtained. In the future, we may
enter into other transactions with directors, officers and other affiliates,
particularly with respect to the licensing of patents and other rights to pursue
new potential products. Although we intend that all those transactions be
approved by a majority of disinterested members of our board of directors or a
committee of the board, we
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cannot guarantee that these transactions will be as favorable as those
transactions that could be obtained from unaffiliated persons.
OUR BUSINESS MODEL AND STRUCTURE MAY LIMIT OUR FINANCIAL FLEXIBILITY AND OUR
ABILITY TO LICENSE COMPETING PRODUCT IDEAS
Our current business model is based on a multiple subsidiary structure in
which each subsidiary has license rights or other rights to manufacture and
market a particular product or group of related products. Generally, the
inventor of a product or the owner of the related proprietary rights to a
product or technology owns a minority portion of the equity in the applicable
subsidiary. As the majority stockholder in that subsidiary, we will owe
fiduciary duties to any minority stockholder, including a duty to pay pro rata
dividends if we decide to transfer funds from the subsidiary to us. Therefore,
our ability to fund subsidiaries with revenue generated by other subsidiaries
will be limited, and we may lack flexibility in transferring funds to us and
among the subsidiaries. Furthermore, because we owe a fiduciary duty to the
minority stockholders in each of our subsidiaries and because some of the
members of our management team and board of directors own stock directly in our
subsidiaries or invented the related products or technology, our ability or
willingness to pursue licenses for potential products that might compete with
any of our current products or product candidates may be limited, even if the
potential product has greater commercial potential than our current product.
Therefore, it is possible we may not be able to pursue the opportunity of
acquiring a potentially successful commercial product.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE
AVAILABLE OR COULD RESULT IN DILUTION TO OUR STOCKHOLDERS AND ADVERSELY AFFECT
OUR OPERATIONS
We may need to raise additional funds within the next 24 months,
particularly if our product development, regulatory approval, marketing or
selling costs are higher than we currently anticipate. We may seek to sell
additional equity or debt securities or to obtain a credit facility, which we
may not be able to do on favorable terms, or at all. The sale of additional
equity or convertible debt securities would result in additional dilution to our
stockholders. If additional funds are raised through the issuance of debt
securities or preferred stock, these securities could have rights that are
senior to holders of common stock and any debt securities could contain
covenants that would restrict our operations.
To date, none of our products which requires FDA approval has been approved
for commercial sale. If we are delayed in obtaining or are unable to obtain
regulatory approval to market our products, we may exhaust our available
resources, including the proceeds from this offering, significantly sooner than
we had planned. If this were to happen, we would need to raise additional funds
to complete commercialization of our products and continue our research and
development programs. We cannot assure you that we would be able to obtain these
additional funds on favorable terms, if at all.
LOSS OF KEY PERSONNEL AND CONSULTANTS COULD HARM OUR BUSINESS
Because of the specialized nature of our business, we are dependent on the
efforts of our board of directors, executive officers and scientific personnel,
including Bart Chernow, M.D., our President and Chief Executive Officer, and
Michael Salem, M.D., our Executive Vice President, Research and Development.
Competition for qualified employees among pharmaceutical, diagnostic, device and
biotechnology companies is intense, and the loss of some of our personnel, or an
inability to attract, retain and motivate additional highly skilled scientific,
technical and management personnel, could harm our business and could cause us
to incur additional costs. We cannot guarantee that we will be able to retain
our existing personnel or attract and retain additional qualified employees. In
addition, we rely on consultants and advisors to assist us in executing our
business strategy of licensing and acquiring promising new technologies. A
majority of our research and scientific advisors are engaged by us on a
consulting basis and are employed on a full-time basis by employers other than
us. In addition, some of our research and scientific advisors have consulting or
other advisory arrangements with other entities that may conflict or compete
with their obligations to us.
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OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS MAY BE HINDERED AS A RESULT OF
GOVERNMENT REGULATORY REQUIREMENTS AND A LENGTHY AND EXPENSIVE APPROVAL PROCESS
The research, development, preclinical and clinical trials, manufacturing
and marketing of most of our product candidates are subject to an extensive
regulatory approval process by the FDA in the United States and other regulatory
agencies in the United States and abroad. The process of obtaining FDA and other
required regulatory approvals for health care products, including required
preclinical animal studies and clinical human testing, is lengthy, expensive and
uncertain. Regulatory authorities have substantial discretion to terminate
clinical trials, delay or withhold registration and marketing approval, and
mandate product recalls. Failure to comply with regulatory requirements may
result in criminal prosecution, civil penalties, recall or seizure of products,
total or partial suspension of production or injunction, as well as other action
against our potential products or us. Even after spending considerable time and
money, we may not receive regulatory approvals for clinical testing or for the
manufacturing or marketing of our products. We may encounter significant delays
or excessive costs in the effort to secure necessary approvals or licenses,
which would adversely affect the marketing and sale of our products. Even if we
obtain regulatory clearance for a product, that product will be subject to
continual review. Later discovery of previously unknown defects or failure to
comply with the applicable regulatory requirements may result in restrictions on
the marketing of a product or withdrawal of the product from the market, as well
as possible civil or criminal penalties.
If we obtain regulatory approval for a product, the approval will be
limited to those diseases for which our clinical trials demonstrate the product
is safe and effective. A more detailed discussion regarding government
regulation of our products is included in this prospectus under the heading
"Business -- Government Regulation."
MANY OF OUR PRODUCTS WILL BE SUBJECT TO PREMARKET REVIEW BY THE FDA WHICH WILL
DELAY, AND MAY PREVENT, THEIR SUCCESSFUL COMMERCIALIZATION
Unless an exemption applies, each medical device that we wish to market in
the United States must first receive one of the following types of FDA premarket
review authorizations:
- 510(k) clearance via Section 510(k) of the Food, Drug and Cosmetics Act
of 1938, as amended; or
- premarket approval via Section 515 of the Food, Drug, and Cosmetics Act
if the FDA has determined that the medical device in question poses a
greater risk of injury than a comparable approved device.
The FDA's 510(k) clearance process usually takes from four to 12 months,
but can take longer. The process of obtaining premarket approval under Section
515 is much more costly, lengthy and uncertain. This approval process generally
takes from one to three years, but can take even longer.
In addition, prior to marketing a new drug or biologic in the United
States, we must first complete a new drug application, or NDA, or a biological
license application, or BLA. Both NDAs and BLAs must include detailed
information about the drug or biologic, the process by which it is manufactured
and the results of product development, preclinical studies and clinical trials.
If questions arise during the FDA review process, approval can take more than
five years. Even with the submission of relevant data, the FDA may ultimately
decide that the NDA or BLA does not satisfy its regulatory criteria for approval
and deny approval or require additional clinical studies.
We cannot assure you that the FDA will ever grant either 510(k) clearance
or Section 515 approval for our medical devices or otherwise approve our NDA's
or BLA's for any product we propose to market. The FDA can also impose more
burdensome premarket approval requirements on modifications to our existing
products or future products, which in either case could be costly and cause us
to divert our attention and resources from the development of new products or
the enhancement of existing products.
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OUR BUSINESS MAY SUFFER IF WE ARE REQUIRED TO REVISE OUR LABELING OR PROMOTIONAL
MATERIALS OR THE FDA TAKES AN ENFORCEMENT ACTION AGAINST US FOR OFF-LABEL USES
We may not promote or advertise our products, or any future FDA cleared or
approved products, for uses not within the scope of our clearances or approvals
or make unsupported promotional claims about the benefits of our products. If
the FDA determines that our claims are outside the scope of our clearances or
are unsupported, it could require us to revise our promotional claims or take
enforcement action against us. If we were subject to such an action by the FDA,
our sales could be delayed, our revenues could decline and our reputation among
clinicians, doctors, inventors and research and academic institutions could be
harmed.
OUR BUSINESS WOULD BE HARMED IF THE FDA DETERMINES THAT WE HAVE FAILED TO COMPLY
WITH APPLICABLE REGULATIONS OR WE DO NOT PASS AN INSPECTION
We are subject to inspection and market surveillance by the FDA concerning
compliance with pertinent regulatory requirements. If the FDA finds that we have
failed to comply with these requirements, the agency can institute a wide
variety of enforcement actions, ranging from a public warning letter to more
severe sanctions such as:
- fines, injunctions and civil penalties;
- the recall or seizure of our products;
- withdrawal of previously granted product approvals;
- the issuance of public notices or warnings;
- the imposition of operating restrictions, partial suspension or total
shutdown of production; and
- criminal prosecution.
IF WE FAIL TO OBTAIN NECESSARY FOREIGN REGULATORY APPROVALS IN ORDER TO MARKET
AND SELL OUR PRODUCTS OUTSIDE OF THE UNITED STATES, WE MAY NOT BE ABLE TO SELL
OUR PRODUCTS IN OTHER COUNTRIES
We hope eventually to market our products outside of the United States.
Achieving this goal will entail obtaining foreign regulatory approvals from
governments in other countries that may have different requirements from the
regulatory process in the United States. The differences in foreign regulatory
processes may subject our products to additional clinical trials and approvals,
as well as possibly different licensing, manufacturing and labeling standards,
even if the products are fully approved for manufacture, marketing and
distribution in the United States. If the relevant foreign approvals cannot be
obtained, the potential market for our products would be limited. Further, in
order to meet any additional requirements that might be imposed by foreign
governments, we may incur substantial costs that will affect our profitability.
IF WE OR OUR CONTRACT MANUFACTURERS FAIL TO COMPLY WITH APPLICABLE REGULATIONS,
SALES OF OUR PRODUCTS COULD BE DELAYED AND OUR REVENUES COULD BE HARMED
Every medical product manufacturer is required to demonstrate and maintain
compliance with the FDA's regulations on manufacturing quality. We and any
contract manufacturers or suppliers with whom we enter into agreements may be
required to meet these requirements. The FDA enforces its regulations through
periodic unannounced inspections. We cannot assure you that we or our contract
manufacturers will pass any of these inspections. If we or our contract
manufacturers fail one of these inspections in the future, our operations could
be disrupted and our manufacturing and sales delayed significantly until we can
demonstrate adequate compliance. If we or our contract manufacturers fail to
take adequate corrective action in a timely fashion in response to a quality
system regulations inspection, the FDA could shut down our or our contract
manufacturers' manufacturing operations and require us, among other things, to
recall our products, either of which would harm our business.
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CHANGES IN THE HEALTH CARE INDUSTRY AND REGULATORY ENVIRONMENT MAY NEGATIVELY
AFFECT ANY REVENUES WE RECEIVE FROM OUR POTENTIAL PRODUCTS OR COULD RESULT IN A
REDUCTION IN THE SIZE OF THE POTENTIAL MARKET FOR OUR PRODUCTS, EACH OF WHICH
COULD HAVE A NEGATIVE IMPACT ON OUR FINANCIAL PERFORMANCE
Trends toward managed care, health care cost containment and other changes
in government and private sector initiatives in the United States and other
countries in which we may do business are placing increased emphasis on the
delivery of more cost-effective medical therapies, which could adversely affect
the sale and prices of our products. For example:
- major third-party payors of hospital services, including Medicare,
Medicaid and private health care insurers, have substantially revised
their payment methodologies during the last few years which has resulted
in stricter standards for reimbursement of hospital charges for some
medical procedures;
- proposals were adopted recently that will change the reimbursement
procedures for the capital expenditure portion of the cost of providing
care to Medicare patients;
- numerous legislative proposals have been or are being considered that
could result in major changes in the U.S. health care system that could
harm our business;
- the National Institute of Health is drafting a policy which, if adopted,
would require companies to pay royalties to NIH on products developed
from taxpayer funded research projects that ultimately generate over $500
million in U.S. sales per year;
- recent consolidation among health care facilities and purchasers of
medical products in the United States, who prefer to limit the number of
suppliers from whom they purchase medical products, could cause these
entities to not purchase our products or demand discounts in our prices;
- economic pressure exists to contain health care costs in international
markets;
- proposed and existing laws and regulations in domestic and international
markets regulate pricing and profitability of companies in the health
care industry; and
- recent initiatives by third-party payors to challenge the prices charged
for medical products could affect our ability to sell products on a
competitive basis.
Given the possibility of future changes in the health care industry, we
cannot guarantee that:
- federal or state health care legislation seeking to curb the cost of
health care will not be adopted in the future;
- any products sought to be commercialized by us or our collaborators will
be considered cost-effective; or
- adequate third-party health insurance reimbursements will be available
for users of our products in order for us to establish and maintain price
levels sufficient to realize an appropriate return on our investment in
product development.
Both the pressure to reduce prices for our products in response to these
trends and the decrease in the size of the market as a result of these trends
could harm our business.
OUR BUSINESS MAY BE THREATENED BY THE ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF
SOME OF OUR PRODUCTS
The prospect of broadly available genetic predisposition testing has raised
issues which are currently being widely discussed by the medical, scientific and
legislative communities, as well as by other interested groups and
organizations, regarding the appropriate utilization and the confidentiality of
information provided by these tests. It is possible that discrimination by
insurance companies could occur through the raising of premiums by insurers to
prohibitive levels, outright cancellation of insurance or unwillingness to
provide coverage to patients shown to have a genetic predisposition to a
particular disease. While we do not engage in genetic testing, some of our
products and processes, including our GMP Conversion Technology process, enhance
genetic testing. Potential customers may choose not to purchase our products as
a possible result of
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the social backlash. We could experience a delay in market penetration or a
reduction in the size of our potential serviceable market, harming future
revenue, if insurance discrimination were to become a significant barrier to
testing acceptance. Similarly, employers could discriminate against employees
with a positive genetic predisposition due to the increased risk for disease,
resulting in possible cost increases for health insurance and the potential for
lost employment time. Finally, governmental authorities could, for social or
other purposes, limit the use of genetic testing or prohibit testing for genetic
predisposition to certain conditions. For these reasons, we could experience a
delay or reduction in test acceptance, which could result in reduced market
potential for our products.
Our tissue engineering products currently utilize and require further
research involving immature human cells, known as stem cells. Until the very
recent advent of laboratory cultivation of human stem cells, there were three
possible sources of these cells: adult stem cells derived from pediatric or
adult donors; embryo germ stem cells derived from aborted fetuses; and embryonic
stem cells derived from embryos prior to implantation in the womb. Ethical
concerns over the latter two sources of stem cells have made the use of these
cells controversial. Currently, federal law places significant constraints on
government funding of research using stem cells. Although we are not dependent
on government funding for research and development of our tissue engineering
products, and despite the potential use of laboratory cultivated stem cells, the
stem cell controversy could adversely affect market acceptance of any ultimate
tissue engineering product or public attitudes toward us in general.
OUR USE OF BIOLOGICAL, RADIOACTIVE AND OTHER HAZARDOUS MATERIALS EXPOSES US TO
THE RISK OF MATERIAL ENVIRONMENTAL LIABILITIES, AND WE MAY INCUR SUBSTANTIAL
ADDITIONAL COSTS TO COMPLY WITH ENVIRONMENTAL LAWS
Because we use and generate biological, radioactive and other hazardous
substances in our operations, we are subject to potentially material liabilities
related to personal injuries or property damages that may be caused by the
spread of biological or radioactive contamination or by other hazardous
substance releases or exposures. Decontamination and other clean-up costs
associated with such releases or exposures, or related damages or liabilities,
could have a negative impact on our results of operation or financial condition.
We are required to comply with increasingly stringent laws and regulations
governing environmental protection and workplace safety, including requirements
governing the handling, storage, disposal and transportation of biological,
radioactive and other hazardous substances and wastes, and laboratory operating
and safety procedures. These laws and regulations can impose substantial fines
and criminal sanctions for violations. We could incur substantial capital and
operating costs in order to bring our facilities into compliance with these
requirements, including significant start-up costs at facilities we may
construct or operate in the future. These costs could limit our ability to
conduct manufacturing operations in a cost-effective manner.
OUR PRODUCT CANDIDATES MAY SUBJECT US TO PRODUCT LIABILITY FOR WHICH INSURANCE
MAY NOT BE AVAILABLE
The use of our potential products may expose us to product liability
claims. In addition, there is a risk that as we further develop products,
adequate insurance coverage and indemnification by collaborative partners will
not be available or, if available, it may not be in sufficient amounts or at a
reasonable cost. A successful product liability claim could materially harm our
business.
OUR CURRENT STOCKHOLDERS WILL BENEFIT FROM THIS OFFERING, AND INVESTORS WILL
EXPERIENCE IMMEDIATE DILUTION
The offering price is substantially higher than the current book value per
share of our outstanding common stock, assuming conversion of our convertible
preferred stock. Stockholders existing as of September 30, 2000 have paid an
average of $8.09 per share for their stock which is considerably less than the
amount to be paid for the common stock in this offering. As a result, investors
purchasing common stock in this offering will incur immediate and substantial
dilution. In addition, we have issued options to acquire common stock at prices
significantly below the offering price. To the extent those outstanding options
are ultimately exercised, there will be further dilution to investors in this
offering.
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WE MAY SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS
WHICH DO NOT YIELD A FAVORABLE RETURN
We have significant flexibility to allocate a substantial portion of net
proceeds from this offering. Our business model calls for us to acquire rights
to and develop innovative technologies with unknown commercial potential and for
which additional testing and regulatory approval may be required. As a result,
investors in this offering will be relying upon our judgment with only limited
information about our specific intentions regarding the use of proceeds. We
cannot assure you that the proceeds will be invested to yield a favorable
return.
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND YOU MAY NOT BE
ABLE TO RESELL SHARES OF OUR COMMON STOCK FOR A PROFIT
Prior to this offering, there has been no public market for our common
stock. We will determine the initial public offering price with the
underwriters. This price may not be the price at which the common stock will
trade after this offering. The market price of our common stock may decline
below the initial public offering price and an active trading market may not
develop after this offering. We cannot assure you of the extent to which an
active trading market will develop or how liquid that market may become.
THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The market price of the common stock may fluctuate substantially due to a
variety of factors, including:
- announcements of technological innovations or new products by us or our
competitors;
- announcements of FDA approval or disapproval of our products;
- the success rate of our discovery efforts, animal studies and human
trials leading to performance-based payments and revenues under our
collaborative agreements;
- developments or disputes concerning patents or proprietary rights,
including announcements of infringement, interference or other litigation
regarding these rights;
- the willingness of collaborators to commercialize our products and the
timing of commercialization;
- changes in our strategic relationships which adversely affect our ability
to acquire or commercialize products;
- announcements concerning our competitors, or the health care industry in
general;
- public concerns over the safety of our products or our competitors'
products;
- changes in governmental regulation of the health care industry;
- changes in the reimbursement policies of third-party insurance companies
or government agencies;
- actual or anticipated fluctuations in our operating results from period
to period;
- variations in our quarterly results;
- changes in financial estimates or recommendations by securities analysts;
- changes in accounting principles; and
- the loss of any of our key scientific or management personnel.
In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of health care and medical
technology companies, particularly companies like ours without consistent
product revenues and earnings, have been highly volatile, and may continue to be
highly volatile in the future. This volatility has often been unrelated to the
operating performance of particular companies. In the past, securities class
action litigation has often been brought against companies that experience
volatility
17
<PAGE> 21
in the market price of their securities. Whether or not meritorious, litigation
brought against us could result in substantial costs and a diversion of
management's attention and resources.
WE MAY BE REQUIRED TO TAKE SIGNIFICANT ACTIONS THAT ARE CONTRARY TO OUR BUSINESS
OBJECTIVES TO AVOID BEING REQUIRED TO REGISTER AS AN INVESTMENT COMPANY UNDER
THE INVESTMENT COMPANY ACT OF 1940
As an operating company, we believe that we are not an investment company
as that term is defined under the Investment Company Act. Generally, a company
must register under the Investment Company Act and comply with significant
restrictions on operations and transactions with affiliates if its investment
securities exceed 40% of the company's total assets, or if it holds itself out
as being primarily engaged in the business of investing, owning or holding
securities. Under an alternative test, a company is not required to register
under the Investment Company Act if not more than 45% of its total assets
consist of, and not more than 45% of its net income is derived from, securities
other than government securities and securities of majority-owned subsidiaries
and companies primarily controlled by it. If we are unable to rely on these
alternative tests, we may have to ask for exemptive relief from the SEC or rely,
once every three years, on a one-year temporary exemption from the registration
requirements of the Investment Company Act.
If we are not able to obtain exemptive relief and the one-year temporary
exemption is no longer available, we might need to take certain actions to avoid
the requirement to register as an investment company. For example, we might be
compelled to acquire additional income or loss generating assets that we might
not otherwise have acquired, be forced to forego opportunities to acquire
interests in companies that would be important to our strategy or be forced to
forego the sale of minority interests we would otherwise want to sell. In
addition, we might need to sell some assets which are considered to be
investment securities, including interests in subsidiary companies. It is not
feasible for us to register as an investment company because the Investment
Company Act regulations are inconsistent with our strategy of acquiring,
operating and managing our subsidiary companies.
WE ARE CONTROLLED BY OUR DIRECTORS AND EXECUTIVE OFFICERS WHO, COLLECTIVELY, MAY
PREVENT OR DELAY A CHANGE IN CONTROL AND WHOSE INTERESTS MAY BE DIFFERENT FROM
THE INTERESTS OF OUR OTHER STOCKHOLDERS
Upon the completion of this offering, our executive officers and directors
will own or control approximately % of the outstanding shares of common
stock, based on their beneficial ownership as of September 30, 2000 and
including options that are exercisable within 60 days of September 30, 2000. As
a result, those individuals, acting together, will generally be able to
determine the outcome of corporate transactions or other matters submitted for
stockholder approval. These principal stockholders could preclude any
unsolicited acquisition of us and, consequently, adversely affect the value of
the common stock.
OUR CHARTER DOCUMENTS AND DELAWARE LAW CONTAIN PROVISIONS THAT MAY INHIBIT
POTENTIAL ACQUISITION BIDS, WHICH MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK, DISCOURAGE MERGER OFFERS AND PREVENT CHANGES IN OUR MANAGEMENT
Section 203 of the Delaware General Corporation Law may inhibit potential
acquisition bids for our company. Upon completion of this offering, we will be
subject to Section 203, which regulates corporate acquisitions and limits the
ability of a holder of 15% or more of our stock from acquiring the rest of our
stock for three years. Under Delaware law, a corporation may opt out of the
antitakeover provisions. We may choose not to opt out of the antitakeover
provisions of Delaware Law.
Upon the closing of this offering, our board of directors will have the
authority to issue up to five million shares of preferred stock. Our board of
directors can fix the price, rights, preferences and privileges of the preferred
stock without any further vote or action by our stockholders. These rights,
preferences and privileges may be senior to those rights of the holders of our
common stock. We have no current plans to issue any shares of preferred stock.
We have also adopted other provisions in our charter documents effective upon
the closing of this offering that could delay or prevent a change in control.
The approval of 80% of our stockholders is required to amend particular
provisions of our certificate of incorporation, and our stockholders cannot act
by written consent. Only our board of directors, acting pursuant to a resolution
of a majority of the
18
<PAGE> 22
directors then in office, may call a special meeting of our stockholders. These
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control transaction.
IF OUR EXISTING STOCKHOLDERS SELL A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON
STOCK IN THE PUBLIC MARKET, OUR STOCK PRICE MAY DECLINE
After this offering, we will have outstanding shares of
common stock. Of these shares, the shares being offered in this
offering will be freely tradable without restriction under the Securities Act
except for any shares held by our "affiliates" as that term is defined in Rule
144 under the Securities Act.
As of September 30, 2000, approximately 16.4 million shares of common stock
held by existing stockholders are "restricted shares" as that term is defined in
Rule 144. These shares will be available for sale in the public market
commencing approximately 180 days after the date of this prospectus, or earlier
if the underwriters release their lock-up restrictions. Most of the shares that
will be available for sale after the 180th day after the date of this prospectus
will be subject to volume limitations because they are held by our affiliates or
have been held less than two years. Approximately 4.6 million shares of our
common stock held by existing stockholders will be eligible for resale without
being subject to volume limitations commencing 180 days after the date of this
prospectus.
Approximately 7.6 million of the restricted shares are owned by
stockholders who have the right beginning six months after the date of this
prospectus to require us to file a registration statement to enable them to sell
those shares. These stockholders also have the right to require us to include
their shares in a registration statement that we file for subsequent offerings
of our securities.
Although our directors, executive officers and substantially all of our
stockholders have agreed that they will not sell or otherwise dispose of any
shares of common stock for a period of 180 days after the completion of this
offering, these lock-up restrictions may be removed prior to 180 days after the
offering without prior notice by the underwriters. In addition, the lock-up
agreements may not be effective in restricting the sale of stock by those
persons who are subject to them.
As of September 30, 2000 there were outstanding options to purchase
approximately 2.2 million shares of our common stock. Should the holders of
these options exercise their options, there will be additional shares eligible
for sale 90 days, or to the extent covered by lock up agreements, 180 days,
after the date of this prospectus.
If our stockholders sell substantial amounts of the common stock, including
shares issued upon the exercise of outstanding options, in the public market,
the market price of our common stock could fall. For more detailed information
regarding future sales of our common stock, please see "Shares Eligible for
Future Sale" and "Underwriting."
19
<PAGE> 23
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performances or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
- the effectiveness of our product candidates for their future intended
uses;
- FDA and other regulatory approvals;
- the market, customer acceptance and demand for new health care
technologies;
- the impact of competitive products and pricing;
- obtaining funding for new research and development projects;
- the timing and success of new product development and launch;
- the availability of raw materials;
- the occurrence of unforeseeable events;
- the regulatory environment;
- fluctuations in operating results;
- the timing and outcome of legal proceedings; and
- the ability to license new technologies.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"hopes," "believes," "estimates," "intends," "projects," "predicts,"
"potential," "continue," and similar expressions intended to identify
forward-looking statements. These statements reflect our current views with
respect to future events and are based on our assumptions and subject to risks
and uncertainties. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. We discuss many of these risks in
this prospectus in greater detail under the heading "Risk Factors." Also, these
forward-looking statements represent our estimates and assumptions only as of
the date of this prospectus.
We use market data and industry forecasts and projections throughout this
prospectus, which we have obtained from market research, publicly available
information and industry and medical publications. Industry publications
generally state that the information they provide has been obtained from sources
they believe to be reliable, but that the accuracy and completeness of such
information is not guaranteed. The forecasts and projections are based on
industry surveys and the preparers' experience in the industry and there is no
assurance that any of the projected amounts will be achieved. Similarly, we
believe that the surveys and market research we or others have performed are
reliable, but we have not independently verified this information.
You should read this prospectus and the documentation we reference in this
prospectus completely and with the understanding that our actual future results
may be materially different from what we expect. Except as required by
applicable law, including the securities laws of the United States, and the
rules and regulations of the Securities and Exchange Commission, we do not plan
to publicly update or revise any forward-looking statement after we distribute
this prospectus. We qualify all of our forward-looking statements by these
cautionary statements.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
20
<PAGE> 24
USE OF PROCEEDS
We expect that we will receive net proceeds of approximately
$ from the sale of shares of common stock in this
offering based on an assumed initial public offering price of $ per
share, and, after deducting underwriting discounts and commissions and estimated
offering expenses payable by us. If the underwriters exercise their
over-allotment option in full, we will receive additional net proceeds of
approximately $ . We currently intend to use the net proceeds of this
offering for:
- research and development of our current and future products;
- commercialization of our current and future products;
- capital expenditures, including building manufacturing facilities;
- licensing and acquisition of new technologies;
- prosecution of patents and the continued protection of our intellectual
property rights;
- hiring additional employees;
- working capital; and
- general corporate purposes, including acquiring or leasing additional
facilities.
In addition, we also may use a portion of the net proceeds of this offering
for the acquisition of complementary businesses.
We have not yet determined our expected expenditures, and we cannot
estimate the amounts to be used for each purpose set forth above. Accordingly,
our management will have significant flexibility in allocating a significant
portion of the net proceeds of this offering. Pending use of the net proceeds as
described above, we intend to invest the net proceeds of this offering in
short-term, interest-bearing, investment-grade securities.
OUR POLICY REGARDING DIVIDENDS
We have never declared or paid cash dividends on our capital stock, and we
do not currently intend to pay any cash dividends on our common stock in the
foreseeable future. We expect to retain future earnings, if any, to fund the
development and growth of our business. Future dividends, if any, will be
determined by our board of directors.
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<PAGE> 25
CAPITALIZATION
You should read this table together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and the related notes appearing elsewhere in this
prospectus. The following table describes our capitalization as of September 30,
2000:
- on an actual basis;
- on a pro forma basis after giving effect to the automatic conversion of
all of our outstanding shares of convertible preferred stock into
10,450,000 shares of common stock; and
- on a pro forma as adjusted basis to give effect to the conversion of all
outstanding shares of convertible preferred stock into 10,450,000 shares
of common stock and the sale of shares of common stock
offered by us at an assumed initial public offering price of
$ per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments....... $114,557 $114,557 $
======== ======== ========
Stockholders' equity:
Preferred stock -- unallocated, $.01 par value:
9,550,000 authorized, actual and pro forma;
5,000,000 shares authorized, pro forma as adjusted;
none issued and outstanding, actual, pro forma and
pro forma as adjusted.............................. -- -- --
Series A convertible preferred stock, $.01 par value:
6,450,000 shares designated, actual; none
designated, pro forma and pro forma as adjusted;
6,450,000 shares issued and outstanding, actual;
none issued and outstanding, pro forma and pro
forma as adjusted.................................. 65 -- --
Series B convertible preferred stock, $.01 par value:
4,000,000 shares designated, actual; none
designated, pro forma and pro forma as adjusted;
4,000,000 shares issued and outstanding, actual;
none issued and outstanding, pro forma and pro
forma as adjusted.................................. 40 -- --
Common stock, $.001 par value: 80,000,000 shares
authorized, actual and pro forma; 120,000,000
shares authorized, pro forma as adjusted; 5,987,227
shares issued and outstanding, actual; 16,437,227
shares issued and outstanding, pro forma;
shares issued and outstanding, pro
forma as adjusted.................................. 6 16
Additional paid-in capital............................ 135,518 135,613
Deficit accumulated during the development stage...... (20,501) (20,501) (20,501)
-------- -------- --------
Total stockholders' equity......................... 115,128 115,128
-------- -------- --------
Total capitalization.......................... $115,128 $115,128 $
======== ======== ========
</TABLE>
The actual, pro forma and pro forma as adjusted information set forth in
the table excludes:
- shares of common stock issuable upon the exercise of the
underwriters' over-allotment option;
- 2,163,000 shares of common stock issuable upon the exercise of stock
options outstanding as of September 30, 2000, at a weighted average
exercise price of $10.41 per share; and
- 830,968 shares of common stock reserved for issuance under our stock
option plan.
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<PAGE> 26
DILUTION
Our pro forma net tangible book value as of September 30, 2000 was
approximately $114.0 million, or $6.94 per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding assuming the conversion of all shares of
convertible preferred stock outstanding into 10,450,000 shares of common stock.
Pro forma net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of common stock in
this offering and the pro forma net tangible book value per share of common
stock immediately after completion of this offering on a pro forma as adjusted
basis. After giving effect to the sale of the shares of common
stock by us in this offering at an assumed initial public offering price of
$ per share and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, our pro forma net
tangible book value as of September 30, 2000 would have been $ , or
$ per share of common stock. This represents an immediate increase in
net tangible book value of $ per share of common stock to existing
common stockholders and an immediate dilution in pro forma net tangible book
value of $ per share to new stockholders purchasing shares of common
stock in this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value per share before this
offering............................................... $ 6.94
Increase in pro forma net tangible book value per share
attributable to this offering..........................
-------
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution per share to new stockholders...................... $
=======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
2000, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing and new
stockholders purchasing shares of common stock in this offering, before
deducting underwriting discounts and commissions and offering expenses payable
by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Existing stockholders................. 16,437,227 % $133,022,716 % $8.09
New stockholders......................
----------- ----- ------------ ------
Total........................ 100.0% $ 100.0%
=========== ===== ============ ======
</TABLE>
The tables and calculations above assume no exercise of the underwriters'
over-allotment option to purchase up to an additional shares of
common stock. This information also assumes no exercise of stock options
outstanding. As of September 30, 2000, there were 2,163,000 shares of common
stock issuable upon the exercise of outstanding options, at a weighted average
exercise price of $10.41 per share. To the extent that options with exercise
prices below the price per share of this offering are exercised, there will be
further dilution to new investors.
23
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statement of operations
data for the period from May 17, 1999 (date of inception) to December 31, 1999
and our balance sheet data as of December 31, 1999 are derived from our
consolidated audited financial statements, included elsewhere in this
prospectus. We have derived our statement of operations data for the period from
inception to September 30, 1999, for the nine months ended September 30, 2000
and for the period from inception to September 30, 2000 and our balance sheet
data as of September 30, 2000 from our unaudited consolidated financial
statements, which we include elsewhere in this prospectus. In the opinion of
management, the unaudited consolidated financial statements reflect and include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of such results. We have presented pro forma net loss per
share information to give effect to the assumed conversion of all outstanding
shares of our convertible preferred stock into shares of common stock as of
their original dates of issuance. See the notes to our consolidated financial
statements for a detailed explanation of this determination of the shares used
to compute actual and pro forma basic and diluted net loss per share. We are
currently a development stage company.
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM PERIOD FROM MAY 17, 1999
MAY 17, 1999 MAY 17, 1999 NINE MONTHS (INCEPTION) TO
(INCEPTION) TO (INCEPTION) TO ENDED SEPTEMBER 30,
DECEMBER 31, 1999 SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 2000
----------------- ------------------ ------------------ ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................. $ -- $ -- $ 15 $ 15
Operating expenses:
Research and development........... 1,122 593 11,612 12,734
Selling, general and
administrative................... 3,474 2,370 8,262 11,736
------- ------- -------- --------
Total operating expenses.... 4,596 2,963 19,874 24,470
------- ------- -------- --------
Loss from operations................. (4,596) (2,963) (19,859) (24,455)
Interest income, net................. 436 124 3,518 3,954
------- ------- -------- --------
Net loss............................. $(4,160) $(2,839) $(16,341) $(20,501)
======= ======= ======== ========
Net loss per share -- basic and
diluted............................ $ (0.87) $ (0.62) $ (3.15) $ (4.10)
======= ======= ======== ========
Shares used in computing net loss per
share -- basic and diluted......... 4,762 4,609 5,191 4,996
Pro forma net loss per share -- basic
and diluted........................ $ (0.53) $ (0.53) $ (1.14) $ (2.01)
======= ======= ======== ========
Shares used in computing pro forma
net loss per share -- basic and
diluted............................ 7,804 5,363 14,356 10,216
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $28,816 $114,557
Working capital............................................. 28,430 111,609
Total assets................................................ 29,178 121,072
Deficit accumulated during the development stage............ (4,160) (20,501)
Total stockholders' equity.................................. 28,657 115,128
</TABLE>
24
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial statements
and the related notes included elsewhere in this prospectus.
OVERVIEW
We are a development stage company formed on May 17, 1999 to identify,
acquire, develop and commercialize innovative technologies for the health care
market. We acquire technologies through our operating subsidiaries which are
focused on a particular product candidate or group of related product
candidates. Our subsidiaries are supported, operated, managed and funded by a
shared corporate and administrative infrastructure. We own a substantial
majority interest in each subsidiary company. Generally, a minority interest in
each subsidiary is issued to the institution or individual from whom the
subsidiary acquired the rights to the product candidates or technologies. Each
subsidiary is included in one of three divisions or operating segments:
therapeutics, diagnostics or devices. The operating results for each of these
three segments include each division's share of corporate infrastructure costs
allocated based on the effort expended by corporate personnel on behalf of the
particular subsidiary. In addition, a corporate and other segment includes the
results of financing activities and selling, general and administrative expenses
of our corporate office not directly related to any particular subsidiary. The
corporate and other segment also includes the expenses and revenues from media
development services provided to third parties by us.
Since our inception, we have devoted the majority of our efforts and
resources to hiring employees, establishing facilities, acquiring rights to
technologies and sponsoring research and development through collaborations with
scientists, academic research institutions and other companies. As a result of
these activities, we have incurred net losses of approximately $4.2 million in
1999 and $16.3 million in the nine months ended September 30, 2000. Our
accumulated deficit was $20.5 million as of September 30, 2000. We expect to
continue to incur net losses for the foreseeable future.
We have generated only limited revenues from operations to date. Only one
of our twelve subsidiaries formed to develop and commercialize health care
technology products has products or services available for sale. Future revenues
may include product revenues, royalties, grants, fees for services and license
fees. The timing and amount of our revenues, if any, will likely fluctuate from
year-to-year and quarter-to-quarter and depend upon the achievement of
milestones, including, the receipt of FDA and other regulatory approvals, the
introduction of new products and other performance requirements. Therefore, our
results of operations for any period may not be representative of the results of
operations for any other period. In addition, our limited operating history
makes it difficult to forecast future operating results.
In September 2000, our GMP/Genetics subsidiary commercially launched its
GMP Conversion Technology, a new proprietary, gene separation process that is
designed to significantly improve the accuracy of genetic analysis and testing.
We licensed this technology from Johns Hopkins University in January 2000. We
began processing genetic samples in September 2000 and we began recognizing
revenue in October 2000. We recognize revenue from our GMP Conversion Technology
process upon shipment to our customers of the completed sample. We anticipate
that some of our target customers for our GMP/Conversion Technology process will
be genetic researchers, including those researchers identifying new genes,
conducting genetic analysis and matching genes to specific diseases. In
addition, we intend to market our conversion services to commercial laboratory
customers performing clinical predisposition genetic tests and tests for
inherited diseases. We also anticipate that our GMP Conversion Technology
process will be used by companies involved in genomics-based drug discovery and
functional genomics.
Research and development expenses include expenses associated with
sponsored research programs, patent application and protection, personnel
expenses, preclinical and clinical trials and technology acquisition and
licensing. We recognize these expenses as they are incurred. Sponsored research
expenses relate to amounts paid by us to research institutions that are
attempting to develop technologies which we own or have licensed. These expenses
as well as other investments in research and development have been, and we
believe
25
<PAGE> 29
will continue to be, required to develop our existing and future product
candidates. In addition, research and development expenses are affected by the
timing of development activities, including preclinical tests and clinical
trials and the regulatory approval process. We expect our research and
development expenses to increase as we continue to invest in the development of
our technologies.
Selling, general and administrative expenses include expenses related to
recruiting and hiring personnel, developing our shared corporate and
administrative infrastructure, managing and supporting the activities of our
subsidiaries and commercially launching our GMP Conversion Technology. We expect
our selling, general and administrative expenses to continue to increase as our
business grows and as we commercialize other product candidates.
In August 2000, we entered into an agreement with Motorola whereby we
agreed to process, on a preferential basis, genetic specimens using our GMP
Conversion Technology for customers of Motorola BioChip systems. We also agreed,
subject to limited exceptions, not to process genetic specimens for subsequent
use with any other biological microarray technology for other than research
purposes. Motorola paid GMP/Genetics $2.0 million under this agreement, which
beginning October 1, 2000, is being recorded as license revenue over the
27-month term of the agreement.
At December 31, 1999, we had available net operating loss carryforwards of
approximately $2.4 million that we may be able to use to offset any future
taxable income for federal income tax purposes. The utilization of the loss
carryforwards to reduce future income taxes will depend on our ability to
generate sufficient taxable income prior to the expiration of the net operating
loss carryforwards. The carryforwards begin to expire in the year 2019. However,
the Tax Reform Act of 1986 limits the maximum annual use of net operating loss
and tax credit carryforwards in some situations where changes occur in the stock
ownership of a corporation. For financial reporting purposes, a valuation
allowance has been recognized to reduce the net deferred tax assets to zero due
to uncertainties with respect to our ability to generate taxable income in the
future sufficient to realize the benefit of deferred income tax assets.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND PERIOD FROM MAY 17, 1999 (DATE OF
INCEPTION) TO SEPTEMBER 30, 1999
Revenue
We generated revenue of approximately $15,000 from operations during the
nine months ended September 30, 2000 as compared to no revenue for the period
from May 17, 1999 (date of inception) to September 30, 1999. These revenues were
attributable exclusively to media development services provided to third parties
by us and which are reported in the corporate and other segment.
Research and Development
Research and development expenses during the nine months ended September
30, 2000 were $11.6 million as compared to $593,000 for the period from
inception to September 30, 1999. The increase in research and development
expenses in the first nine months of 2000 is the result of licensing and
acquiring multiple health care technologies and the related funding of research
and development of these technologies, including sponsored research agreements
with Eastern Virginia Medical School and Children's Hospital at Harvard Medical
School. Expenses incurred to license and acquire technologies were $4.4 million
in the first nine months of 2000 and none in 1999. Sponsored research payments
amounted to $2.1 million in the first nine months of 2000 and none in 1999.
Research and development expenses for the first nine months of 2000 included
non-cash stock compensation of $938,000 for options issued for consulting
services.
Research and development expenses for the therapeutics segment totaled $3.4
million for the nine months ended September 30, 2000 as compared to expenses of
$264,000 for the period from inception to September 30, 1999. The expenses for
the first nine months of 2000 primarily related to the licensing and development
of the diabetes technology held by GMP/Endotherapeutics, and also included
licensing and development expenses associated with the oxygen delivery
technology held by GMP/Oxycell and the spinal
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cord injury technology held by GMP/Tissue Engineering. Research and development
expenses for the 1999 period pertained to the initiation of the development of
the oxygen delivery technology.
Research and development expenses for the diagnostics segment totaled $3.6
million for the nine months ended September 30, 2000 as compared to none for the
period from inception to September 30, 1999. The expenses for the first nine
months of 2000 primarily related to the licensing, development and
commercialization of our genetics technology, and also included the licensing
and development expenses for the blood coagulation technology held by
GMP/Thromboflex and the cancer detection technology held by
GMP/Diagnostic/Prognostic Markers.
Research and development expenses for the devices segment totaled $4.6
million for the nine months ended September 30, 2000 as compared to $144,000 for
the period from inception to September 30, 1999. The expenses for the first nine
months of 2000 primarily related to the licensing and development of the
wireless technologies held by GMP/Wireless Medicine, and also included the
licensing and development of additional device technologies in the first nine
months of 2000.
There were no research and development expenses for the corporate and other
segment in the first nine months of 2000 and $185,000 of expenses related to the
evaluation of technologies that we chose not to acquire in the period from
inception to September 30, 1999.
Selling, General and Administrative
Selling, general and administrative expenses for the nine months ended
September 30, 2000 were $8.3 million as compared to $2.4 million for the period
from inception to September 30, 1999. The increase in selling, general and
administrative expenses was due primarily to the increase in our personnel, with
the total number of employees growing from 10 as of September 30, 1999 to 71 as
of September 30, 2000. In addition to the expenses associated with recruiting
and hiring personnel, we established facilities and an administrative
infrastructure to support the activities of our subsidiaries. In particular, we
established our molecular genetics laboratory, which opened in September 2000.
Selling, general and administrative expenses included non-cash stock
compensation of $920,000 in the first nine months of 2000 and $87,000 for the
period from inception to September 30, 1999, in both periods for options issued
for consulting services. Selling, general and administrative expenses for 1999
included expenses of approximately $1.5 million associated with structuring and
arranging our initial financing.
Selling, general and administrative expenses for the therapeutics segment
totaled $1.0 million for the nine months ended September 30, 2000 as compared to
$40,000 for the period from inception to September 30, 1999, in both periods for
corporate infrastructure expenses allocated to the segment based on the effort
expended by corporate personnel.
Selling, general and administrative expenses for the diagnostics segment
totaled $2.9 million for the nine months ended September 30, 2000 as compared to
none for the period from inception to September 30, 1999. These expenses for the
first nine months of 2000 primarily related to managing the commercialization of
our genetics technology.
Selling, general and administrative expenses for the devices segment
totaled $1.9 million for the nine months ended September 30, 2000 as compared to
$250,000 for the period from inception to September 30, 1999, in both periods
for corporate infrastructure expenses allocated to the segment based on the
effort expended by corporate personnel.
Selling, general and administrative expenses for our corporate and other
segment were $2.5 million in the nine months ended September 30, 2000 and $2.1
million for the period from inception to September 30, 1999. In both periods,
these expenses reflected administrative expenses not allocable to a particular
subsidiary and non-cash stock compensation expenses, and in 1999 also included
the $1.5 million paid in connection with our initial financing.
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Operating Loss
Our revenue from inception through September 30, 2000 was only $15,000. As
a result, our consolidated operating loss and our operating loss by segment is
based on the research and development and selling, general and administrative
expense activity described above. Our consolidated operating loss was $19.9
million for the nine months ended September 30, 2000 as compared to $3.0 million
for the period from inception to September 30, 1999. The therapeutics segment
operating loss was approximately $4.4 million for the nine months ended
September 30, 2000 as compared to $303,000 in the 1999 period. The diagnostics
segment operating loss was approximately $6.4 million for the nine months ended
September 30, 2000 compared to no activity for the period from inception to
September 30, 1999. The devices segment operating loss was approximately $6.5
million for the nine months ended September 30, 2000 compared to $393,000 for
the period from inception to September 30, 1999. The corporate and other segment
operating loss for the nine months ended September 30, 2000 was $2.6 million as
compared to an operating loss of $2.3 million for the period from inception to
September 30, 1999.
Interest Income
Interest income for the nine months ended September 30, 2000 was $3.5
million as compared to $124,000 for the period from inception to September 30,
1999. This increase is attributable to the increase in cash available for
investment following the sale of common stock and Series A and Series B
convertible preferred stock.
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
Revenue
We generated no revenue from operations during the period from our
inception to December 31, 1999.
Research and Development
Research and development expenses during the period from inception to
December 31, 1999 were $1.1 million. These expenses primarily related to the
initiation of development of the oxygen delivery technology in the therapeutics
segment, the initiation of development of our anti-embolism stocking, local drug
delivery systems and glaucoma treatment technology in our devices segment and
evaluation of technologies that we chose not to acquire and which were allocated
to our corporate and other segment.
Selling, General and Administrative
Selling, general and administrative expenses for the period from inception
to December 31, 1999 were $3.5 million. These expenses were due primarily to
organizational activities, obtaining financing, recruiting and hiring personnel
and identifying health care technologies to be licensed. Selling, general and
administrative expenses included non-cash stock compensation of $115,000 for the
period from inception to December 31, 1999 for options issued for consulting
services. In addition, selling, general and administrative expenses for 1999
included expenses of approximately $1.5 million associated with structuring and
arranging our initial financing. Of these expenses, $198,000 was allocated to
our therapeutics segment, $610,000 to our devices segment and $2.7 million to
our corporate and other segment based on the effort expended by corporate
personnel for each particular segment. Corporate and other segment expenses
reflect administrative expenses not allocable to a particular segment, including
efforts for identifying new health care technology licensing opportunities and
financing activities.
Operating Loss
Since we had no revenue in 1999, our consolidated operating loss and our
operating loss by segment is based solely on the research and development and
selling, general and administrative expense activity described above. Our
consolidated operating loss was $4.6 million from inception to December 31,
1999. Our
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therapeutics, devices and corporate and other segment operating losses were
$563,000, $1.1 million and $2.9 million.
Interest Income
Interest income from inception to December 31, 1999 was $436,000. This
amount is attributable to the cash available for investment following the sale
of common stock and Series A convertible preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations from funds provided by our
founders and from the sale of our common stock and our Series A and B
convertible preferred stock. The sale of our common and preferred stock raised
net aggregate proceeds of approximately $133.0 million. We also received
approximately $1.0 million from the sale of common stock of GMP/Genetics to
Motorola.
As of September 30, 2000, we had cash and cash equivalents of $114.6
million and working capital of approximately $111.6 million. Our cash resources
have been used historically to acquire technologies, finance research and
development expenses, including sponsored research, for capital expenditures,
primarily for the construction of our genetic testing laboratory in Waltham,
Massachusetts, and for selling, general and administrative expenses. We
anticipate substantial increases in research and development expenses to fund
sponsored research and development agreements, preclinical and clinical studies
and trials, development of prototypes, laboratory operations, equipment and
facility improvements and expansions, and selling, general and administrative
expenses.
As of September 30, 2000, we had entered into sponsored research and
development agreements with commitments totaling approximately $11.8 million
over the next six years, of which $787,000 is due in the last quarter of 2000
and $6.6 million of which is due in the year ended December 31, 2001. We have
further committed to make milestone payments to entities from which we acquired
or licensed technologies of up to $6.3 million upon the achievement of specified
product development events. In July 2000, GMP/Wireless Medicine also executed a
technology development agreement with Motorola. Under this agreement,
GMP/Wireless Medicine has initially agreed to make payments of up to $6.0
million to fund research to further develop our wireless sensor technologies. We
have entered into operating lease commitments of $3.5 million payable through
2005, largely related to the lease of facilities.
We believe the net proceeds from this offering together with our existing
resources will be sufficient to meet our anticipated capital needs for the next
24 months, although we cannot guarantee that we will not require or pursue
additional funds prior to that date. Our working capital requirements will
depend upon numerous factors, including:
- the success of commercialization of our products;
- the need to fund cash payments in order to acquire rights to potential
new products;
- results of research and development activities;
- the expenses associated with the prosecution and defense of patents
and the continued protection and defense of our intellectual property;
- progress of our animal studies or human trials;
- changes in or terminations of our relationships with strategic
partners;
- changes in the focus, direction or costs of our research and
development programs;
- competitive and technological advances;
- delays in the regulatory approval process;
- the availability of other financing; and
- other unforeseen circumstances.
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In the long term, we will require additional funds in addition to the
proceeds of this offering to meet our business objectives. We have no
commitments to obtain any additional funds and cannot guarantee that such funds
will be available on acceptable terms, or at all.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of
interest rates in the United States, particularly since the majority of our
investments are in short-term instruments. Due to the nature of our short-term
investments, we have concluded that we do not have material market risk
exposure.
As of September 30, 2000, our cash and cash equivalents consisted primarily
of obligations of the United States government and its agencies and demand
deposits and money market funds held by large financial institutions in the
United States. The recorded carrying amounts of cash and cash equivalents
approximate fair value due to their short-term maturities.
Currently, all of our sales and purchases are denominated in U.S. dollars.
Therefore, we do not believe that we currently have any direct foreign currency
exchange rate risk.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Investments and Hedging Activities. SFAS 133
establishes a new model for accounting for derivatives and hedging activities
and supersedes several existing standards. SFAS 133, as amended by SFAS 137 and
SFAS 138, is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. We do not expect that the adoption of SFAS 133 will have a
material impact on our financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements. SAB 101 explains how the SEC staff
applies by analogy the existing rules on revenue recognition to other
transactions not covered by such rules. In March 2000, the SEC issued SAB 101A
that delayed the original effective date of SAB 101 until the second quarter of
2000 for calendar year companies. In June 2000, the SEC issued SAB 101B that
further delayed the effective date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. We do not
expect that the adoption of SAB 101 will have a material impact on our financial
statements.
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BUSINESS
OVERVIEW
We identify, acquire, develop and commercialize innovative health care
technologies. We believe that a significant number of promising health care
technologies are not developed or commercialized because the academic, medical
and other institutions or inventors that discover the technologies lack access
to sufficient funding, as well as management, development and commercialization
expertise. We have assembled a team of recognized medical experts to identify
promising new technologies which have been discovered by these institutions and
have built the infrastructure and management capabilities that we believe are
necessary to develop and commercialize these technologies.
Once we identify a particular health care technology, we carefully evaluate
that technology, negotiate for its acquisition and then establish or use an
existing subsidiary company to license or purchase the technology. We provide
equity ownership in our subsidiary companies to the institutions, inventors or
collaborating scientists that are associated with each technology. We own a
substantial majority of the equity and have management control of these
subsidiaries. In addition, our acquisition or license agreement and our
sponsored research agreements with the original owner of the technology
generally provide that all enhancements or improvements made to the acquired
technology are owned by us. In developing products, our subsidiary companies
benefit from access to our experienced management team and board of directors,
as well as our common infrastructure, which includes medical, scientific, legal,
business, regulatory and other management and operational functions. We also
have entered into strategic relationships with established health care product
companies which should enable us to accelerate product development and
commercialization. These strategic relationships include agreements with Myriad
Genetics and NOVA Biomedical. In addition, we have received equity investments
from Medtronic and Quest Diagnostics.
Our management team and board of directors include many leading physicians
and scientists, who enhance our access to medical schools, hospitals and other
academic and research organizations that are developing medical technologies. To
date, we have licensed or acquired health care technologies from institutions
such as Children's Hospital at Harvard Medical School, Eastern Virginia Medical
School, Johns Hopkins University, Massachusetts Institute of Technology, Mayo
Clinic, Mayo Foundation for Medical Research and Education, McGill University,
and Universite Louis Pasteur. We have also licensed technologies from our
strategic partner, Motorola, Inc. We have already established 12 subsidiary
companies with products in development relating to therapeutics, diagnostics and
medical devices. In September 2000, we commercially introduced our first health
care technology product, our GMP Conversion Technology. This technology is a new
proprietary gene separation process that is designed to significantly improve
the accuracy of genetic analysis and testing. We licensed the GMP Conversion
Technology from Johns Hopkins University in January 2000 and began commercial
sales in October 2000.
Our business model offers flexible solutions to the challenges of
acquiring, developing and commercializing promising new health care
technologies. We believe that our diverse group of technologies will allow us to
mitigate the risk and uncertainty associated with the development of any one of
these technologies. Similarly, we have the flexibility to choose different means
by which to maximize the financial returns from each of our technologies. For
example, if a subsidiary company is commercially successful, we may decide to
sell the subsidiary company, undertake an initial public offering of its equity
or spin it off to our stockholders. Alternatively, if we deem it strategically
appropriate, we may choose instead to retain our equity interest in a subsidiary
company or to license or sell the rights to the technology owned by that
company.
CHALLENGES IN COMMERCIALIZING EMERGING HEALTH CARE TECHNOLOGIES
Our business model is designed to overcome what we perceive to be the
challenges facing small, single-product health care companies and academic and
other institutions that seek to develop and commercialize new medical
technologies. Although the vast majority of products for the health care market
are commercialized by large, well-financed companies with long operating
histories, we believe some of the most innovative health care technologies are
found in medical schools, universities and other institutions.
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Challenges and obstacles to developing, financing and commercializing innovative
health care technologies include:
- identifying and evaluating the commercial promise of new technologies;
- acquiring or securing rights to these technologies;
- developing an adequate infrastructure and obtaining sufficient capital
investment;
- managing the risk and uncertainty of product development; and
- successfully commercializing products.
OUR SOLUTIONS, STRATEGIES AND TACTICS
Our objective is to become a leader in developing and commercializing
important health care technologies. To achieve this objective and to overcome
the challenges identified above, we plan to:
- CAPITALIZE ON THE EXPERTISE OF OUR MANAGEMENT TEAM AND BOARD OF DIRECTORS
TO IDENTIFY AND EVALUATE NEW HEALTH CARE TECHNOLOGIES. Our management
team, board of directors and collaborating scientists are an assembly of
leaders in the fields of medicine and biotechnology. Their cumulative
experience, international reputations and extensive network of contacts
distinguish them among their peers. These individuals include not only
recognized physicians and medical researchers, but also professionals in
business, finance, medical regulatory issues, intellectual property and
other specialties. An important part of our business strategy is to
capitalize on this network of professionals to identify innovative health
care technologies and select for development those that hold significant
medical and commercial promise. As a result of this strategy, we have
identified and acquired rights to more than 20 different technologies
since our inception in May 1999. For example, through our relationships
with Bert Vogelstein, M.D. and Kenneth W. Kinzler, Ph.D., we licensed
from Johns Hopkins University a new proprietary gene separation process,
called GMP Conversion Technology. Drs. Vogelstein and Kinzler have since
become our research and scientific advisors and have entered into
consulting agreements with us. We began commercializing this technology
in September 2000 at our molecular genetics facility in Waltham,
Massachusetts.
- COMPETE EFFECTIVELY FOR NEW HEALTH CARE TECHNOLOGIES. As part of our
strategy to compete effectively for promising new health care
technologies, we offer institutions or scientists who have created or
invented a promising technology a minority equity interest in a newly
formed or existing subsidiary company that will acquire, develop and seek
to commercialize that technology. We believe these innovators have found
the opportunity to retain an equity interest preferable to the model
traditionally offered by large health care, medical technology and
diagnostics companies. While our corporate structure provides the
innovators with an equity ownership in the subsidiary company, we have
management control and own a substantial majority of the subsidiary's
equity. This strategy has helped us to acquire and license technologies
from institutions such as Children's Hospital at Harvard Medical School,
Eastern Virginia Medical School, Johns Hopkins University, Massachusetts
Institute of Technology, Mayo Clinic, Mayo Foundation for Medical
Research and Education, McGill University, and Universite Louis Pasteur.
- PROVIDE ACCESS TO INFRASTRUCTURE AND CAPITAL INVESTMENT. Our subsidiary
companies benefit from access to our common corporate infrastructure
which provides financial and administrative economies of scale, including
support in capital raising, project management, business development,
scientific and clinical research, human resource management, accounting,
intellectual property protection, legal and regulatory compliance, risk
management and marketing. We believe that our diverse group of
technologies and our strategic relationships provide innovators access to
a common corporate infrastructure and the capital needed to develop and
realize the commercial potential of their technologies. In addition,
through our strategic partnerships we can provide access to additional
sources of funds. For instance, Motorola, Inc., one of our strategic
partners and principal stockholders, has invested in two of our
subsidiary companies, GMP/Wireless Medicine and GMP/Genetics. We
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believe that our common corporate infrastructure and the synergies that
it creates efficiently spreads the capital and administrative costs
associated with developing new technologies over all of our product
candidates and permits the sharing of funds and medical, scientific and
management expertise.
- DEVELOP STRATEGIC RELATIONSHIPS WITH LEADING COMMERCIAL INSTITUTIONS. We
have developed strategic relationships with several leading commercial
institutions. Not only do these institutions enhance our ability to
identify and acquire new technologies, but many of these strategic
partners also take an active role in the development of our products. For
instance, we have entered into collaborative agreements with Motorola for
the development of our wireless products and NOVA Biomedical for the
construction of our molecular genetics facility and the development of
our Thromboflex product. We intend to cultivate these and other
relationships to create long-term alliances across multiple product
lines.
- COMMERCIALIZE OUR PRODUCTS DIRECTLY OR THROUGH STRATEGIC PARTNERS. We
have developed our infrastructure and strategic relationships to provide
us with flexibility in commercializing our products. In some instances,
we may determine that it is optimal to market and sell our products
through our own sales and marketing staff. For example, we currently
market and sell our GMP Conversion Technology process ourselves. In other
instances, we may enter into collaborative arrangements with
pharmaceutical, medical device, diagnostics, technology firms and other
companies, some of which may already be one of our strategic partners,
for the marketing and sale of products worldwide. If we choose to enter
into marketing and sales arrangements with strategic partners, we would
hope to capitalize on the reputation and marketing strength of those
firms to sell our products without the need to invest heavily in our own
marketing and distribution infrastructure.
OUR SUBSIDIARY COMPANIES
Our medical product candidates are assigned to one of our three operating
divisions: therapeutics, diagnostics or devices. The following summarizes
information with respect to our products under development.
<TABLE>
<CAPTION>
THERAPEUTICS DIVISION
SUBSIDIARY COMPANY POTENTIAL PRODUCT APPLICATION STAGE OF DEVELOPMENT
------------------ ---------------------------------- ---------------------
<S> <C> <C>
GMP/Endotherapeutics Drug therapy to generate new Preclinical
pancreatic islet cells to treat
diabetes
GMP/OxyCell Treatment that improves oxygen Preclinical
delivery to tissues
GMP/Tissue Engineering Tissue engineered treatment for Preclinical
spinal cord and other nerve
injuries
</TABLE>
GMP/ENDOTHERAPEUTICS
GMP/Endotherapeutics has licensed from Eastern Virginia Medical School and
McGill University the exclusive, worldwide rights to a protein known as Islet
Neogenesis Gene Associated Protein, or INGAP. INGAP has demonstrated in
preclinical studies an ability to stimulate the growth of islets or insulin-
producing pancreatic cells in diabetic and normal hampsters and mice. Based on
these studies, we believe that INGAP represents a potentially important
development for the treatment of diabetes in humans. GMP/Endotherapeutics is
developing this product in collaboration with Dr. Aaron L. Vinik, Director,
Strelitz Diabetes Research Institute and Professor of Medicine, Anatomy and
Neuro-biology at Eastern Virginia Medical School. Dr. Vinik is also a research
and scientific advisor to our company and has entered into a consulting
agreement with us.
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Market Overview
Diabetes mellitus is a chronic, life-threatening disease for which there is
currently no cure. In both human and economic terms, diabetes is one of the most
costly diseases in the world. Approximately 16 million people in the United
States, or 5.9% of the population, and 130 million people worldwide are
afflicted with diabetes. According to the American Diabetes Association, or ADA,
800,000 new cases of diabetes are diagnosed each year in the United States. In
addition, the ADA estimates that the total direct medical costs associated with
diabetes care each year in the United States are approximately $44.0 billion.
In patients with diabetes, the body does not produce or respond adequately
to insulin, which is a hormone produced by the islet cells in the pancreas.
Through the production of insulin and other substances, the pancreas regulates
the body's metabolism of sugar, or glucose. A healthy pancreas produces the
correct amount of insulin required to maintain a person's blood glucose at
proper levels. In patients with diabetes, glucose is not fully metabolized,
either because insulin-producing cells are destroyed or exist in reduced
numbers, which results in the body's cells inability to effectively metabolize
glucose, or because the body does not respond to insulin. High glucose levels
acutely inhibit the immune system and result in fatigue, slow healing and lower
resistance to infection. In severe cases, high glucose levels can lead to coma
and death. Chronically elevated blood glucose levels result in significant,
long-term complications, including heart attacks, strokes, blindness, kidney
disease, nerve disease, vascular disease and amputations. Insulin replacement
treatments and other oral medications have only limited success in controlling
consequences of diabetes.
There are two types of diabetes. Type I diabetes, sometimes referred to as
juvenile onset diabetes, is a more severe form of the disease and is
characterized by a complete lack of insulin secretion by the pancreas due to the
destruction of pancreatic islet cells. Type I patients require life-long,
glycemic care, which is the repeated monitoring of blood glucose levels one or
more times daily, and replacement of insulin by daily injections or infusions in
order to maintain blood glucose levels in a near normal range.
Type II diabetes, or adult onset diabetes, is more common than Type I and
is a metabolic disorder where high blood glucose levels result from the body's
inability to make enough, or to properly use one's own, insulin produced by the
pancreas. Almost all patients with Type II diabetes have a defect in insulin
secretion and, therefore, do not produce enough insulin. Patients with Type II
diabetes are treated with a combination of one or more oral medications. In
addition to oral medications, in many cases, one or more daily insulin
injections are also required.
Islet Neogenesis Gene Associated Protein (INGAP)
GMP/Endotherapeutics owns the exclusive, worldwide rights to INGAP. INGAP
has been demonstrated in hamster and mice studies to enable new pancreatic islet
cells to grow and to induce immature pancreatic islet cells to grow and produce
insulin. In preclinical studies, INGAP has decreased blood glucose levels to
normal values in 75% of the diabetic hamsters tested or treated, without the
need for further therapy after the initial course of treatment. The gene
responsible for producing the INGAP protein is substantially the same in both
hamsters and humans. In other studies, treating diabetic mice which have a form
of diabetes similar to Type I diabetes in humans with INGAP appears to reverse
diabetes in 100% of treated animals. Additionally, the treatment of human
pancreatic cells with INGAP in laboratory in vitro experiments resulted in
binding of INGAP to islet cells and subsequent generation of new islet cells.
Based on our research completed to date, we believe that INGAP may offer a
significant commercial opportunity by offering what we believe to be the first
ever possibility to stimulate the growth of new human pancreatic islet cells,
which may then result in the production of insulin and, therefore, the
normalization of blood glucose levels. FDA approval is required before marketing
any product based upon INGAP. The product will be subject to the drug approval
process, which includes preclinical animal trials, clinical trials, which
typically include three phases, and the filing of a new drug application with
the FDA. Currently, we are continuing preclinical small and large animal
studies. We plan to file an investigational new drug application, or IND, with
the FDA in 2001.
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Our licensed diabetes therapy is the subject of three issued U.S. patents
expiring in 2015, 2016 and 2017, one pending U.S. patent application and ten
patent applications pending in other countries. We have filed an application for
the reissue of one of our U.S. patents.
GMP/OXYCELL
GMP/OxyCell has acquired the exclusive, worldwide rights to compounds that
enable the transport of inositol hexaphosphate, or IHP, and 2,3
diphosphoglycerate, the body's natural compound which assists in the delivery of
oxygen, into human red blood cells. IHP significantly improves the capability of
red blood cells to deliver oxygen to body tissues. GMP/OxyCell is developing its
product candidates in collaboration with Dr. Claude Nicolau, Visiting Professor
of Medicine at Harvard Medical School and Professor of BioTechnology at
Universite Louis Pasteur, and Dr. Jean Marie Lehn, Professor of Chemistry at
Universite Louis Pasteur and Professor at the College de France in Paris. Both
Drs. Nicolau and Lehn are research and scientific advisors to our company and
have entered into consulting agreements with us.
Market Overview
Oxygen is indispensable to the life of all human tissues and is transported
to those tissues by red blood cells. Hemoglobin, a molecule contained within red
blood cells, is responsible for carrying oxygen from lungs to tissues throughout
the body. Oxygen deficiency can lead to tissue damage or death. In human blood,
each hemoglobin molecule carries four molecules of oxygen but releases only one
molecule to the tissues.
The causes of inadequate tissue oxygenation generally can be classified
into four categories:
- ANEMIA: insufficient hemoglobin resulting from blood loss following
injury or surgery or disorders that affect red blood cell production or
maintenance.
- ISCHEMIA: inadequate red blood cell flow for tissue oxygenation
resulting from obstructed or constricted blood vessels.
- HEART FAILURE: inability of the heart to pump sufficient quantities of
blood to meet the oxygen needs of tissues.
- LUNG FAILURE: the failure of the lungs to oxygenate blood adequately.
According to the Centers for Disease Control, approximately 4.1 million
people in the United States were anemic in 1995, with approximately 2.5 million
of these cases affecting Americans under the age of 45. A red blood cell
transfusion is the standard therapy for anemia resulting from blood loss.
Sources of red blood cells for transfusions include stored supplies of donated
blood or of the recipient's own pre-donated blood. Health care professionals
also may use medications that stimulate red blood cell production if anemia is
anticipated, for example, as a result of planned surgery, but these medications
require time to be effective. Red blood cell transfusions have risks and
limitations, including the potential risk of disease transmission from donated
blood that has been infected by HIV, hepatitis and other blood-borne diseases.
Red blood cells deteriorate in storage and lose approximately 75% of their
oxygen releasing ability after eight days of storage. Nevertheless, the National
Blood Resource Center estimated that approximately 11.5 million units of red
blood cells and whole blood, including the patients' own previously donated
blood, were transfused in the United States in 1997.
Red blood cell transfusions generally do not effectively treat ischemic
conditions or inadequate tissue oxygenation that result from obstructed or
constricted blood vessels or from heart or lung failure. Each year, according to
the Framingham Heart Study and the National Heart Lung Blood Institute,
approximately 600,000 people in the United States suffer a new or recurrent
stroke. About 4.4 million stroke survivors are alive today. In 1999, according
to the American Heart Association, direct pharmaceutical costs associated with
strokes were approximately $400 million, with total direct costs of
approximately $30.6 billion to care for this patient group. In addition, there
are approximately 12.0 million Americans with coronary artery disease that
require treatment and approximately 4.5 million people who carry a diagnosis of
congestive heart
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failure. Total direct expenditures in these patient groups are estimated by the
American Heart Association to be approximately $70 billion in 1999, with
estimated direct drug costs of approximately $4.6 billion.
Our OxyCell Technology
We are currently developing and testing compounds that may significantly
enhance the delivery of oxygen to organs and tissues without many of the
potential risks and limitations associated with some of the current methods.
These compounds enable the transport of IHP and 2,3 diphosphoglycerate into
human and animal red blood cells. IHP is a naturally occurring plant chemical
that enhances the capability of hemoglobin to deliver oxygen to tissues and
organs by allowing each red blood cell to release more oxygen to tissues. IHP-
bound hemoglobin more effectively removes the metabolic by-product, carbon
dioxide, from tissues. In addition, stored blood treated with IHP may be able to
release oxygen to the tissues more rapidly following transfusion.
Our collaborating scientists have identified and are testing naturally
occurring compounds that enable the transport of IHP and 2,3 diphosphoglycerate
into red blood cells and they are continuing research that may lead to the
identification of other compounds having these characteristics. We will own any
OxyCell products that emerge from this research. The OxyCell compounds are
capable of penetrating the red blood cell's membrane and then interacting with
hemoglobin. This might have significant beneficial effects on oxygen delivery in
patients affected by the narrowing of blood vessels and reduced oxygen supply.
OxyCell products would not be a blood substitute and, therefore, would not
have the risks of disease transmission or potential shortages associated with
transfused red blood cells or many hemoglobin substitute products. We intend to
develop this technology as a therapeutic, which could be used to treat diseases
such as acute and chronic anemia, angina and heart attacks, congestive heart
failure, stroke, peripheral vascular disease and other diseases involving
inadequate circulation or respiratory functions. We do not expect OxyCell
products to replace red blood cell transfusion; however, administering OxyCell
products may be effective as an oxygen therapeutic to enhance the oxygen
carrying capacity and delivery by oxygen of one's own red blood cells and any
transfused red blood cells. Studies suggest that our product candidate may be
useful as a complementary treatment or as an alternative to red blood cell
transfusions in elective or emergency surgery and trauma cases. Preclinical
studies are being performed using compounds identified by scientists now working
for GMP/OxyCell and Universite Louis Pasteur. We expect results of further
preclinical studies over the next few months. Any OxyCell product will be
subject to the drug approval process, which includes preclinical animal trials,
clinical human trials, which typically include three phases, and the filing of a
new drug application with the FDA.
The OxyCell technology includes compounds which are the subject of two
French patents expiring in 2016 and two pending U.S. patent applications and two
additional pending foreign patent application.
GMP/TISSUE ENGINEERING
GMP/Tissue Engineering has licensed technologies and methods that we hope
to use to repair and restore spinal cord and other nerve functions using natural
and synthetic materials. Our technology was discovered by researchers from the
Massachusetts Institute of Technology and the Children's Hospital at Harvard
Medical School. GMP/Tissue Engineering is working on this technology with Dr.
Robert Langer, Professor of Chemical and Biomedical Engineering at the
Massachusetts Institute of Technology, and Dr. Joseph P. Vacanti, the John
Howmans Professor of Surgery at Harvard Medical School and the Director of the
Laboratory for Tissue Engineering and Organ Fabrication at Massachusetts General
Hospital. Both Drs. Langer and Vacanti are research and scientific advisors to
our company and have entered into consulting agreements with us.
Market Overview
Spinal cord injuries that result in paralysis present special treatment
problems because the central nervous system is not known to regenerate after
injury. Injury to the spinal cord may include death of nerve cells, disruption
of nerve pathways, loss of the insulation around nerves, loss of the structural
integrity of the
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cord and subsequent, potentially permanent paralysis. Our researchers believe
that tissue engineering, whereby tissue and organ failure or injury are
addressed by implanting natural, synthetic or semi-synthetic tissue, results in
the formation of new living tissues that are fully functional. This approach is
emerging as a potentially significant alternative or complementary solution to a
number of previously incurable diseases.
We believe that the potential market for a successful approach to restoring
spinal cord function after injury is significant. According to the National
Spinal Cord Injury Statistics Center, the estimated annual incidence of spinal
cord injury which result in paralysis, not including those who die at the scene
of the accident, is approximately 40 cases per million persons in the United
States, or approximately 10,000 new cases each year. There are approximately
200,000 persons alive today in the United States who have suffered spinal cord
injuries. The average lifetime costs for a person afflicted with spinal cord
injury range from approximately $300,000 to approximately $1.7 million.
Our Tissue Engineered Spinal Cord Injury Technology
In recent years, biomedical research efforts to help individuals with
spinal cord injuries have focused on attempts to regenerate nerve cells, called
neurons, that are peculiar to the central nervous system. Our technology,
however, uses a different, tissue engineering approach to nerve damage. Our
approach creates new living tissues that function normally. Our tissue
engineering approach couples technologically advanced, biodegradable polymers
that form a plastic scaffolding to immature nerve cells, known as neuronal stem
cells, and nerve growth factors to provide a stable and precisely engineered
bridge across severed nerves. This approach is able to generate growth of signal
transmitting neurons in the affected tissues. Recent preclinical studies in rats
suggest that this tissue engineering approach may be successful for the
treatment of spinal cord injury. During 2001, we plan to conduct preclinical
animal studies in addition to the rat studies that were previously completed.
FDA approval is required before marketing of the product can begin. Any
future product will likely be subject to the biologic licensing application
process. It is possible that the product will be considered a combination
product and also need to meet medical device requirements under a premarket
approval application process. Under either circumstance, preclinical and
clinical trials will be necessary before an application may be submitted to the
FDA.
Our licensed tissue engineering technology is the subject of eleven U.S.
patents that expire between 2005 and 2015 and 43 foreign patents that expire
between 2007 and 2016. We have three pending U.S. patent applications and 18
pending foreign applications. Our license covers treatments for spinal cord and
peripheral nerve injuries.
<TABLE>
<CAPTION>
DIAGNOSTICS DIVISION
SUBSIDIARY COMPANY POTENTIAL PRODUCT APPLICATION STAGE OF DEVELOPMENT
-------------------------- ----------------------------------- --------------------
<S> <C> <C>
GMP/Genetics GMP Conversion Technology that Commercially
improves the accuracy of genetic launched in
analysis and testing September 2000
GMP/Thromboflex Device to perform quantitative Prototype in
evaluation of blood clotting and development
platelet activity
GMP/Diagnostic/Prognostic Markers Blood and urine analyses to detect Human tests ongoing
cancer and its spread
</TABLE>
GMP/GENETICS
GMP/Genetics has acquired a license from Johns Hopkins University for a new
proprietary gene separation process, called GMP Conversion Technology, which is
designed to improve significantly the
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accuracy of genetic analysis and testing. GMP/Genetics is working with Drs. Bert
Vogelstein and Kenneth W. Kinzler, both Professors of Oncology at Johns Hopkins
University School of Medicine, and Dr. Nickolas Papadopoulos, formerly Assistant
Professor of Cancer Genetics and Pathology at Columbia University College of
Physicians and Surgeons, and now Chief Scientific Officer of GMP/Genetics. Both
Drs. Vogelstein and Kinzler are research and scientific advisors to our company
and have entered into consulting agreements with us. Our GMP Conversion
Technology process is in the initial phase of commercialization.
Market Overview
In the molecular genetics diagnostic market, DNA- or RNA-based probes are
utilized for the diagnosis of inherited and pre-dispositional diseases.
According to the publication, Medical Data International, approximately $620
million was spent worldwide in 1998 on molecular genetics diagnostics. If the
worldwide market for molecular genetic diagnostics grows at a 30% annual rate,
as estimated in the September 1999 issue of Laboratory and Industry Report, it
will be approximately $1.7 billion by the year 2003. Cancer diagnostic testing
is the second largest molecular genetic diagnostic testing category and is
expected to grow from 20% of the genetic testing performed in 1997 to 30% of the
tests being performed in 2003. The rapid expansion of the molecular genetic
diagnostic market is driven by the following:
- the completion of the initial sequencing of the human genome;
- the linkage of individual genes to specific diseases;
- application of genetic analysis in cell biology;
- genomic approaches to diagnosing and curing diseases;
- the aging population with greater knowledge of genetic predisposition to
diseases;
- the emergence of therapies which reduce risk upon diagnosis of a genetic
disposition; and
- the partnering of diagnostic and pharmaceutical companies aimed at
creating drugs and diagnostics that are specific to a person's genetic
makeup.
The last decade has seen an exponential expansion of scientific knowledge
related to human genetics and the human genome. Currently, more than 4,000
diseases, some of which are life threatening, are known to be hereditary.
Similarly, it is known that alterations, such as mutations or deletions, of a
gene or in a sequence of genes play a role in heart disease, diabetes,
blindness, kidney disease, cancer and many other types of diseases. The
identification of disease-related genes has led to a significant increase in the
number of available genetic tests that detect diseases or an individual's risk
of disease. However, because of the enormous implications of the test results,
scientists, health care professionals and particularly patients are concerned
about the accuracy of genetic analysis and testing. Misleading and inaccurate
information could inflict psychological or physical harm to a patient or a
patient's relatives who may share a genetic disorder.
According to the December 1999 issue of the medical journal The Lancet,
even for well-known genetic diseases, for which genetic test diagnoses have been
commonly available for years, the accuracy of detection rates ranges generally
only from 60% to 90%. The mutation detection rate for breast and ovarian cancers
from genetic tests ranges generally from only 35% to 65%. Because up to 65% of
diagnoses of genetic disease may be missed, there is a significant need to
develop technologies that enhance the accuracy of genetic testing.
One reason for the inaccuracy of genetic testing is that humans carry two
copies of most genes, one copy from one's mother and one copy from one's father.
Genetic defects may be carried on the copy from one's mother or one's father.
Unfortunately, because the two copies are always mixed together, the detection
of genetic abnormalities is potentially obscured as the genetic test may detect
the copy that does not have the mutation instead of the copy that does have the
mutation. If the copy inherited from one's mother and father were separated and
subsequently tested for abnormalities, then any genetic test performed should be
significantly enhanced.
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Our GMP Conversion Technology
Our GMP Conversion Technology process is applicable for commercial,
clinical and research genetic analysis and testing. Our process is not a genetic
test. Rather, it is designed to significantly improve the accuracy of genetic
analysis and testing by separating the genes into the two differing natural
forms inherited from the subject's two parents. The technology employs a routine
blood sample, and we anticipate that it may be applicable to testing for
virtually all common hereditary diseases.
Our GMP Conversion Technology process is based on the research of Bert
Vogelstein, M.D., Kenneth W. Kinzler, Ph.D., and Nickolas Papadopoulos, M.D.
Drs. Kinzler and Vogelstein are known for their discoveries of the genetic
alterations that cause colorectal cancers and for the development of genetic
tests for these malignancies. This work has made these investigators the most
often cited scientists in the world in medical journals during the last decade.
Our GMP Conversion Technology process could help protect individuals from
incorrect or incomplete diagnosis for susceptibility to cancer and neurological
and cardiovascular diseases. It also has the potential to substantially reduce
health care costs by eliminating the need for repeated testing, potentially
unnecessary biopsies, major surgeries and other preventative measures in
individuals not at risk for these diseases. Our GMP Conversion Technology
process has already been extensively tested in human subjects and has enabled
the successful diagnosis of genetic mutations for colon cancer that were
undetected using conventional testing methods.
In March of this year, GMP/Genetics entered into a strategic agreement with
NOVA Biomedical Corporation under which NOVA managed the construction and
development of our commercial and research molecular genetics laboratory on the
NOVA premises for the processing of blood specimens using our GMP Conversion
Technology. We have initiated the commercialization process and our molecular
genetics laboratory began to accept samples in September 2000.
The GMP Conversion Technology process is used on a specimen prior to, and
in preparation for, performing genetic analysis or a genetic test. Genetic tests
are regulated by the FDA, which considers them Class I medical devices.
Marketing of Class I medical devices is permitted without prior approval of the
FDA as long as specified standards are met. Those standards and related FDA
regulatory obligations are imposed upon the entities actually performing and
marketing the final genetic tests, and we are not directly subject to those
obligations. However, we believe that we are operating in a compliant manner and
are seeking certification under the Clinical Laboratory Improvement Act, or
CLIA.
Our technology is the subject of one U.S. patent which expires in 2015. We
have filed an application for the reissue of this patent. There are three
pending U.S. patent applications and two pending foreign applications.
GMP/THROMBOFLEX
GMP/Thromboflex has acquired technology developed by Dr. Jose Venegas which
can monitor coagulation and quantitatively assess the activity of platelets and
other substances in the blood that affect clotting. GMP/Thromboflex is
developing the technology with Dr. Venegas, Associate Professor in Anesthesia/
Bioengineering at Harvard Medical School. Dr. Venegas is a research and
scientific advisor to our company and has entered into a consulting agreement
with us.
Market Overview
Patients who require invasive surgical and cardiology procedures, patients
who require extensive bed rest and hospitalization, immobile subjects, patients
with blood disorders and patients with cancer are at risk for the development of
thrombosis, or blood clots, particularly in the leg veins and in the lungs, that
may result in life threatening clinical conditions. Procedures in which such
risks are particularly high include all surgeries that require general
anesthesia, such as coronary artery bypass or heart valve surgery, neurosurgery,
orthopedic surgery, general and trauma surgery, and coronary angioplasty and
stenting. To minimize clotting risks, anticoagulants, or prophylaxes, are often
administered. Without appropriate prophylaxis, according to a
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1992 issue of Mayo Clinic Proceedings, blood clots and complications may occur
in as many as 50% of patients undergoing orthopedic surgery and 25% of other
patients undergoing other invasive procedures.
Heart attack and stroke patients may have anticoagulant or antiplatelet
medications administered as soon as possible in the emergency room in order to
stop the damage associated with their heart attack or stroke. Similarly,
patients who have had heart attacks, mechanical heart valve replacement,
orthopedic surgery, and those who suffer from leg vein or lung blood clots often
require anticoagulation medication for a prolonged period of time. Anticoagulant
and antiplatelet agents are now widely recognized as having an extremely
important clinical role and require careful dosing and monitoring to avoid the
adverse side effects of overdoses, which can cause severe bleeding or under
dosage, which can result in the formation of blood clots. However, many of the
current testing devices do not provide real-time, quantifiable measures of
coagulants for use by health care providers.
In the United States, approximately 55 million individuals currently suffer
from conditions associated with thrombosis. This year, it is estimated that
nearly two million patients worldwide will undergo either cardiopulmonary bypass
surgery or balloon angioplasty to treat these conditions. The annual number of
surgeries requiring blood clotting control in the United States is approximately
12 million, and 36 million worldwide. The annual market for blood clotting tests
and associated instruments currently exceeds $600 million. According to
Diagnostics Update, the near-patient segment of the market is currently valued
at approximately $100 million worldwide annually, with $64 million of that
segment in the United States, and is expected to grow at an annual rate of 13%
through the year 2005. Our market would include approximately 112,000
hospital-based, near-patient test sites in the United States found in operating
rooms, coronary catheterization and recovery suites, emergency rooms, intensive
care units as well as central laboratories.
Our Blood Coagulation Monitor
Our technology detects the presence of blood clotting and monitors patients
for the effect of anticoagulant and antiplatelet medications. Our technology has
demonstrated an ability to assess the quantitative activity of human platelets.
Current near-patient testing devices for evaluating the effects of anti-platelet
medications on blood clotting activity provide only a broad, qualitative
analysis as to how platelets aggregate or clump together. Our blood coagulation
monitor is intended to provide real-time, quantifiable information about the
effects of anti-coagulant and anti-platelet medications. These results could
give health care providers an accurate measure of platelet and blood clotting
activity, thereby allowing a better assessment of the relationship between
platelet activity and other substances in the blood essential to the formation
of blood clots. With this new technology, it is envisioned that much of the
operating room, emergency room and cardiac catheterization suite guesswork
associated with coagulation could be removed, using accurate, quantified,
real-time data to make any adjustments in the balance between coagulation and
anti-coagulation.
Our technology has already been tested on whole blood samples from human
subjects. Under the supervision of Dr. Venegas, a product development plan for a
commercial version of this device has been established with NOVA Biomedical for
the engineering, development and production of this device. A 510(k) premarket
notification application must be filed with the FDA before the proposed product
can be cleared for marketing. Under the 510(k) process, the device must be found
to be substantially equivalent to an already marketed device.
Our blood coagulation monitoring technology is the subject of one U.S.
patent which expires in 2017.
GMP/DIAGNOSTIC/PROGNOSTIC MARKERS
GMP/Diagnostic/Prognostic Markers has acquired from Children's Medical
Center Corporation at Harvard Medical School, and from The Burnham Institute the
worldwide exclusive licenses to multiple tumor biomarkers than can potentially
detect the presence or spread of cancer in a patient through blood and urine
testing. GMP/Diagnostic/Prognostic Markers is working on this technology in
conjunction with Dr. Bruce Zetter, Professor of Surgery and Cell Biology at
Harvard Medical School, Dr. Marsha Moses, Associate Professor of Surgery at
Harvard Medical School, and Dr. John Reed, Scientific Director of The Burnham
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Institute. Drs. Zetter, Moses and Reed are research and scientific advisors to
our company and have entered into consulting agreements with us.
Market Overview
More than 40% of people in the United States will be diagnosed with cancer
at some point in their lives, and over 20% of them will die from it. The
American Cancer Society Surveillance Research in 1999 estimates that
approximately 8.2 million Americans alive today have a personal history of
cancer. In the year 2000, about 563,000 Americans are expected to die of cancer,
more than 1,500 people per day. Since 1990, there has been a significant
increase in the number of patients who have been diagnosed with cancer. Part of
this increase is due to improved diagnostic tests, but the bulk of the increase
is the result of the aging of the population.
Cancer cells can break away from a primary tumor and travel through the
blood or lymphatic system to other parts of the body. This spread of cancerous
cells is called metastasis. When cancer spreads, the disease is called
metastatic cancer. Metastatic tumors are more likely to grow in some parts of
the body than in others. The lymph nodes, brain, lungs, liver and bones are
common sites of metastasis. When cancer has metastasized, it may be treated with
chemotherapy, radiation therapy, biological therapy, surgery or a combination of
these therapies. The choice of treatment generally depends on the type of
primary cancer, the size and location of the metastasis, the number of
metastatic sites involved, the patient's age and general health and the types of
treatments used previously.
The survival rates of patients with various cancers are typically in the
90% to 95% range if the cancer is diagnosed before it metastasizes. However,
many cancers such as breast, prostate and colorectal cancers are often diagnosed
at a later stage, after the cancer has metastasized, when symptoms begin to
affect the patient. If the cancer has metastasized, the survival rate typically
falls to the 5% to 20% range. Metastatic cancer may be clinically undetectable,
depending on the degree of development. Such undetectable spread raises two
significant problems:
- a patient must live with a great deal of uncertainty following primary
cancer treatment; and
- a physician must decide on an appropriate course of treatment without
sufficient information.
Our Diagnostic and Prognostic Marker Technologies
Our proprietary diagnostic and prognostic marker technologies, including
Thymosin SS15, Matrix Proteases and the BAG family of proteins, may enable
physicians to accurately detect the presence or spread of cancer by simply
testing a patient's blood or urine. Using current diagnostic or prognostic
tests, a physician may be uncertain as to whether the cancer is locally invasive
or has already metastasized. Therefore, currently available tests may not allow
physicians to make a clinical judgment as to the proper treatment for their
cancer patients. Our technology may permit the early detection of cancer
metastasis. Elevated levels of our proprietary biomarkers such as Thymosin SS15
and Matrix Proteases may indicate the progression of the patient's cancer from a
locally invasive site to other distant organs. Secretion of these biomarkers
into urine or blood could then identify patients at risk for metastases. The BAG
family of proteins may also regulate tumor cell motility, or movement, or the
cancer cell's ability to spread. We anticipate that these cancer biomarkers may
be combined to form a proprietary test menu for diagnostic and prognostic
information about cancer.
If any of our future products are successful, physicians may use the
information from our biomarkers to develop more precise courses of treatment and
potentially eliminate the need for patients to undergo difficult and expensive
therapies. In cases where cancer is localized or appears to be early-stage,
physicians may appropriately adopt a watch and wait strategy rather than
aggressive or intensive therapies, such as surgical intervention, chemotherapy
or radiation. If, however, there is evidence of metastasis using our biomarker,
physicians can suggest more aggressive chemotherapy or radiation. Given the
widely different results, side effects and costs of these treatments, the
ability to determine the spread of cancer should provide valuable information to
both physicians and patients.
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The FDA regulates diagnostic and prognostic tests as Class I medical
devices, permitting marketing without prior approval of the FDA as long as the
tests are being conducted by a laboratory that meets the standards of CLIA. The
CLIA standards require that the laboratory be qualified to perform highly
complex laboratory tests.
Our licensed diagnostic and prognostic marker technologies are the subject
of twelve issued U.S. patents which expire between 2013 and 2018, ten pending
U.S. patent applicants and twelve pending foreign applications. Our licenses
with Children's Medical Center Corporation at Harvard Medical School and The
Burnham Institute cover products and processes related to the diagnosis or
prognosis of any disease or condition in humans or animals.
<TABLE>
<CAPTION>
DEVICES DIVISION
SUBSIDIARY COMPANY POTENTIAL PRODUCT APPLICATION STAGE OF DEVELOPMENT
-------------------------- ----------------------------------- --------------------
<S> <C> <C>
GMP/Wireless Medicine Multiple wireless sensor products Prototype stage
for hospital and outpatient uses
GMP/Vision Solutions Polymer device and surgical method Preclinical
to reduce intraocular pressure
related to glaucoma
GMP/Cardiac Care Coronary stent and devices for Prototype stage
heart disease
GMP/Drug Delivery Devices to enable local tissue drug Preclinical
delivery by electrical impulse
catheters and patches
GMP/Vascular Anti-embolism stocking that allows Prototype stage
patient mobility
GMP/Surgical Solutions Devices and products for use in Prototype stage
operating rooms
</TABLE>
GMP/WIRELESS MEDICINE
GMP/Wireless Medicine has acquired an exclusive, worldwide license from our
strategic partner, Motorola, Inc., to proprietary technology for wireless sensor
products for electrocardiograph, or ECG, and other vital signs that we believe
will eliminate the need to have patients physically connected to electronic
testing instruments.
Market Overview
The electrocardiograph, or ECG, is a discrete diagnostic tool which
measures and displays the characteristics of the heart's electrical activity. An
electrocardiogram management system allows for the digital storage, review and
retrieval of electrocardiograms. Continuous patient monitoring systems assess a
patient's vital signs, such as their heart rate and electrocardiography, or
cardiac monitoring, blood pressure, blood oxygen values, temperature and
respiration rates. This information enables rapid decision making in emergency
and critical care environments of hospitals, including intensive care units,
operating rooms and other associated interventional areas such as recovery
rooms, emergency departments, labor and delivery rooms, cardiac catheterization
labs, endoscopy rooms and other monitored beds. Patient monitoring equipment and
services are also used in non-critical care environments. As health care
providers seek to reduce costs and appropriately use monitored beds, many
patients who previously would have remained in the intensive-care unit are being
moved to non-critical care areas, where portable and remote continuous
monitoring systems are used. These non-critical care areas include
non-intensive-care areas of hospitals, outpatient care facilities, outpatient
surgical facilities, chronic care facilities and patients' homes.
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Most health care providers today use multiple discrete and continuous
monitoring systems throughout their facilities. These systems often do not
connect together or communicate with other systems. A conventional cardiac
monitor typically requires up to twelve electrodes to be attached to the body of
the patient, and each has a wire, generally several feet or more in length,
leading to the cardiac monitor. These electrodes are used to detect heart
signals from the patient and convert them into an ECG evaluation. The lengthy
wired electrodes of conventional ECG apparatus obstruct the patient and limit
the patient's movement. They are also cumbersome for the physician or nurse.
Similarly, they frequently become detached from the patient causing an alarm to
sound and require attention from one or more health care providers. A patient
may have to have the lead wires changed each time the patient is moved to
another area within the hospital, for example, from the emergency room to the
intensive care unit or to a testing area. The lead changing requires additional
nursing and technician time and the various monitors do not allow transfer of
data.
Multifunctional or continuous patient monitoring systems assess a patient's
vital signs such as heart rate, blood pressure, temperature and respiration
rate. According to Frost & Sullivan, the annual market size for these systems in
the United States is about $783 million, and is forecasted to grow at about 6.7%
each year. According to Frost & Sullivan, the worldwide market for these systems
was $5.3 billion in 1997, growing at an annual rate of 8.7% from 1994 to 1997.
These continuous monitors are used, for example, in intensive care units,
intermediate care units, operating rooms and portable units for transportation
of patients between hospital wards. Our wireless ECG and blood pressure
monitoring products might be used in each of these market segments.
Frost & Sullivan estimates that the total worldwide electrocardiography
equipment market was approximately $200 million in 1998. This market is expected
to grow at an annual rate of 3.0% over the next three years. According to the
Boston Consulting Group, based on FDA estimates, the total number of ECG
monitors in the United States was about 750,000. Our wireless ECG products would
potentially be used in each patient on which a discrete ECG is performed or on
whom continuous ECG monitoring is required. Similarly, our products could be
used on patients on whom treadmill exercise tests are performed. According to a
recent article in the Journal of the American College of Cardiology, there are
more than 800,000 treadmill exercise tests performed each year in the U.S. on
the Medicare population.
Our Wireless Sensor Technologies
Our products are being designed to eliminate the need to physically connect
a patient to an ECG or other continuous monitoring system. These products will
enhance conventional monitoring devices by using wireless technology to transmit
the data necessary to monitor patients. Our technology includes a system of
wireless sensors that connect with conventional electrode patches attached to
the patient. The sensors would transmit measurements and other readings like
heart rate, blood pressure and temperature from the electrode patch to the ECG
or other monitoring system. The wireless product's universal interface would
provide a wireless link between the patient and existing monitoring devices.
Our proposed wireless medicine products will not require replacement of the
existing discrete and continuous monitoring systems in a health care facility.
Instead, once the sensors are placed on a patient, they will communicate with
each existing discrete or continuous monitoring system, and will not need to be
changed as the patient is moved in the hospital or outpatient facility. We
believe that our wireless sensor technologies will have multiple benefits for
health care providers and organizations by reducing the overall costs of
replacing wired leads and decreasing technician, nursing and physician time.
Similarly, they should improve patient comfort and outcomes. Our systems will be
designed to open standards, use standard components and function with equipment
manufactured by numerous medical device manufacturers, including equipment
currently deployed in hospitals.
We intend to design our systems to combine wireless technology and discrete
and continuous monitoring systems to allow access to patient vital signs and
other diagnostic data both inside and outside the hospital environment. We also
expect that our product line will include wireless sensors for cardiac exercise
tolerance test systems, such as treadmill systems, as well as those for portable
Holter monitoring systems that are worn
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by patients for 24 to 48 hours. A 510(k) premarket notification application must
be submitted and cleared by the FDA prior to marketing of our proposed wireless
products. In addition, we will seek approval for the use of the technology from
the Federal Communications Commission, or FCC. However, we do not expect the FCC
to require us to obtain an FCC spectrum license. We plan to file a 510(k)
application by the end of 2001.
Our licensed wireless medicine technologies are the subject of two issued
U.S. patents which expire in 2016 and 2017, six pending U.S. patent applications
and four pending foreign patent applications. Our license with Motorola covers
products that are used in hospitals, health care provider offices, some
outpatient facilities and other acute and chronic health and medical related
facilities.
GMP/VISION SOLUTIONS
GMP/Vision Solutions has acquired from Mary Lynch, M.D. and Reay Brown,
M.D. the rights under pending patent applications for new devices and surgical
methods for the treatment of glaucoma. GMP/Vision Solutions is working on this
technology with Dr. Lynch, Professor of Ophthalmology at Emory University, and
Dr. Brown, a founding partner of Atlanta Ophthalmology Associates and the former
Pamela Furman Professor of Ophthalmology at Emory University. Drs. Lynch and
Brown are research and scientific advisors to our company and have entered into
consulting agreements with us.
Market Overview
Glaucoma is a disorder of the optic nerve that usually occurs in
association with an elevated pressure within the eye, referred to as intraocular
pressure. High pressure develops because of an internal fluid imbalance in the
eye, caused by a disruption of normal drainage of fluid from the eye due to a
blockage of the drainage pathways. The increased pressure affects the function
of the optic nerve and if the pressure remains high enough for a long enough
time period, total vision loss occurs. The current therapeutic approaches for
glaucoma include medication or surgery. Medications, however, are expensive and
have many serious side effects including congestive heart failure, respiratory
distress, hypertension, depression and kidney stones. Compliance with medication
is also a major problem because over half of glaucoma patients do not follow
correct dosing schedules.
Laser surgery, while often effective, is not long lasting and approximately
one half of these patients develop a recurrence of elevated pressure within five
years. Further, the laser surgery is not repeatable. Another type of surgery,
known as a trabeculectomy, can be performed where a hole is made in the sclera,
or covering of the eye, to allow eye fluid to drain. However, there are many
associated problems including scarring, failure of the operation and serious
infection inside the eye due to bacteria entering the eye through the hole.
Medical and surgical therapies for glaucoma represent a significant market
opportunity. According to a 1999 issue of The Lancet, approximately two million
persons in the United States, and approximately 66 million persons worldwide,
are known to have glaucoma. In the United States, glaucoma is the second leading
cause of blindness in the population as a whole and is the leading cause of
blindness in the African-American community. In addition, according to a recent
article in The Lancet, approximately six to seven million persons worldwide will
have irreversible blindness due to the disease. According to an article
published in 1995 in the journal Investigative Ophthalmology and Visual
Sciences, the total costs associated with glaucoma in the United States were
approximately $2.3 billion in 1991, including approximately $1.4 billion in
direct health care costs and $900 million in indirect costs. In 1992, more than
$1.0 billion was spent on federal financial assistance to blind glaucoma
patients. A 1998 study published in the journal Glaucoma estimates the total
direct cost per patient in the United States with glaucoma for two years of
diagnosis, evaluation, and medical therapy was $2,160.
There are approximately 100,000 surgical procedures done in the United
States every year for glaucoma. Annually, there are approximately one million
glaucoma surgical procedures performed worldwide. Annual treatment costs for
patients who undergo surgery for glaucoma are similar to those yearly costs of
patients who are treated with medications.
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Our Glaucoma Technology
[Diagram of our glaucoma technology being inserted into an eye.]
GMP/Vision Solutions' technologies rely on a new approach to glaucoma
surgery which blends new instrumentation and surgical techniques. A
microsurgical device, designed to enhance the normal flow of ocular fluid out of
the eye, is implanted in Schlemm's Canal, the normal drainage canal of the eye.
We expect that the device and surgical technique will allow for normalization of
the eye pressure without permanently altering the structural integrity of the
eye. We hope that our technology will result in fewer complications from
infections and scarring than current methods to treat glaucoma and may be
performed on an outpatient basis.
Drs. Lynch and Brown have successfully implanted a pre-production model of
this glaucoma device in preclinical large animal studies. Additional large
animal studies are underway. A 510(k) premarket application must be submitted
and cleared by the FDA prior to marketing our proposed glaucoma product.
We have filed four U.S. patent applications and four foreign patent
applications for the protection of our glaucoma technology.
GMP/CARDIAC CARE
GMP/Cardiac Care has acquired from the Mayo Clinic, Mayo Foundation for
Medical Research and Education, the worldwide, exclusive licenses for a line of
cardiac care technologies designed to improve the performance of cardiac
catheterization and other procedures. Among these technologies is an advanced
modular coronary stent that we are designing to prevent the renarrowing or
reclosure, known as restenosis, of blood vessels that have been unblocked by
angioplasty and an innovative valveless catheter system that reduces the time
and complexity of cardiac catheterization procedures. GMP/Cardiac Care is
working on these technologies with Dr. David Holmes, Professor of Medicine at
the Mayo Medical School and Director of the Adult Cardiac Catheterization
Laboratory of the Mayo Clinic, and Dr. Robert Schwartz, Associate Professor of
Medicine at the Mayo Medical School and a consultant to the Division of
Cardiovascular Diseases and Internal Medicine at the Mayo Clinic. Drs. Holmes
and Schwartz are research and scientific advisors to our company and have
entered into consulting agreements with us.
Market Overview
According to the American Heart Association, coronary artery disease is the
leading cause of death in the United States. Approximately 13 million people
alive in the United States have been diagnosed with this disease, which is
generally characterized by the progressive accumulation of plaque as a result of
the deposit of cholesterol and other fatty materials on the walls of arteries.
The accumulation of plaque leads to a narrowing of the interior passage, or
lumen, of the arteries, reducing blood flow to the heart. When blood flow to the
heart becomes insufficient, the oxygen supply is restricted, resulting in chest
pains, heart attack or death. The American Heart Association estimates that the
cost of cardiovascular diseases in the United States in the year 2000 will be
$326.6 billion, including direct and indirect costs associated with coronary
artery disease of $118.2 billion. Approximately 2.0 million to 2.3 million
individuals with coronary artery disease in the United States have significant
limitations in their daily activities due to the disease. Coronary
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artery disease accounts for approximately 2.2 million hospital admissions per
year and approximately 10.0 million outpatient medical visits.
Approximately one million patients in the United States and three million
patients worldwide annually undergo minimally invasive diagnostic and/or
interventional cardiac catheterization procedures potentially including a
procedure commonly known as coronary angioplasty. In an angioplasty, a blocked
coronary blood vessel is opened by inserting a device known as a dilation
catheter through the patient's arteries. A metal tube, known as a stent, is
often inserted to prevent renarrowing or reclosure of the blood vessel, or
restenosis. The use of stents has grown rapidly since commercial introduction in
the United States in 1994. According to a recent article in the Journal of the
American College of Cardiology, coronary stents are used in over fifty percent
of angioplasty patients in the United States. A recent study published in the
New England Journal of Medicine indicates that within six months after coronary
angioplasty, between 25% and 45% of patients experience restenosis. In addition,
approximately 60% of patients with multi-vessel coronary artery disease who
received angioplasty have been shown to require retreatment within three years
of having had the procedure. The American Heart Association reports the average
cost of a cardiac catheterization procedure to be $10,880.
There are also many other minimally invasive catheterization procedures
including therapeutic and diagnostic procedures to treat patients with
peripheral vascular disease, or disease that appears in blood vessels other than
in the heart. Approximately 1.0 million and 1.3 million of these procedures, are
performed annually in the United States and worldwide respectively.
Our Cardiac Care Product Technologies
Our cardiac care technologies have been designed to significantly enhance
angioplasty techniques and other minimally invasive catheterization procedures
described above.
We expect our modular coronary stent system to be offered to interventional
cardiologists. Coronary stents are metal tubes or coils that are mounted on
coronary dilation catheters which keep arteries open. Our proposed stent is
designed to be small, enabling cardiologists to advance it along narrow vessels
and permitting the use of a stent in smaller harder to reach blood vessels. In
addition, we are designing our modular stent to be flexible and trackable,
enabling cardiologists to advance and control them more accurately within the
vasculature as compared to current stent products.
We anticipate that the GMP/Cardiac Care product line will also include our
proposed valveless catheter system that may be utilized in any minimally
invasive diagnostic or interventional catheterization procedure. Coronary
angioplasty involves the insertion through an artery in the patient's groin of a
guide catheter which is directed up through the aorta into the coronary blood
vessel to be treated. The end of the guide catheter is attached to a homeostasis
valve apparatus that prevents bleeding. The valve apparatus contains inlets and
outlets for injection sites, including valves and stopcocks, so that blood may
be withdrawn and medications administered. Current valve systems are cumbersome
to operate, require significant mechanical forces in order to administer
medications and may cause blood pressure readings to be inaccurate during valve
flushing, air bubbles in the patient and patient blood loss. Our proprietary
technology may allow for blood to be more easily withdrawn from patients, or
medications to be administered, without wasting time manipulating multiple
stopcocks, and without the risk that the medication or fluid may not be
delivered to the patient or that an air bubble may be created.
Our valveless catheter system could also be used in any minimally invasive
catheterization procedure such as in interventional neuroradiology
catheterization procedures, electrophysiology procedures to map and treat
cardiac arrhythmias and intra-aortic balloon pump procedures. In addition, our
products are designed to be used in other new procedures, including
catheter-based vascular grafts, cardiopulmonary support procedures and treatment
of abdominal aortic aneurysms.
In addition, in collaboration with the Mayo Foundation and Drs. Holmes and
Schwartz, we intend to develop other cardiac care products that address
restenosis.
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A 510(k) premarket notification application must be submitted and cleared
by the FDA prior to marketing any future cardiac care products.
Our licensed cardiac care technologies are the subject of one issued U.S.
patent, expiring in 2016, six pending U.S. patent applications and two pending
foreign patents. Our license with the Mayo Clinic, Mayo Foundation for Medical
Research and Education covers products used for diagnostic, scientific, forensic
and therapeutic applications.
GMP/DRUG DELIVERY
GMP/Drug Delivery has acquired the rights from Drs. Neville Crawford,
Charles L. Brown III and Nicolas A. F. Chronos to develop catheter and patch
drug delivery systems which use electrical impulses to deliver drugs directly to
cells. GMP/Drug Delivery is working on this technology with Dr. Neville
Crawford, Honorary Research Professor (Emeritus) at the Institute for
Cardiovascular Research at the University of Leeds, Dr. Brown, the Director of
the Fuqua Heart Center Research Department at Piedmont Hospital in Atlanta, and
Dr. Chronos, one of our directors and the Director of the Atlanta Cardiovascular
Research Institute. Drs. Crawford, Brown and Chronos are research and scientific
advisors to our company and have entered into consulting agreements with us.
Market Overview
One of the major difficulties in many forms of drug or gene therapy is that
large amounts of a drug must be given in order to have the therapeutic effect
that is desired. With many drugs, such as those for cancer therapy,
administration of chemotherapeutic drugs into the body through the oral or
intravenous route may have serious side effects, thereby limiting the amount of
the drug that can be given. If drugs can be administered directly into the
tissues, they can go precisely where they are needed, so significantly smaller
amounts of drug may be used. Smaller amounts of drugs given through local drug
delivery may dramatically reduce the side effects of many medications such as
chemotherapy for cancer patients.
Another major difficulty associated with drug delivery is that the drug or
gene is often not able to penetrate cell walls. Through local drug delivery and
new techniques to open pores to allow drugs to enter cells, drugs or genes may
be delivered in smaller doses where they are most needed. Because many diseases
have a genetic component, it is believed that genetic research will eventually
allow pharmaceutical companies to develop tailor-made drugs that will assist
individuals to be treated based on their individual genetic makeup. Current
methods of gene delivery typically yield inefficient gene transfer, or are
inconvenient, invasive and costly. These methods, which include use of a virus
to transfer genetic material, can cause immune complications or limit the size
of the gene being delivered.
Our Drug Delivery Devices
[Illustration of our drug delivery device.]
GMP/Drug Delivery is developing catheter and patch drug delivery systems
which use electrical impulses to deliver drugs to cells, known as iontophoresis
and electroporation systems. These systems are
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intended to provide physicians with a more efficient and cost-effective means to
deliver drugs or genes into tissues and cells of patients with illnesses, such
as cancer and heart disease. We believe that our combination
iontophoresis/electroporation catheter and patch drug delivery technology will
be applicable to cardiology, oncology, gene therapy, dermatology and transdermal
drug delivery. We are planning to market our drug delivery devices to be used in
the treatment of cancer. Our product candidates will target solid malignant
tumors such as squamous cell carcinoma, melanoma and adenocarcinoma in the areas
of oncology and dermatology.
Our catheter and patch drug delivery technology is designed to be used in
combination with drugs in the site-specific treatment of disease. Our catheter
device for local drug delivery, which has been extensively tested in large
animal preclinical studies, provides an electrical force to increase migration
of drugs and other agents into the body. These devices are designed to enhance
local drug delivery systems allowing penetration into the tissues, cells and
blood vessel walls. The design of these devices provides an ability to open and
close the cellular walls allowing for drug penetration. This is accomplished
without obstructing blood flow within the vessel.
Our patch device for local drug delivery is designed to enhance delivery of
drugs and other agents into several tissues and organ systems, using electrical
forces via electrodes. The technique is intended to allow control over the
amount of agent delivered, as compared with intravenous or oral drug
administration, and it may be turned on and off as needed.
A 510(k) premarket notification application must be submitted and cleared
by the FDA prior to marketing any of our proposed drug delivery devices.
We have two pending U.S. patent applications and one pending foreign patent
application for the protection of our drug delivery technology.
GMP/VASCULAR
GMP/Vascular is developing a new stocking that will help prevent deep vein
blood clots in patients. Our patent is based on the idea of one of our
directors, Dr. Charles L. Brown III. GMP/Vascular is working to develop this
technology with Dr. Brown and another of our directors, Dr. Robert S. Langer.
Drs. Brown and Langer are research and scientific advisors to our company and
have entered into consulting agreements with us.
Market Overview
Deep venous thrombosis, or blood clots in the leg veins, and pulmonary
embolism, or lung blood clots, are major health problems for hospitalized
patients. The number of new cases of recognized deep vein thromboses in the
United States is estimated to be 250,000 per year, while the number of fatal
pulmonary embolism cases is estimated to number from approximately 50,000 to
100,000 per year. The lower extremities are the source of 90% of all blood
clots. Blood clots can also be difficult to diagnose because of subtle clinical
findings. Eighty percent of pulmonary emboli occur without clinical signs of
deep vein thrombosis. Two-thirds of the deaths that occur as a result of
pulmonary emboli do so within 30 minutes of their presentation, thus making
rapid diagnosis extremely important. On the other hand, it is now understood
that the increased potential risk for pulmonary embolism exists for an average
of four to five weeks after hospital discharge.
According to the American Hospital Association, 40.5 million surgical
procedures were performed in 1999. We believe that deep vein thrombosis
prophylaxis is necessary for a large subset of these patients such as those who
receive general anesthesia or undergo orthopedic surgery, gynecologic surgery or
trauma surgery. Similarly, we believe that a significant percentage of
hospitalized patients who require bed rest have some form of deep vein
thrombosis prophylaxis. A number of prophylactic measures now exist to guard
against deep vein thrombosis or pulmonary emboli. Mechanical devices in the
market for treating deep vein thrombosis include graduated compression
stockings, intermittent sequential pneumatic compression devices, pneumatic foot
pumps and inferior vena caval filters. Unfortunately, current compressive device
therapy is encumbered by the need to attach these devices to a central console
that provides the force of compression through tubes
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connected to the compression devices. These consoles are normally bulky,
frequently noisy and commit the patient to bed rest while in use.
Pharmacological methods include low dose blood thinning medications such as
heparin, low molecular weight heparin and warfarin. Although effective for deep
vein thrombosis prevention in a variety of procedures, all anticoagulant
medications have the potential to cause significant bleeding.
Our Anti-embolism Stocking
Our anti-embolism stocking will be designed to apply compression to parts
of the body through a polymer, to be developed, to stimulate fluid flow and
inhibit the development of deep vein thrombosis in patients who are at risk to
develop blood clots. The proprietary light polymer technology should be
extremely portable, allowing its use in ambulatory patients. Unlike current
compressive device therapy, our new polymer stocking is expected to be designed
to allow the patient full mobility by eliminating a central console. A 510(k)
premarket notification application must be submitted and cleared by the FDA
prior to marketing our proposed anti-embolism stocking.
Our anti-embolism stocking technology is the subject of one issued U.S.
patent which expires in 2017 and one pending foreign patent application.
GMP/SURGICAL SOLUTIONS
GMP/Surgical Solutions has acquired or licensed from several individual
inventors rights to a selection of surgical products, including syringe holders,
fluid warming systems, hand-held reusable instruments such as lighted forceps
and endoscopic surgical instruments. GMP/Surgical Solutions is different from
our other subsidiary companies because it is not focused on the development and
commercialization of one particular technology. Rather, we are developing a
number of products which broadly apply to a variety of uses and which enhance or
simplify surgical and other procedures. We have been able to identify and are
developing these instruments of varying natures and uses, which were generally
discovered by individual practicing physicians and other inventors.
Our Surgical Product Line
Our line of fluid management systems consists primarily of a
self-contained, disposable and reusable solution warming device which warms
fluids before placing them in the chest cavity following open-heart surgery, or
any other surgical procedures. This warming system is mobile and keeps fluids at
a consistent temperature throughout operative cases.
We also plan to sell a line of syringe holders which are useful for
differing syringe sizes which protect operating and hospital personnel from
unwanted needle punctures as well as keeping solutions within the syringe at a
constant temperature. This proprietary line of syringe holders is intended to be
marketed and sold directly to patients who require injections such as those with
diabetes or allergic reactions.
Our lighted forceps product line consists of a series of instruments
incorporating a fiber optic lighting system which is broadly applicable to
multiple surgical specialties. These instruments are specifically designed to be
lightweight and to place a focused light source directly on the tissue bed where
surgery is performed and to allow surgeons to isolate a small section of the
tissue where clear vision is required. We believe that this proprietary product
line will be used in plastic surgery, general surgery, neurosurgery,
cardiothoracic surgery, orthopedic surgery, urologic surgery, gynecologic
surgery and pediatric surgery cases.
We intend to offer innovative solutions for minimally invasive cardiac,
vascular, general and other laparoscopic surgery. We have licensed proprietary
technology that enhances the ease of use of cannulas, or devices through which
laparoscopic surgery is performed. The product line is based on the concept that
a mechanical linkage can be established between the surgical instruments and the
laparoscope, or video camera, such that as the surgical instrument is
maneuvered, the laparoscope moves in a synchronized manner. These products may
alter the surgeon's approach to laparoscopic surgical procedures and may provide
improved clinical benefits by reducing procedure time and producing better
patient outcomes. Similarly, through the use
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of these systems surgeons may improve their ability to perform operations
through minimally invasive techniques as opposed to an open, more invasive,
procedure.
These products will require submission of a 510(k) premarket notification
application prior to marketing. They are likely to be considered Class I and
Class II devices.
Our surgical solutions technologies are the subject of two issued U.S.
patents which expire in 2014 and 2017, two U.S. provisional patent applications
and two foreign patent applications.
STRATEGIC RELATIONSHIPS
ACADEMIC RELATIONSHIPS
We have entered into agreements with some of the world's leading medical
academic institutions. Many of the technologies that we have licensed were
discovered in the laboratories of these institutions, and we are funding ongoing
research at many of these institutions. The following is a list of the
institutions with which we are affiliated.
- The Burnham Institute, La Jolla, California;
- Children's Medical Center Corporation at Harvard Medical School,
Cambridge, Massachusetts;
- Eastern Virginia Medical School, Norfolk, Virginia;
- Johns Hopkins University, Baltimore, Maryland;
- Massachusetts Institute of Technology, Cambridge, Massachusetts;
- Mayo Clinic, Mayo Foundation for Medical Research and Education,
Rochester Minnesota;
- McGill University, Montreal, Canada; and
- Universite Louis Pasteur, Strasbourg, France.
CORPORATE RELATIONSHIPS
We have also entered into agreements with non-academic enterprises in
connection with the licensing of our intellectual property and the development
of our products. The following is a list of some of the non-academic enterprises
with which we are affiliated.
- MOTOROLA, INC. In May 2000, GMP/Wireless Medicine executed a license and
cross license agreement with Motorola, one of our principal stockholders.
We amended this agreement in July 2000. Under this agreement, as amended,
Motorola licensed patent rights for wireless technologies to GMP/Wireless
Medicine in exchange for the payment to Motorola of progress payments and
royalties, which are payable at various stages of development and
commercialization of our wireless sensor technologies. Upon satisfaction
of regulatory milestones and the occurence of other events, Motorola has
the right to acquire up to 85% of the outstanding stock of GMP/Wireless
for a premium to fair market value at the time of the exercise of the
right.
In July 2000, GMP/Wireless Medicine also executed a technology
development agreement with Motorola. Under this agreement, GMP/Wireless
Medicine has initially agreed to make payments of up to $6.0 million to
fund research to further develop the application of our wireless sensor
technologies. In return, Motorola has agreed to assign, staff and maintain
a design team to conduct that research and development and provide
laboratory space dedicated to developing wireless sensor applications.
In August 2000, we entered into an agreement with Motorola whereby we
agreed to process, on a preferential basis, genetic specimens using our
GMP Conversion Technology process for customers using Motorola's BioChip
systems. For a 27-month term, we also agreed, subject to certain
exceptions, not to process genetic specimens for subsequent commercial use
with any other biological microarray technology.
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Also in August 2000, Motorola purchased 66,667 shares of common stock
of GMP/Genetics for a purchase price of approximately $1.0 million.
For more information on our Motorola agreements, see "Relationships and
Related Party Transactions."
- MYRIAD GENETICS LABORATORY, INC. In July 2000, GMP/Genetics entered into
a strategic agreement with Myriad with respect to the potential use of
our GMP Conversion Technology process in conjunction with their molecular
diagnostic tests. Under this agreement, following completion of an
initial evaluation period, we will work with Myriad to evaluate the
commercial feasibility of using our conversion services in connection
with their diagnostic tests. We have granted Myriad the option to obtain
our commercial conversion services and to obtain a worldwide
non-exclusive license under our GMP Conversion Technology process for
research and commercial use. In addition, the agreement provides for
collaborative activities by Myriad and us to encourage the use of our
conversion services by the research community.
- NOVA BIOMEDICAL CORPORATION. In March 2000, GMP/Genetics entered into a
five-year strategic agreement with NOVA Biomedical Corporation to develop
a commercial laboratory on NOVA's premises for the processing of
specimens using our GMP Conversion Technology process. Under the terms of
that agreement, NOVA managed the construction of our commercial and
research molecular genetics laboratory. NOVA collaborates with us on an
ongoing basis with respect to the overall operation of the facility.
We have also entered into a sole source cooperative agreement with NOVA
for the design, development and manufacture of an instrument using our
GMP/Thromboflex technology.
RESEARCH AND DEVELOPMENT
Given the nature of our business, research and development expenditures
have accounted for, and will continue to account for, a significant portion of
our operating expenses. Each of our subsidiary companies conducts, or contracts
for, its own research and development activities with respect to its products
under development. Research is typically conducted pursuant to sponsored
research agreements we have entered into with the inventor of the technology
and/or the research facility with which the inventor is affiliated. We generally
agree to fund the research in stages, with continued funding being dependent
upon the achievement of various milestones. We may also enter into consulting
agreements with the inventors. We expense all research and development costs as
we incur them. Research and development expenses were approximately $1.1 million
for 1999 and approximately $11.6 million for the nine months ended September 30,
2000.
COMPETITION
The pharmaceutical, diagnostics, device and biotechnology industries are
intensely competitive, and we expect competition from other companies and other
research and academic institutions to continue to increase. Many of these
companies have substantially greater financial, research and development and
marketing capabilities than we have and have substantially greater experience in
undertaking preclinical and clinical testing of products, obtaining regulatory
approvals and manufacturing and marketing medical and biotechnology products.
For instance, we anticipate that our therapeutics division will compete with
large pharmaceutical companies such as Eli Lilly and Company, Glaxo Wellcome
Inc. and Merck & Co., Inc. In addition, our diagnostics division will likely
face competition from companies such as Roche Diagnostics and Abbott
Laboratories. Finally, we anticipate that our devices division will compete with
such diversified companies as Johnson & Johnson, Boston Scientific Corporation
and Baxter International Inc.
We may not be able to develop products that are more effective or achieve
greater market acceptance than our competitors' products. Our competitors may
also prove to be more effective in navigating the regulatory process, resulting
in faster commercialization of their products.
In addition, we compete for the licenses to, or the acquisition of,
promising new technologies. Other companies, many of which have greater
resources than we do, may seek to acquire these new technologies as
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well. This competition could increase the cost of technology acquisition or
reduce the number and quality of potential products for us to develop.
Further, we face substantial competition in acquiring interests in emerging
health care technologies from, among others, the following types of
organizations:
- venture capital firms;
- large corporate investors; and
- publicly-traded medical technology companies.
These competitors may limit our opportunity to acquire interests in new
technology and to form new subsidiary companies.
GOVERNMENT REGULATION
Our development, manufacture and potential sale of therapeutics is subject
to extensive regulation by U.S. and foreign governmental authorities.
FDA REGULATION OF PRODUCTS
Products being developed by us may be regulated as drugs, biologics or
medical devices. In some instances, we will have combination products, such as a
product that delivers a drug therapy or a drug product using both biological
products and active ingredients. Drugs and medical devices are subject to
regulation under the Federal Food, Drug, and Cosmetic Act, and biological
products, in addition to being subject to certain provisions of that Act, are
also regulated under the Public Health Services Act. Many of our existing
products are considered solely as medical devices, as drugs or as biologics.
Both the statutes and regulations promulgated under the statutes govern, among
other things, the testing, manufacturing, safety efficacy, labeling, storage,
recordkeeping, advertising and other promotional practices involving the
regulation of drugs, devices and biologics. Several of our products have
undergone early testing to determine safety and have a clear regulatory pathway
in seeking marketing approval from the FDA.
NEW DRUGS AND BIOLOGICS
Obtaining FDA approval for products determined to be new drugs or biologics
has historically been a costly and time consuming process. Prior to marketing
these products, a new drug application, or NDA, or a biological license
application, or BLA, must be completed.
Generally, in order to gain FDA premarket approval, a developer first must
conduct preclinical studies in the laboratory and in animal model systems to
gain preliminary information on an agent's efficacy and to identify any safety
problems. The results of these studies are submitted as a part of an
investigational new drug application, or IND, which the FDA must review before
human clinical trials of an investigational drug can start. The IND application
includes a detailed description of the clinical investigations to be undertaken.
In order to commercialize any drug or biologic products, we must sponsor
and file an IND and be responsible for initiating and overseeing the clinical
studies to demonstrate the safety, efficacy and potency that are necessary to
obtain FDA approval of any of the products. We will be required to select
qualified investigators to supervise the administration of the products and
ensure that the investigations are conducted and monitored in accordance with
FDA regulations, including the general investigational plan and protocols
contained in the IND. Clinical trials are normally done in three phases,
although the phases may overlap. Phase I trials are concerned primarily with the
safety and preliminary effectiveness of the drug, involve fewer than 100
subjects and may take from six months to over one year. Phase II trials
typically involve a few hundred patients and are designed primarily to
demonstrate effectiveness in treating or diagnosing the disease or condition for
which the drug is intended, although short-term side effects and risks in people
whose health is impaired may also be examined. Phase III trials are expanded
clinical trials with larger numbers of patients which are intended to evaluate
the overall benefit-risk relationship of the drug and to gather additional
information for proper dosage and labeling of the drug. The process of clinical
trials generally takes two to five
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years to complete, but may take longer. The FDA receives reports on the progress
of each phase of clinical testing, and it may require the modification,
suspension or termination of clinical trials if it concludes that an unwarranted
risk is presented to patients.
If clinical trials of a new product are completed successfully, the sponsor
of the product may seek FDA marketing approval. If the product is regulated as a
biologic or drug, the FDA will require the submission and approval of an NDA or
a BLA before commercial marketing of the biologic. The NDA or BLA must include
detailed information about the drug and its manufacture and the results of
product development, preclinical studies and clinical trials. The testing and
approval processes require substantial time and effort and we cannot guarantee
that any approval will be granted on a timely basis, if at all. If questions
arise during the FDA review process, approval can take more than five years.
Even with the submissions of relevant data, the FDA may ultimately decide that
the NDA or BLA does not satisfy its regulatory criteria for approval and deny
approval or require additional clinical studies. In addition, the FDA may
condition marketing approval on the conduct of specific post-marketing studies
to further evaluate safety and effectiveness. Even if FDA regulatory clearances
are obtained, a marketed product is subject to continual review, and later
discovery of previously unknown problems or failure to comply with the
applicable regulatory requirements may result in restrictions on the marketing
of a product or withdrawal of the product from the market as well as possible
civil or criminal sanctions.
REGULATION OF MEDICAL DEVICES
Any device products that we may develop are likely to be regulated by the
FDA as medical devices rather than drugs. The nature of the FDA requirements
applicable to devices depends on their classification by the FDA. A device
developed by us would be automatically classified as a Class III device,
requiring pre-market approval, unless the device was substantially equivalent to
an existing device that has been classified in Class I or Class II or to a
pre-1976 device that has not yet been classified or we convince the FDA to
reclassify the device as Class I or Class II. If we were unable to demonstrate
such substantial equivalence and unable to obtain reclassification, we would be
required to undertake the costly and time-consuming process, comparable to that
for new drugs, of conducting preclinical studies, obtaining an investigational
device exemption to conduct clinical tests, filing a pre-market approval
application, and obtaining FDA approval.
If the device were a Class I product, the general controls of the Federal
Food, Drug, and Cosmetic Act, chiefly adulteration, misbranding and good
manufacturing practice requirements, would nevertheless apply. If substantial
equivalence to a Class II device could be shown, the general controls plus
special controls, such as performance standards, guidelines for safety and
effectiveness, and post-market surveillance, would apply. While demonstrating
substantial equivalence to a Class I or Class II product is not as costly or
time-consuming as the pre-market approval process for Class III devices, it can
in some cases also involve conducting clinical tests to demonstrate that any
differences between the new device and devices already on the market do no
affect safety or effectiveness. If substantial equivalence to a pre-1976 device
that has not yet been classified has been shown, it is possible that the FDA
would subsequently classify the device as a Class III device and call for the
filing of pre-market approval applications at that time. If the FDA took that
step, then filing an application acceptable to the FDA would be a prerequisite
to remaining on the market.
Many of our products will be considered as medical devices and will require
approval as Class II medical devices. This will require testing to demonstrate
that the product is substantially equivalent to a prior approved product.
OTHER
In addition to the regulations discussed above, our business is and will be
subject to regulation under various state and federal environmental and work
place safety laws, including the Occupational Safety and Health Act, the
Resource Conservation and Recovery Act and the Toxic Substance Control Act.
These and other laws govern our use, handling, disposal and transportation of
various biological, chemical and radioactive substances used in, and wastes
generated by, our operations. We believe that we are in material compliance with
applicable environmental laws and that our continued compliance will not
materially
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adversely affect our business. We cannot predict, however, whether new
environmental requirements will be imposed upon us, whether we will become
subject to liabilities arising from our operations under environmental laws or
the extent that such requirements or liabilities could affect us. Similarly, we
cannot predict whether new regulatory restrictions on the marketing of
biotechnology products will be imposed by state or federal regulators and
agencies. In addition, products which are to be used for veterinary purposes may
be subject to regulation by the U.S. Department of Agriculture as well by the
FDA. Finally, our wireless product will require FCC approval. However, we do not
expect to be required to obtain an FCC spectrum license.
SALES AND MARKETING
Our strategy is to create a sales and marketing team that will enable us to
directly market our products on our own or to contract with third-party
organizations for the sale and marketing of our products. In June 2000, we hired
a director of sales to coordinate our efforts. Although we currently intend to
enter into strategic relationships with pharmaceutical and other companies as we
deem appropriate for the marketing of most of our future products, we intend to
begin marketing our GMP Conversion Technology ourselves. We have already begun
these marketing and sales efforts in the United States. In other instances, we
may rely on third parties for the advertising and promotion of our products, and
we anticipate that those third parties will control the timing and amount of
resources generally devoted to these activities.
We believe that the benefits of entering into strategic relationships for
the sale and marketing of our products are twofold. First, because we will not
be required to invest significant time and resources to develop a large sales
force internally, we will be able to focus on research and product acquisition
and development. Second, we hope to benefit from the advertising and promotion
of our products by third parties that have established sales and marketing
forces and likely have greater resources devoted to advertising and product
promotion.
MANUFACTURING AND PROCESSING
In March of this year, GMP/Genetics entered into a five-year strategic
development agreement with NOVA Biomedical Corporation to develop a commercial
laboratory on the NOVA premises for the processing of specimens using our GMP
Conversion Technology. Under the terms of that agreement, NOVA managed the
construction of our commercial and research molecular genetics laboratory. The
laboratory is fully staffed and operated by GMP/Genetics personnel.
We currently intend to outsource the manufacturing of substantially all of
our products. We believe this strategy will allow us to focus on our core
research and product development capabilities and reduce the substantial capital
investment required to manufacture our products. We also believe that the use of
experienced manufacturers will provide greater manufacturing specialization and
expertise, higher levels of flexibility and responsiveness and faster delivery
of products than in-house manufacturing. Specialized manufacturers are critical
to our industry because they are required to comply with applicable good
manufacturing practices prescribed by the FDA and other rules and regulations
prescribed by foreign regulatory authorities. If we do decide to establish a
manufacturing facility, we will require substantial additional funds and will be
required to hire and train significant additional personnel and comply with the
extensive good manufacturing practice regulations applicable to that facility.
PATENTS AND PROPRIETARY RIGHTS
Patents and other proprietary rights are essential to our business. Prior
to the acquisition of a particular technology, we evaluate the existing
proprietary rights, our ability to adequately obtain and protect these rights
and the likelihood or possibility of infringement upon competing rights of
others. Then once we acquire a technology, our policy is to file patent
applications and protect technology, inventions and improvements to
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<PAGE> 58
inventions that are commercially important to the development of our business.
With respect to our products, we seek patent protection, as appropriate, on:
- the product itself;
- the methods of using the product;
- the methods of manufacturing the product; and
- the methods of administering the product to certain tissues.
We also rely on trade secrets, know-how, continuing technology innovations
and licensing opportunities to develop and maintain our competitive position.
For the majority of our technologies and processes, we have acquired a license
to or ownership of the patents or future patents under license and technology
transfer agreements with the holder of the patent. Generally, each license
agreement remains in effect until the last of the patents covered under each
license agreement expires. In addition, these license agreements are typically
subject to the rights of each licensor to conduct non-commercial research
programs. For other of our technologies, we filed and have direct title to the
patents. For information on the patents covering our products, see "-- Our
Subsidiary Companies."
We cannot guarantee that any future patents will be granted or that patents
issued to us will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide proprietary protection to us.
Furthermore, we cannot guarantee that others will not independently develop
similar products or, if patents are issued to us or our collaborators, will not
design around those patents.
In addition, the Bayh-Dole Act, federal legislation, imposes various
requirements on inventors, including universities, which are seeking to license
or transfer rights to inventions developed with U.S. federal government funding.
If the transferee is a small business firm, the transferring inventor must
determine that the small business has the financial resources and an appropriate
plan to bring the invention to practical application. Accordingly, if we are not
able to satisfy inventors of federally funded technologies that we have
sufficient resources, our ability to acquire and commercialize new technology
would be limited. Furthermore, the Bayh-Dole Act reserves to the federal
government a nonexclusive, nontransferable, irrevocable, license to use any
invention which was federally funded such as our GMP Conversion Technology
process, GMP/Cardiac Care products and GMP/Diagnostic/Prognostic Markers
technologies. To the extent that any of our technology was federally funded, our
rights would be subject to the government's license.
For a more complete description of the risks and limitations of patent
protection, see "Risk Factors-We depend on patents and other proprietary rights,
some of which are uncertain and unproven, and we may not be able to protect our
proprietary information" and "-- Infringement claims by third parties could
result in costly litigation, divert management's attention and otherwise harm
our business."
EMPLOYEES
As of September 30, 2000, we had 63 full-time employees and 37 part-time
employees and consultants, of which 28 were in research and development and 72
were in management and administration. We intend to hire additional personnel.
We also plan to continue utilizing part-time or temporary consultants on an as-
needed basis. None of our employees is represented by a labor union and we
believe our relations with our employees are good.
FACILITIES
Our corporate headquarters are located in Fort Lauderdale, Florida. We
lease approximately 21,500 square feet of office space in Fort Lauderdale,
Florida under a lease which expires in March 2005. We also lease approximately
1,000 square feet of space in Atlanta, Georgia under a lease which expires in
June 2003. We also lease approximately 1,200 square feet of space in Destin,
Florida on a month-to-month basis. In addition, we lease approximately 9,000
square feet from NOVA Biomedical Corporation in Waltham, Massachusetts under a
lease which expires in March 2005. Additionally, researchers associated with our
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<PAGE> 59
subsidiary companies occupy various laboratories at institutions primarily in
the United States, for which we pay usage fees.
LEGAL PROCEEDINGS
We are not party to any material legal proceedings, nor are we currently
aware of any threatened material legal proceedings. From time to time, we may
become involved in litigation relating to claims arising out of our operations
in the normal course of business.
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<PAGE> 60
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SCIENTIFIC ADVISORS
The following table shows information about our executive officers and
directors as of September 30, 2000:
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION(s)
------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Steve Gorlin............................... 63 Chairman of the Board of Directors
Bart Chernow, M.D.......................... 53 President, Chief Executive Officer and
Director
Michael Salem, M.D......................... 39 Executive Vice President, Research and
Development
Holger Weis................................ 37 Chief Financial Officer and Treasurer
Jeffrey L. Raney, J.D...................... 57 General Counsel and Secretary
Charles L. Brown, III, M.D................. 43 Director
Nicolas A. F. Chronos, M.D................. 39 Director
Martin Fleisher, Ph.D...................... 65 Director
M. Judah Folkman, M.D...................... 67 Director
David Hung, M.D............................ 43 Director
John J. Huntz, Jr.......................... 50 Director
Rudyard L. Istvan, J.D..................... 50 Director
B. Kristine Johnson........................ 48 Director
Spencer B. King III, M.D................... 63 Director
Robert S. Langer, Sc.D..................... 51 Director
Joseph P. Vacanti, M.D..................... 51 Director
James B. Williams.......................... 44 Director
</TABLE>
Drs. Chernow and Brown, and Messrs. Gorlin, Istvan and Williams are members
of our executive committee. Drs. King and Fleisher and Messrs. Huntz and
Williams are members of the compensation committee. Messrs. Istvan and Huntz and
Ms. Johnson are members of the audit committee.
Steve Gorlin has served as Chairman of the Board of Directors since our
inception in May 1999 and was our Chief Executive Officer from our inception
until January 2000. Over the past 25 years, Mr. Gorlin has actively managed his
investments and founded several biotechnology and pharmaceutical companies,
including Hycor Biomedical Inc., Theragenics Corporation, CytRx Corporation,
CytRx Biopool, Medicis Pharmaceutical Corporation and EntreMed, Inc., which are
publicly traded companies. Mr. Gorlin founded and served as Chairman of the
Board of EntreMed Inc., from its inception in 1991 until December 1995. In
December 1990, he founded Perma-Fix Environmental Services, Inc., a public
company involved in the disposal of hazardous waste. Since its inception in
1998, Mr. Gorlin has been Chairman of the Board of Surgi-Vision, Inc., a
privately held development-stage company which exploits magnetic resonance
imaging technology developed at Johns Hopkins University.
Bart Chernow, M.D. has served as a Director since June 1999, as our
President since November 1999 and as our Chief Executive Officer since January
2000. Dr. Chernow served as our Executive Vice President from May 1999 to
November 1999. Since May 1999, Dr. Chernow has also been an Adjunct Professor of
Medicine at Johns Hopkins University School of Medicine in Baltimore, Maryland,
where he was Vice Dean of Research and Technology from October 1997 to May 1999,
and Professor of Medicine, Anesthesiology and Critical Care from June 1990 to
May 1999. Prior to Johns Hopkins, he was Associate Professor at Harvard Medical
School and was Director of the Henry K. Beecher Anesthesia Research. Dr. Chernow
is past President of the American College of Chest Physicians. He has been
honored by the American College of Physicians who made him a Master of the
College in 1999 and by the American College of Chest Physicians who made him a
Master Fellow in 1999. Dr. Chernow was recently appointed to the Advisory
Council of the Harvard University-Massachusetts Institute of Technology Division
of Health Sciences and Technology.
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<PAGE> 61
Michael Salem, M.D. has served as Executive Vice President, Research and
Development since March 2000. From December 1999 through March 2000, he served
as our Senior Vice President and Medical Director. From August 1994 until
December 1999, Dr. Salem was Vice Chairman of the Department of Surgery and
Associate Professor of Surgery and Anesthesiology at the George Washington
University School of Medicine in Washington, D.C., specializing in General
Surgery and Critical Care Medicine. He has also served as Director of Trauma and
Surgical Critical Care, as Co-Director of the Intensive Care Unit at the George
Washington University Hospital and Director of Surgical Research serving as
Principal Investigator in numerous clinical trials. He served for four years as
a member of the Institutional Review Board for animal and human research
studies. Dr. Salem is currently a member of the editorial board of the journal
Critical Care Medicine. He completed his medicine and surgical residency
training at George Washington University, and completed clinical and research
fellowships in critical care medicine at the Massachusetts General Hospital in
Boston and at Johns Hopkins Hospital in Baltimore. Dr. Salem was an elected
member of the Medical Faculty Senate and the Governing Board of the Medical
Faculty Associates of the George Washington University School of Medicine.
Holger Weis has served as our Chief Financial Officer since July 2000. From
June 1986 until joining us, Mr. Weis was an accountant in various positions with
Ernst & Young LLP, a professional services firm, having served most recently as
Senior Manager. At Ernst & Young, Mr. Weis served clients ranging from young
entrepreneurial companies to large, publicly traded multinationals, consulting
on accounting, compensation, and mergers and acquisition matters. While with
Ernst & Young in Germany from 1991 to 1994, Mr. Weis consulted with American,
British and French multinationals conducting business in Europe. He is a
graduate of the J.M. Tull School of Accounting at the University of Georgia. Mr.
Weis is a certified public accountant.
Jeffrey L. Raney, J.D. has served as our General Counsel and Secretary
since October 1999. From March 1993 to October 1999, Mr. Raney was the Vice
President, Administration of Computer Generation, a telecommunications company.
Prior to that time, he was a Senior Partner in the Atlanta, Georgia office of
the law firm of Powell, Goldstein, Frazer and Murphy, LLP, where he was counsel
for a number of technology companies including Hayes Microcomputers, Inc., SCI
Systems, Sales Technologies, Inc. and EntreMed, Inc. He specializes in providing
legal services to technology-based firms. Mr. Raney graduated cum laude from the
University of Michigan Law School.
Charles L. Brown III, M.D. has served as a Director since our inception in
May 1999 and was our President from our inception in May 1999 until September
1999. Dr. Brown has been a partner in Cardiology of Georgia, a cardiology
practice, since August 1992. Dr. Brown specializes in interventional cardiology
and is the Director of the Fuqua Heart Center Research Department at Piedmont
Hospital in Atlanta, Georgia. He oversees several clinical trials and is the
principal investigator for many of these studies. He is the inventor or
co-inventor of nine patents that were assigned to Global Vascular Concepts, the
predecessor to two of our subsidiaries.
Nicolas A. F. Chronos, M.D. has served as a Director since our inception in
May 1999. Since July 1999, Dr. Chronos has been the Director of the Atlanta
Cardiovascular Research Institute, or ACRI, and, from October 1993 to July 1999,
was the Director of Research for the Andreas Gruentzig Cardiovascular Center of
Emory University in Atlanta, Georgia. At ACRI, he directs research and is the
principal investigator on several device and drug studies. Along with Mr. Gorlin
and Dr. Charles Brown, Dr. Chronos co-founded Global Vascular Concepts. Dr.
Chronos trained in medicine at London University where he was awarded a merit
degree.
Martin Fleisher, Ph.D. has served as a Director since October 1999. Dr.
Fleisher has served as Chief of Clinical Chemistry since July 1996 and has been
a member of the Department of Clinical Laboratories since February 1968 at the
Memorial Sloan-Kettering Cancer Center in New York City, where he has held
various positions since February 1968. He is a member of the Memorial
Sloan-Kettering Cancer Center and is certified as a Laboratory Director in New
York State. Dr. Fleisher's expertise in clinical laboratory medicine is
extensive and he serves or has served on advisory boards for several
corporations, including American
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Standards Medical Systems, Becton-Dickinson and Company, DiaSorin,
Beckman-Coulter and Roche Diagnostics.
M. Judah Folkman, M.D. has served as a Director since June 1999. Since
1968, Dr. Folkman has been the Julia Dyckman Andrus Professor of Pediatric
Surgery at Harvard Medical School and, from 1967 to 1981, the Surgeon-in-Chief
and Chairman of the Department of Surgery at Children's Hospital in Boston,
Massachusetts. Dr. Folkman received his M.D. from Harvard Medical School. Dr.
Folkman is also a member of the Board of Directors of Johnson & Johnson, a
publicly held health care company.
David Hung, M.D. has served as a Director since July 1999. Dr. Hung is a
hematologist, oncologist and molecular biologist. Dr. Hung became President and
CEO of Pro-Duct Health, Inc., a medical device start-up company focused on
breast cancer patients, in August 1998, after four years at Chiron Corporation,
a biotechnology company, where he served as Vice President of Preclinical
Research and head of the New Projects Division. Dr. Hung graduated from the
University of California San Francisco Medical School. Dr. Hung has more than 15
years of experience in molecular biology research, having completed basic
research fellowships at the Brain Tumor Research Institute and the
Cardiovascular Research Institute and heading a National Institute of
Health-funded laboratory at the University of California San Francisco.
John J. Huntz, Jr. has served as a Director since July 2000. Since March
1998, Mr. Huntz has served as Managing Director for Fuqua Ventures, a venture
capital firm. He currently serves on the Boards of Directors of Derivion
Corporation, Manhattan Associates, Pythogoras Participations, Webforia, Inc.,
National Venture Capital Association and The Atlanta Venture Forum. Mr. Huntz
served as Executive Vice President and Chief Operating Officer of Fuqua
Enterprises, Inc. from August 1995 to March 1998 and Senior Vice President from
March 1994 to August 1995. Prior to joining Fuqua, he served as Managing Partner
of Noble Ventures International, a venture capital and investment advisory firm,
from 1989 to 1993.
Rudyard L. Istvan, J.D. has served as a Director since September 1999. Mr.
Istvan is a Senior Vice President and the General Manager of Future Businesses
for Motorola, where he has served in various officer positions since December
1991. He has worldwide responsibility for corporate strategy, business research,
venture investing and certain classes of technology outlicensing. He heads
Motorola Millennium Ventures, the charter of which is to create major new
business platforms for Motorola. He also heads Motorola's life sciences
initiative, which includes Motorola's BioChip Systems division, the newest of
the new business platforms. He was formerly a Senior Vice President of The
Boston Consulting Group. Mr. Istvan holds a J.D. cum laude from Harvard Law
School, and a M.B.A. from Harvard Business School where he was a Baker Scholar.
He is a member of the Massachusetts Bar. Mr. Istvan serves as a director at the
designation of Motorola pursuant to the terms of a voting agreement that will be
terminated upon the closing of this offering.
B. Kristine Johnson has served as a Director since December 1999. Since
January 2000, Ms. Johnson has been a principal with Affinity Capital Management,
Inc., a Minneapolis based venture capital firm that invests in early stage
health care companies. Between May 1999 and December 1999 she was a consultant
to Affinity. Between April 1982 and April 1999, Ms. Johnson worked for
Medtronic, Inc., a medical technology company. Most recently she served as
Medtronic's Senior Vice President and chief administrative officer, working on
strategic planning, information technology, public affairs and media relations.
She also held positions with Medtronic as President and General Manager of the
firm's vascular business; President and General Manager of its tachyarrhythmia
management business; Vice President and General Manager of its peripheral
vascular business; Vice President of corporate affairs and planning; and Vice
President of corporate relations with Cargill, Inc., an international marketer,
processor and distributor of agricultural and food products. Ms. Johnson is a
director of ADC Telecommunications Inc., a publicly traded telecommunications
company.
Spencer B. King III, M.D. has served as a Director since June 1999. Since
July 2000, Dr. King has been the Fuqua Chair of Interventional Cardiology at the
Fuqua Heart Center in Atlanta, Georgia. Prior to that time, Dr. King served as
the Director of the Andreas Gruentzig Cardiovascular Center at Emory University
in Atlanta, Georgia, where he had been a physician since January 1972. He has
developed several devices used in interventional cardiology, and he serves as
Chairman of the American Board of Internal Medicine
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sub-board in Interventional Cardiology. Dr. King is the Immediate Past President
of the American College of Cardiology.
Robert S. Langer, Sc.D. has served as a Director since June 1999. Dr.
Langer is the Kenneth J. Germenshausen Professor of Chemical and Biomedical
Engineering at the Massachusetts Institute of Technology in Cambridge,
Massachusetts, where he has been a professor since July 1977. Dr. Langer's
innovations have provided a framework for the emerging technologies of tissue
engineering and have been used in drug delivery systems, tissue repair,
vaccines, diagnostics and novel therapeutics. One of these innovations resulted
in a drug delivery system that was the first FDA-approved treatment for brain
cancer. Dr. Langer holds over 360 patents in the fields of biomedical and
chemical engineering. Dr. Langer received his Sc.D. in Chemical Engineering from
Massachusetts Institute of Technology. Dr. Langer is a director of Boston Life
Sciences, Inc., a publicly traded biotechnology company, and a director of
Focal, Inc., a publicly traded medical technology company.
Joseph P. Vacanti, M.D. has served as a Director since June 1999. Dr.
Vacanti is the John Homans Professor of Surgery at Harvard Medical School, where
he has been a surgeon since July 1994, and the Director of the Laboratory for
Tissue Engineering and Organ Fabrication at the Massachusetts General Hospital,
with which he has been affiliated since October 1998. From July 1983 to August
1998, Dr. Vacanti was also a surgeon at Children's Hospital in Boston. Dr.
Vacanti is the inventor or co-inventor of over 30 patented technologies. He is
the current President of the Tissue Engineering Society. Dr. Vacanti earned his
M.D. degree from the University of Nebraska College of Medicine with high
distinction.
James B. Williams has served as a Director since April 2000. Since March
1999, Mr. Williams has been a Partner with the Texas Pacific Group, a private
equity firm. From December 1994 until December 1999, Mr. Williams served in
various senior executive capacities at Kaiser Permanente, a health care
organization, including national Senior Vice President -- Group Operations and
Strategic Development, President -- Kaiser Permanente International, and
President -- Kaiser/Group Health. Mr. Williams also serves on the board of
directors of Magellan Health Services, Inc., a publicly-held health care
company, and Genesis Health Ventures, Inc., a publicly-held provider of services
to the elderly. He also serves on the board of directors of several private
health care, technology and industrial companies. Mr. Williams received his MBA
with honors from the University of Southern California.
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SCIENTIFIC ADVISORS
We also have an ongoing relationship with many research and scientific
advisors with whom we consult regularly regarding our technologies and products.
The following table lists those advisors with whom we have entered into
consulting agreements or other contractual arrangements and the institutions
with which they are affiliated:
<TABLE>
<CAPTION>
NAME INSTITUTION
--------------------------------------------- ---------------------------------------------
<S> <C>
Henry Brem, M.D.............................. Johns Hopkins University
Morton B. Brown, Ph.D........................ University of Michigan
Reay Brown, M.D.............................. Atlanta Ophthalmology Associates
Nicolas A.F. Chronos, M.D.................... Atlanta Cardiovascular Research Institute
Professor Neville Crawford, Ph.D............. University of Leeds, United Kingdom
Peter J. Fitzgerald. M.D., Ph.D.............. Stanford University
Leon-Paul Georges, M.D....................... Eastern Virginia Medical School
David R. Holmes, Jr., M.D.................... Mayo Foundation for Medical Research and
Education, Mayo Clinic
Kenneth Kinzler, Ph.D........................ Johns Hopkins University
Robert S. Langer, Sc.D....................... The Massachusetts Institute of Technology
Jean-Marie Lehn, Ph.D. (Nobel Laureate)...... Universite Louis Pasteur, France
Mary J. Lynch, M.D........................... Atlanta VA Medical Center, Emory University
Victor A. McKusick, M.D...................... Johns Hopkins University
Marsha Moses, Ph.D........................... Harvard Medical School, Children's Hospital
Claude Nicolau, Ph.D......................... Harvard Medical School
Professor Nicolas S. Peters, M.D............. St. Mary's Hospital, United Kingdom
Professor Herbert M. Pinedo, M.D., Ph.D...... Free University Hospital, Netherlands
Franklyn Prendergast, M.D., Ph.D............. Mayo Foundation for Medical Research and
Education, Mayo Clinic
John Reed, M.D., Ph.D........................ The Burnham Institute
Michael Roizen, M.D.......................... University of Chicago
Lawrence Rosenberg, M.D., Ph.D............... McGill University
Robert S. Schwartz, M.D...................... Mayo Foundation for Medical Research and
Education, Mayo Clinic
M. Bruce Shields, M.D........................ Yale University
Mark Skolnick, Ph.D.......................... Myriad Genetics, Inc.
Jay S. Skyler, M.D........................... University of Miami
Joseph P. Vacanti, M.D....................... Harvard Medical School, Massachusetts General
Hospital
Jose Venegas, Ph.D........................... Harvard Medical School, Massachusetts General
Hospital
Aaron Vinik, M.D., Ph.D...................... Eastern Virginia Medical School
Bert Vogelstein, M.D......................... Johns Hopkins University
Bruce Zetter, Ph.D........................... Harvard Medical School, Children's Hospital
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
Our by-laws provide for a board of directors consisting of up to 21
members, with the exact number to be fixed by resolution of a majority of the
board. The number of directors is currently set at 14.
The board of directors has an executive committee, a compensation committee
and an audit committee.
Executive Committee. The executive committee is responsible for overall
strategy, monitoring performance, and other operating decisions. Our five
executive committee members include Mr. Steve Gorlin, Dr. Charles Brown, Dr.
Bart Chernow, Mr. Rudyard Istvan and Mr. James B. Williams, with Dr. Brown
chairing the committee.
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Compensation Committee. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding all forms of
compensation provided to our executive officers and directors and employees,
including stock compensation and loans. The current members of the compensation
committee are Dr. Martin Fleisher, Dr. Spencer B. King III, Mr. John J. Huntz,
Jr., and Mr. James B. Williams, with Mr. Huntz chairing the committee.
Audit Committee. The audit committee of the board of directors reviews and
monitors our corporate financial reporting and our internal and external audits,
including, among other things, our internal audit and control functions, the
results and scope of the annual audit and other services provided by our
independent auditors and our compliance with legal requirements that have a
significant impact on our financial reports. The audit committee also consults
with our management and our independent auditors regarding the preparation of
financial statements and, as appropriate, initiates inquiries into aspects of
our financial affairs. In addition, the audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of the audit committee are
Mr. Rudyard L. Istvan, Ms. B. Kristine Johnson and Mr. John J. Huntz, Jr., with
Mr. Istvan chairing the committee.
DIRECTOR COMPENSATION
Non-employee directors who are not compensated under consulting or other
arrangements with us are paid $1,000 for each day of attendance at each meeting
of the board of directors or any of its committees. Outside board members who
identify technologies which are used in our business may also be given an equity
stake in the subsidiary which is established to develop the technology.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors consisted in 1999 of
Dr. Nicolas Chronos, Dr. Martin Fleisher and Ms. Nancy Taylor. It currently
consists of Dr. Martin Fleisher, Dr. Spencer B. King III, Mr. John J. Huntz, Jr.
and Mr. James B. Williams. During fiscal 1999, Messrs. Steve Gorlin and John
Thomas, two of our then executive officers, were directors of Surgi-Vision,
whose President and Chief Executive Officer, Ms. Nancy Taylor, was a member of
our compensation committee.
For more information regarding our interlocks and insider participation,
see "Relationships and Related Party Transactions."
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EXECUTIVE COMPENSATION
The following table sets forth all compensation earned, including salary,
bonuses, stock options and other compensation, during the fiscal year ended
December 31, 1999, by our Chief Executive Officer and our other most highly
compensated executive officer whose total salary and bonus for that fiscal year
exceeded $100,000. We may refer to these officers as our named executive
officers in other parts of this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND POSITION(S) SALARY BONUS OPTIONS COMPENSATION
-------------------------------------------------- -------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Steve Gorlin...................................... $85,517 $100,000 -- --
Chairman and Chief Executive Officer (currently
Chairman)
Bart Chernow...................................... 130,208 100,000 300,000 $5,000(1)
President (currently President and Chief
Executive Officer)
</TABLE>
------------------------------------
(1) Represents a non-accountable allowance for the purchase of medical
periodicals, journals and subscriptions.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes stock options granted to each named
executive officer during the fiscal year ended December 31, 1999. No stock
appreciation rights were granted to these individuals during that year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED(1) FISCAL YEAR '99 PER SHARE(2) DATE 5% 10%
------------------------------ ---------- --------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve Gorlin.................. -- -- -- -- -- --
Bart Chernow.................. 300,000 23.3% $1.00 09/21/09 $165,398 $407,384
</TABLE>
------------------------------------
(1) The options granted to Bart Chernow are presently exercisable. Each of the
options granted has a term of ten years from the date of grant.
(2) There is currently no public market for our common stock. The exercise price
of each of these options is equal to the fair market value of our common
stock on the date of grant as determined by our board of directors.
(3) Potential realizable value is based on the assumption that the common stock
price appreciates at the annual rate shown, compounded annually, from the
date of grant until the end of the option term. The amounts have been
calculated based on the requirements promulgated by the Securities and
Exchange Commission. The actual value, if any, a named executive officer may
realize will depend on the excess of the stock price over the exercise price
on the date the option is exercised, if the executive were to sell the
shares on the date of exercise, so there is no assurance that the value
realized will be equal to or near the potential realizable value as
calculated in this table.
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FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the year-end number
and value of unexercised options for each of the named executive officers. None
of the named executive officers exercised any options in 1999. There was no
public trading market for the common stock as of December 31, 1999. We have
never granted any stock appreciation rights.
In light of the substantial disparity between the fair market value of the
common stock as of December 31, 1999 and the price per share of the common stock
in this offering, and in order to quantify the effect of this offering on the
value of the options, we have used an assumed offering price of $ per
share in calculating the values in the table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT DECEMBER
31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT DECEMBER 31, THE-MONEY OPTIONS AT
1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Steve Gorlin..................................... -- -- $ -- $ --
Bart Chernow..................................... 300,000 -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS
The following named executive officers have signed employment agreements
with GMP.
Steve Gorlin. Mr. Gorlin's employment agreement has a three-year term
ending July 31, 2002. His annual base salary is $250,000 and his salary will be
reviewed on at least an annual basis.
Bart Chernow, M.D. Dr. Chernow's employment agreement has a three-year
term ending May 31, 2002. His annual base salary is $475,000. His salary will be
reviewed on at least an annual basis.
BENEFIT PLANS
1999 STOCK OPTION PLAN
Our board of directors adopted our 1999 Stock Option Plan on May 17, 1999,
and our stockholders approved the adoption of the plan on May 18, 1999. We have
reserved 3,000,000 shares of common stock for issuance under the plan, 2,169,032
of which had been issued as of September 30, 2000. Under the plan, officers,
employees, members of the board of directors, and consultants are eligible to
receive awards. The only type of award that may be made under the plan is an
option to purchase shares of common stock. Options may either be incentive stock
options that qualify for favorable tax treatment for the optionee under Section
422 of the Internal Revenue Code of 1986 or nonstatutory stock options not
designed to qualify for favorable tax treatment. If shares awarded under the
plan are forfeited, then those shares will again become available for new awards
under the plan.
The compensation committee of our board of directors administers the plan.
The committee has complete discretion to make all decisions relating to the
interpretation and operation of the plan, including the discretion to determine
which eligible individuals are to receive an award, and to determine the type,
number and vesting requirements and other features and conditions of each award.
The exercise price for incentive stock options granted under the plan may
not be less than 100% of the fair market value of the common stock on the option
grant date. The exercise price for nonstatutory stock options granted under the
plan may not be less than the par value of the common stock on the option grant
date. The exercise price may be paid in cash or by other means, including a
cashless exercise method as determined by the committee.
Our board of directors may terminate or amend the plan at any time. If the
board amends the plan, stockholder approval of the amendment will be required to
increase the maximum number of shares of
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common stock that may be issued under the plan, change the classes of people
that may receive awards under the plan or make any amendment required to be
approved by the stockholders under any applicable law. The plan will continue in
effect until terminated by our board of directors or until all shares available
for issuance under the plan have been issued and all restrictions on shares
granted under the plan have lapsed. However, no incentive stock options may be
granted after May 16, 2009.
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than terms we could have obtained from
unaffiliated third parties. It is our intention to ensure that all future
transactions between us and our officers, directors, principal stockholders and
their affiliates, are approved by a majority of the board of directors,
including a majority of the independent and disinterested members, and are on
terms no less favorable to us than those that we could obtain from unaffiliated
third parties.
FORMATION AND FINANCING TRANSACTIONS
We were incorporated as Global Medical Products, Inc. in May 1999. In May
and June 1999, in connection with our formation, we issued convertible
promissory notes bearing interest at a rate of 6% per annum to Steve Gorlin, the
Chairman of our Board of Directors, in an aggregate principal amount of
$200,000. The notes were convertible into our common stock. In June 1999, we
retired $118,500 of the notes by issuing 1,185,000 shares of common stock to Mr.
Gorlin. In September 1999, we retired the remaining notes by repaying $81,500.
In September 1999, we paid $1,518,000 to GMP Partners for assistance in
structuring and arranging our initial capitalization. GMP Partners was owned
one-third by each of Steve Gorlin, Jeffrey L. Raney, our General Counsel and
Secretary, and John C. Thomas, Jr., our Senior Financial Manager. The amounts
paid were distributed by GMP Partners, and the following directors and/or
executive officers of ours who performed services on behalf of GMP Partners
received a portion of the distribution: Bart Chernow, M.D., received $969,250;
Steve Gorlin received $264,375; Nicolas A. F. Chronos, M.D. received $81,250;
Charles L. Brown III, M.D. received $90,000; and John C. Thomas, Jr. received
$69,375.
In September 1999, we sold 1,500,000 shares of our Series A convertible
preferred stock to Motorola, Inc., one of our principal stockholders, for
$7,500,000. In addition, in March 2000, we sold 520,000 shares of our Series B
convertible preferred stock to Motorola for $9,360,000. In August 2000, we sold
129,677 shares of our common stock to Motorola for $3,695,795. One of our
directors, Rudyard L. Istvan, is an executive officer of Motorola.
In September 1999, we sold 1,500,000 shares of our Series A convertible
preferred stock for $7,500,000 and in March 2000, we sold 833,333 shares of our
Series B convertible preferred stock for $14,999,994 to a group of investment
funds which are under the common control of J. & W. Seligman & Co. Incorporated.
In addition, in August 2000, we sold 149,792 shares of our common stock to the
Seligman & Co. investment funds for $4,269,072.
In September 1999, we sold 20,000 shares of our Series A convertible
preferred stock to Affinity Ventures II, LLC, for $100,000. In addition, in
March 2000, we sold 13,000 shares of our Series B convertible preferred stock to
Affinity Ventures II, LLC for $234,000. One of our directors, B. Kristine
Johnson, is a venture partner of Affinity Ventures II, LLC.
In September 1999, we sold 200,000 shares of our Series A convertible
preferred stock to Fuqua Venture Partners I, LLC for $1,000,000. In addition, in
March 2000, we sold 30,000 shares of our Series B convertible preferred stock to
Fuqua Venture for $540,000. One of our Directors, John J. Huntz, Jr., is a
Managing Director of Fuqua Venture.
In March 2000, we sold 2,000,000 shares of our Series B convertible
preferred stock to Texas Pacific Group, one of our principal stockholders, for
$36 million. In addition, in August 2000, we sold 128,393 shares
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of our common stock to Texas Pacific Group for approximately $3,659,200. One of
our directors, James B. Williams, is an executive officer of Texas Pacific
Group.
GLOBAL VASCULAR CONCEPTS TRANSACTION
In August 1999, we purchased newly issued shares of common stock of Global
Vascular Concepts, or GVC, which is the predecessor of GMP/Drug Delivery and
GMP/Vascular, representing approximately 81% of GVC's outstanding common stock
after the purchase, for the assumption of $182,551 of net liabilities and
$250,000 payable to GVC. In addition, we committed to fund up to $8.6 million
for the development of GVC's technology. Immediately before the acquisition,
Charles L. Brown III, M.D., Nicolas A. F. Chronos, M.D. and Steve Gorlin each
owned an approximately 31.8% equity interest in GVC, John C. Thomas, Jr. owned
an approximately 3.2% equity interest in GVC, and Jeffrey L. Raney owned an
approximately 0.5% equity interest in GVC.
TRANSACTIONS WITH MOTOROLA, INC.
In March 2000, we formed GMP/Wireless Medicine to develop multiple wireless
sensor technologies that were invented by Motorola, which will beneficially own
approximately percent of our common stock after this offering. In May 2000,
GMP/Wireless executed a license and cross license agreement with Motorola which
was amended in July 2000. Under this agreement, as amended, Motorola licensed to
GMP/Wireless particular patent rights to wireless technologies for use in
hospitals, health care provider offices, medical outpatient facilities and other
health and medical related facilities. In exchange for these patent rights,
GMP/Wireless paid Motorola $1.0 million upon signing the license agreement and
has agreed to make additional progress payments in the aggregate amount of $3.5
million. GMP/Wireless also agreed to make royalty payments over the life of the
agreement on direct sales equal to 2% of net sales below $25 million, 2.5% for
net sales above $25 million but less than $50 million, and 3% for net sales
above $50 million. If GMP/Wireless has a third party manufacture the products,
then royalties payable to Motorola will be an amount equal to 20% of
GMP/Wireless' gross margin from the sale of wireless products. If GMP/Wireless
chooses to sublicense the rights to patents to a third party, then GMP/Wireless
will pay Motorola the greater of 20% of sublicense revenues received by
GMP/Wireless and half of the amount that Motorola would have received if the
sale had been made directly by GMP/Wireless. As partial consideration for the
license agreement, GMP/Wireless also issued 1,500,000 shares of its common
stock, representing 15% of outstanding common stock, to Motorola pursuant to a
stock acquisition agreement.
GMP/Wireless granted Motorola an option to purchase 50,000 shares of our
common stock at an exercise price of $18.00 per share. In addition, beginning on
the second anniversary of FDA and FCC approval of the first GMP/Wireless product
and continuing for sixty days after that date, Motorola has the right to
purchase from us an amount of GMP/Wireless common stock that would increase
Motorola's equity interest in GMP/Wireless to 50% of GMP/Wireless' outstanding
common stock. In the event that we provide written notice to Motorola of our
intent to sell all of the assets or common stock of GMP/Wireless or conduct an
initial public offering of its securities or at any time between the fifth and
tenth anniversaries of the above described regulatory approval of GMP/Wireless
products, Motorola has the right to purchase from us an amount of GMP/Wireless
stock that would increase its equity ownership to 85% of GMP/Wireless'
outstanding common stock. The purchase price in each case would be based on 105%
of the fair market value of GMP/Wireless as agreed on by us and Motorola or, in
the absence of agreement, as determined by independent appraisers appointed by
Motorola and us.
GMP/Wireless also executed a technology development agreement with
Motorola. Under this agreement, GMP/Wireless has agreed to make payments of up
to $6.0 million to fund research to further develop wireless medical sensor
technologies. In return, Motorola has agreed to assign and maintain a design
team to conduct that research and development and to provide laboratory space
dedicated to developing wireless applications.
In August 2000, we entered into an agreement with Motorola under which we
agreed to process, on a preferential basis, genetic specimens using our GMP
Conversion Technology exclusively for customers of
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Motorola's BioChip systems. In addition, during the 27-month term of the
agreement, we also agreed, subject to certain exceptions, not to process genetic
specimens for subsequent use with any other biological microarray technologies
except for research purposes. In exchange for these agreements, Motorola paid
GMP/Genetics $2.0 million. In addition, GMP/Genetics agreed to pay Motorola 15%
of the revenue that GMP/Genetics receives from the Motorola BioChip customers
using the GMP Conversion Technology process during the term of the agreement.
GMP/Genetics also agreed to use Motorola's BioChip systems in the event that it
requires the use of such technology for its own internal use or in connection
with its genetic conversion services provided to its clients. Finally, if after
the expiration of the agreement GMP/Genetics elects to discontinue the operation
of its genetic conversion services, Motorola has to the option to obtain a
non-exclusive license to our GMP Conversion Technology process on commercially
reasonable terms for use solely with its BioChip systems.
In connection with the preferential BioChip system arrangement, Motorola
purchased 66,667 shares of common stock of GMP/Genetics for a purchase price of
approximately $1.0 million.
CONSULTING AGREEMENTS
In August 1999, we entered into separate consulting agreements with Charles
L. Brown III, M.D. and Nicolas A. F. Chronos, M.D. to provide advice in the
areas of product development and market strategy. The agreements require us to
pay each of the consultants $6,250 per month to aid their research efforts over
the three-year term of the agreements. In November 1999, we increased Dr.
Brown's research stipend to $10,417 per month. For 1999, we paid research
stipends equal to $39,583 and $31,250 to Dr. Brown and Dr. Chronos. For the
first nine months of 2000, we paid $93,753 and $56,250 to Dr. Brown and Dr.
Chronos.
In November 1999, we entered into a consulting agreement with Robert S.
Langer, Sc.D., one of our directors. The agreement requires us to pay Dr. Langer
$125,000 over the one-year term of the agreement. For 1999 and the first nine
months of 2000, we paid $20,833 and $93,753 to Dr. Langer for consulting
services.
In November 1999, we entered into a consulting agreement with Joseph P.
Vacanti, M.D., one of our directors. The agreement requires us to pay Dr.
Vacanti $100,000 over the one-year term of the agreement. For 1999 and the first
nine months of 2000, we paid $14,583 and $75,000 to Dr. Vacanti for consulting
services.
OTHER TRANSACTIONS
Bart Chernow, M.D. owns 200,000 shares of common stock, or 2.1%, of
GMP/Endotherapeutics and 200,000 shares, or 2.1%, of GMP/Genetics.
Steve Gorlin owns 200,000 shares of common stock, or 2.1%, of
GMP/Endotherapeutics and 200,000 shares, or 2.1%, of GMP/Genetics.
Spencer B. King III, M.D. owns 400,000 shares of common stock, or 4.4%, of
GMP/Vision Solutions.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock (assuming conversion of all shares of preferred
stock into common stock) as of September 30, 2000, and as adjusted to reflect
the sale of the shares of common stock in this offering, by:
- each of the named executive officers;
- each of our directors;
- each person or entity known to us to beneficially own more than 5% of our
outstanding stock; and
- all of our executive officers and directors as a group.
Unless otherwise indicated, the address of each of the individuals listed
in the table is c/o GMP Companies, Inc., One East Broward Boulevard, Suite 1701,
Fort Lauderdale, Florida 33301. Except as otherwise indicated, the persons named
in the table have sole voting and investment power with respect to all shares of
common stock held by them.
Percentage ownership in the following table is based on 16,437,227 shares
of common stock (assuming conversion of all shares of preferred stock into
common stock) outstanding as of September 30, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of our common stock subject to options that are presently
exercisable or exercisable within 60 days of September 30, 2000 are deemed to be
outstanding and beneficially owned by the person holding such options for the
purpose of computing the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the percentage of any other
person. The information set forth in the following table excludes any shares
purchased in this offering by the respective beneficial owner.
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF BENEFICIALLY OWNED
NUMBER OF SHARES OF SHARES -------------------
COMMON STOCK SUBJECT TO BEFORE AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OPTIONS(1) OFFERING OFFERING
--------------------------------------------------- ------------------- ---------- -------- --------
<S> <C> <C> <C> <C>
Seligman Funds(2).................................. 2,483,125 -- 15.1% %
Motorola, Inc.(3).................................. 2,149,677 -- 13.1
Texas Pacific Group(4)............................. 2,128,393 -- 12.9
James B. Williams(5)............................... 2,178,393 50,000 13.2 --
Charles L. Brown III, M.D.(6)...................... 840,167 -- 5.1
Steve Gorlin(7).................................... 840,167 -- 5.1
Nicolas A. F. Chronos, M.D......................... 840,166 -- 5.1
Bart Chernow, M.D.................................. 690,000 300,000 4.1
Robert Langer, Sc.D................................ 450,000 -- 2.7
Joseph Vacanti, M.D................................ 350,000 -- 2.1
John J. Huntz, Jr.(8).............................. 280,000 50,000 1.7
Michael S. Salem................................... 135,000 75,000 * *
Jeffrey L. Raney................................... 127,830 52,083 * *
Martin Fleisher, Ph.D.............................. 100,000 -- * *
Judah Folkman, M.D................................. 100,000 -- * *
Spencer B. King III, Sc.D.......................... 100,000 -- * *
David Hung......................................... 100,000 -- * *
B. Kristine Johnson(9)............................. 60,000 60,000 * *
Rudyard L. Istvan.................................. 50,000 50,000 * *
Holger Weis........................................ 26,563 26,563 * *
All executive officers and directors as a group (17
persons)......................................... 7,268,286 663,646 42.5
</TABLE>
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---------------
* Less than one percent
(1) Represents the number of shares issuable upon the exercise of options
exercisable within 60 days of September 30, 2000. These shares are also
included in the amount listed in the column entitled "Number of Shares of
Common Stock Beneficially Owned."
(2) Represents shares under the common control of J.&W. Seligman & Co.
Incorporated, the address for which is 100 Park Avenue, New York, New York
10017.
(3) The address of Motorola, Inc. is c/o Motorola Millennium Ventures, 1303 E.
Algonquin Road, Schaumburg, Illinois 60196.
(4) Represents shares owned by affiliates of Texas Pacific Group, with respect
to which Texas Pacific Group has shared voting and dispositive power. The
address of Texas Pacific Group is 201 Main Street, Suite 2420, Fort Worth,
Texas 76102.
(5) Includes 2,128,393 shares held by affiliates of Texas Pacific Group, for
which Mr. Williams is a director.
(6) Includes 200,000 shares held by a limited liability company for which Dr.
Brown is the managing member and 350,000 shares held for Dr. Brown in a
profit sharing plan.
(7) Includes 300,000 shares held in a family limited partnership for which Mr.
Gorlin is the general partner and 100,000 shares held by Mr. Gorlin's wife.
(8) Includes 230,000 shares held by Fuqua Venture Partners I, LLC, for which Mr.
Huntz is Managing Director.
(9) Ms. Johnson disclaims beneficial ownership of the 33,000 shares owned by
Affinity Ventures II LLC. Ms. Johnson is a venture partner of Affinity
Ventures II LLC.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our
amended and restated certificate of incorporation and our amended and restated
bylaws is a summary. Statements contained elsewhere in this prospectus relating
to these provisions are not necessarily complete, and we refer you to our
amended and restated certificate of incorporation and the amended and restated
bylaws that will be in effect upon the completion of this offering. Copies of
these documents have been filed with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus constitutes a
part.
Our authorized capital stock will consist of 125,000,000 shares, which
includes 120,000,000 shares of common stock, par value $0.001 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share, upon the closing
of this offering.
COMMON STOCK
As of September 30, 2000, assuming conversion of all outstanding shares of
preferred stock, there were 16,437,227 shares of common stock outstanding that
were held of record by approximately 280 stockholders. Upon completion of this
offering, there will be shares of common stock outstanding. In
addition, as of September 30, 2000 there were outstanding options to purchase of
a total of 2,163,000 shares of common stock. Our common stock has the following
rights, preferences and privileges:
Voting Rights. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of our stockholders, including the
election of our directors. There are no cumulative voting rights, and,
therefore, the holders of a plurality of the shares of common stock voting for
the election of directors may elect all of our directors standing for election.
Dividends. Holders of common stock are entitled to receive dividends if
and when dividends are declared by our board of directors out of assets legally
available for the payment of dividends, subject to preferential rights of
outstanding shares of preferred stock, if any. We have never paid dividends in
the past and do not intend to do so in the future.
Liquidation. In the event of a liquidation, dissolution or winding up of
our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities and making provision for the holders of outstanding shares of
preferred stock, if any, the remainder of our assets will be distributed ratably
among the holders of shares of common stock.
Rights and Preferences. The common stock has no preemptive, redemption,
conversion or subscription rights. The rights, powers, preferences and
privileges of holders of common stock are subject to, and may be impaired by,
the rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.
Fully Paid and Nonassessable. All outstanding shares of common stock are,
and the shares of common stock to be issued pursuant to this offering will be,
fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of the offering, all outstanding shares of preferred stock
will be converted automatically into common stock. Pursuant to the terms of our
restated certificate of incorporation, the board of directors will be
authorized, subject to any limitation prescribed by Delaware law, without
further stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock, in one or more classes or series, and to
fix the voting powers, if any, and the distinctive designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions of these rights, of the shares of
each class or series. The board of directors is authorized to issue preferred
stock with voting, conversion and other rights and preferences that could impair
the voting power or other rights of the holders of common stock.
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We have no current plans to issue any preferred stock. However, the
issuance of preferred stock or of rights to purchase preferred stock could make
it more difficult or less desirable for a third party to acquire a majority of
our outstanding common stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BY-LAWS AND OF DELAWARE
LAW
Our restated certificate of incorporation and bylaws, effective upon
completion of this offering, contains provisions that could discourage, delay or
prevent a tender offer or takeover attempt at a price which many stockholders
may find attractive. The existence of these provisions could limit the price
that investors might otherwise pay in the future for shares of common stock.
CERTIFICATE OF INCORPORATION AND BYLAWS
Blank Check Preferred Stock. As noted above, our board of directors,
without stockholder approval, will have the authority under our restated
certificate of incorporation to issue preferred stock with rights superior to
the rights of the holders of common stock. As a result, preferred stock could be
issued quickly and easily, could impair the rights of holders of common stock
and could be issued with terms calculated to delay or prevent a change of
control or make removal of management more difficult.
Election Of Directors. Our restated certificate of incorporation provides
that only a majority of directors then in office may fill any vacancy occurring
on the board of directors, even though less than a quorum may then be in office.
These provisions may discourage a third party from voting to remove incumbent
directors and simultaneously gaining control of the board of directors by
filling the vacancies created by that removal with its own nominees. In
addition, we have entered into an agreement with Motorola, one of our
stockholders, which permits Motorola to designate one member of our board of
directors. That agreement terminates upon completion of this offering.
Furthermore, we have entered into an additional agreement with one of our
stockholders which requires us to nominate for election to our board one person
so designated by that stockholder.
Stockholder Action. Our restated certificate of incorporation provides
that stockholders may only act at meetings of stockholders and not by written
consent in lieu of a stockholders' meeting.
Stockholder Meetings. Our restated certificate of incorporation and bylaws
provide that stockholders may not call a special meeting of the stockholders.
Rather, only our board of directors, acting pursuant to a resolution of a
majority of the directors then in office, will be able to call special meetings
of stockholders. Our bylaws also provide that stockholders may only conduct
business at special meetings of stockholders that was specified in the notice of
the meeting. These provisions may discourage another person or entity from
making a tender offer, even if it acquired a majority of our outstanding voting
stock, because the person or entity could only take action at a duly called
stockholders' meeting relating to the business specified in the notice of
meeting and not by written consent.
Requirements For Advance Notification Of Stockholder Nominations And
Proposals. Our bylaws provide that a stockholder seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide timely notice of
this intention in writing. To be timely, a stockholder must deliver or mail the
notice and we must receive the notice at our principal executive offices not
less than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. However, if we change the
date of the annual meeting of stockholders to a date that is not within 30 days
of the anniversary of our previous annual meeting of stockholders, then we must
receive the stockholder's notice no later than the close of business on the 10th
day after the date on which we mail notice of the date of the meeting or we make
a public announcement, whichever first occurs. The bylaws also include a similar
requirement for making nominations at special meetings and specify requirements
as to the form and content of the stockholder's notice. These provisions could
delay stockholder actions that are favored by the holders of a majority of our
outstanding stock until the next stockholders' meeting.
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Super-Majority Voting. Delaware law generally provides that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation, unless a
corporation's certificate of incorporation requires a greater percentage. We
have provisions in our restated certificate of incorporation which require a
vote of at least 80% of the stockholders entitled to vote in the election of
directors to amend, alter, change or repeal the anti-takeover provisions of our
restated certificate of incorporation.
DELAWARE ANTI-TAKEOVER STATUTE
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law. Under Section 203, some business combinations between a
Delaware corporation whose stock generally is publicly traded or held of record
by more than 2,000 stockholders and an interested stockholder are prohibited for
a three-year period following the date that the stockholder became an interested
stockholder, unless:
- the corporation has elected in its amended and restated certificate of
incorporation not to be governed by Section 203;
- the board of directors of the corporation approved the transaction which
resulted in the stockholder becoming an interested stockholder before the
stockholder became an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction, excluding voting stock owned by
directors who are also officers or held in employee benefit plans in
which the employees do not have a confidential right to tender stock held
by the plan in a tender or exchange offer; or
- the board of directors approves the business combination and holders of
two-thirds of the voting stock which the interested stockholder did not
own authorize the business combination at a meeting.
We have not made an election in our amended and restated certificate of
incorporation to opt out of Section 203. In addition to the above exceptions to
Section 203, the three-year prohibition does not apply to some business
combinations proposed by an interested stockholder following the announcement or
notification of an extraordinary transaction involving the corporation and a
person who was not an interested stockholder during the previous three years or
who became an interested stockholder with the approval of a majority of the
corporation's directors. For the purposes of Section 203, a business combination
generally includes mergers or consolidations, transactions involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. Also,
an interested stockholder generally includes a stockholder who becomes
beneficial owner of 15% or more of a Delaware corporation's voting stock,
together with the affiliates or associates of that stockholder.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our restated certificate of incorporation limits the liability of our
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors will not be personally liable for monetary damages for breach of
their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us under the
provisions that we describe above or otherwise, we have been informed that in
the opinion of the Securities and Exchange Commission, this indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Our bylaws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
that capacity, regardless of whether our by-laws would otherwise permit
indemnification for that liability. We are in the process of obtaining liability
insurance for our officers and directors. At the present time, there is no
pending litigation or proceeding involving any of our directors, officers,
employees or agents in which indemnification will be required or permitted. We
are not aware of any threatened litigation or proceeding which may result in a
claim for indemnification.
REGISTRATION RIGHTS
Holders of approximately 7.6 million shares of our common stock have
registration rights with respect to those shares. Beginning six months following
this offering, holders of at least 30% of these shares may require us to file a
registration statement under the Securities Act covering at least 30% of the
shares held by them, or a lesser percentage if the anticipated aggregate
offering price would exceed $7.5 million. We will not be required to comply with
a request for registration within 60 days before or 180 days after the effective
date of another registration statement filed by us. When we are eligible to
utilize a registration statement on Form S-3 to register an offering of our
securities, any holder may request that we file a registration statement on Form
S-3 covering shares held by them, provided that the aggregate public offering
price is at least $500,000. These holders can request only two S-3 registrations
in any twelve month period. These registration rights will be subject to our
right to delay the filing of a registration statement for not more than 90 days
if, in the view of our board of directors, a filing would be seriously
detrimental to us. We can only delay a filing in this manner once in any twelve
month period.
In addition, these holders have "piggyback" registration rights. If we
propose to register any common stock under the Securities Act, these
stockholders may require us to include all or a portion of their securities in
the registration. However, the managing underwriter, if any, of such offering
has the right to limit the number of securities proposed to be included in the
registration.
We are required to bear all registration expenses incurred in connection
with these registrations. The holders of shares registered by us will pay all
underwriting discounts and selling commissions applicable to the sale of their
securities. We also agreed to indemnify these holder for any damages they suffer
due to any untrue statement or omission that we make in a registration statement
covering their shares.
The registration rights of these holders will terminate upon the earlier of
the third anniversary of date of this prospectus or when all of the registrable
shares may be sold without registration under the Securities Act pursuant to
Rule 144(k).
LISTING
We have applied to have our common stock included for quotation on the
Nasdaq National Market under the symbol "GMPC."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
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<PAGE> 77
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common
stock, and no predictions can be made regarding the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Sales of our common stock in the public
market after certain contractual legal restrictions on the sale of some shares
lapse, or the perception that such sales may occur, could adversely affect the
prevailing market price.
SALE OF RESTRICTED SHARES AND LOCK-UP AGREEMENTS
Upon completion of this offering, based upon the number of shares
outstanding as of September 30, 2000, we will have outstanding an aggregate of
shares of common stock, or shares if the
underwriters exercise the over-allotment option in full, excluding 2,163,000
shares underlying outstanding options as of September 30, 2000. Of these shares,
all of the shares sold in this offering, or shares
if the underwriters over-allotment option is exercised in full, will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by our affiliates, as that term is defined in
Rule 144 under the Securities Act, may generally only be sold in compliance with
the limitations of Rule 144 described below. As defined in Rule 144, an
affiliate of an issuer is a person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the issuer. The remaining 16,437,227 outstanding shares of common stock are
deemed "restricted securities" as that term is defined under Rule 144.
Restricted securities may be sold in the public market only if they qualify for
an exemption from registration under Rule 144, including Rule 144(k), or Rule
701 under the Securities Act.
We, our directors, executive officers and substantially all of our
stockholders have agreed not to offer, sell, contract to sell or, with limited
exception, otherwise dispose of any shares of common stock or any security
convertible into or exchangeable for common stock for a period of 180 days from
the date of this prospectus without the prior written consent of Salomon Smith
Barney. Stockholders subject to these restrictions may dispose of shares as a
gift or distribution, provided that the recipients of those shares agree to the
same restrictions. All restricted shares will be available for resale to the
public in accordance with Rule 144 commencing approximately 180 days after the
date of this prospectus.
Without giving effect to the lock-up agreements between our stockholders
and the underwriters described above, and subject to the provisions of Rules
144, 144(k) and 701, additional shares will be available for sale in the public
market, subject in the case of shares held by affiliates to compliance with
volume restrictions, as follows:
- shares will be available for immediate sale in the public market
on the date of this prospectus;
- shares will be available for sale beginning 90 days after the date
of this prospectus; and
- 16,437,227 shares will be available for sale 180 days after the date of
this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, commencing 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year, including persons who are affiliates, is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which is
expected to be approximately shares upon completion of
this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to a sale, subject to restrictions
specified in Rule 144.
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<PAGE> 78
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell those
shares without regard to the volume, manner-of-sale or other limitations
contained in Rule 144.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us
pursuant to stock options granted prior to the date of this prospectus is
eligible to resell the shares 90 days after the effective date of this offering
in reliance on Rule 144, but without compliance with various restrictions,
including the holding period (unless that person is an affiliate), contained in
Rule 144.
STOCK OPTIONS
As of September 30, 2000, options to purchase a total of 2,163,000 shares
of common stock were outstanding, of which were then exercisable.
Upon completion of this offering, we intend to file a registration statement to
register for resale common stock subject to outstanding options or research for
future issuance under our 1999 Stock Option Plan. That registration statement
will become effective immediately upon filing. Accordingly, shares covered by
that registration statement will become eligible for sale in the public markets,
subject to vesting restrictions, Rule 144 volume limitations applicable to our
affiliates or the lock-up agreements with Salomon Smith Barney. Holders of
options to purchase shares of common stock have entered into lock-up agreements.
We have agreed not to issue, sell or otherwise dispose of any shares of
common stock during the 180-day period following the date of this prospectus,
except we may issue and grant options to purchase shares of common stock under
our 1999 Stock Option Plan. In addition, we may issue shares of common stock in
connection with an acquisition of or a strategic alliance with another company
if the terms of the issuance provide that the common stock so issued may not be
resold prior to the expiration of the 180-day lock-up period.
REGISTRATION RIGHTS
Holders of approximately 7.6 million shares of our common stock have
registration rights with respect to those shares. The registration rights of
these holders will terminate upon the earlier of the third anniversary of date
of this prospectus or when all of the registrable shares may be sold without
registration under the Securities Act pursuant to Rule 144(k). For a description
of these registration rights, see "Description of Capital Stock -- Registration
Rights."
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<PAGE> 79
U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following summary sets forth the U.S. federal tax consequences that are
anticipated to be material in the acquisition, ownership and disposition of our
common stock by a holder that, for U.S. federal income tax purposes, is not a
"United States person," as this term is defined below. This summary does not
address every aspect of U.S. federal income taxation that may be relevant to a
particular non-U.S. holder under special circumstances or who is subject to
special treatment under applicable law (e.g., certain financial institutions,
insurance companies, broker-dealers and tax-exempt organizations) and does not
address any tax consequences arising under the laws of any state, local or
foreign jurisdiction. This summary is based upon the U.S. federal tax law now in
effect, which is subject to change, perhaps with retroactive effect. Prospective
investors should consult their tax advisers regarding their particular tax
consequences of acquiring, owning and disposing of our common stock.
For purposes of this summary, a "non-U.S. holder" means a holder of common
stock that for U.S. federal income tax purposes is an individual or entity other
than:
- a citizen or individual resident of the United States;
- a corporation or other entity created or organized under the laws of the
United States or any State or political subdivision of the United States;
- an estate the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
- a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust, and one or more United persons have the
authority to control all substantial decisions of the trust, or the trust
was in existence on August 20, 1996, was treated as a U.S. person on that
date, and properly elected to continue to be so treated.
DIVIDENDS
Distributions that we make on our common stock generally will be taxable to
you as ordinary income to the extent of our earnings and profits, as determined
for U.S. federal income tax purposes. For that purpose, our earnings and profits
will be the greater of our current earnings and profits and the sum of our
current and accumulated earnings and profits. Currently, we have no earnings and
profits. Distributions in excess of our earnings and profits will be treated
first, on a share-by-share basis, as a non-taxable return of capital reducing
your tax basis in your common stock. Any such distribution in excess of your tax
basis in a share of common stock will be treated as capital gain and will be
either long-term or short-term capital gain depending upon whether you have held
the share of common stock for more than one year. Dividends that a non-U.S.
holder receives on our common stock generally will be subject to withholding of
U.S. federal income tax at the rate of 30%. If a distribution that a non-U.S.
holder receives on our common stock is effectively connected with the conduct of
trade or business in the United States by the non-U.S. holder, the dividend will
not be subject to withholding but instead will be subject to U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally. In addition, a corporate non-U.S. holder receiving effectively
connected dividends may be subject to a branch profits tax of 30% on the
corporation's effectively connected earnings and profits, subject to certain
adjustments.
Non-U.S. holders should consult any applicable income tax treaties that may
provide for a reduction of or exemption from U.S. withholding tax or, in the
case of a corporate non-U.S. holder, the branch profits tax. A non-U.S. holder
may be required to satisfy certain certification requirements in order to claim
treaty benefits.
GAIN ON DISPOSITION
A non-U.S. holder generally will not be subject to U.S. federal income or
withholding tax on gain recognized on a sale or other disposition of our common
stock, unless:
- the gain is effectively connected with the conduct of trade or business
in the United States by the non-U.S. holder;
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<PAGE> 80
- in the case of non-U.S. holder who is a nonresident alien individual who
holds our common stock as a capital asset, the holder is present in the
United States for 183 or more days in the taxable year of the
disposition, and certain other requirements are met;
- the non-U.S. holder is subject to tax pursuant to the provisions of the
Internal Revenue Code regarding the taxation of U.S. expatriates; or
- we are or have been a "U.S. real property holding corporation" within the
meaning of Section 897(c)(2) of the Internal Revenue Code at any time
within the shorter of the five-year period preceding such disposition or
such holder's holding period. We do not believe that we are, and do not
anticipate becoming, a U.S. real property holding corporation.
Gain that is effectively connected with the conduct of trade or business in
the United States by the non-U.S. holder will be subject to U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally and, with respect to corporate holders and under certain
circumstances, the branch profits tax. Non-U.S. holders should consult any
applicable income tax treaties that may provide for different rules.
UNITED STATES FEDERAL ESTATE TAX
The gross estate for U.S. federal estate tax purposes of an individual
non-U.S. holder who is treated as the owner of, or has made certain lifetime
transfers of, an interest in our common stock will include the value of that
interest, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, we must report annually to the U.S. Internal Revenue Service and
to each non-U.S. holder the amount of dividends paid to the non-U.S. holder and
the tax withheld on those dividends, regardless of whether any tax has been
actually withheld. This information may also be made available to the tax
authorities of a country in which the non-U.S. holder resides. Under current
U.S. Treasury regulations, U.S. information reporting requirements and backup
withholding tax will generally not apply to dividends paid on our common stock
to a non-U.S. holder at an address outside the United States. Payments by a U.S.
office of a broker of the proceeds of a sale of our common stock are subject to
both backup withholding at a rate of 31% and information reporting unless the
holder certifies as to its non-U.S. holder status under penalties of perjury or
otherwise establishes an exemption. Payments of the proceeds from the
disposition of our common stock by foreign offices of U.S. brokers, or foreign
brokers with certain types of relationships to the U.S., will not be subject to
backup withholding, but will be subject to information reporting, unless the
broker has documentary evidence in its records that thc holder is a non-U.S.
holder and certain other conditions are met, or the holder otherwise establishes
an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of tax, a refund may
be obtained, provided certain required information is furnished to the Internal
Revenue Service. The U.S. Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, those regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. The final
regulations are anticipated to become effective for payments made after December
31, 2000, subject to certain transition rules.
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<PAGE> 81
UNDERWRITING
Salomon Smith Barney Inc. and Credit Suisse First Boston Corporation are
acting as representatives of the underwriters named below. Subject to the terms
and conditions stated in the underwriting agreement dated the date of this
prospectus, each underwriter named below has agreed to purchase, and we have
agreed to sell to each underwriter, the number of shares set forth opposite the
name of that underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------ ---------
<S> <C>
Salomon Smith Barney Inc....................................
Credit Suisse First Boston Corporation......................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by their counsel and to other conditions. The
underwriters are obligated to purchase all the shares, other than those covered
by the over-allotment option described below, if they purchase any of the
shares.
The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to dealers at the public offering price less a concession not
in excess of $ per share. The underwriters may allow, and those dealers
may reallow, a concession not in excess of $ per share on sales to
other dealers. If all of the shares are not sold at the initial offering price,
the representatives may change the public offering price and the other selling
terms. The representatives have advised us that the underwriters do not intend
to confirm any sales to any accounts over which they exercise discretionary
authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discount. The underwriters may exercise that option solely to cover
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter must purchase a number of additional
shares approximately proportionate to that underwriter's initial purchase
commitment.
At our request, the underwriters have reserved up to 5% of our common stock
for sale at the initial public offering price to our directors, officers,
employees or others who are associated with us through a directed share program.
The number of shares of common stock available for sale to the general public
will be reduced by the number of directed shares purchased by participants in
the program. Any directed shares not purchased will be offered by the
underwriters to the general public on the same basis as all other shares of
common stock offered. We have agreed to indemnify the underwriters against
certain liabilities and expenses, including liabilities under the Securities
Act, in connection with the sales of the directed shares.
We, our officers and directors and substantially all of our stockholders
have agreed that, without the prior written consent of Salomon Smith Barney
Inc., for a period of 180 days from the date of this prospectus, we and they
will not, dispose of or hedge any shares of our common stock or any securities
convertible into or exchangeable for common stock. Salomon Smith Barney Inc. in
its sole discretion may release any of the securities subject to these lock-up
agreements at any time without notice.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the shares will be
determined through negotiations among us and the representatives. Among the
factors considered in determining the initial public offering price were our
record of operations, our current financial condition, our future prospects, our
markets, the economic conditions in and future prospects for the biotechnology,
pharmaceutical and other industries in which we compete, our management and
currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies considered
comparable to us. However, the prices at which the shares will sell in the
public market after this offering may be lower than the price at which they are
sold by the underwriters and an active trading market in the common stock may
not develop or continue after this offering.
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<PAGE> 82
We have applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "GMPC."
The following table shows the underwriting discounts and commissions we
will pay to the underwriters in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY GMP
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share......................................... $ $
Total............................................. $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of common stock in the open
market. These transactions may include short sales, syndicate covering
transactions and stabilizing transactions. Short sales involve syndicate sales
of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
"Covered" short sales are sales of shares made in an amount up to the number of
shares represented by the underwriters' over-allotment option. In determining
the source of shares to close out the covered syndicate short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option. Transactions to close out the
covered syndicate short involve either purchases of the common stock in the open
market after the distribution has been completed or the exercise of the
over-allotment option. The underwriters may also make "naked" short sales of
shares in excess of the over-allotment option. The underwriters must close out
any naked short position by purchasing shares of common stock in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the shares in
the open market after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of bids for or purchases of
shares in the open market while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc. repurchases shares originally sold by that syndicate
member in order to cover syndicate short positions or make stabilizing
purchases.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriters may
conduct these transactions on the Nasdaq National Market or in the
over-the-counter market, or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that the total expenses of this offering will be approximately
$ .
The representatives have performed investment banking and advisory services
for us from time to time for which they have received customary fees and
expenses. Salomon Smith Barney Inc. acted as placement agent in our private
placement of Series B convertible preferred stock completed in March 2000 for
which they received customary compensation. The representatives may, from time
to time, engage in transactions with and perform services for us in the ordinary
course of their business.
We have agreed to indemnify the underwriters against particular
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make in respect of
any of those liabilities.
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<PAGE> 83
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Greenberg Traurig, P.A., Miami, Florida. Various legal matters in
connection with this offering will be passed upon for the underwriters by
Cravath, Swaine & Moore, New York, New York. Nancy E. Taylor, Joe Reeder and
Marvin Rosen own 100,000, 5,000 and 10,000 shares of our common stock. Ms.
Taylor and Messrs. Reeder and Rosen are shareholders of Greenberg Traurig.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and for the period from May 17, 1999
(date of inception) through December 31, 1999, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the common stock offered by this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules to the registration statement. For further information
about us and the shares of our common stock to be sold in this offering, please
refer to the registration statement and the exhibits and schedules filed as a
part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document referred to are
not necessarily complete. Each statement in this prospectus regarding the
contents of the referenced contract or other document is qualified in all
respects by our reference to the copy filed with the registration statement.
You may inspect a copy of the registration statement without charge at the
Securities and Exchange Commission's principal office in Washington, D.C. and
obtain copies of all or any part thereof upon payment of a fee from the Public
Reference Room of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Securities and Exchange Commission's
regional offices in New York, located at Seven World Trade Center, Suite 1300,
New York, New York 10048, or in Chicago, located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Securities and Exchange Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934 and,
in accordance therewith, will file periodic reports, proxy and information
statements and other information with the Commission, including, audited
financial statements certified by an independent public accounting firm. Our
periodic reports, proxy and information statements and other information will be
available for inspection and copying at the regional offices, public references
facilities and website of the Commission referred to above.
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<PAGE> 84
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM MAY
17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
Consolidated Balance Sheet as of December 31, 1999.......... F-3
Consolidated Statement of Operations for the period from May
17, 1999 (Date of Inception) to December 31, 1999......... F-4
Consolidated Statement of Stockholders' Equity for the
period from May 17, 1999 (Date of Inception) to December
31, 1999.................................................. F-5
Consolidated Statement of Cash Flows for the period from May
17, 1999 (Date of Inception) to December 31, 1999......... F-6
Notes to Consolidated Financial Statements for the period
from May 17, 1999 (Date of Inception) to December 31,
1999...................................................... F-7
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM MAY
17, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 1999
(UNAUDITED), NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED), AND THE PERIOD FROM MAY 17, 1999 (DATE OF
INCEPTION) TO SEPTEMBER 30, 2000 (UNAUDITED)
Consolidated Balance Sheets as of December 31, 1999 and
September 30, 2000 (Unaudited)............................ F-15
Consolidated Statements of Operations for the periods from
May 17, 1999 (Date of Inception) to September 30, 1999
(Unaudited), the nine months ended September 30, 2000
(Unaudited), and the period from May 17, 1999 (Date of
Inception) to September 30, 2000 (Unaudited).............. F-16
Consolidated Statements of Cash Flows for the periods from
May 17, 1999 (Date of Inception) to September 30, 1999
(Unaudited), the nine months ended September 30, 2000
(Unaudited), and the period from May 17, 1999 (Date of
Inception) to September 30, 2000 (Unaudited).............. F-17
Notes to Consolidated Financial Statements for the periods
from May 17, 1999 (Date of Inception) to September 30,
2000 (Unaudited) and the nine months ended September 30,
2000 (Unaudited).......................................... F-18
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
GMP Companies, Inc.
We have audited the accompanying consolidated balance sheet of GMP
Companies, Inc. (a development stage company) as of December 31, 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the period from May 17, 1999 (date of inception) to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GMP Companies,
Inc. (a development stage company) at December 31, 1999 and the consolidated
results of its operations and its cash flows for the period from May 17, 1999
(date of inception) to December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Atlanta, Georgia
February 4, 2000
except for Note 11, as to which the date is
March 20, 2000
F-2
<PAGE> 86
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1999
---------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $22,282,422
Short-term investments.................................... 6,533,661
Interest receivable....................................... 24,733
Prepaid expenses.......................................... 109,522
-----------
Total current assets.............................. 28,950,338
Furniture and equipment..................................... 227,006
Less accumulated depreciation............................. 13,246
-----------
Net furniture and equipment............................... 213,760
Other assets................................................ 13,475
-----------
Total assets...................................... $29,177,573
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 234,354
Accrued liabilities....................................... 286,461
-----------
Total current liabilities......................... 520,815
Minority interest........................................... --
Stockholders' equity:
Preferred stock, $.01 par value, 20,000,000 shares
authorized:
Series A Convertible Preferred Stock, $.01 par value;
6,450,000 shares designated, issued and outstanding at
December 31, 1999, liquidation preference
$32,250,000........................................... 64,500
Common stock, $.001 par value; 80,000,000 shares
authorized; 4,990,000 shares issued and outstanding at
December 31, 1999...................................... 4,990
Additional paid-in capital................................ 32,747,348
Deficit accumulated during the development stage.......... (4,160,080)
-----------
Total stockholders' equity........................ 28,656,758
-----------
Total liabilities and stockholders' equity........ $29,177,573
===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 87
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenue..................................................... $ --
Expenses:
Research and development.................................. 1,122,024
Selling, general and administrative (includes $115,134 of
non-cash stock compensation)........................... 3,474,192
-----------
Total operating expenses.......................... 4,596,216
-----------
Loss from operations.............................. (4,596,216)
Other income:
Interest, net............................................. 436,136
-----------
Net loss.......................................... $(4,160,080)
===========
Net loss per share -- basic and diluted..................... $ (0.87)
===========
Weighted average shares outstanding -- basic and diluted.... 4,762,314
===========
Pro forma net loss per share -- basic and diluted........... $ (0.53)
===========
Pro forma weighted average shares outstanding............... 7,804,236
===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 88
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
SERIES A CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE TOTAL
--------------------- ------------------ PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE EQUITY
---------- -------- --------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 17, 1999
(date of inception)....... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock at
$0.10 per share........... -- -- 3,805,000 3,805 376,695 -- 380,500
Issuance of common stock to
retire notes payable to a
related party, valued at
$0.10 per share........... -- -- 1,185,000 1,185 117,315 -- 118,500
Issuance of Series A
Convertible Preferred
Stock at $5 per share, net
of issuance costs of
$65,594................... 6,450,000 64,500 -- -- 32,119,906 -- 32,184,406
Options issued for
consulting services....... -- -- -- -- 133,432 -- 133,432
Net loss.................... -- -- -- -- -- (4,160,080) (4,160,080)
--------- ------- --------- ------ ----------- ----------- -----------
Balance at December 31,
1999...................... 6,450,000 $64,500 4,990,000 $4,990 $32,747,348 $(4,160,080) $28,656,758
========= ======= ========= ====== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 89
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(4,160,080)
Adjustments to reconcile net loss to net cash used in
operating activities:
Options issued for consulting services.................... 133,432
Depreciation.............................................. 13,246
Changes in operating assets and liabilities:
Interest receivable.................................... (24,733)
Prepaid expenses....................................... (109,522)
Other assets........................................... (13,475)
Accounts payable....................................... 234,354
Accrued liabilities.................................... 286,461
-----------
Net cash used in operating activities....................... (3,640,317)
INVESTING ACTIVITIES:
Purchase of available-for-sale investments.................. (6,533,661)
Purchases of furniture and equipment........................ (227,006)
-----------
Net cash used in investing activities....................... (6,760,667)
FINANCING ACTIVITIES:
Proceeds from notes payable to related party................ 200,000
Payments on notes payable to related party.................. (81,500)
Proceeds from issuance of common stock...................... 380,500
Net proceeds from issuance of Series A Convertible Preferred
Stock..................................................... 32,184,406
-----------
Net cash provided by financing activities................... 32,683,406
-----------
Net increase in cash and cash equivalents................... 22,282,422
Cash and cash equivalents at the beginning of the period --
-----------
Cash and cash equivalents at the end of the period.......... $22,282,422
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 9,460
===========
NON-CASH FINANCING ACTIVITY:
Issuance of common stock to retire notes payable to related
party..................................................... $ 118,500
===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 90
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
GMP Companies, Inc. (the "Company") is a development stage company formed
on May 17, 1999 to identify, acquire, develop and commercialize innovative
technologies for the health care market. The Company acquires technologies
through operating subsidiaries that are focused on a particular product
candidate or group of related product candidates. The Company's subsidiaries are
supported, managed and funded by a shared corporate and administrative
infrastructure. The Company currently owns a significant majority interest in
each subsidiary company. Generally, a minority interest in each subsidiary is
issued to the institution or individual from whom the subsidiary acquired the
rights to the product candidates or technologies. Each subsidiary is included in
one of three divisions or operating segments: therapeutics, diagnostics or
devices. The operating results for each of these three segments include each
division's share of corporate infrastructure costs allocated based on the effort
expended by corporate personnel on behalf of the subsidiaries within a
particular division. In addition, a corporate and other segment includes the
results of financing activities and general and administrative expenses of our
corporate office not directly related to any particular subsidiary.
The Company is in the development stage and has neither realized any
operating revenues nor has any assurance of realizing any future operating
revenues. Since inception, the Company has been primarily involved in acquiring
and developing technologies, obtaining financing, hiring employees and
conducting research and development.
The accompanying consolidated financial information of the Company includes
the accounts of its wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The attribution of a portion of a subsidiaries' net loss to its
minority stockholders resulted in minority interest benefit of $2,850 for the
period from May 17, 1999 (date of inception) to December 31, 1999 which is
included in general and administrative expenses.
RESEARCH AND DEVELOPMENT
Research and development costs and the costs of obtaining licenses used in
research and development are expensed as incurred.
PATENT COSTS
Costs incurred in filing, maintaining and defending patents are expensed as
incurred. Such costs aggregated $253,811 in the period from May 17, 1999 (date
of inception) to December 31, 1999 and are included in research and development
expense.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
INVESTMENTS
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. These investments are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("SFAS 115"). The Company has
classified all short-term investments as
F-7
<PAGE> 91
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. Realized gains and losses are included in
investment income and are determined on a first-in, first-out basis (see Note
4).
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets ranging
from three to seven years.
STOCK-BASED COMPENSATION
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123") sets
forth accounting and reporting standards for stock-based employee compensation
plans (see Note 5). As permitted by SFAS 123, the Company accounts for stock
option grants in accordance with Accounting Principle Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations. Under APB 25, no compensation expense is recognized for stock
or stock options issued to employees at fair market value.
We account for equity instruments issued to nonemployees in accordance with
the provisions of SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No.
96-18 Accounting for Equity Instruments that Are Issued to Other than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services.
The compensation expense related to grants that do not vest immediately is
amortized over the vesting period of the stock options using the graded vesting
method as that methodology most closely approximates the way in which those
options are earned by the option holder. The graded vesting method provides for
vesting of each portion of the overall award over its respective vesting period,
and results in higher vesting in earlier years than straight-line vesting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that subject the Company to concentration of credit
risk consist primarily of cash, cash equivalents and short-term investments.
Such assets are maintained by high credit quality, third party financial
institution custodians. The carrying values reported in the balance sheet for
cash, cash equivalents and short-term investments approximate their fair values.
Cash equivalents of $12,516,857 as of December 31, 1999 consist primarily
of investments in short-term U.S. corporate notes. The Company's cash
equivalents include a concentration of 52% in the discounted notes of three
issuers: Federal Home Loan Mortgage Corporation (26%), Federal National Mortgage
Association (16%) and Federal Home Loan Bank (10%).
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with SFAS No. 109, Accounting for Income Taxes.
COMPREHENSIVE INCOME
The reporting and display of comprehensive income and its components in a
full set of general purpose financial statements are required under the SFAS No.
130, Reporting Comprehensive Income ("SFAS 130"). This standard requires that
all items recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The
F-8
<PAGE> 92
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company has not presented a statement of comprehensive income as there are no
additional components of comprehensive income to be presented.
2. NET LOSS PER SHARE
Net loss per share has been computed according to SFAS No. 128, Earnings
Per Share ("SFAS 128"), which requires disclosure of basic and diluted earnings
per share. Basic earnings per share excludes any dilutive effects of options,
shares subject to repurchase, warrants, and convertible securities. Diluted
earnings per share includes the impact of potentially dilutive securities. The
Company's potentially dilutive securities are antidilutive and, therefore, are
not included in the computation of weighted-average shares used in computing
diluted loss per share. Following the guidance given by the Securities and
Exchange Commission, common stock and preferred stock that has been issued or
granted for nominal consideration prior to the anticipated effective date of the
initial public offering must be included in the calculation of basic and diluted
net loss per common share as if these shares had been outstanding for all
periods presented. The Company has not issued or granted shares for nominal
consideration since its formation.
Pro forma net loss per share was computed by dividing the net loss by the
weighted average number of shares of common stock outstanding plus the
conversion of a combined 10,450,000 shares of Series A and Series B Convertible
Preferred Stock into common stock, which will occur upon consummation of the
Company's initial public offering, retroactive to the date of issuance.
The following is a reconciliation of the numerator and denominator of basic
and diluted net loss per share amounts:
<TABLE>
<CAPTION>
PERIOD FROM MAY 17, 1999
(DATE OF INCEPTION)
THROUGH DECEMBER 31, 1999
-------------------------
<S> <C>
Basic and diluted:
Net loss.................................................. $(4,160,080)
===========
Weighted average shares used in computing basic and
diluted net loss per share............................. 4,762,314
===========
Net loss per share -- basic and diluted................... $ (0.87)
===========
Pro forma basic and diluted:
Shares used above......................................... 4,762,314
Pro forma adjustment to reflect weighted average effect of
assumed conversion of preferred stock.................. 3,041,922
-----------
Total weighted average shares of common stock outstanding
pro forma.............................................. 7,804,236
===========
Pro forma net loss per share -- basic and diluted........... $ (0.53)
===========
</TABLE>
During the period from May 17, 1999 (date of inception) through December
31, 1999, the Company had securities outstanding which could potentially dilute
basic earnings per share in the future, but were excluded from the computation
of diluted net loss per share, as their effect would have been antidilutive.
These outstanding securities consist of the following at December 31, 1999:
<TABLE>
<S> <C>
Convertible (at one share for one share) preferred stock.... 6,450,000
Outstanding options......................................... 1,289,500
----------
Total............................................. 7,739,500
==========
Weighted average exercise price of options per share........ $ 1.98
==========
</TABLE>
F-9
<PAGE> 93
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. RELATED PARTY TRANSACTIONS
In May and June 1999, the Company entered into convertible promissory notes
bearing interest at a rate of 6% per annum with the Chairman of the Board of
Directors of the Company for aggregate proceeds of $200,000. The notes were
convertible into common stock of the Company and, in June 1999, the Company
retired $118,500 of the notes by issuing 1,185,000 common shares. In September
1999, the Company retired the remaining notes by repaying $81,500.
Effective August 1999, the Company purchased approximately 81% of the
outstanding common stock of Global Vascular Concepts, Inc. ("GVC") for $250,000
payable to GVC plus the assumption of $182,551 of net liabilities. The assets
and liabilities transferred were accounted for at historical costs in a manner
similar to a pooling of interests accounting because prior to the combination,
the controlling group of stockholders of the Company also controlled GVC.
Additionally, the results of operations of the combined companies are reflected
as if the transaction had taken place at May 17, 1999. All significant
intercompany transactions and accounts have been eliminated in the combination.
The successor companies to GVC are GMP/Drug Delivery and GMP/Vascular.
In August 1999, the Company entered into consulting agreements with four of
the Company's directors to provide advice in the areas of product development
and market strategy. The agreements require the Company to pay each of the
directors amounts per month ranging from $6,250 to $10,417 over the term of the
agreements. The Company paid and expensed $104,166 under the agreements during
the period from May 17, 1999 (date of inception) through December 31, 1999.
In connection with assistance in arranging and structuring an offering of
the Company's Series A Convertible Preferred Stock (see Note 5), the Company
paid $1,518,000 to GMP Partners ("GMP Partners"). The three partners in GMP
Partners consist of two directors and an employee of the Company. This fee is
included in selling, general and administrative expenses for the period from May
17, 1999 (date of inception) through December 31, 1999.
4. SHORT-TERM INVESTMENTS
Short-term investments consist of debt securities classified as
available-for-sale and have maturities greater than 90 days and less than twelve
months from the date of acquisition. The Company has invested primarily in U.S.
corporate notes, all of which have a minimum investment rating of A. The Company
had no realized gains or losses from the sale of short-term investments for the
period ended December 31, 1999. The following table summarizes unrealized gains
and losses on the Company's investments as of December 31, 1999:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST LOSS GAIN VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Certificate of deposit............................. $4,000,000 $ -- $ -- $4,000,000
U.S. corporate notes............................... 2,041,118 -- -- 2,041,118
United Kingdom corporate note...................... 492,543 -- -- 492,543
---------- -------- -------- ----------
$6,533,661 $ -- $ -- $6,533,661
========== ======== ======== ==========
</TABLE>
5. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
In September 1999, the Company completed a private placement of 6,450,000
shares of its Series A Convertible Preferred Stock ("Series A") for $5.00 per
share. The Series A is convertible at the option of the holders in whole or in
part into common stock on a one-for-one basis and is automatically convertible
in
F-10
<PAGE> 94
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
whole upon the Company successfully completing an initial public offering at a
specified minimum price and offering level, a merger or at the written consent
of a majority of the holders of Series A. The holders of Series A vote together
with the holders of common stock as a single class on all actions to be taken by
the stockholders of the Company.
The Series A provides for a preference upon liquidation equal to the
purchase price plus all declared but unpaid dividends. Upon liquidation, the
remaining assets, if any, would be distributed ratably to the common
stockholders.
STOCK OPTIONS AND WARRANTS
In 1999, the Company adopted the GMP Companies, Inc. 1999 Stock Option Plan
(the "Plan") which, as amended, the Plan has 2,000,000 shares of the Company's
common stock reserved for grants to employees of the Company as well as outside
directors and consultants, of which 710,500 shares remain available for grant as
of December 31, 1999. The Company granted options to consultants for services
and recorded compensation expense of $133,432 for the period from May 17, 1999
(date of inception) through December 31, 1999. The Company's subsidiaries also
maintain separate stock option plans for their employees and directors.
These options generally vest 25% on the date of grant and the remainder
vest in equal monthly increments over 3 years and generally expire 10 years from
the dates of grant. Options issued to directors generally vest immediately.
Pro forma information regarding net loss per share is required by SFAS 123,
and has been determined as if the Company had accounted for its employee and
director stock options under the fair value method of SFAS 123. The fair values
for these options and the options granted under a subsidiary plan were estimated
at the date of grant using a Black-Scholes pricing model with the following
weighted average assumptions for 1999: risk-free interest rates of 6%;
volatility of .40; no dividend yield; and an expected life of an option of 5
years.
Option valuation models used under SFAS 123 were developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require input
of highly subjective assumptions. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
For purposes of SFAS 123 pro forma disclosures, the estimated fair values
of the options granted to employees are amortized to expense over the vesting
period. The weighted average fair value per option granted in 1999 was $0.88.
The Company's pro forma net loss for the period from May 17, 1999 (date of
inception) through December 31, 1999 is approximately $(4,684,000). Pro forma
net loss per share -- basic and diluted is $(0.98).
A summary of the Company's stock options and warrants granted to employees
and directors, and related information follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at May 17, 1999 (date of inception)............ -- $ --
Granted.................................................... 1,289,500 $1.98
--------- -----
Outstanding at December 31, 1999........................... 1,289,500 $1.98
--------- -----
Exercisable at December 31, 1999........................... 637,417 $2.00
========= =====
</TABLE>
F-11
<PAGE> 95
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes information about stock options granted to
employees and directors that are outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED REMAINING OPTIONS WEIGHTED
RANGE OF OUTSTANDING AT AVERAGE CONTRACTUAL LIFE EXERCISABLE AT AVERAGE
EXERCISE PRICES DECEMBER 31, 1999 EXERCISE PRICE IN YEARS DECEMBER 31, 1999 EXERCISE PRICE
--------------- ----------------- -------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
$1.00................ 974,000 $1.00 9.5 478,813 $1.00
$5.00................ 315,500 5.00 9.9 158,604 5.00
--------- -------
1,289,500 1.98 9.6 637,417 2.00
========= =======
</TABLE>
6. INCOME TAXES
The Company has net operating loss carryforwards of approximately
$2,383,000 at December 31, 1999 which, for income tax purposes, substantially
expire in 2019. The utilization of the net operating loss carryforwards may be
limited in future years due to changes in ownership of the Company pursuant to
Internal Revenue Code Section 382. For financial reporting purposes, a valuation
allowance has been recognized to reduce the net deferred tax assets to zero due
to uncertainties with respect to the Company's ability to generate taxable
income in the future sufficient to realize the benefit of deferred income tax
assets.
Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income tax assets and liabilities as of December 31, 1999
are as follows:
<TABLE>
<S> <C>
Deferred income tax assets:
Net operating loss carryforwards.......................... $905,720
Intangible assets capitalized for tax purposes............ 37,156
Accrued liabilities....................................... 10,347
Charitable contribution................................... 3,800
Depreciation.............................................. 663
--------
957,686
Valuation allowance for deferred income tax assets........ (957,686)
--------
Net deferred income tax assets.............................. $ --
========
</TABLE>
A reconciliation of the provision for income taxes to the federal statutory
rate for the period from May 17, 1999 (date of inception) to December 31, 1999
is as follows:
<TABLE>
<S> <C>
Tax benefit at statutory rate............................... $(1,377,027)
State tax, net of federal benefit........................... (160,383)
Amount paid to GMP Partners LP.............................. 576,840
Other....................................................... 2,884
Valuation allowance......................................... 957,686
-----------
$ --
===========
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31, 1999:
<TABLE>
<S> <C>
Salaries, consulting and benefits........................... $182,563
Legal fees.................................................. 101,526
Other....................................................... 2,372
--------
$286,461
========
</TABLE>
F-12
<PAGE> 96
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS
In 1999, the Company entered into leases for office facilities in Georgia
and for two locations in Florida. The following is a schedule of future minimum
lease payments required under those leases which have initial or remaining terms
of one year or more at December 31, 1999:
<TABLE>
<CAPTION>
OPERATING
LEASE
PAYMENTS
---------
<S> <C>
2000........................................................ $167,600
2001........................................................ 88,700
2002........................................................ 76,200
2003........................................................ 71,500
--------
Total minimum lease payments...................... $404,000
========
</TABLE>
Rent expense aggregated $89,957 for the period from May 17, 1999 (date of
inception) through December 31, 1999.
In connection with the lease of office space in Georgia, the Company has
provided an irrevocable standby letter of credit of approximately $151,000 as a
guarantee of the Company's performance under the lease. The standby letter of
credit amount decreases by the amount of payments made under the lease and was
reduced to approximately $115,000 as of December 31, 1999.
The Company has entered into letters of intent and is currently negotiating
license agreements related to certain technology which may obligate the Company
to fund up to $7 million associated with the development of such technology and
an additional $3 million upon reaching milestones as specified in the agreement.
9. SEGMENT INFORMATION
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131") requires the reporting of segment information based on
the information provided to the Company's chief operating decision maker for
purposes of making decisions about allocating resources and assessing
performance. The Company's operations have been classified into four business
segments: (i) therapeutics, (ii) diagnostics, (iii) devices and (iv) corporate
and other. The therapeutics segment focuses on novel therapies for various
disease states. The diagnostics segment focuses on medical monitoring and
diagnosing technologies. The devices segment focuses on technologies that are
used in various medical environments to enhance treatment using devices that are
placed in or on the body. Corporate and other includes certain cash equivalents
and certain other assets which are not identifiable to the operations of the
Company's primary business segments.
F-13
<PAGE> 97
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The operating results for each of these three segments include each
division's share of corporate infrastructure costs allocated based on the effort
expended by corporate personnel on behalf of the particular subsidiary. In
addition, the corporate and other segment includes the results of financing
activities and general and administrative expenses of our corporate office not
directly related to any particular subsidiary. Summarized financial information
of the Company's operations by business segment after the elimination of
intercompany transactions follows:
<TABLE>
<CAPTION>
PERIOD FROM MAY 17, 1999
(DATE OF INCEPTION) THROUGH
DECEMBER 31, 1999
----------------------------
<S> <C>
Revenue:
Therapeutics.............................................. $ --
Diagnostics............................................... --
Devices................................................... --
Corporate and other....................................... --
-----------
Consolidated...................................... $ --
===========
Operating loss:
Therapeutics.............................................. $ (562,533)
Diagnostics............................................... --
Devices................................................... (1,140,078)
Corporate and other....................................... (2,893,605)
-----------
Consolidated...................................... $(4,596,216)
===========
Depreciation and amortization:
Therapeutics.............................................. $ --
Diagnostics............................................... --
Devices................................................... --
Corporate and other....................................... 13,246
-----------
Consolidated...................................... $ 13,246
===========
</TABLE>
Total assets of $29,177,573 as of December 31, 1999 and expenditures for
long-lived assets of $227,006 for the period from May 17, 1999 (Date of
Inception) through December 31, 1999 all pertained to the corporate and other
segment.
10. YEAR 2000 DATE CONVERSION (UNAUDITED)
In late 1999, the Company completed its remediation and testing of systems.
As a result of those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues, either with its products
under development, its internal systems, or the products and services of third
parties. The Company will continue to monitor its computer applications and
those of its suppliers and vendors throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
11. REINCORPORATION
The Company was originally a Georgia corporation and was reincorporated in
the State of Delaware under the name GMP Companies, Inc. on March 20, 2000. All
information in the financial statements assumes that the reincorporation in
Delaware was completed prior to December 31, 1999.
F-14
<PAGE> 98
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, STOCKHOLDERS' EQUITY
1999 2000 AT SEPTEMBER 30, 2000
------------ ------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $22,282,422 $114,557,492
Short-term investments......................... 6,533,661 --
Account receivable............................. -- 9,626
Interest receivable............................ 24,733 426,323
Prepaid expenses............................... 109,522 1,248,340
----------- ------------
Total current assets................... 28,950,338 116,241,781
Furniture, equipment and leasehold
improvements................................... 227,006 3,858,878
Less accumulated depreciation.................. 13,246 109,103
----------- ------------
Net furniture, equipment and leasehold
improvements................................ 213,760 3,749,775
Intangible asset (less accumulated amortization
of $120,000 as of September 30, 2000).......... -- 1,080,000
Other assets..................................... 13,475 --
----------- ------------
Total assets........................... $29,177,573 $121,071,556
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 234,354 $ 350,698
Accrued liabilities............................ 286,461 1,393,286
License fees payable........................... -- 2,000,000
Deferred revenue............................... -- 888,889
----------- ------------
Total current liabilities.............. 520,815 4,632,873
License fees payable............................. -- 200,000
Deferred revenue................................. -- 1,111,111
Minority interest................................ -- --
Stockholders' equity:
Preferred stock, $.01 par value, 20,000,000
shares authorized:
Series A Convertible Preferred Stock, $.01
par value; 6,450,000 shares designated,
issued and outstanding at December 31,
1999 and September 30, 2000 (unaudited),
liquidation preference $32,250,000; (none
pro forma)................................ 64,500 64,500 --
Series B Convertible Preferred Stock; $.01
par value; 4,000,000 shares designated,
issued and outstanding at September 30,
2000 (unaudited), liquidation preference
$72,000,000; (none pro forma)............. -- 40,000 --
Common stock, $.001 par value; 80,000,000
shares authorized; 4,990,000 and 5,987,227
shares issued and outstanding at December
31, 1999 and September 30, 2000 (unaudited);
(16,437,227 pro forma)...................... 4,990 5,987 $ 16,437
Additional paid-in capital..................... 32,747,348 135,518,309 135,612,359
Deficit accumulated during the development
stage....................................... (4,160,080) (20,501,224) (20,501,224)
----------- ------------ ------------
Total stockholders' equity............. 28,656,758 115,127,572 115,127,572
----------- ------------ ------------
Total liabilities and stockholders'
equity............................... $29,177,573 $121,071,556
=========== ============
</TABLE>
See accompanying notes.
F-15
<PAGE> 99
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
MAY 17, 1999
PERIOD FROM MAY 17, 1999 (DATE OF INCEPTION)
(DATE OF INCEPTION) TO NINE MONTHS ENDED TO
SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------ ------------------ ---------------------
<S> <C> <C> <C>
Revenue $ -- $ 14,626 $ 14,626
Expenses:
Research and development
(includes $0, $938,243 and $938,243)
of non-cash stock compensation) 592,942 11,612,232 12,734,256
Selling, general and administrative
(includes $87,134, $919,645 and $1,053,077)
of non-cash stock compensation) 2,370,595 8,261,923 11,736,115
------------ ------------- -------------
Total operating expenses 2,963,537 19,874,155 24,470,371
------------ ------------- -------------
Loss from operations (2,963,537) (19,859,529) (24,455,745)
------------ ------------- -------------
Other income:
Interest, net 124,126 3,518,385 3,954,521
------------ ------------- -------------
Net loss $ (2,839,411) $ (16,341,144) $ (20,501,224)
============ ============= =============
Net loss per share -- basic and diluted $ (0.62) $ (3.15) $ (4.10)
============ ============= =============
Weighted average shares outstanding -- basic and
diluted 4,609,416 5,190,884 4,995,770
============ ============= =============
Pro forma net loss per share -- basic and
diluted.......................................... $ (0.53) $ (1.14) $ (2.01)
============ ============= =============
Pro forma weighted average shares outstanding --
basic and diluted................................ 5,362,701 14,356,212 10,216,474
============ ============= =============
</TABLE>
See accompanying notes.
F-16
<PAGE> 100
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MAY 17, 1999 MAY 17, 1999
(DATE OF INCEPTION) TO NINE MONTHS ENDED (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
---------------------- ------------------ ----------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $(2,839,411) $(16,341,144) $(20,501,224)
Adjustments to reconcile net loss to net cash
used in operating activities:
Options issued for consulting services......... 87,134 1,857,888 1,991,320
Depreciation and amortization.................. 4,190 215,857 229,103
Minority interest.............................. (2,850) (12,650) (15,500)
Changes in operating assets and liabilities:
Accounts receivable.......................... -- (9,626) (9,626)
Interest receivable.......................... -- (401,590) (426,323)
Prepaid expenses............................. (7,406) (1,138,818) (1,248,340)
Other assets................................. -- 13,475 --
Accounts payable............................. 6,215 116,344 350,698
Accrued liabilities.......................... 30,219 634,475 923,786
License fees payable......................... -- 2,200,000 2,200,000
Deferred revenue............................. -- 2,000,000 2,000,000
----------- ------------ ------------
Net cash used in operating activities............ (2,721,909) (10,865,789) (14,506,106)
INVESTING ACTIVITIES:
Purchase of available-for-sale investments....... -- -- (6,533,661)
Maturity of available-for-sale investments....... -- 6,533,661 6,533,661
Purchases of furniture, equipment and leasehold
improvements................................... (124,852) (3,148,872) (3,375,878)
----------- ------------ ------------
Net cash (used in) provided by investing
activities..................................... (124,852) 3,384,789 (3,375,878)
FINANCING ACTIVITIES:
Proceeds from notes payable to related party..... 200,000 -- 200,000
Payments on notes payable to related party....... (31,500) -- (81,500)
Proceeds from issuance of common stock........... 380,500 28,273,716 28,654,216
Proceeds from issuance of subsidiary common
stock.......................................... -- 1,000,005 1,000,005
Net proceeds from issuance of Series A
Convertible Preferred Stock.................... 32,184,406 -- 32,184,406
Net proceeds from issuance of Series B
Convertible Preferred Stock.................... -- 70,482,349 70,482,349
----------- ------------ ------------
Net cash provided by financing activities........ 32,733,406 99,756,070 132,439,476
----------- ------------ ------------
Net increase in cash and cash equivalents........ 29,886,645 92,275,070 114,557,492
Cash and cash equivalents at the beginning of the
period......................................... -- 22,282,422 --
----------- ------------ ------------
Cash and cash equivalents at the end of the
period......................................... $29,886,645 $114,557,492 $114,557,492
=========== ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest........................... $ 9,265 $ -- $ 9,460
=========== ============ ============
NON-CASH FINANCING ACTIVITY:
Issuance of common stock to retire notes payable
to related party............................... $ 118,500 $ -- $ 118,500
=========== ============ ============
Stock issued and granted in connection with
development agreement.......................... $ -- $ 1,200,000 $ 1,200,000
=========== ============ ============
</TABLE>
See accompanying notes.
F-17
<PAGE> 101
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
PERIODS FROM MAY 17, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000 AND
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
GMP Companies, Inc. (the "Company") is a development stage company formed
on May 17, 1999 to identify, acquire, develop and commercialize innovative
technologies for the health care market. The Company acquires technologies
through operating subsidiaries focused on a particular product candidate or
group of related product candidates. The Company's subsidiaries are supported,
managed and funded by a shared corporate and administrative infrastructure. The
Company currently owns a significant majority interest in each subsidiary
company. Generally, a minority interest in each subsidiary is issued to the
institution or individual from whom the subsidiary acquired the rights to the
product candidates or technologies. Each subsidiary is included in one of three
divisions or operating segments: therapeutics, diagnostics or devices. The
operating results for each of these three segments include each divisions' share
of corporate infrastructure costs allocated based on the effort expended by
corporate personnel on behalf of the subsidiary. In addition, a corporate and
other segment includes the results of financing activities and general and
administrative expenses of our corporate office not directly related to any
particular subsidiary. The corporate and other segment also includes media
development services provided by the Company.
The Company is in the development stage and has realized limited operating
revenues. Since inception, the Company has been primarily involved in acquiring
technologies, obtaining financing, hiring employees and conducting research and
development.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of Company's management, necessary for a
fair presentation of the Company's financial position, results of operations and
cash flows for that period. The financial information for the nine months ended
September 30, 2000 may not be indicative of the results that may be expected for
the entire fiscal year ended December 31, 2000. These financial statements
should be read in conjunction with the audited financial statements and related
notes for the period from May 17, 1999 (date of inception) to December 31, 1999
beginning on page F-1 of this prospectus and "Management's Discussion and
Analysis of the Financial Condition and Results of Operations."
The accompanying consolidated financial information of the Company includes
the accounts of its wholly-owned and majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The attribution of a portion of a subsidiaries' net loss to its
minority stockholders resulted in minority interest benefit of $2,850 for the
period from May 17, 1999 (date of inception) to September 30, 1999, $12,650 for
the nine months ended September 30, 2000 and $15,500 for the period from May 17,
1999 (date of inception) to September 30, 2000. The minority interest benefit is
included in general and administrative expenses.
STOCK-BASED COMPENSATION
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123") sets
forth accounting and reporting standards for stock-based employee compensation
plans. As permitted by SFAS 123, the Company accounts for stock option grants in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"), and related interpretations. Under APB 25, no
compensation expense is recognized for stock or stock options issued to
employees at fair market value.
The Company accounts for equity instruments issued to nonemployees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
(EITF) Issue No. 96-18 Accounting for Equity
F-18
<PAGE> 102
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Instruments that Are Issued to Other than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.
The compensation expense related to grants that do not vest immediately is
amortized over the vesting period of the related stock options using the graded
vesting method as that methodology most closely approximates the way in which
those options are earned by the option holder. The graded vesting method
provides for vesting of each portion of the overall award over its respective
vesting period, and results in higher vesting in earlier years than
straight-line vesting.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Investments and Hedging Activities. SFAS 133
establishes a new model for accounting for derivatives and hedging activities
and supersedes several existing standards. SFAS 133, as amended by SFAS 137 and
SFAS 138, is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company does not expect that the adoption of SFAS 133 will
have a material impact on its financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
("SAB 101"), Revenue Recognition in Financial Statements. SAB 101 explains how
the SEC staff applies by analogy the existing rules on revenue recognition to
other transactions not covered by such rules. In March 2000, the SEC issued SAB
101A that delayed the original effective date of SAB 101 until the second
quarter of 2000 for calendar year companies. In June 2000, the SEC issued SAB
101B that further delayed the effective date of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. The
Company does not expect that the adoption of SAB 101 will have a material impact
on its financial statements.
2. UNAUDITED PRO FORMA INFORMATION
If the offering contemplated by this prospectus is consummated, all classes
of the preferred stock outstanding as of the closing date will be converted into
shares of common stock. The pro forma stockholders' equity as of September 30,
2000 reflects conversion of all preferred stock into 10,450,000 shares of common
stock.
Pro forma net loss per share was computed by dividing the net loss by the
weighted average number of shares of common stock outstanding plus the
conversion of a combined 10,450,000 shares of Series A and Series B Convertible
Preferred Stock into common stock, which will occur upon consummation of the
Company's initial public offering, retroactive to the date of issuance.
3. NET LOSS PER SHARE
Net loss per share has been computed according to the SFAS No. 128,
Earnings Per Share ("SFAS 128"), which requires disclosure of basic and diluted
earnings per share. Basic earnings per share excludes any dilutive effects of
options, shares subject to repurchase, warrants, and convertible securities.
Diluted earnings per share includes the impact of potentially dilutive
securities. The Company's potentially dilutive securities are antidilutive and,
therefore, are not included in the computation of weighted-average shares used
in computing diluted loss per share. Following the guidance given by the
Securities and Exchange Commission, common stock and preferred stock that has
been issued or granted for nominal consideration prior to the anticipated
effective date of the initial public offering must be included in the
calculation of basic and diluted net loss per common share as if these shares
had been outstanding for all periods presented. The Company has not issued or
granted shares for nominal consideration since its formation.
F-19
<PAGE> 103
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of the numerator and denominator of basic
and diluted net loss per share amounts:
<TABLE>
<CAPTION>
PERIOD FROM MAY 17, 1999 PERIOD FROM MAY 17, 1999
(DATE OF INCEPTION) NINE MONTHS (DATE OF INCEPTION)
THROUGH ENDED THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------ ------------------ ------------------------
<S> <C> <C> <C>
BASIC AND DILUTED:
Net loss.................... $(2,839,411) $(16,341,144) $(20,501,224)
=========== ============ ============
Weighted average shares used
in computing basic and
diluted net loss per
share..................... 4,609,416 5,190,884 4,995,770
=========== ============ ============
Net loss per share -- basic
and diluted............... $ (0.62) $ (3.15) $ (4.10)
=========== ============ ============
PRO FORMA BASIC AND DILUTED:
Shares used above........... 4,609,416 5,190,884 4,995,770
Pro forma adjustment to
reflect weighted average
effect of assumed
conversion of preferred
stock..................... 753,285 9,165,328 5,220,704
----------- ------------ ------------
Total weighted average
shares of common stock
outstanding pro
forma -- basic and
diluted................... 5,362,701 14,356,212 10,216,474
=========== ============ ============
Pro forma loss per share --
basic and diluted......... $ (0.53) $ (1.14) $ (2.01)
=========== ============ ============
</TABLE>
4. SALES OF SERIES B CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
In March 2000, the Company completed a private placement of 4,000,000
shares of its Series B Convertible Preferred Stock ("Series B") for $18.00 per
share raising $70,482,349 net of issuance costs. The Series B is convertible at
the option of the holders in whole or in part into common stock on a one-for-one
basis and is automatically convertible in whole upon the Company successfully
completing an initial public offering at a specified minimum price and offering
level, a merger or at the written consent of a majority of the holders of Series
B. The holders of Series B vote together with the holders of the Series A and
common stock as a single class on all actions to be taken by the shareholders of
the Company. The terms for the Series B and Series A provide for a preference
upon liquidation equal to the purchase price plus all declared but unpaid
dividends. Upon liquidation, the remaining assets, if any, would be distributed
ratably to the common shareholders.
In July and August 2000, the Company sold 991,195 shares of common stock
for an aggregate purchase price of $28,249,058. New investors to the Company
purchased 583,333 shares of common stock and the remaining 407,862 shares were
purchased by three significant shareholders who exercised their right to
maintain their pro rata ownership in the Company.
In August 2000, Motorola, Inc. purchased 66,667 shares of common stock of
GMP-Genetics for a purchase price of $1,000,005. In accordance with Staff
Accounting Bulletin No. 51, Accounting for Sales of Stock by a Subsidiary ("SAB
51"), this sale of stock by GMP-Genetics was accounted for as an equity
transaction in consolidation as realization is not assured as GMP-Genetics is a
development stage company.
F-20
<PAGE> 104
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LICENSE AGREEMENTS
In August 2000, the Company's subsidiary GMP/Genetics entered into an
agreement with Motorola under which GMP/Genetics agreed to process, on a
preferential basis, genetic specimens using GMP Conversion Technology
exclusively for customers of Motorola's BioChip systems. In addition, during the
27-month term of the agreement, GMP/Genetics also agreed, subject to certain
exceptions, not to process genetic specimens for subsequent use with any other
biological microarray technologies except for research purposes. In exchange for
these agreements, Motorola paid GMP/Genetics $2,000,000.
In March 2000, the Company formed GMP/Wireless Medicine to develop multiple
wireless sensor technologies that were invented by Motorola. In May 2000,
GMP/Wireless executed a license and cross license agreement with Motorola which
was amended in July 2000. Under this agreement, as amended, Motorola licensed to
GMP/Wireless particular patent rights to wireless technologies for use in
hospitals, health care provider offices, medical outpatient facilities and other
health and medical related facilities. In exchange for these patent rights,
GMP/Wireless paid Motorola $1,000,000 upon signing the license agreement and has
agreed to make additional progress payments in the aggregate amount of
$3,500,000. GMP/Wireless also agreed to make royalty payments over the life of
the agreement on direct sales equal to 2% of net sales below $25,000,000, 2.5%
for net sales above $25,000,000 but less than $50,000,000, and 3% for net sales
above $50,000,000. If GMP/Wireless has a third party manufacture the products,
then royalties payable to Motorola will be an amount equal to 20% of
GMP/Wireless' gross margin from the sale of wireless products. If GMP/Wireless
chooses to sublicense the rights to the patents to a third party, then
GMP/Wireless will pay Motorola the greater of 20% of sublicense revenues
received by GMP/Wireless and half of the amount that Motorola would have
received if the sale had been made directly by GMP/Wireless. As partial
consideration for the license agreement, GMP/Wireless also issued 1,500,000
shares of its common stock, representing 15% of outstanding common stock, to
Motorola pursuant to a stock acquisition agreement.
GMP/Wireless granted Motorola an option to purchase 50,000 shares of the
Company's common stock at an exercise price of $18.00 per share. In addition,
beginning on the second anniversary of Food and Drug Administration and Federal
Communication Commission approval of the first GMP/Wireless product and
continuing for sixty days after that date, Motorola has the right to purchase an
amount of GMP/Wireless common stock that would increase Motorola's equity
interest in GMP/Wireless to 50% of GMP/Wireless' outstanding common stock. In
the event that the Company provides written notice to Motorola of its intent to
sell all of the assets or common stock of GMP/Wireless or conduct an initial
public offering of its securities or at any time between the fifth and tenth
anniversaries of the above described regulatory approval of GMP/Wireless
products, Motorola has the right to purchase from the Company an amount of
GMP/Wireless stock that would increase its equity ownership to 85% of
GMP/Wireless' outstanding common stock. The purchase price in each case would be
based on 105% of the fair market value of GMP/Wireless as agreed on by the
Company and Motorola or, in the absence of agreement, as determined by
independent appraisers appointed by Motorola and the Company.
6. INTANGIBLE ASSET
In March 2000 GMP/Genetics entered into a five-year strategic development
agreement with NOVA Biomedical Corporation to develop a commercial laboratory on
the NOVA premises for the processing of specimens using our GMP Conversion
Technology. Under the terms of that agreement, NOVA managed the construction of
that laboratory. The Company's consideration for this agreement included
non-cash equity consideration valued at $1,200,000. Such amount was recorded as
an intangible asset and is being amortized on a straight-line basis over the
five-year term of the agreement.
F-21
<PAGE> 105
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS
The Company has entered into sponsored research and development agreements
related to certain technologies obligating the Company to fund approximately
$11,755,000 (of which $787,000 is due in fourth quarter 2000 and $6,576,000 is
due in 2001) for the development of such technologies and up to an additional
$6,250,000 upon reaching milestones as specified in the agreements. In addition,
in July 2000, GMP/Wireless Medicine also executed a technology development
agreement with Motorola. Under this agreement, GMP/Wireless Medicine has agreed
to make payments of up to $6,000,000 to fund research to further develop the
application of our wireless sensor technologies. In return, Motorola has agreed
to assign, staff and maintain a design team to conduct that research and
development and provide laboratory space dedicated to developing wireless sensor
applications. The Company's operating lease commitments of $3,500,000 are
payable through 2005 and primarily relate to the lease of facilities.
8. SEGMENT INFORMATION
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131") requires the reporting of segment information based on
the information provided to the Company's chief operating decision maker for
purposes of making decisions about allocating resources and assessing
performance. The Company's operations have been classified into four business
segments: (i) therapeutics, (ii) diagnostics, (iii) devices and (iv) corporate
and other. The therapeutics segment focuses on novel therapies for various
disease states. The diagnostics segment focuses on monitoring and diagnosing
technologies. The devices segment focuses on technologies that are used in
various medical environments to enhance treatment using devices that are placed
in or on the body. Corporate and other includes certain cash equivalents and
certain other assets which are not identifiable to the operations of the
Company's primary business segments and include the operations of the health
care media development services provided by the Company.
F-22
<PAGE> 106
GMP COMPANIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The operating results for each of these three segments include each
division's share of corporate infrastructure costs allocated based on the effort
expended by corporate personnel on behalf of the subsidiaries within a
particular division. In addition, the corporate and other segment includes the
results of financing activities and general and administrative expenses of our
corporate office not directly related to any particular subsidiary. Summarized
financial information of the Company's operations by business segment after the
elimination of intercompany transactions follows:
<TABLE>
<CAPTION>
PERIOD FROM MAY 17, 1999 NINE MONTHS PERIOD FROM MAY 17, 1999
(DATE OF INCEPTION) TO ENDED (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------ ------------------ ------------------------
<S> <C> <C> <C>
REVENUE:
Therapeutics........................ $ -- $ -- $ --
Diagnostics......................... -- -- --
Devices............................. -- -- --
Corporate and other................. -- 14,626 14,626
----------- ------------ ------------
Consolidated...................... -- $ 14,626 $ 14,626
=========== ============ ============
OPERATING LOSS:
Therapeutics........................ $ (303,318) $ (4,424,264) $ (4,986,797)
Diagnostics......................... -- (6,444,799) (6,444,799)
Devices............................. (393,438) (6,539,803) (7,679,881)
Corporate and other................. (2,266,781) (2,450,663) (5,344,268)
----------- ------------ ------------
Consolidated...................... $(2,963,537) $(19,859,529) $(24,455,745)
=========== ============ ============
DEPRECIATION & AMORTIZATION:
Therapeutics........................ $ -- $ -- $ --
Diagnostics......................... -- 120,000 120,000
Devices............................. -- 5,709 5,709
Corporate and other................. 4,190 90,148 103,394
----------- ------------ ------------
Consolidated...................... $ 4,190 $ 215,857 $ 229,103
=========== ============ ============
EXPENDITURES FOR LONG-LIVED ASSETS:
Therapeutics........................ $ -- $ 6,530 $ 6,530
Diagnostics......................... -- 2,945,735 2,945,735
Devices............................. -- 57,648 57,648
Corporate and other................. 124,852 621,959 848,965
----------- ------------ ------------
Consolidated...................... $ 124,852 $ 3,631,872 $ 3,858,878
=========== ============ ============
</TABLE>
Total assets summarized by business segment are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1999 2000
------------------ -----------------
<S> <C> <C>
TOTAL ASSETS:
Therapeutics................................................ $ -- $ 199,030
Diagnostics................................................. -- 4,462,365
Devices..................................................... -- 51,939
Corporate and other......................................... 29,177,573 116,358,222
------------ ------------
Consolidated.............................................. $ 29,177,573 $121,071,556
============ ============
</TABLE>
F-23
<PAGE> 107
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHARES
GMP/COMPANIES, INC.
COMMON STOCK
[LOGO]
------------------
PROSPECTUS
, 2001
------------------
SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses, other than underwriting discounts and commissions, expected
to be incurred by us in connection with the issuance and distribution of the
securities being registered under this registration statement are estimated to
be as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 45,540
NASD filing fees............................................
The Nasdaq National Market listing fee......................
Printing and engraving expenses.............................
Accounting fees and expenses................................
Legal fees and expenses.....................................
Blue Sky fees and expenses (including legal fees)...........
Transfer Agent fees.........................................
Miscellaneous...............................................
--------
Total.............................................
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. Our restated certificate of incorporation
and our bylaws provide that we shall indemnify our directors and officers to the
fullest extent permitted by law.
Our restated certificate of incorporation further provides that our
directors will not be personally liable to us or any stockholder for monetary
damages for breach of fiduciary duty, except to the extent such exemption is not
permitted by law. Section 102 of the Delaware General Corporation Law provides
that officers and directors will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for:
- any breach of the their duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions or otherwise, we have been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Our bylaws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
such capacity, regardless of whether our bylaws would otherwise permit
indemnification for that liability. We are in the process of obtaining
directors' and officers' liability insurance which would indemnify our directors
and officers against damages arising out of claims which might be made against
them based on their negligent acts or omissions while acting in their capacity
as officers and directors.
II-1
<PAGE> 109
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities under the Securities Act.
Reference is made to the form of underwriting agreement filed as Exhibit 1.1
hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have issued the securities set forth below that were not registered under the
Securities Act.
(a) ISSUANCE OF CAPITAL STOCK
In May 1999, we issued 3,805,000 shares of our common stock, no par value,
for an aggregate purchase price of $380,500. In March 2000 we amended and
restated our charter to change the common stock par value from none to $.001 per
share. No underwriters were involved in this sale of these securities.
In June 1999, we issued 1,185,000 shares of our common stock, no par value,
in exchange for convertible promissory notes in the amount of $118,500 which we
had issued in May 1999.
In September 1999, we issued 6,450,000 shares of our Series A convertible
preferred stock, par value $1.00 per share, for an aggregate purchase price of
$32,250,000. In March 2000 we amended and restated our charter to change the
Series A convertible preferred stock par value from $1.00 per share to $.01 per
share. Upon the closing of this offering the shares of Series A convertible
preferred stock will automatically convert into 6,450,000 shares of common
stock. No underwriters were involved in this sale of these securities.
In March 2000, we issued 4,000,000 shares of our Series B convertible
preferred stock, par value $.01 per share, for an aggregate purchase price of
$72,000,000. Upon the closing of this offering the shares of Series B
convertible preferred stock will automatically convert into 4,000,000 shares of
common stock. Salomon Smith Barney was the placement agent for this offering.
In July and August 2000, we issued 991,195 shares of our common stock, par
value $.001 per share, for an aggregate purchase price of $28,249,058. No
underwriters were involved in those sales of securities.
The sales of capital stock were made in reliance upon the exemption from
registration under the Securities Act provided by Section 4(2) of the Securities
Act, and its related rules and regulations, regarding sales by an issuer not
involving a public offering. All of the foregoing are deemed restricted
securities for purposes of the Securities Act.
(b) GRANTS AND EXERCISES OF STOCK OPTIONS
As of September 30, 2000, we had granted options to employees, directors
and consultants under our 1999 Stock Option Plan, to purchase a total of
2,169,032 shares of common stock at a weighted average exercise price of $10.41
per share. Of these options, 6,032 have been exercised.
The issuance of options and the issuance of common stock upon the exercise
of these options was exempt from registration under the Securities Act either
pursuant to Rule 701 under the Securities Act, as a transaction pursuant to a
compensatory benefit plan, or pursuant to Section 4(2) of the Securities Act, as
a transaction by an issuer not involving a public offering. All of the foregoing
securities are deemed restricted securities for purposes of the Securities Act.
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<PAGE> 110
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------- --------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Restated Certificate of Incorporation*
3.2 -- Amended and Restated Bylaws*
5.1 -- Opinion of Greenberg Traurig, P.A.*
10.1 -- 1999 Stock Option Plan
10.2 -- Employment Agreement with Steve Gorlin*
10.3 -- Employment Agreement with Bart Chernow, M.D.*
10.4 -- License Agreement, dated as of January 31, 2000, by and
among GMP/Endotherapeutics, Inc., Medical College of Hampton
Roads d/b/a/ Eastern Virginia Medical School and McGill
University.+
10.5 -- Research Funding Agreement, dated January 31, 2000, by and
between GPM/Endotherapeutics, Inc. and Medical College of
Hampton Roads d/b/a/ Eastern Virginia Medical School.+
10.6 -- Patent and Know-How License Agreement, dated May 31, 2000,
between Global Oxycell, Inc. and the CENTRE NATIONAL DE
RECHERCHE SCIENTIFIQUE.+
10.7 -- Technology Transfer and Royalty Agreement, dated February
23, 2000, between GMP/Vision Solutions, Inc., and Dr. Mary
Lynch.+
10.8 -- Exclusive Patent License Agreement, dated as of February 22,
2000, between GMP/Tissue Engineering, Inc., Children's
Medical Center Corporation and Massachusetts Institute of
Technology.+
10.9 -- License Agreement, dated as of January 14, 2000, between
GMP/Genetics, Inc. and The Johns Hopkins University.+
10.10 -- Strategic Agreement for Professional Services Related to the
Management of GMP/Genetics, Inc., dated as of March 21,
2000, by and between GMP/Genetics, Inc. and Nova Biomedical
Corporation.
10.11 -- Technology Transfer and Royalty Agreement, dated February
23, 2000, between GMP/Thromboflex, Inc. and Dr. Jose
Venegas.+
10.12 -- Agreement for the Development of the Thromboflex System,
dated as of June 6, 2000, by and between GMP/Thromboflex,
Inc. and Nova Biomedical Corporation.
10.13 -- Amended and Restated License and Cross-License Agreement,
dated July 27, 2000, between GMP/Wireless Medicine, Inc. and
Motorola, Inc.
10.14 -- Exclusive License Agreement, as of dated May 25, 2000, by
and between GMP/Diagnostic/Prognostic Markers, Inc. and
Children's Medical Center Corporation, for the Moses
Laboratory.+
10.15 -- Exclusive License Agreement, dated as of May 25, 2000, by
and between GMP/Diagnostic/Prognostic Markers, Inc. and
Children's Medical Center Corporation, for the Zetter
Laboratory.+
10.16 -- Exclusive License Agreement, dated June 7, 2000, between
GMP/Diagnostic/Prognostic Markers, Inc. and The Burnham
Institute.+
10.17 -- Technology License Contract, dated May 26, 2000, between
GMP/Cardiac Care, Inc. and the Mayo Foundation for Medical
Education and Research.+
</TABLE>
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<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
------- --------
<S> <C> <C>
10.18 -- Shareholders' Agreement among GMP/Wireless Medicine, Inc.,
GMP/Companies, Inc. and Motorola, Inc.
10.19 -- Amended and Restated Investor's Agreement.
10.20 -- Strategic Agreement, dated as of July 15, 2000, by and
between Myriad Genetic Laboratories, Inc. and GMP/Genetics,
Inc.
10.21 -- Office Lease, dated November 15, 1999, by and between RSP II
Barnett Bank Plaza, Ltd., and Global Medical Products.
10.22 -- Distribution Agreement, dated as of August 22, 2000, by and
between Motorola, Inc. and GMP/Genetics, Inc.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Greenberg Traurig, P.A. (included in Exhibit
5.1)*
23.2 -- Consent of Ernst & Young LLP
24.1 -- Power of Attorney (set forth on the signature page of this
Registration Statement)
27.1 -- Financial Data Schedules (SEC use only)*
</TABLE>
---------------
* To be filed by amendment
+ Certain information in these exhibits has been omitted pursuant to a request
for confidential treatment filed with the SEC.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question 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.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
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<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida, on November 7, 2000.
GMP COMPANIES, INC.
By: /s/ BART CHERNOW, M.D.
------------------------------------
Bart Chernow, M.D.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures
appear below, constitute and appoint Bart Chernow, M.D., Chief Executive
Officer, President and Director, and Holger Weis, Chief Financial Officer and
Treasurer, and each of them individually, as their true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for them
in their names, places and steads, in any and all capacities, to sign any and
all amendments (including post effective amendments) to this registration
statement and any subsequent registration statement filed pursuant to Rule
462(b)under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and the other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power 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 they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVE GORLIN Chairman and Director November 7, 2000
-----------------------------------------------------
Steve Gorlin
/s/ BART CHERNOW, M.D. President, Chief Executive November 7, 2000
----------------------------------------------------- Officer and Director
Bart Chernow, M.D. (Principal Executive
Officer)
/s/ HOLGER WEIS Chief Financial Officer and November 7, 2000
----------------------------------------------------- Treasurer (Principal
Holger Weis Financial and Accounting
Officer)
/s/ CHARLES L. BROWN, III, M.D. Director November 7, 2000
-----------------------------------------------------
Charles L. Brown, III, M.D.
/s/ NICOLAS A.F. CHRONOS, M.D. Director November 7, 2000
-----------------------------------------------------
Nicolas A.F. Chronos, M.D.
/s/ MARTIN FLEISHER, PH.D. Director November 7, 2000
-----------------------------------------------------
Martin Fleisher, Ph.D.
</TABLE>
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<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ M. JUDAH FOLKMAN, M.D. Director November 7, 2000
-----------------------------------------------------
M. Judah Folkman, M.D.
/s/ RUDYARD L. ISTVAN Director November 7, 2000
-----------------------------------------------------
Rudyard L. Istvan
/s/ DAVID HUNG, M.D. Director November 7, 2000
-----------------------------------------------------
David Hung, M.D.
/s/ JOHN J. HUNTZ, JR. Director November 7, 2000
-----------------------------------------------------
John J. Huntz, Jr.
/s/ B. KRISTINE JOHNSON Director November 7, 2000
-----------------------------------------------------
B. Kristine Johnson
/s/ SPENCER B. KING, III, M.D. Director November 7, 2000
-----------------------------------------------------
Spencer B. King, III, M.D.
/s/ ROBERT S. LANGER, SC.D Director November 7, 2000
-----------------------------------------------------
Robert S. Langer, Sc.D
/s/ JOSEPH P. VACANTI Director November 7, 2000
-----------------------------------------------------
Joseph P. Vacanti
/s/ JAMES B. WILLIAMS Director November 7, 2000
-----------------------------------------------------
James B. Williams
</TABLE>
II-6
