<PAGE>
As filed with the Securities and Exchange Commission on January 13, 1998
Registration No. 333-42763
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------
SYNBIOTICS CORPORATION
(Exact name of Registrant as specified in its charter)
California 95-3737816
(State or other juris- (I.R.S. Employer
diction of incorpo- Identification No.)
ration or organization)
11011 Via Frontera
San Diego, California 92127
(619) 451-3771
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Kenneth M. Cohen
President and Chief Executive Officer
SYNBIOTICS CORPORATION
11011 Via Frontera, San Diego, California 92127
(619) 451-3771
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copy to:
Hayden J. Trubitt, Esq.
BROBECK, PHLEGER & HARRISON LLP
550 West C Street, Suite 1300
San Diego, California 92101
------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title of each class of Offering Price Aggregate
securities to be registered Amount to be Registered Per Share (1) Offering Price (1) Amount of Registration Fee (1)
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<S> <C> <C> <C> <C>
Common Stock 759,018 Shares $3.13 $2,375,726 $700.84
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</TABLE>
(1) Estimate based on the average of the high and low prices of the Registrant's
Common Stock as reported by the Nasdaq National Market on December 12, 1997
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended. Fee previously paid with original filing.
______________________
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
SYNBIOTICS CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................... 2
Information Incorporated by Reference.................... 2
The Company.............................................. 3
Forward-Looking Statements............................... 3
Risk Factors............................................. 3
Use of Proceeds.......................................... 7
Selling Shareholder...................................... 7
Plan of Distribution..................................... 9
Legal Matters............................................ 10
Indemnification.......................................... 10
</TABLE>
<PAGE>
759,018 Shares
SYNBIOTICS CORPORATION
Common Stock
This Prospectus relates to the public offering, which is not being underwritten,
of 759,018 shares of Common Stock, no par value per share (the "Shares"), of
Synbiotics Corporation ("Synbiotics" or the "Company"). All of these Shares are
held and may be offered by Merial Limited, a shareholder of the Company, whose
predecessor (Rhone Merieux S.A.S.) received such Shares pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") provided by Section 4(2) thereof, in connection with
Synbiotics' acquisition of a business unit of Rhone Merieux S.A.S. in July 1997
(the "Acquisition"). As used herein, the term "Selling Shareholder" refers to
Rhone Merieux S.A.S. when reference is being made to the time of the
Acquisition, and to Merial Limited when reference is being made to the present.
As part of the purchase price in the Acquisition, Synbiotics issued the Shares
to the Selling Shareholder. The Shares are being registered by the Company
pursuant to a Stock Restriction and Rights Agreement executed in connection with
the Acquisition. See "The Company" and "Selling Shareholder."
The sale of the Shares may be effected by the Selling Shareholder from time to
time in transactions in the over-the-counter market, in negotiated transactions
or a combination of such methods of sale, at fixed prices which may be changed,
at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholder may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concession or
commission from the Selling Shareholder and/or the purchasers of the Shares for
whom such broker-dealers may act as agents or to whom they may sell as
principals or both (which compensation as to a particular broker-dealer might be
in excess of customary commissions). It is not possible at the present time to
determine the price to the public in any sale of the Shares by the Selling
Shareholder and the Selling Shareholder reserves the right to accept or reject,
in whole or in part, any proposed purchase of Shares. Accordingly, the public
offering price and the amount of any applicable underwriting discounts and
commissions will be determined at the time of such sale by the Selling
Shareholder. Substantially all costs, expenses and fees incurred in connection
with the registration of the Shares, estimated to be approximately $17,700, are
being borne by the Company, but all selling and other expenses incurred by the
Selling Shareholder will be borne by the Selling Shareholder. See "Plan of
Distribution."
None of the proceeds from the sale of the Shares by the Selling Shareholder will
be received by the Company, unless the price per share received is over $5.00,
in which case Synbiotics could under certain circumstances receive a portion of
such excess proceeds. See "Plan of Distribution." The Company has agreed,
among other things, to bear certain expenses (other than fees and expenses of
counsel and discounts, commission and brokerage commissions and fees) in
connection with the registration and sale of the Shares being offered by the
Selling Shareholder. See "Selling Shareholder."
Synbiotics Common Stock is traded on the Nasdaq National Market ("Nasdaq
National Market") under the symbol "SBIO." On November 30, 1997, the closing
sale price of Synbiotics Common Stock as reported on the Nasdaq National Market
was $3.38 per share.
The Selling Shareholder and any broker-dealers, agents or underwriters that
participate with the Selling Shareholder in the distribution of Shares may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
_______________
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 3 FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_______________
The date of this Prospectus is January 13, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, the Selling Shareholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares to any person or by anyone
in any jurisdiction in which such offer or solicitation may not lawfully be
made.
AVAILABLE INFORMATION
Synbiotics is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as applicable to small business
issuers such as Synbiotics, and in accordance therewith files annual and
quarterly reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information may be inspected at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
Commission's regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048; and at Northwest Atrium Center, 500 West Madison Street, Room 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained at
prescribed rates at the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a World Wide Web
site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Common Stock of the Company is traded on
the Nasdaq National Market and such reports, proxy and information statements
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement. The Registration
Statement may be inspected at the public reference facilities maintained by the
Commission at the addresses set forth in the preceding paragraph. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (Commission
File No. 0-11303) are hereby incorporated by reference in this Prospectus:
(1) The Annual Report of the Company on Form 10-KSB for the fiscal year
ended December 31, 1996;
(2) The Quarterly Reports of the Company on Form 10-QSB for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and
(3) The Company's Registration Statement on Form 8-A filed with the Commission
on November 14, 1983 and declared effective on January 13, 1984 pursuant to
Section 12 of the Exchange Act, in which there is described the terms,
rights and provisions applicable to the Company's Common Stock.
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<PAGE>
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon written or oral request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into such document). Requests for such documents should be submitted
in writing to the Secretary, at Synbiotics Corporation, 11011 Via Frontera, San
Diego, California 92127 or by telephone at (619) 451-3771.
THE COMPANY
Synbiotics Corporation is a leading provider of rapid diagnostic and laboratory
diagnostic products for the animal health care industry, including canine
reproduction diagnostic products and services, PennHIP(R) (a diagnostic test for
canine hip dysplasia) and nutritional supplements marketed to breeders and
owners of purebred dogs and their veterinarians. The Company also markets a line
of vaccine products. Synbiotics was founded in 1982 to research and develop
monoclonal antibody-based diagnostic and therapeutic products. In the early
years, the Company, like most biotechnology firms, was focused on developing
therapeutics for human diseases. The high cost of human drug development,
coupled with the lengthy FDA approval process, motivated Synbiotics to begin
commercializing its technology through the less restrictive animal health care
market. Synbiotics is one of a small number of companies that focuses
exclusively on animal health and is the second largest provider of diagnostic
products to the animal health market.
The Company's principal executive offices are located at 11011 Via Frontera, San
Diego, California 92127, and its telephone number is (619) 451-3771.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements that are based on current expectations, estimates and
projections about the Company's industry, management's beliefs, and assumptions
made by management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict; therefore,
actual results may differ materially from those expressed or forecasted in any
such forward-looking statements. Such risks and uncertainties include those
noted in "Risk Factors" below and in the documents incorporated herein by
reference. The Company undertakes no obligation to update publicly any forward-
looking statements, whether as a result of new information, future events or
otherwise.
RISK FACTORS
An investment in the Shares involves a high degree of risk. In addition to the
other information contained in this Prospectus, the following risk factors
should be considered carefully in evaluating an investment in the Shares.
Patent Litigation Involving the Company's Canine Heartworm Diagnostic Products
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Barnes-Jewish Hospital of St. Louis (the "Hospital") has filed a lawsuit against
the Company claiming patent infringement and seeking unspecified damages. The
Hospital is the owner of a patent which the Hospital alleges
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<PAGE>
covers the Company's canine and heartworm diagnostic products. The Company is
also the owner of several patents which cover its canine heartworm diagnostic
products. The Company believes that it does not infringe the Hospital's patent,
and also believes that the Hospital's patent is invalid. However, in the event
that the Company were to lose the lawsuit or enter into an unfavorable
settlement agreement, there would be a materially adverse effect on the
Company's financial condition and results of operations. In addition, patent
litigation is likely to be costly and disruptive even if the Company were to
prevail in the litigation.
The Hospital had previously sued IDEXX Laboratories, Inc., the Company's primary
competitor for canine heartworm diagnostics, for patent infringement under the
Hospital's patent; IDEXX's defense involved an assertion that the patent is
invalid. On September 28, 1997, IDEXX announced a settlement of this suit for
$5,500,000 (an undisclosed portion of which represents royalties on prior sales)
and future royalties.
No Assurance that Acquired Businesses Can Be Successfully Combined
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There can be no assurance that the anticipated benefits of the acquisition of
the veterinary diagnostics business of Rhone Merieux S.A.S. ("RMD") (completed
in July 1997), the 1996 acquisition of the business of International Canine
Genetics, Inc. ("ICG"), or any other future acquisitions (collectively, the
"Acquired Business") will be realized. Acquisitions of businesses involve
numerous risks, including difficulties in the assimilation of the operations,
technologies and products of the Acquired Business, introduction of different
distribution channels, potentially dilutive issuances of equity and/or increases
in leverage and risk resulting from issuances of debt securities, the need to
establish internally operating functions which had been previously provided pre-
acquisition by a corporate parent, accounting charges, operating companies in
different geographic locations with different cultures, the potential loss of
key employees of the Acquired Business, the diversion of management's attention
from other business concerns and the risks of entering markets in which
Synbiotics has no or limited direct prior experience. In addition, there can be
no assurance that the acquisitions will not have a material adverse effect upon
Synbiotics' business, results of operations or financial condition, particularly
in the quarters immediately following the consummation of the acquisitions, due
to operational disruptions, unexpected expenses and accounting charges which may
be associated with the integration of the Acquired Business and Synbiotics.
Competition
- -----------
Competition in the animal health care industry is intense. Many competitors,
such as Pfizer Animal Health, Merial Animal Health (the successor to Rhone
Merieux) and IDEXX Laboratories, have substantially greater financial,
manufacturing, marketing and product research resources than the Company. Large
companies in particular have extensive expertise in conducting pre-clinical
testing for new products and in obtaining the necessary regulatory approvals to
market products. Competition is based on test sensitivity, accuracy and speed;
product price; and similar factors. IDEXX Laboratories requires its distributors
not to carry the products of competitors such as Synbiotics. There can be no
assurance that such competition will not adversely affect Synbiotics' results of
operations or ability to maintain or increase sales and market share.
History of Operating Losses; Accumulated Deficit
- ------------------------------------------------
Although the Company's operations were profitable for the nine month periods
ended September 30, 1997 and 1996 and for the year ended December 31, 1996, the
Company has had a history of losses. Synbiotics has incurred a consolidated
accumulated deficit of $9,202,000 at September 30, 1997, even after the release
in 1996 of a $7,158,000 valuation allowance related to deferred tax assets.
There can be no assurance that Synbiotics can generate sufficient revenue to
sustain profitability.
Reliance on Third Party Manufacturers
- -------------------------------------
Certain of Synbiotics' products (including its ICT Gold diagnostic kits and all
of its vaccines) are, and certain anticipated new products are expected to be,
manufactured by third parties under the terms of distribution and/or
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<PAGE>
manufacturing agreements. The ICT Gold products and feline leukemia virus
vaccine are licensed to Synbiotics by their respective outside manufacturers. In
the event that these third parties are unable (due to operational, licensing,
financial or other reasons) to supply Synbiotics with sufficient finished
products, Synbiotics would suffer significant disruption of its business.
Synbiotics has the right, under certain circumstances, pursuant to the
agreements to use alternate manufacturing sources. In some circumstances,
however, the Company would lack such a right.
If Synbiotics should encounter delays or difficulties in its relationship with
manufacturers, the resulting problems could have a material adverse effect on
Synbiotics.
Sales and Marketing
- -------------------
The Company's product distribution strategy results in a large percentage of
sales being to only a few customers. During the year ended December 31, 1996,
sales to two distributors totalled 37% of the Company's gross revenues. In
addition, RMD's products are presently sold through distributors. There can be
no assurance that Synbiotics will be able to establish an adequate sales and
marketing capability in any or all targeted markets or that it will be
successful in gaining market acceptance of its products. To the extent
Synbiotics enters into distributor arrangements, any revenues received by
Synbiotics will be dependent on the efforts of third parties and there can be no
assurance that such efforts will be successful. IDEXX Laboratories' requirement
that its distributors not carry the products of competitors such as Synbiotics
has induced certain distributors to stop doing business with Synbiotics in order
to carry IDEXX products instead. In addition, Synbiotics' sales of products, on
a private-label basis, toward the over-the-counter market may cause an adverse
reaction among Synbiotics' regular distributor and veterinarian customers.
Attraction and Retention of Key Employees
- -----------------------------------------
The success of Synbiotics is highly dependent, in part, on its ability to retain
highly qualified personnel, including senior management and scientific
personnel. Competition for such personal is intense and the inability to retain
additional key employees or the loss of one or more current key employees could
adversely affect Synbiotics. Although Synbiotics has been successful in
retaining required personnel to date, there can be no assurance that Synbiotics
will be successful in the future.
Reliance on New and Recent Products
- -----------------------------------
Synbiotics relies to a significant extent on new and recently developed
products, and expects that it will need to continue to introduce new products to
be successful in the future. There can be no assurance that Synbiotics will
obtain and maintain market acceptance of its products. With respect to future
products, there can be no assurance that such products will meet applicable
regulatory standards, be capable of being produced in commercial quantities at
acceptable cost or be successfully commercialized.
There can be no assurance that new products can be manufactured at a cost or in
quantities necessary to make them commercially viable. If Synbiotics were unable
to produce internally, or to contract for, a sufficient supply of its new
products on acceptable terms, or if it should encounter delays or difficulties
in its relationships with manufacturers, the introduction of new products would
be delayed, which could have a material adverse effect on Synbiotics.
Future Capital Needs; Uncertainty of Additional Funding
- -------------------------------------------------------
The development and commercialization of Synbiotics' products requires
substantial funds. Synbiotics' future capital requirements will depend on many
factors, including cash flow from operations, the need to finance further
acquisitions, if any, continued scientific progress in its products and
development programs, the cost of manufacturing scale-up, the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims, the
cost
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<PAGE>
involved in patent infringement litigation, competing technological and market
developments, and the cost of establishing effective sales and marketing
arrangements. Synbiotics anticipates that its existing available cash, cash
equivalents and short-term investments will be adequate to satisfy its current
capital requirements and fund its current operations, although any large
acquisition would require additional capital resources. There can be no
assurance that additional financing, if required, will be available on
acceptable terms or at all. If additional funds are raised by issuing equity
securities, further dilution to then existing shareholders may result. Debt
financing would result in increased leverage and risk. In July 1997 the Company
obtained $15,000,000 of debt financing from Banque Paribas, of which $11,493,000
was used in connection with the acquisition of RMD. The $15,000,000 included a
$5,000,000 revolving line of credit. However, draws on the line of credit are
subject to certain requirements and can be used only for certain purposes. If
adequate funds are not available, Synbiotics may be required, among other
things, to delay, scale back or eliminate one or more of its research and
development programs or seek to obtain funds through arrangements with
collaborative partners or others even if the arrangements would require
Synbiotics to relinquish certain rights to certain of its technologies, product
candidates or products that Synbiotics would not otherwise relinquish.
Seasonality
- -----------
Synbiotics has experienced some seasonality in its business, with sales highest
in December to April, the time period in which distributors purchase canine
heartworm diagnostic products to sell to veterinarians for the heartworm season.
There can be no assurance that such seasonality will not have a material adverse
impact on Synbiotics' operations.
Patents and Proprietary Technology
- ----------------------------------
Synbiotics generally has sought and will continue to seek to protect its
interests by treating its particular variations in the production of monoclonal
antibodies as trade secrets. Synbiotics also has pursued and intends to continue
aggressively to pursue protection for new products, new methodological concepts,
and compositions of matter through the use of patents and trademarks where
obtainable. At present, Synbiotics has been granted eleven U.S. patents.
There can be no assurance that Synbiotics will be issued any additional patents
or that, if any patents are issued, they will provide Synbiotics with
significant protection or will not be challenged. Even if such patents are
enforceable, Synbiotics anticipates that any attempt to enforce its patents
would be time consuming and costly. Moreover, the laws of some foreign countries
do not protect Synbiotics' proprietary rights in its products to the same extent
as do the laws of the United States.
The patent positions of biotechnology companies, including Synbiotics, are
uncertain and involve complex legal and factual issues. Additionally, the
coverage claimed in a patent application can be significantly reduced before the
patent is issued. As a consequence, there can be no assurance that any of
Synbiotics' future patent applications will result in the issuance of patents
or, if any patents issue, that they will provide significant proprietary
protection or will not be circumvented or invalidated. Because patent
applications in the United States are maintained in secrecy until patents issue
and publication of discoveries in the scientific or patent literature often lag
behind actual discoveries, Synbiotics cannot be certain that it was the first
inventor of inventions covered by its pending patent applications or that it was
the first to file patent applications for such inventions. Moreover, Synbiotics
may have to participate in interference proceedings declared by the U.S. Patent
and Trademark Office to determine priority of invention that could result in
substantial cost to Synbiotics, even if the eventual outcome is favorable to
Synbiotics. There can be no assurance that Synbiotics' patents would be held
valid by a court of competent jurisdiction. An adverse outcome of any patent
litigation could subject Synbiotics to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require Synbiotics
to cease using the technology in dispute. A patentholder has filed a lawsuit
asserting that the Company's key canine heartworm diagnostic tests infringe its
patent.
There can be no assurance that such patentholder or other third parties will not
assert other infringement claims against Synbiotics in the future or that any
such assertions will not result in costly litigation or require Synbiotics to
obtain a license to intellectual property rights of such parties. There can be
no assurance that any such licenses
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<PAGE>
would be available on terms acceptable to Synbiotics, if at all. Furthermore,
parties making such claims may be able to obtain injunctive or other equitable
relief that could effectively block Synbiotics' ability to further develop, or
commercialize, its products in the United States and abroad. Such claims could
result in the award of substantial damages. Defense of any lawsuit or failure to
obtain any such license could have a material adverse effect on Synbiotics.
Finally, litigation, regardless of outcome, could result in substantial cost to,
and a diversion of efforts by, Synbiotics.
Government Regulation
- ---------------------
Synbiotics' business is subject to substantial regulation by the United States
government. See "Business--Government Regulation" in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996, which is hereby
incorporated by reference. In addition, Synbiotics' operations may be subject to
future legislation and/or rules issued by domestic or foreign governmental
agencies with regulatory authority relating to Synbiotics' business. There can
be no assurance that Synbiotics will be found in compliance with any of the
various regulations to which it is subject.
For marketing outside the United States, Synbiotics will be subject to foreign
regulatory requirements in such foreign jurisdictions, which very widely from
country to country. There can be no assurance the Synbiotics will meet and
sustain compliance with any such requirements.
Products Liability and Insurance
- --------------------------------
The design, development and manufacture of Synbiotics' products involve an
inherent risk of product liability claims and associated adverse publicity.
Synbiotics has obtained liability insurance for potential product liability
associated with the commercial sale of its products. There can be no assurance,
however, that Synbiotics will be able to maintain such insurance. Although
Synbiotics currently maintains general liability insurance, there can be no
assurance that the coverage limits of Synbiotics' insurance policies will be
adequate. Product liability insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms or at all. A successful claim
brought against Synbiotics in excess of Synbiotics' insurance coverage could
have a material adverse effect upon Synbiotics.
Hazardous Materials
- -------------------
Synbiotics' research and development involves the controlled use of hazardous
materials, chemicals and various radioactive compounds. Although Synbiotics
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by local state and federal regulations, the
risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, Synbiotics could be
held liable for any damages that result and any such liability could exceed the
resources of Synbiotics. Synbiotics may incur substantial costs to comply with
environmental regulations.
USE OF PROCEEDS
All proceeds from the sale of the Shares will be for the account of the Selling
Shareholder, as described below, and the Company will not receive any of the
proceeds from the sale of the Shares, unless the price per share received is
over $5.00 per share, in which case the Company could under certain
circumstances receive a portion of such excess proceeds. Any monies so received
by the Company would be used for general working capital purposes. See "Selling
Shareholder" and "Plan of Distribution."
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SELLING SHAREHOLDER
The following table sets forth certain information regarding the Selling
Shareholder's beneficial ownership of the Company's Common Stock as of November
30, 1997. Except as a licensee/purchaser in bulk of feline leukemia virus
vaccine, and except for a variety of transitional and continuing commercial
relationships entered into as a part of the Acquisition, the Selling Shareholder
has not had a material relationship with the Company within the past three years
other than as a result of the ownership of the Shares. The numbers set forth in
the column "Number of Shares Being Offered" below constitute all of the Shares
that the Selling Shareholder may distribute in this offering; however, there are
currently no agreements, arrangements or understandings with respect to the sale
of any of the Shares and the table below assumes the sale of all Shares held by
the Selling Shareholder. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Shareholder may offer the
Shares for resale from time to time. See "Plan of Distribution."
The Selling Shareholder purchased the Shares in connection with the Acquisition
in July, 1997. In connection with the purchase of such Shares, the Selling
Shareholder represented that it was acquiring the Shares for investment and with
no present intention of distributing the Shares. The Company agreed to prepare
and file a registration statement upon the Selling Shareholder's one-time demand
and to bear all expenses other than fees and expenses of counsel for the Selling
Shareholder and discounts, commissions and brokerage commissions and fees. The
Selling Shareholder made such demand. Even though the Stock Restriction and
Rights Agreement limited the Selling Shareholder to a registration effected in
connection with a firm commitment underwritten offering, and the Selling
Shareholder has no arrangements for such a firm commitment underwritten
offering, the Company decided to waive such limitation and honor the demand for
registration. Accordingly, the Company filed with the Commission a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time.
The Stock Restriction and Rights Agreement also requires the Company to prepare
and file such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until all Shares offered
hereby have been sold pursuant thereto or until all remaining Shares could
immediately be sold pursuant to Rule 144 under the Securities Act.
The following table sets forth the name of the Selling Shareholder, the number
of shares of Synbiotics Common Stock owned beneficially by the Selling
Shareholder as of November 30, 1997, and the number of shares which may be
offered pursuant to this Prospectus.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Offering(1) Owned After Offering(2)
------------------------- ------------------------
Number of Shares
Selling Shareholder Number Percentage Being Offered(3) Number Percentage
- ---------------------- --------- ------------- ------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Merial Limited 759,018 9.3% 759,018 0 0.0%
</TABLE>
_______________
(1) The person named in the table has sole voting and sole investment
power with respect to all shares beneficially owned.
(2) This assumes that all Shares owned by the Selling Shareholder which are
offered hereby are sold. The Selling Shareholder reserves the right to
accept or reject, in whole or in part, any proposed purchase of Shares.
(3) The Selling Shareholder may offer less than the amount of Shares
indicated. No representation is made that any Shares will or will not
be offered for sale.
-8-
<PAGE>
Of the 759,018 Shares, 230,000 were issued into and are being held in escrow
subject to the satisfaction of certain contingencies related to the
commercialization of new products. The escrowed shares can be offered to the
public under the Registration Statement only if and when the contingencies are
satisfied and the shares are released from escrow to the Selling Shareholder.
PLAN OF DISTRIBUTION
The Shares offered hereunder may be sold from time to time by the Selling
Shareholder, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market or in the general
over-the-counter market or otherwise, at prices and on terms then prevailing or
related to the then-current market price, or in negotiated transactions. The
Shares may be sold to or through one or more broker-dealers, acting as agent or
principal, in underwritten offerings, block trades, agency placements, exchange
distributions, brokerage transactions or otherwise, or in any combination of
transactions.
At the time a particular offer of Shares is made, to the extent required, a
supplemental Prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from the Selling Shareholder, any
discounts, commissions and other items constituting compensation from the
Selling Shareholder and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
In connection with any transaction involving the Shares, broker-dealers or
others may receive from the Selling Shareholder, and may in turn pay to other
broker-dealers or others, compensation in the form of commissions, discounts or
concessions in amounts to be negotiated at the time (which compensation may be
in excess of customary commissions). Broker-dealers and any other persons
participating in a distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Act in connection with such distribution, and any such
commissions, discounts or concessions may be deemed to be underwriting discounts
or commissions under the Act.
Any or all of the sales or other transactions involving the Shares described
above, whether effected by the Selling Shareholder, any broker-dealer or others,
may be made pursuant to this prospectus. In addition, any Shares that qualify
for sale pursuant to Rule 144 under the Act may be sold under Rule 144 rather
than pursuant to this prospectus.
In order to comply with the securities laws of certain states, if applicable,
the Shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, if the Shares cease to be listed for trading in
the Nasdaq National Market or on a national securities exchange, in certain
states the Shares may not be sold unless they have been registered or qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.
Synbiotics and the Selling Shareholder may agree to indemnify certain persons,
including broker-dealers or others, against certain liabilities in connection
with any offering of the Shares, including liabilities under the Securities Act.
It is not possible at the present time to determine the price to the public in
any sale of the Common Stock by the Selling Shareholder. Accordingly, the public
offering price and the amount of any applicable underwriting discounts and
commissions will be determined at the time of such sale by the Selling
Shareholder. The Company will pay substantially all the expenses incident to the
registration, offering and sale of the Common Stock to the public by the Selling
Shareholder (currently estimated to be $17,700), other than fees, discounts and
commissions of underwriters, dealers or agents, if any, and transfer taxes.
Pursuant to the Stock Restriction and Rights Agreement entered into as part of
the Acquisition, under certain circumstances Synbiotics is entitled to receive a
portion of the sales price of the Shares to the extent such sales price exceeds
$5.00 per share. If the Shares are sold under the Registration Statement before
April 9, 1998, the Company
-9-
<PAGE>
is entitled to receive from the Selling Shareholder 75% of any such excess. If
the Shares are sold under the Registration Statement between April 9, 1998 and
January 9, 1999, the Company is entitled to receive from the Selling Shareholder
50% of any such excess. If the Shares are sold under the Registration Statement
between January 9, 1999 and July 9, 2001, the Company is entitled to receive
from the Selling Shareholder 25% of any such excess.
The Stock Restriction and Rights Agreement also provided for certain put and
call rights as to the Shares, but in accordance with the Stock Restriction and
Rights Agreement such put and call rights terminate when the indicated Shares
are sold pursuant to this Registration Statement.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the Company by
Brobeck, Phleger & Harrison LLP, San Diego, California.
INDEMNIFICATION
Section 317 of the California General Corporation Law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations. Under the Company's Articles of Incorporation,
the Company is authorized to provide indemnification of its agents (as defined
in Section 317 of the California Corporations Code) for breach of duty to the
Company and its shareholders through bylaw provisions or through agreements with
the agents, or both, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject to the limits on such
excess indemnification set forth in Section 204 of the California Corporations
Code. The Company has entered into such indemnification agreements with each of
its directors and officers.
Article VIII, Section A of the Bylaws of the Company provides that the Company
may indemnify any person who is or was a director, officer, employee or agent of
the Company, or any person who is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, subject to
certain limitations. In addition, expenses incurred by a director, officer,
employee or agent in defending a civil or criminal action, suit or proceeding by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Company may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company.
The Company's Articles of Incorporation provide that the liability of the
Company's directors for monetary damages shall be eliminated to the fullest
extent permissible under California law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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.
The above discussion of the Company's Articles of Incorporation and Bylaws and
of Section 317 of the California General Corporation Law is not intended to be
exhaustive and is qualified in its entirety by such Articles of Incorporation,
Bylaws and statute.
-10-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various costs and expenses to be paid by the
Company with respect to the sale and distribution of the securities being
registered. All of the amounts shown are estimates except the Securities and
Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 700
Printing Expenses*............................................. 1,000
Blue Sky Fees and Expenses*.................................... 0
Legal Fees and Expenses*....................................... 10,000
Accounting Fees and Expenses*.................................. 5,000
Miscellaneous*................................................. 1,000
-------
Total.................................................. $17,700
=======
</TABLE>
- ------------------------
*Estimated
Item 15. Indemnification of Directors and Officers
(a) Section 317 of the California General Corporation Law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations. Under the Company's Articles of
Incorporation, the Company is authorized to provide indemnification of its
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the Company and its shareholders through bylaw provisions
or through agreements with the agents, or both, in excess of the
indemnification otherwise permitted by Section 317 of the California
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the California Corporations Code. The Company has
entered into such indemnification agreements with each of its directors and
officers.
(b) Article VIII, Section A of the Bylaws of the Company provides that the
Company may indemnify any person who is or was a director, officer, employee
or agent of the Company, or any person who is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, subject to certain limitations. In addition, expenses incurred
by a director, officer, employee or agent in defending a civil or criminal
action, suit or proceeding by reason of the fact that he or she is or was a
director, officer, employee or agent of the Company may be paid by the
Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that he
or she is not entitled to be indemnified by the Company.
(c) The Company's Articles of Incorporation provide that the liability of the
Company's directors for monetary damages shall be eliminated to the fullest
extent permissible under California law.
II-1
<PAGE>
The above discussion of the Company's Articles of Incorporation, Bylaws and of
Section 317 of the California General Corporation Law is not intended to be
exhaustive and is qualified in its entirety by such Articles of Incorporation,
Bylaws and statute.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<C> <S>
4.1 Stock Restriction and Rights Agreement dated July 9, 1997, between the
Company and Rhone Merieux S.A.S. (incorporated by reference to Exhibit
10.65 to the Company's Form 10-QSB for the quarterly period ended
September 30, 1997).
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
</TABLE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to include any additional
or changed material information on the plan of distribution;
(2) That, for determining liability under the Securities Act, each such post-
effective amendment shall be treated as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
treated as the initial bona fide offering; and
(3) To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a 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
question has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 13th day of
January, 1998.
SYNBIOTICS CORPORATION
By /s/ KENNETH M. COHEN
-----------------------
Kenneth M. Cohen,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Kenneth M.
Cohen as attorney-in-fact, with the power of substitution, for him in any and
all capacities, to sign any amendment to this Registration Statement and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting to said attorney-in-fact
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kenneth M. Cohen Chief Executive Officer, January 13, 1998
- ------------------------- President and Director
Kenneth M. Cohen (Principal Executive Officer)
/s/ Michael K. Green Chief Financial Officer and January 13, 1998
- ------------------------- Vice President - Finance
Michael K. Green (Principal Financial Officer)
/s/ * Chief Accounting Officer and January 13, 1998
- ------------------------- Corporate Controller
Keith A. Butler (Principal Accounting Officer)
/s/ * Director January 13, 1998
- -------------------------
Patrick Owen Burns
/s/ * Director January 13, 1998
- -------------------------
James C. DeCesare
/s/ * Director January 13, 1998
- -------------------------
Brenda D. Gavin
/s/ * Director January 13, 1998
- -------------------------
M. Blake Ingle
/s/ * Director January 13, 1998
- -------------------------
Donald E. Phillips
*/s/ Kenneth M. Cohen
- -------------------------
(Kenneth M. Cohen,
Attorney-in-Fact)
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<C> <S>
4.1 Stock Restriction and Rights Agreement dated July 9, 1997, between the
Company and Rhone Merieux S.A.S. (incorporated by reference to Exhibit
10.65 to the Company's Form 10-QSB for the quarterly period ended
September 30, 1997.
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
</TABLE>
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
December 19, 1997
Synbiotics Corporation
11011 Via Frontera
San Diego, California 92127
Ladies and Gentlemen:
We have acted as counsel to Synbiotics Corporation, a California corporation
(the "Company"), in connection with the registration for resale of 759,018
shares of Common Stock (the "Shares"), as described in the Company's
Registration Statement on Form S-3 ("Registration Statement"), filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").
This opinion is being furnished in accordance with the requirements of Item 16
of Form S-3 and Item 601(b)(5)(i) of Regulation S-B under the Act.
We are familiar with the corporate proceedings taken by the Company in
connection with the issuance and sale of the Shares. It is our opinion that the
Shares are duly authorized, validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Prospectus which is part of the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
This opinion is expressed as of the date hereof and we disclaim any undertaking
to advise you of any subsequent changes in applicable law or in the facts stated
or assumed herein which may alter, affect or modify the opinion expressed
herein. Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company or the Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
-----------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 21, 1997 appearing on page 15 of Synbiotics Corporation's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
PRICE WATERHOUSE LLP
San Diego, California
December 19, 1997
