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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________
SCIOS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 95-3701481
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
___________
2450 BAYSHORE PARKWAY
MOUNTAIN VIEW, CALIFORNIA 94043-1173
(415) 966-1550
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
___________
JOHN H. NEWMAN
VICE PRESIDENT
SCIOS INC.
2450 BAYSHORE PARKWAY
MOUNTAIN VIEW, CALIFORNIA 94043-1173
(415) 966-1550
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
___________
COPIES TO:
ANDREI M. MANOLIU, ESQ.
MICHAEL R. JACOBSON, ESQ.
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
FIVE PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
(415) 843-5000
___________
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
___________
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. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
TITLE OF EACH
CLASS OF AMOUNT TO
SECURITIES TO BE BE PROPOSED MAXIMUM OFFERING PRICE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock
$0.001 par value . . . . . 1,263,200 $7.25 $9,158,200 $3,158.00(1)
</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of
computing the amount of the registration fee based on the average of the
high and low prices of the Company's Common Stock as reported on the
Nasdaq National Market on May 22, 1996.
___________
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 THAT 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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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 28, 1996
PROSPECTUS
SCIOS INC.
1,263,200 SHARES
COMMON STOCK
___________________
This Prospectus relates to 1,263,200 shares of Common Stock, par value
$.001 (the "Common Stock"), of Scios Inc. ("Scios" or the "Company")
which are being offered and sold by a certain stockholder of the Company (the
"Selling Stockholder"). The Selling Stockholder, directly or through
agents, broker-dealers or underwriters, may sell the Common Stock offered
hereby from time to time on terms to be determined at the time of sale, in
transactions on the Nasdaq National Market or in privately negotiated
transactions or in a combination of such methods of sale, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing prices or at negotiated prices. The
Selling Stockholder and any agents, broker-dealers or underwriters that
participate in the distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Act"), and any commission received by them and any profit on the
resale of the Common Stock purchased by them may be deemed to be underwriting
discounts or commissions under the Act. See "Selling Stockholder" and
"Plan of Distribution." The Company will not receive any proceeds from the
sale of shares by the Selling Stockholder.
The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "SCIO." The last reported sales price of the Company's
Common Stock on the Nasdaq National Market on May 24, 1996 was $7.75 per
share.
___________________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 5.
___________________
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.
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are $20,000. The Selling Stockholder has agreed
to reimburse these expenses up to an amount equal to $20,000 plus the
registration fee. See "Plan of Distribution." The aggregate proceeds to
the Selling Stockholder from the Common Stock will be the purchase price of
the Common Stock sold less the aggregate agents' commissions and
underwriters' discounts, if any.
The Company has agreed to indemnify the Selling Stockholder and certain
other persons against certain liabilities, including liabilities under the
Act.
_________, 1996
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), 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 and
copied at the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Room 1024, 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
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Common Stock of the Company is quoted on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.
Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the
Commission under the Act. This Prospectus does not contain all of the
information contained in such Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus regarding the contents of any
contract or any other documents are not necessarily complete and, in each
instance, reference is hereby made to the copy of such contract or document
filed as an exhibit to the Registration Statement. The Registration
Statement, including exhibits thereto, may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies of all or any
part thereof may be obtained from the Public Reference Section, Securities
and Exchange Commission, Washington, D.C., 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, including all material incorporated by reference therein;
and
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 filed on or about May 14, 1996.
(iii) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A as filed on June 19, 1990.
All documents 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 the offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference 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 subsequently-filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such 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, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are
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specifically incorporated by reference herein or into such documents). Such
request may be directed to Scios Inc., Attention: Corporate Secretary, 2450
Bayshore Parkway, Mountain View, California 94043-1173, telephone (415)
966-1550.
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THE COMPANY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDING "RISK FACTORS" APPEARING ELSEWHERE IN THIS PROSPECTUS
AND THE FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED IN THE COMPANY'S
ANNUAL REPORT (FORM 10-K) FOR THE YEAR ENDED DECEMBER 31, 1995, INCORPORATED
BY REFERENCE HEREIN (THE "ANNUAL REPORT"). EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" BEGINNING AT PAGE 6 OF THIS
PROSPECTUS AND THOSE DISCUSSED IN "MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" CONTAINED IN
THE ANNUAL REPORT, AS WELL THOSE DISCUSSED ELSEWHERE IN THE PROSPECTUS, THE
ANNUAL REPORT, AND ANY OTHER DOCUMENT INCORPORATED HEREIN PRIOR TO THE
TERMINATION OF THE OFFERING.
Scios is a biopharmaceutical company engaged in the discovery, development
and commercialization of novel human therapeutics. The Company focuses its
proprietary research and development efforts on products to treat acute
illnesses, primarily in the areas of cardiovascular and renal diseases, and
seeks to collaborate with corporate partners in the development of products
to treat chronic diseases. In addition to activities involving both
protein-based and small-molecule drug discovery and development, the Company
has a marketing and sales organization selling third-party products that
generate cash to help fund continued development of the Company's proprietary
products, none of which to date has been developed to the commercialization
stage.
The Company directs its resources towards the development of proprietary
products that address acute illnesses, primarily in the areas of
cardiovascular and renal diseases. The Company's lead products for acute
conditions are AURICULIN-Registered Trademark- anaritide for the treatment of
oliguric acute renal failure (acute renal failure in patients with abnormally
low urine output) which is being developed with Genentech, Inc. and
NATRECOR-Registered Trademark-BNP for the treatment of acute congestive heart
failure.
In May 1995, the Company announced the results of a 500-patient Phase III
clinical trial (the "ARF-Phase III") of AURICULIN-Registered Trademark- for
the treatment of acute renal failure in the broad population of acute renal
failure patients ("ARF"). The results of the ARF-Phase III showed no
significant reduction in the need for dialysis and no significant reduction
in mortality in the broad population of ARF patients. However, the ARF-Phase
III did show the potential for the use of AURICULIN-Registered Trademark-
anaritide for reduction in the need for dialysis in a prospectively-defined
subgroup of ARF patients (approximately 24% of the broad population of acute
renal failure patients) suffering from oliguric acute renal failure ("OARF"
trial). Treatment with AURICULIN-Registered Trademark- anaritide did not
reduce mortality in patients suffering from OARF.
Based upon the results of this study, discussions with the Food and Drug
Administration ("FDA"), and quantitative market research indicating that OARF
affects up to 80,000 patients in the United States each year, in October 1995
Scios initiated a Phase III clinical study of AURICULIN-Registered
Trademark-anaritide for the treatment of OARF (the "OARF-Phase III" trial).
As with all clinical studies, looking forward, there can be no assurance the
results of the OARF-Phase III will be similar to those achieved in the
ARF-Phase III or will otherwise be successful.
NATRECOR is currently in Phase II clinical studies for the treatment of
acute congestive heart failure. The Company is also continuing preclinical
studies of its anti-inflammatory compounds.
Therapies for chronic conditions, such as FIBLAST-TM- bFGF growth factor
for wound healing, insulinotropin for Type II diabetes and a treatment for
Alzheimer's disease, are being developed by corporate partners or by Scios
with funding from corporate partners. Under its arrangements with corporate
partners, Scios typically receives research and development funding, payments
for clinical supplies and/or milestone payments for achieving scientific and
clinical benchmarks. The Company also is entitled to royalties on commercial
sales of products and, in some cases, may receive additional revenues from
the manufacture of products.
Scios's financial strategy involves careful management of its cash through
targeted investment in its acute-care pipeline, while supporting these
efforts with cash flow from its commercial operations and from corporate
partner funded projects.
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Scios was formed through the September 1992 merger (the "Merger") of
Scios Inc., a Delaware corporation ("Scios"), and Nova Pharmaceutical
Corporation, a Delaware corporation ("Nova"). The Merger brought together
Scios' expertise in producing recombinant proteins with Nova's expertise in
synthesizing small molecules. As a result, Scios has capabilities in
molecular and cell biology, protein and medicinal chemistry, molecular
modeling, pharmacology and the bioprocessing sciences, and has the tools to
undertake the rational design of small molecules based on knowledge of the
associated design targets. The Company also acquired Nova's sales force and
a line of marketed psychiatric products which constitute the Company's
present commercial operations.
The Company was incorporated in California in 1981 under the name
California Biotechnology, Inc. and reincorporated in Delaware in 1988. The
Company changed its name to Scios Inc. in February 1992 and to Scios Nova
Inc. in September 1992 following the Merger and reverted to the name Scios
Inc. in March 1996. The principal executive offices of the Company are
located at 2450 Bayshore Parkway, Mountain View, California 94043. The
telephone number at that location is (415) 966-1550.
5
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RISK FACTORS
THE FOLLOWING ARE SIGNIFICANT RISK FACTORS THAT SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING THE COMMON STOCK OF SCIOS.
NO ASSURANCE OF SUCCESSFUL AND TIMELY PRODUCT DEVELOPMENT AND APPROVAL OF
PRODUCTS UNDER DEVELOPMENT
Scios focuses its product development efforts on proprietary therapeutics
for acute illnesses, principally in the areas of cardiovascular and renal
diseases. The Company's success will depend on its ability to achieve
scientific and technological advances and to translate such advances into
reliable, commercially competitive products on a timely basis. Scios's
products are at various stages of research and development and further
development and testing will be required to determine their technical
feasibility and commercial viability. Most of these products are not likely
to become commercially available, if at all, for several more years at the
earliest. The proposed development schedules for the Company's products may
be affected by a variety of factors, including technological difficulties,
proprietary technology of others, reliance on third parties for support and
changes in governmental regulation, many of which factors will not be within
the control of Scios. Of all the Company's potential products,
AURICULIN-Registered Trademark- anaritide, which is being developed with
Genentech, Inc., is at the most advanced stage of development. AURICULIN
anaritide originally had been developed by Scios as a treatment for the broad
population of ARF patients but proved ineffective in such application in the
ARF-Phase III trial. The Company currently is developing AURICULIN anaritide
for the treatment of OARF but there can be no assurance that the ongoing
OARF-Phase III trial will be successful. See "Risk Factors-Uncertainty
Regarding AURICULIN Anaritide" and "-Relationship with Genentech." Any
delay in the development, introduction or marketing of the Company's
potential products could result either in such products being marketed at a
time when their cost and performance characteristics would not be competitive
in the marketplace or in a shortening of their commercial lives.
UNCERTAINTY REGARDING AURICULIN ANARITIDE.
In May 1995, the Company announced the results of the ARF-Phase III trial.
Such study did not show any significant reduction in the need for dialysis or
mortality among the broad population of ARF patients. This study did show a
significant reduction in the need for dialysis among a prospectively-defined
subgroup of patients suffering from OARF but did not show a significant
reduction in mortality among this subgroup.
AURICULIN anaritide had originally been developed as a treatment for the
broad population of ARF patients and its failure in the ARF-Phase III trial
has had a material adverse effect on the market price of the Company's Common
Stock. Should AURICULIN anaritide fail to show a significant reduction in the
need for dialysis among, or the mortality rate of patients suffering from
OARF in the OARF-Phase III trial, such failure could have a similar material
adverse effect on the Company's Common Stock. There can be no assurance that
AURICULIN anaritide will show a significant reduction in the need for
dialysis among, or the mortality rate of, patients suffering from OARF.
DEPENDENCE ON THIRD PARTIES
The Company plans to continue the development of therapies for the
treatment of chronic conditions primarily under the sponsorship of corporate
partners. Continued funding and participation by the Company's corporate
partners under joint development and licensing agreements will depend not
only on the timely achievement of research and development objectives by the
Company, which cannot be assured, but also on each corporate partner's own
financial, competitive, marketing and strategic considerations. Scios also
may from time to time enter into collaborative arrangements involving the
licensing of certain rights to its acute care therapeutics. See "Risk
Factors-Relationship with Genentech." Under several of its joint
development and license agreements, Scios relies on its corporate partners to
conduct preclinical and clinical trials, to obtain regulatory approvals and
to manufacture and market products. Although the Company believes that its
corporate partners will have an economic incentive to meet their contractual
responsibilities, the amount and timing of resources devoted to these
activities generally will be controlled by the corporate partners.
Suspension or termination of its joint development agreements with
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certain of Scios's corporate partners or the failure of those partners to
meet their contractual responsibilities could have a material adverse effect
on the Company.
It is expected that, for at least the next several years, a portion of
Scios's total revenues will continue to be derived from collaborative
research agreements. Future collaborative research agreements entered into
by Scios, if any, may be subject to similar risks to those described in the
preceding paragraph. The inability of Scios to obtain new collaborative
research agreements or to retain those currently in effect might have a
material adverse effect on its future operations.
RELATIONSHIP WITH GENENTECH
In December 1994 the Company entered into a Collaboration Agreement (the
"Original Collaboration Agreement") with Genentech, Inc. relating to the
joint development and commercialization of AURICULIN anaritide for use in the
treatment of acute renal failure. The Original Collaboration Agreement was
amended in April 1996 to modify the timing of certain development timeframes
and milestones. Following the results of the ARF-Phase III clinical trials
in May 1995, the focus of the Company's and Genentech's efforts under the
Original Collaboration Agreement, as amended (the "Collaboration
Agreement") has been the development and commercialization of AURICULIN
anaritide for the treatment of OARF, a sub-category of ARF. The
Collaboration Agreement provides for co-promotion of AURICULIN anaritide in
the United States and Canada and gives Genentech exclusive marketing rights
in countries other than the United States and Canada (the "Licensed
Territory"). In addition to royalties on sales in the Licensed Territory,
Scios is to receive $30 million in milestone payments based upon regulatory
filings or approvals in the U.S. Under the Collaboration Agreement, the
Company will receive $15 million upon the submission of a New Drug
Application ("NDA") to the FDA to market AURICULIN, provided the submission
takes places on or before June 30, 1998. The remaining $15 million would be
paid to the Company upon the earlier of sales exceeding $100 million in a
twelve-month time period or January 1, 2001. Genentech has the option to
instead make a single $30 million payment upon FDA marketing approval if the
submission of the NDA takes place after June 30, 1998. Genentech may also be
required to make additional payments of up to $20 million upon obtaining
regulatory approvals and achieving certain sales levels in other designated
markets.
The Company will bear the development costs of AURICULIN anaritide until
the receipt of regulatory approval in North America. Thereafter, all costs
of development and promotion within North America will be shared equally
among the two parties. Genentech will bear all costs for development and
promotion within the Licensed Territory.
For the reasons set forth in "Risk Factors-Government Regulation: Need
for Regulatory Approval" there can be no assurance that the Company will
ever receive the requisite regulatory approvals to market the product and to
receive the milestone payments called for by the Collaboration Agreement. In
addition, for the reasons set forth in "Risk Factors-No Assurance of
Successful and Timely Development and Approval of Products Under
Development" and "-Uncertainty Regarding AURICULIN Anaritide" there can be
no assurance that any product developed under the Collaboration Agreement
will generate sufficient, if any, revenue (through milestone payments, sales,
royalties, or otherwise) to offset the development and promotion costs
incurred.
Before the Company can file an NDA for AURICULIN anaritide, Phase III
clinical trials must show significant clinical benefits in a given
application. AURICULIN anaritide did not show significant clinical benefits
in the treatment of the broad population of ARF patients in the ARF-Phase III
clinical trials. The Company currently is conducting the OARF-Phase III
clinical trials for the use of AURICULIN anaritide in the treatment of OARF.
There can be no assurance that the OARF-Phase III clinical trials will
show clinical benefits in the treatment of OARF or, if the OARF-Phase III
clinical trials do show clinical benefits in the treatment of OARF, that the
Company will be able to file an NDA before December 31, 1998. If the Company
does not file an NDA for AURICULIN anaritide by December 31, 1998, or if,
within 60 days of such filing, the FDA has not accepted for review an NDA
which was filed by December 31, 1998, Genentech has the option of (i)
electing to bring
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NATRECOR-Registered Trademark- BNP or another natriuretic peptide product
under development by Scios into the Collaboration Agreement for use in the
Field or (ii) terminating the Collaboration Agreement. This option could
limit the Company's ability to enter into other collaborative arrangements on
NATRECOR BNP or any other natriuretic peptide product until the earlier of
the FDA's acceptance for review of an NDA for AURICULIN anaritide or the
expiration of the above deadlines. If Genentech were to exercise its right
to bring another product into the Collaboration Agreement in place of
AURICULIN anaritide, the milestone payments due upon regulatory approval and
other events would be reduced significantly.
RELIANCE ON CERTAIN PRODUCTS
The Company currently markets in the United States four psychiatric
products under license from SmithKline Beecham Corporation (the "SB
Products") and co-promotes a fifth product, HALDOL-Registered Trademark-
Decanoate distributed by McNeil Pharmaceutical ("McNeil"). As of June 1,
1996, the Company will co-promote the antidepressant drug EFFEXOR-Registered
Trademark-(venlafaxine HCl) under an agreement with the Wyeth-Ayerst
Laboratories division of American Home Products ("WA"). The SB Products
have a well-established reputation, but unit volume for certain products has
been eroding and can be expected to continue to erode due to competition from
generic products sold at substantially lower prices. In the past, the
decrease in unit sales has been partially offset by price increases; however,
there can be no assurance that the market will accept any additional price
increases. Under its agreement with McNeil, the Company receives quarterly
payments based on total sales of this product reaching specified levels.
Although the Company believes that SmithKline Beecham ("SB"), WA and McNeil
(collectively, the "Psychiatric Product Licensors") will have an economic
incentive to meet their respective contractual responsibilities, the amount
and timing of resources devoted to these activities generally will be
controlled by such parties. Suspension or termination of the Company's
agreements with any Psychiatric Product Licensor or the failure of any
Psychiatric Product Licensor to meet its contractual responsibilities could
have a material adverse effect on the Company.
CONTINUING OPERATING LOSSES
Scios has had net operating losses since its inception and expects such
losses for at least several more years. As of December 31, 1995, Scios had
an accumulated deficit of approximately $290 million.
The ability of the Company to achieve profitability depends principally
upon the success of its product development efforts and the timing and scope
of regulatory approvals, particularly with respect to the Company's lead
products, AURICULIN anaritide and NATRECOR BNP. Other key factors include
the amount of profits generated from the Company's sale of the SB Products,
HALDOL Decanoate and any additional products co-promoted or licensed by the
Company and the development of new sources of third-party funding and other
revenues to support continuing research and development programs.
NEED FOR ADDITIONAL FUNDING
Substantial expenditures will be required to enable Scios to continue
research and development activities, to conduct existing and planned clinical
trials and to manufacture and market products currently under development.
While Scios believes that its net assets, together with funding from
corporate partners and interest income, will be sufficient to meet capital
requirements through 1998, over the long term the Company will need to
arrange additional financing for the operation of its business, including the
commercialization of its products currently under development, and will
consider collaborative arrangements and additional public or private
financings, including additional equity financings. There can be no
assurances that such additional collaborative arrangements or financings can
be obtained on reasonable terms.
DEPENDENCE ON PROPRIETARY RIGHTS OF OTHERS
The manufacture and sale of any products developed by Scios will involve
the use of processes, products or information the rights to certain of which
are owned by others. Although Scios has obtained licenses for the use of
certain of such processes, products and information, there can be no
assurance that such licenses will not be
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terminated or expire during critical periods, that Scios will be able to
obtain licenses or other rights which may be important to it or, if obtained,
that such licenses will be obtained on commercially reasonable terms. If
Scios is unable to obtain such licenses, it may have to develop alternatives
to avoid infringing patents of others, potentially causing increased costs
and delays in product development and introduction or precluding Scios from
developing, manufacturing or selling its planned products. Some of Scios's
licenses provide for limited periods of exclusivity that may be extended only
with the consent of the licensor. There can be no assurance that extensions
will be granted on any or all such licenses. This same restriction may be
contained in licenses obtained in the future. Additionally, there can be no
assurance that the patents underlying any licenses will be valid and
enforceable. To the extent any products developed by Scios are based on
licensed technology, royalty payments on licenses will reduce Scios's gross
profit from such product sales and may render the sales of such products
uneconomical.
Scios supports and collaborates in research conducted in universities and
in governmental research organizations. There can be no assurance that Scios
will have or be able to acquire exclusive rights to inventions or technical
information derived from such collaborations or that disputes will not arise
as to rights in derivative or related research programs conducted by them.
Scios receives grants and other public funding and collaborates with
governmental research organizations in connection with certain research
programs. Inventions resulting from such public funding or collaboration may
be subject to regulatory and contractual restrictions on the manner in which
any resulting inventions may be commercialized, and the government research
organization typically retains certain rights to use such inventions itself
or, under certain circumstances, to grant rights to others.
In the event of contractual breach or bankruptcy of Scios, certain of the
Company's collaborative research contracts provide for transfer of technology
(including rights to practice under any patents or patent applications) to
the contract sponsors.
LIMITED MANUFACTURING EXPERIENCE
Scios has concentrated its resources on product discovery and development
prior to investing substantially in manufacturing capability. To date the
Company has produced only its proprietary basic fibroblast growth factor
("bFGF") in limited quantities sufficient for clinical trials then being
conducted on bFGF and currently relies on third parties for the manufacture
of other products including AURICULIN anaritide. Scios has a production
facility which the Company believes will enable it to produce bFGF for a
third party, and potentially other products, under requirements for current
Good Manufacturing Practices ("cGMP"). However, the Company does not
currently possess the staff or facilities necessary to manufacture any
product in the commercial quantity expected to be required in the long term.
Scios's strategy of building or acquiring commercial-scale manufacturing
facilities or utilizing third-party facilities only as the need arises
carries with it certain risks, as there can be no assurance that such
facilities can be built, acquired or used on commercially acceptable terms or
at all or that Scios will be able to meet manufacturing quantity and quality
requirements through the use of such arrangements.
Scios currently intends to obtain AURICULIN anaritide from third-party
manufacturers. The Company has entered into a long-term agreement for the
supply of AURICULIN anaritide in bulk form, and has entered into an agreement
with another third party for fill and finish services. The Company believes
that it would not be cost-effective to qualify alternate suppliers at this
time. However, an inability of either the Company's bulk or its fill and
finish manufacturer to provide material to Scios on a timely basis would
cause delays in supply which could be expected to have a material adverse
effect on the Company's business.
SB manufactures the SB Products. If SB elects to discontinue
manufacturing the SB Products, the Company will either have to develop
additional facilities to manufacture independently on a large scale, procure
a contract manufacturer, or enter into another arrangement with a third party
to manufacture such products. McNeil manufactures HALDOL Decanoate.
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If Scios were to develop additional products with commercial potential, it
would be required to design and construct larger facilities to manufacture
such products or be dependent upon securing a third party contract
manufacturer to manufacture such products. There can be no assurance that
the Company would be able to develop such a manufacturing capability on its
own or enter into such a partnership on favorable terms or at all. In
addition, partnering arrangements could result in a lower level of income to
Scios than if the Company manufactured the products entirely on its own.
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
Scios has limited experience in managing or operating a marketing
organization. Scios currently has a sales force of approximately 85
representatives experienced in marketing products to the psychiatric
profession. These sales representatives work on a part-time basis marketing
the SB Products and co-promoting the McNeil product HALDOL Decanoate. To
date, Scios's marketing experience has been limited to these psychiatric
products. The Company has had no experience marketing the acute care
products which are the focus of its research and development efforts.
Scios's business strategy includes acquiring or licensing additional
products developed by third parties that could be sold by the Company's sales
force while the Company seeks to complete clinical trials and
commercialization of its proprietary products. There can be no assurances
that such third-party product rights will be available on terms favorable to
the Company or at all, or that the Company will be successful in
commercializing its own proprietary products.
If Scios is successful in its efforts to develop additional products for
commercial sale, the commercialization of such products will require
significant financial resources as well as worldwide sales, marketing and
distribution capabilities. The Company will consider entering into
additional corporate partnerships with major pharmaceutical companies in
order to provide funds and expertise to meet these requirements. See "Risk
Factors-Relationship with Genentech." There can be no assurance that the
Company would be able to develop such a marketing capability on its own or
enter into such a partnership on favorable terms or at all. In addition,
partnering arrangements could result in a lower level of income to Scios than
if the Company marketed the products entirely on its own.
TECHNOLOGICAL CHANGE AND RISK OF OBSOLESCENCE; SUBSTANTIAL COMPETITION
Competition is intense in the development of biopharmaceutical products,
particularly in the development of products through the application of
biotechnology. There are numerous companies and academic research groups
throughout the world engaged in similar research and development. Some of
the Company's competitors, including some of its licensees, are working on
products similar to those being developed by Scios, including products in
some of the Company's major therapeutic focus areas. Many of these companies
have substantially greater financial, marketing and human resources than
Scios. With respect to AURICULIN anaritide, Scios believes other companies
may be attempting to develop other forms of natriuretic peptides for
indications similar to those being pursued by the Company.
There can be no assurance that technological developments or superior
marketing capabilities possessed by competitors will not materially adversely
affect the commercial potential of the Company's products. In addition, if
the Company commences significant commercial sales of products, manufacturing
efficiency and marketing capability are likely to be significant competitive
factors. With respect to products no longer covered by patents, such as the
SB Products, Scios faces competition from companies offering generic products.
The Company believes that the competitive success of the Company will be
based primarily on scientific and technological superiority, managerial
competence in identifying and pursuing opportunities, operational competence
in developing, protecting, producing and marketing products and obtaining
timely regulatory agency approvals and adequate funds. Achieving success in
these areas will depend on the Company's ability to attract and retain
skilled and experienced personnel, to develop and secure the rights to
advanced proprietary technology and
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to exploit commercially its technology prior to the development of
competitive products by others. Scios expects that there will be continued
competition for highly qualified scientific, technical and managerial
personnel.
UNCERTAINTY OF LEGAL PROTECTION AFFORDED BY PATENTS AND PROPRIETARY RIGHTS;
POSSIBLE INFRINGEMENT OF RIGHTS OF OTHERS
Scios's success will depend in large part upon its ability to protect its
proprietary products and technology under U.S. and foreign patent laws and
other intellectual property laws. Scios has incurred and expects to continue
to incur, substantial costs in connection with the protection of its
intellectual property rights. The patent position of biotechnology and
pharmaceutical firms generally is highly uncertain and involves complex legal
and factual questions. Although Scios believes it has strong patent positions
on certain of its products, there can be no assurance that any patent will
issue on pending applications of the Company, or that any patent issued will
afford the Company significant commercial protection against competitors for
the technology or product covered by it, or that patents will not be
infringed upon or designed around. Third parties have filed applications
for, or have been issued patents relating to, products or processes which are
similar to or competitive with certain of the Company's products or
processes. Scios is incurring and expects to continue to incur substantial
costs in interference proceedings and in defending the validity or scope of
its patents or in challenging the validity or scope of competing patents.
The Company is unable to predict how the courts will resolve issues relating
to the validity and scope of such patents, and if any such patent were to be
interpreted to cover any of the Company's products and could not be licensed,
circumvented or shown to be invalid, the results of Scios's future operations
could be materially and adversely affected.
Companies which have or obtain patents relating to Scios's products or
processes could bring legal actions against Scios and its corporate partner
claiming damages and seeking to enjoin them from manufacturing or marketing
such products. Because of such proceedings, Scios could encounter delays in
product market introductions while it attempts to design around such patents
or could find that the development, manufacture or sale of Scios's products
could be foreclosed. If any such action were successful, in addition to any
potential liability for damages, Scios or its corporate partners could be
required to obtain a license in order to continue to manufacture or market
such products. Even if licenses were to be available, their cost might not be
commercially acceptable. If a patent were to be issued to a third party
covering products competitive with Scios's products and such patent could not
be licensed, circumvented or shown to be invalid, the results of Scios's
future operations could be materially adversely affected.
Scios also may have to participate in interference proceedings declared by
the United States Patent and Trademark Office (the "PTO") to determine the
priority of inventions, which could result in substantial cost to Scios or in
the determination that patents should be issued to a competitor. Unfavorable
outcomes in interference proceedings could result in the need for
cross-licensing agreements with competitors that could hinder or prevent
Scios from making, using or selling the products which are the subjects of
such patents or adversely affect Scios's operating results.
Other companies engaged in research and development of new health care
products based on biotechnology also are actively pursuing patents for their
technologies, which they consider to be novel and patentable. Scios also
relies and will continue to rely upon trade secrets and know-how to develop
and maintain its competitive position. There can be no assurance, however,
that others will not develop similar technology so that confidentiality
agreements on which the Company relies to protect trade secrets will be
honored. To the extent corporate partners or consultants apply technological
information independently developed by them or by others to Scios projects,
disputes may arise as to the proprietary rights to such information.
GOVERNMENT REGULATION: NEED FOR REGULATORY APPROVAL
The production and marketing of the Company's proposed products and its
ongoing research and development activities are subject to extensive
regulation by numerous governmental authorities in the United States and
other countries. Prior to marketing in the United States, a drug must undergo
rigorous preclinical and clinical
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testing and an extensive regulatory approval process implemented by the U.S.
Food and Drug Administration ("FDA") under federal law, including the Food,
Drug and Cosmetic Act, as amended. Satisfaction of such regulatory
requirements includes satisfying the FDA that the product is both safe and
efficacious. Typically, this takes several years or more depending upon the
type, complexity and novelty of the product and the nature of the disease or
other indication to be treated and requires the expenditure of substantial
resources. Preclinical studies must be conducted in conformance with the
FDA's Good Laboratory Practice regulations. Clinical testing must meet
requirements for Institutional Review Board ("IRB") oversight and informed
consent by clinical trial subjects, as well as FDA prior review, oversight
and the FDA's Good Clinical practice requirements. Clinical trials may
require large numbers of test subjects. Scios has limited experience in
conducting clinical testing and in pursuing applications necessary to gain
regulatory approvals. Furthermore, the Company or the FDA may suspend
clinical trials at any time if either believes that the subjects
participating in such trials are being exposed to unacceptable health risks,
including undesirable or unintended side effects.
Before receiving FDA approval to market a product, Scios may have to
demonstrate that the product is safe and effective on the patient population
that will be treated. Data obtained from preclinical and clinical activities
are susceptible to varying interpretations which could delay, limit or
prevent regulatory clearances. In addition, delays or rejections may be
encountered based upon additional government regulation from future
legislation or administrative action or changes in FDA policy during the
period of product development, clinical trials and FDA regulatory review.
Delays in obtaining such approvals could adversely affect marketing of
Scios's products. Delays in regulatory approvals that may be encountered by
Scios's joint development partners and licensees could adversely affect
Scios's ability to receive royalties or other sales revenues. There can be
no assurance that, after such time and expenditures, regulatory approval will
be obtained for any products developed by the Company. For example, after
significant investment in the development of AURICULIN anaritide for the
treatment of ARF, the ARF-Phase III clinical trial did not show the requisite
clinical benefits to receive FDA approval for the use of AURICULIN anaritide
in the treatment of the broad population of ARF patients. And, while the
Company is conducting Phase III clinical trials for the use of AURICULIN
anaritide in the treatment of OARF, there can be no assurance that such Phase
III trials will be successful. Even if regulatory approval of a product is
granted, such approval will be limited to those disease states and conditions
for which the product is useful, as demonstrated through clinical studies.
Marketing or promoting a drug for an unapproved indication is prohibited.
For example, if the current OARF-Phase III trials show significant clinical
benefits in the use of AURICULIN anaritide-Registered Trademark- for the
treatment of OARF, FDA approval that might be obtained based upon such
results would be limited to the treatment of OARF (a significantly smaller
population than the treatment of ARF in the broad population). See
"Uncertainty Regarding AURICULIN Anaritide."
Even after initial FDA approval has been obtained, for a product or
treatment, further studies may be required to provide additional data on
safety or to gain approval for the use of a product as a treatment for
clinical indications other than those initially targeted. Moreover, the FDA
may reconsider its approval of any product at any time and may withdraw such
approval. Furthermore, approval may entail ongoing requirements for
post-marketing studies. If regulatory approval is obtained, a marketed
product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections. The regulatory standards for
manufacturing are currently being applied stringently by the FDA. Discovery
of previously unknown problems with a product, manufacturer or facility may
result in restrictions on such product or manufacturer, including withdrawal
of the product from the market. In addition, before the Company's products
can be marketed in foreign countries, they are subject to regulatory approval
in such countries similar to that required in the United States.
The Orphan Drug Act currently provides incentives to manufacturers to
develop and market drugs for rare diseases, conditions affecting fewer than
200,000 persons in the United States at the time of application for orphan
drug designation, or conditions affecting more than 200,000 persons in the
United States, if the sponsor establishes that it does not realistically
anticipate that its product sales will be sufficient to recover its costs. A
drug that receives orphan drug designation and is the first product to
receive FDA marketing approval for its product claim is entitled to a
seven-year exclusive marketing period in the United States for that product
claim. However, a drug that is considered by the FDA to be different from a
particular orphan drug is not barred from sale in the United States during
the seven-year exclusive marketing period. The Company has received from the
FDA orphan drug
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designation of AURICULIN anaritide for the treatment of acute kidney failure;
however, there can be no assurance that AURICULIN anaritide will receive FDA
approval, or that, if it receives approval, it will receive exclusive
marketing rights. Additionally, though it is advantageous to obtain orphan
drug act designation for eligible products, there can be no assurance that
the precise scope of protection that is currently afforded by orphan drug
designation will be available in the future or that the current level of
exclusivity and tax credits afforded to a sponsor of a product designated an
orphan drug will remain in effect.
The FDA's regulations require that any drug or formulation to be tested in
humans must be manufactured according to cGMP regulations. This has been
extended to include any drugs which will be tested for safety in animals, in
support of human testing. The cGMPs set certain minimum requirements for
procedures, record-keeping and the physical characteristics of the
laboratories used in the production of these drugs. In addition, various
federal and state laws, regulations and recommendations relating to safe
working conditions, laboratory practices, the experimental use of animals and
the purchase, storage, movement, import and export, use, and disposal of
hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the
Company's research work are or may be applicable to their activities. They
include, among others, the United States Atomic Energy Act, the Clean Air
Act, the Clean Water Act, the Occupational Safety and Health Act, the
National Environmental Policy Act, the Toxic Substances Control Act, and the
Resource Conservation and Recovery Act, national restrictions on technology
transfer, import, export and customs regulations, and other present and
possible future local, state or federal regulation. Scios is unable to
estimate the extent and impact of regulation in the biotechnology field
resulting from such future federal, state or local legislation or
administrative action.
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorization from the appropriate
foreign regulatory authorities. The requirements governing the conduct of
clinical trials, marketing authorization, pricing and reimbursement vary
widely from country to country. This foreign regulatory approval process
includes all of the risks associated with FDA approval set forth above.
RISK OF PRODUCT LIABILITY
The testing, marketing and sale of human therapeutic products entails
significant risks. If the Company succeeds in developing products in these
areas, use of such products in trials and the sale of such products following
regulatory approval may expose the Company to liability claims allegedly
resulting from use of such products. These claims might be made directly by
consumers or others. Scios currently has only limited insurance for its
clinical trials. However, there can be no assurance that Scios will be able
to obtain and maintain such insurance for all of its clinical trials or that
coverage will be in sufficient amounts to protect against damages for
liability that could have a material adverse effect on Scios. There can also
be no assurance that Scios will be able to obtain or maintain product
liability insurance in the future on acceptable terms or in sufficient
amounts to protect the Company against damages for liability that could have
a material adverse effect on the Company. The Company's agreements with SB
and McNeil provide for certain indemnification, but there can be no assurance
that any claim arising from products manufactured by SB or McNeil would not
also include claims directly against Scios.
USE OF HAZARDOUS MATERIALS; RECENT NOTICE OF POTENTIAL LIABILITY
In addition, the Company's research and development involves the
controlled use of hazardous materials, radioactive compounds and other
chemicals. Accordingly, the Company is subject to various federal, state and
local environmental laws and regulations. Failure to comply with present or
future regulations could result in substantial liability to the Company,
suspension or cessation of the Company's operations, restrictions on the
Company's ability to expand at its present location or the incurrence of
other significant expense. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. For example, on November 29, 1995, the Company was notified by
the United States Environmental Protection Agency that it may have liability
in connection with the clean-up of toxic waste arising out of the alleged
disposal of hazardous substances by a subcontractor of Nova. (The Company
acquired Nova in 1992.) The
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Company could be held liable for any damages that result from such clean-up.
The cost of this clean-up and any other potential environmental liability
could exceed the resources of the Company. The Company may also incur
substantial costs to comply with environmental regulations if the Company
develops additional manufacturing capacity or otherwise changes its
operations. For example, in connection with the closure of its Baltimore
research and development facility in 1993 to consolidate such activities at
its Mountain View headquarters, the Company incurred costs of approximately
$370,000 for chemical disposal, storage and related costs.
HEALTHCARE REIMBURSEMENT
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of governmental and
third-party payors to contain or reduce the cost of health care. In certain
foreign markets, pricing of profitability of prescription pharmaceuticals is
subject to governmental control. In the United States there have been, and
the Company expects that there will continue to be, a number of federal and
state proposals to implement similar government control. In addition, an
increasing emphasis on managed care in the United States has increased and
will continue to increase the pressure on pharmaceutical pricing. While the
Company cannot predict whether any such legislative or regulatory proposals
will be adopted or the effect such proposals or managed care efforts may have
on its business, the announcement of such proposals or efforts could have a
material adverse effect on the Company's ability to raise capital, and the
adoption of such proposals or efforts could have a material adverse effect on
the Company's business and financial condition. Further, to the extent that
such proposals or efforts have a material adverse effect on other
pharmaceutical companies that are prospective corporate partners for the
Company, the Company's ability to establish a strategic collaboration may be
adversely affected. In addition, in both domestic and foreign markets, sales
of the Company's proposed products will depend in part on the availability of
reimbursement from third-party payors such as government health
administration authorities, private health insurers, and other organizations.
Third-party payors are increasingly challenging the price and
cost-effectiveness of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products.
There can be no assurance that the Company's proposed products will be
considered cost effective or that adequate third-party reimbursement will be
available to enable the Company to maintain price levels sufficient to
realize an appropriate return on its investment in product development.
NO ASSURANCE OF ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL; ABSENCE OF KEY-MAN
LIFE INSURANCE
Scios's ability to maintain its competitive technological position will
depend, in part, upon its ability to attract and retain highly qualified
scientific, managerial and manufacturing personnel. Competition for such
personnel is intense. Scios must recruit and organize expanded marketing and
sales organizations for those products it will commercialize directly. The
loss of a significant group of key personnel would adversely affect Scios's
product development effort. Scios does not currently maintain key-man life
insurance on any of its employees.
VOLATILITY OF STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies, including the securities of Scios, have been volatile.
Announcements of technological innovations or new commercial products by
Scios or its competitors, a change in status of a corporate partner,
developments concerning proprietary rights, including patents and litigation
matters, publicity regarding actual or potential medical results with
products under development by Scios, regulatory developments in both the
United States and foreign countries and public concern as to the safety of
biotechnology or of pharmaceutical products, as well as period-to-period
fluctuations in revenues and financial results, may have a significant impact
on the market price of its Common Stock. For example, the average trading
price of Scios' Common Stock in the one-month period immediately preceding
the release by Scios of the results of the ARF-Phase III to the public in May
1995, was approximately 100% higher than the average trading price of such
stock in the one-month period immediately following such release. Any
unfavorable releases in the future relating to other clinical trials, such as
the OARF-Phase III trials, could have a similar depressive effect on the
market price of the Scios Common Stock.
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ABSENCE OF DIVIDENDS
Scios has not paid any cash dividends since its inception, and it does not
anticipate paying cash dividends in the foreseeable future.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
Certain provisions of Scios's Certificate of Incorporation, as amended,
Bylaws and Share Purchase Rights Plan may have the effect of delaying,
deferring or preventing attempts to acquire control of Scios. The delay,
deferral or prevention of a change in control may result in denying to
stockholders of Scios the receipt of a premium for their stock in the
transaction which would have resulted in the change of control and may also
result in a depressive effect on the market price of the Scios Common Stock.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder in the offering.
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder, the
number of shares of Common Stock owned beneficially by the Selling
Stockholder as of December 31, 1995 and the number of shares which may be
offered pursuant to this Prospectus. This information is based upon
information provided by the Selling Stockholder. Because the Selling
Stockholder may offer all, some or none of its Common Stock, no definitive
estimate as to the number of shares thereof that will be held by the Selling
Stockholder after such offering can be provided.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING SHARES OFFERING(1)
---------------------- BEING ----------------------
NAME NUMBER PERCENT(2) OFFERED NUMBER PERCENT(2)
---- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Genentech, Inc. . . . . . . . . . . . . . 1,263,200 3.4% 1,263,200 -- --
</TABLE>
- ----------
(1) Assumes the sale of all shares offered hereby.
(2) Applicable percentage of ownership is based on 35,807,949 shares of Common
Stock outstanding (net of treasury shares) on March 31, 1996 and assumes
the issuance of 1,263,200 shares of Common Stock issuable upon conversion
of 12,632 shares of the Company's Nonvoting Series A Preferred Stock.
In December 1994 the Selling Stockholder entered into the Collaboration
Agreement with the Company. See "Risk Factors -- Relationship with
Genentech." At that time the Selling Stockholder also (i) purchased $20
million of Series A Preferred Stock of the Company convertible into 2,105,300
shares of Common Stock and (ii) agreed to loan the Company an additional $30
million, which the Company can draw down at its discretion through December
2002 (the "Loan Facility"). Amounts drawn under the Loan Facility will bear
interest at the prime rate and be repayable in cash or Scios Common Stock, at
the Company's option, in December 2002.
From March 31 to April 10, 1995, the Selling Stockholder converted 5,000
shares of the Scios' Nonvoting Series A Preferred Stock into 500,000 shares
of Common Stock and sold such shares to the public pursuant to a Registration
Statement on Form S-3 filed by the Company in December 1994. In January
1996, the Selling Stockholder converted an additional 3,421 shares of the
Scios' Nonvoting Series A Preferred Stock into 342,100 shares of Common Stock
and sold such shares to the public pursuant to such Registration Statement.
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PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Stockholder hereunder pursuant to contractual registration rights
contained in a Preferred Stock Purchase Agreement entered into in December
1994 (the "Purchase Agreement"), pursuant to which the Selling Stockholder
purchased 21,053 shares of nonvoting Series A Preferred Stock for
approximately $20 million. The Selling Stockholder currently owns 12,632
shares of Series A. Each share of such Preferred Stock is convertible, at the
request of the Selling Stockholder or upon transfer to a third party, into
100 shares of the Company's Common Stock for a total of 1,263,200 shares of
Common Stock. The Selling Stockholder may not transfer ownership of any of
such shares without first offering the Company the opportunity to purchase
such shares at the average closing trading price for a period preceding the
sale. If the Company does not purchase the shares offered to it, the Selling
Stockholder may sell such shares to any third party without reoffering them
to the Company. Furthermore, the Purchase Agreement provides that the
Selling Stockholder may not, without the consent of Scios, sell to a single
third party investor in any 12 month period more than 500,000 shares of
Common Stock purchased under the Purchase Agreement prior to December 31,
1996 or more than 1,000,000 shares of Common Stock during any 12 month period
thereafter (except that the foregoing volume limitation is inapplicable to
sales of the Common Stock to brokers or dealers who agree to abide by such
volume limitation). The foregoing transfer restrictions terminate upon the
earliest to occur of (i) December 30, 2002, (ii) the date on which the
Selling Stockholder and its affiliates no longer own 3% of the Company's
outstanding voting securities or (iii) the closing of a merger or similar
transaction in which greater than 50% of the Company's voting stock is
transferred to a stockholder or group of stockholders, or a sale of all or
substantially all of the Company's assets.
Subject to the restrictions set forth in the Purchase Agreement, the
shares of Common Stock offered hereunder may be sold from time to time by the
Selling Stockholder, or by pledgees, donees, transferees or other successors
in interest. Such sales may be made on the Nasdaq National Market or in the
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 of Common Stock 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.
In connection with distributions of the Common Stock, the Selling
Stockholder may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the Common Stock in the course of
hedging the positions they assume with the Selling Stockholder. The Selling
Stockholder also may sell the Common Stock short and deliver the Common Stock
to close out such short positions. The Selling Stockholder also may enter
into option or other transactions with broker-dealers that involve the
delivery of the Common Stock to the broker-dealers, which may then resell or
otherwise transfer such Common Stock. The Selling Stockholder also may loan
or pledge the Common Stock to a broker-dealer and the broker-dealer may sell
the Common Stock so loaned or upon a default may sell or otherwise transfer
the pledged Common Stock.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholder, 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. Broker-dealers and any other persons participating in a distribution
of the Common Stock 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 Common Stock
described above, whether effected by the Selling Stockholder, any
broker-dealer or others, may be made pursuant to this prospectus. In
addition, any shares of Common Stock that qualify for sale pursuant to Rule
144 under the Act may be sold under Rule 144 rather than pursuant to this
prospectus.
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In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the Common Stock may not be sold unless it has been registered or qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.
The registration fee and fees in connection with listing the Common Stock
on the Nasdaq National Market will be reimbursed by the Selling Stockholder.
The Selling Stockholder will also reimburse the Company for all other costs,
expenses and fees in connection with the registration of the Common Stock
with the Commission up to $20,000. The Company and the Selling Stockholder
have agreed, and hereafter may further agree, to indemnify certain persons,
including broker-dealers or others, against certain liabilities in connection
with any offering of the Common Stock, including liabilities arising under
the Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Cooley Godward Castro Huddleson & Tatum, Palo Alto, California.
EXPERTS
The financial statements and schedules appearing in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 have been
audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such financial statements and schedules are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
18
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized, or in which the
person making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation. The
delivery of this Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain
Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Selling Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
___________
1,263,200 Shares
Common Stock
SCIOS INC.
___________
Prospectus
___________
_________________, 1996
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
Registration fee . . . . . . . . . . . . . . . $3,158
Blue sky qualification fees and expenses . . . --
Printing and engraving expenses . . . . . . . . --
Legal fees and expenses . . . . . . . . . . . . 10,000
Accounting fees and expenses . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . . 1,842
-------
Total . . . . . . . . . . . . . . . . . . $20,000
-------
-------
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) authorize the Company to indemnify its directors and officers
to the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant
to Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they
are, or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of a corporation,
and with respect to any criminal action, they had no reasonable cause to
believe their conduct was unlawful. The Company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate liability for breach of the
director's duty of loyalty to the Company or its stockholders, for acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, for any transaction from which the director derived an
improper personal benefit or for any willful or negligent payment of any
unlawful dividend or any unlawful stock purchase agreement or redemption.
The Company has entered into agreements with its directors and executive
officers that require the Company to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director or
officer of the Company or any of its listed enterprises, provided such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of the Company and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
The Company has purchased an insurance policy covering the officers and
directors of the Company with respect to certain liabilities arising under
the Securities Act or otherwise.
II-1
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
3.3 Certificate of Amendment of Certificate of Incorporation
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
10.32.1 Amendment No. 1 to Collaboration Agreement
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Cooley Godward Castro Huddleson & Tatum.
Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-4.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period during which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or any
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low end or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE>
(2) That, for purposes of determining liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities to be offered therein, and
the offering of such securities at that time shall be deemed to be an initial
BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which shall remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT FORM S-3 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, COUNTY
OF SANTA CLARA, STATE OF CALIFORNIA, ON THE 28TH DAY OF MAY, 1996.
SCIOS INC.
By: /s/ Richard L. Casey
--------------------------------
Richard L. Casey
Chairman of the Board, President
and Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard L. Casey and John H. Newman,
or either of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in 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 and
agent or his substitutes or substitute, may lawfully do or cause to be done
by virtue hereof.
II-4
<PAGE>
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/ RICHARD L. CASEY Chairman of the Board May 28, 1996
- ------------------------------- President and Chief
Richard L. Casey Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)
/S/ KEVIN J. MCPHERSON Controller May 28, 1996
- ------------------------------- (PRINCIPAL ACCOUNTING OFFICER)
Kevin J. McPherson
/S/ SAMUEL H. ARMACOST Director May 28, 1996
- -------------------------------
Samuel H. Armacost
/S/ MYRON DU BAIN Director May 28, 1996
- -------------------------------
Myron Du Bain
/S/ ROBERT W. SCHRIER Director May 28, 1996
- -------------------------------
Robert W. Schrier
/S/ SOLOMON H. SNYDER Director May 28, 1996
- -------------------------------
Solomon H. Snyder
/S/ BURTON E. SOBEL Director May 28, 1996
- -------------------------------
Burton E. Sobel
/S/ EUGENE L. STEP Director May 28, 1996
- -------------------------------
Eugene L. Step
</TABLE>
II-5
<PAGE>
EXHIBIT 3.3
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "SCIOS NOVA INC.", CHANGING ITS NAME FROM "SCIOS NOVA INC." TO
"SCIOS INC.", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF MARCH, A.D.
1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[STATE SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7882654
DATE: 03-26-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SCIOS NOVA INC.
Scios Nova Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: The name of this corporation is Scios Nova Inc.
SECOND: The date on which the Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware is
April 8, 1988. The date on which the Restated Certificate of Incorporation
of the corporation was filed with the Secretary of State of the State of
Delaware is September 3, 1992.
THIRD: The Board of Directors of the corporation, acting in
accordance with the provisions of Section 141(f) and 242 of the General
Corporation Law of the State of Delaware, adopted resolutions to amend
Article I in its entirety to read as follows:
"I.
The name of this corporation is Scios Inc."
FOURTH: Thereafter pursuant to a resolution of the Board of Directors
this Certificate of Amendment was submitted to the stockholders of the
corporation for their approval in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Scios Nova Inc. has caused this Certificate of
Amendment to be signed by its Chief Executive Officer and attested to by its
Secretary this 26th day of March 1996.
SCIOS NOVA INC.
By: /s/ Richard L. Casey
-----------------------
Richard L. Casey
Chief Executive Officer
ATTEST:
/s/ John H. Newman
- ------------------
John H. Newman
Secretary
<PAGE>
EXHIBIT 5.1
[COOLEY GODWARD CASTRO HUDDLESTON & TATUM LETTERHEAD]
May 28, 1996
Scios Inc.
2450 Bayshore Parkway
Mountain View, California 94043
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Scios Inc. (the "Company") of a Registration Statement on
Form S-3 on or about May 29, 1996 (the "Registration Statement") with the
Securities and Exchange Commission covering the offering of up to one million
two hundred sixty-three thousand two hundred (1,263,200) shares of the
Company's Common Stock, $.001 par value (the "Shares").
In connection with this opinion, we have examined the Registration Statement
and related Prospectus, your Restated Certificate of Incorporation and
Bylaws, as amended, and such other documents, records, certificates,
memoranda and other instruments as we deem necessary as a basis for this
opinion. We have assumed the genuineness and authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies thereof, and the due execution and delivery of all
documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid, and
nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
/s/ ANDREI M. MANOLIU
Andrei M. Manoliu
<PAGE>
EXHIBIT 10.32.1
AMENDMENT NO. 1 TO COLLABORATION AGREEMENT
THIS AMENDMENT NO. 1 TO COLLABORATION AGREEMENT, dated as of April 10,
1996 (this "Amendment"), is entered into between SCIOS INC. (formerly Scios
Nova Inc.), a Delaware corporation ("Scios" or "Scios Nova"), and GENENTECH,
INC., a Delaware corporation ("Genentech").
WITNESSETH:
WHEREAS, Scios and Genentech have heretofore entered into a
Collaboration Agreement dated as of December 30, 1994 (the "Collaboration
Agreement");
WHEREAS, Scios and Genentech desire to amend the Collaboration Agreement
as hereinafter provided; and
WHEREAS, capitalized terms not defined herein shall have the meanings
given them in the Collaboration Agreement.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Scios and Genentech hereby agree
as follows:
SECTION 1. AMENDMENT. The Collaboration Agreement is hereby amended
as follows:
A. Sections 2.2 through 2.4 are hereby amended in their entirety to
read as follows:
SECTION 2.2 AURICULIN NDA NOT FILED BY DECEMBER 31, 1998. If, by
December 31, 1998, Scios Nova has not filed an NDA for Auriculin for the
treatment of acute renal failure or if within sixty (60) days of such filing
the FDA has not accepted for review an NDA which was filed by December 31,
1998, Genentech may, in its sole discretion, elect one of the following
options:
(i) Genentech may elect to extend to [ ] the
period of time in which Scios Nova may file for purposes of Section 2.4
below, an NDA for Auriculin for the treatment of acute renal failure;
(ii) Genentech may elect to cause Scios Nova to bring into the
collaboration for the Field any other Scios Nova Product, or to bring into
the collaboration for the Field any Genentech Product, and such Products(s)
shall thereafter be a "Collaboration Product" for purposes of this Agreement;
or
1
<PAGE>
(iii) Genentech may elect to terminate this Agreement as
provided in Section 15.2(b).
Such election must be made by Genentech within sixty (60) days of the later
of (A) December 31, 1998 if Scios Nova has not filed an NDA for Auriculin by
such date or (B) the date upon which Scios Nova notifies Genentech that the
FDA has not accepted for review an NDA filed by December 31, 1998. If no
election is made prior to the end of such election period, this Agreement
shall terminate automatically pursuant to Section 15.2(b). In addition,
Genentech's right to include Scios Nova Products hereunder shall terminate in
its entirety on [ ].
SECTION 2.3 MUTUAL AGREEMENT TO TERMINATE AURICULIN DEVELOPMENT. If
the Parties mutually agree that the development of Auriculin in the Field
should be discontinued prior to December 31, 1998, the Parties shall endeavor
to select either a Scios Nova Product or a Genentech Product to be developed
by Scios Nova as the first Collaboration Product. If, within sixty (60) days
of such decision to discontinue development of Auriculin, the Parties are not
able to agree on another product to develop, then Genentech shall have the
rights under Section 2.2.
SECTION 2.4 AURICULIN NDA FILED BY DECEMBER 31, 1998. If, by December
31, 1998, Scios Nova has filed an NDA for Auriculin for the treatment of
acute renal failure and the FDA has accepted such NDA for review within sixty
(60) days of such filing, each Party shall thereafter have the right to
require the other Party to contribute any or all of its Products, on a
product-by-product basis, to the collaboration for use in the Field. Upon
the exercise of such right by the non-developing Party as to a Product of a
developing Party, such Product shall become a Collaboration Product for all
purposes of this Agreement. Such right as to a Product may be exercised by
providing written notice to the developing Party at any time after such FDA
acceptance of an Auriculin NDA and prior to the Phase III Decision Date;
PROVIDED, HOWEVER, that if Genentech has commenced Phase III trials of any
Genentech Product in the Field prior to FDA acceptance of an NDA for
Auriculin filed before December 31, 1998, Scios Nova shall have ninety (90)
days from the date of such FDA acceptance within which to make the Product
Election as to such first Genentech Product. In addition, each Party's right
to include the other Party's Products hereunder shall terminate in its
entirety on [ ].
B. The first sentence of Section 2.7(a) of the Collaboration
Agreement is hereby amended in its entirety to read as follows:
SECTION 2.7 UNDERSTANDINGS RELATING TO NATRECOR.
(a) RIGHT TO COLLABORATE INSIDE THE FIELD. Pursuant to
Section 2.2(ii), Genentech shall have the right to include Natrecor as a
Collaboration Product in the Field; PROVIDED, HOWEVER, that such right shall
not be exercisable at any time after[ ].
2
<PAGE>
C. Section 2.8(a) of the Collaboration Agreement is hereby amended
in its entirety to read as follows:
SECTION 2.8 NON-NATRIURETIC PRODUCTS.
(a) Neither Party shall commercialize, directly or indirectly,
any Non-Natriuretic Product in the Field prior to [ ]
without first offering to the other Party the opportunity to negotiate a
collaboration with respect to such Non-Natriuretic Product for use in the
Field under this Agreement. If, by[ ], Scios
Nova has filed an NDA for Auriculin for the treatment of acute renal failure
and the FDA has accepted such NDA for review within sixty (60) days of such
filing, the Parties shall continue to be bound until [ ]
to such obligation to first offer the other Party an opportunity to negotiate
a collaboration with respect to use in the Field of any Non-Natriuretic
Product that has reached a Phase III Decision Date by [ ].
If, by December 31, 1998, Scios Nova has not filed such an NDA or if within
sixty (60) days of such filing the FDA has not accepted for review an NDA
which was filed by December 31, 1998, Scios Nova shall continue to be bound
until [ ] to such obligation to first offer
Genentech an opportunity to negotiate with Scios Nova a collaboration with
respect to the use in the Field of any Scios Nova Non-Natriuretic Product
that has reached a Phase III Decision Date by [ ].
D. The first sentence of Section 4.5(a) of the Collaboration
Agreement is hereby amended in its entirety to read as follows:
(a) If, at any time prior to January 1, 1999, either (i)
Scios Nova believes that the development of Auriculin should be discontinued
and Genentech believes such development should be continued, and/or (ii)
Scios Nova does not desire to develop Natrecor in the Field and Genentech
desires to have Natrecor developed in the Field, the Parties shall attempt to
resolve such dispute in accordance with Section 17.1.
E. The first sentence of Section 4.5(c) of the Collaboration
Agreement is hereby amended in its entirety to read as follows:
(c) If the panel decides that there is sufficient data
suggesting that continued development of Auriculin as a product in the Field
is warranted, Scios Nova shall continue such development in the Field in the
Co-Promotion Territory, in accordance with the Development Plan to be
reviewed by the JDC and reviewed and approved by the Management Committee,
until the earlier of (i) the completion of the second Phase III Clinical
Study of Auriculin in the Field in the United States, or (ii) December 31,
1998.
F. The first sentence of Section 4.5(d) of the Collaboration
Agreement is hereby amended in its entirety to read as follows:
3
<PAGE>
(d) If the panel decides that there is not sufficient data to
continue development of Auriculin, but determines that there is sufficient
data suggesting that Natrecor should be developed as a product in the Field,
Scios Nova shall thereafter develop Natrecor in the Field in the Co-Promotion
Territory, in accordance with a Development Plan to be reviewed by the JDC
and reviewed and approved by the Management Committee until the earlier of
(i) the completion of a Phase II Clinical Trial (for the purposes of this
Section 4.5 only, a Phase II Clinical Trial shall mean such studies in humans
of the efficacy and safety of a Product which is designed to generate
sufficient data to commence Phase III Clinical Trials) or (ii) December 31,
1998.
F. Section 7.1 of the Collaboration Agreement is hereby amended in
its entirety to read as follows:
7.1 MILESTONE PAYMENTS.
(a) Genentech shall make the following payments to Scios Nova, within
30 days after the first achievement of each of the milestones by Auriculin:
MILESTONE PAYMENT
(i) MILESTONE ONE. Depending on when and if an NDA is filed by Scios,
Milestone One shall be payable under Alternative A or B as follows:
ALTERNATIVE A:
If there is an NDA filing in the Field and in the
United States ON OR BEFORE June 30, 1998:
NDA filing in the Field and in the United States $15 million
AND
So long as there is Regulatory Approval in the $15 million
United States, upon the earlier of (a) January 1, 2001,
or (b) Net Sales in the United States of $100 million in
any 12-month period.
4
<PAGE>
ALTERNATIVE B:
If there is an NDA filing in the Field and in the
United States AFTER June 30, 1998,
Genentech may choose either of Option 1 or Option 2
within 21 days of receiving written notice of
such NDA filing from Scios Nova:
Option 1: NDA approval in the Field and $30 million
in the United States
OR
Option 2: NDA filing in the Field and $15 million
in the United States
AND
So long as there is Regulatory Approval $15 million
in the United States, upon the earlier of
(e) January 1, 2001, or (f) Net Sales in the
United States of $100 million in any
12-month period.
(ii) MILESTONE TWO. Upon Royalty-Bearing $[ ]
Sales in the Licensed Territory (excluding
Japan) of $[ ] in any 12-month
period.
(iii) MILESTONE THREE. Upon Regulatory $[ ]
Approval in Japan.
Once each such milestone has been paid, Genentech shall have no obligation to
make the analogous milestone payment under Section 7.1(b).
(b) If a Collaboration Product that is a Scios Nova Product other
than Auriculin first meets any of the following milestones, then the
remaining milestone payments under Section 7.1(a) shall no longer apply and
Genentech shall make the following milestone payments to Scios Nova, within
30 days after the first achievement of each of the milestones by such other
Scios Nova Product.
5
<PAGE>
MILESTONE PAYMENT
(i) MILESTONE ONE. Depending on when and if an NDA is filed by Scios,
Milestone One shall be payable under Alternative A or B as follows:
ALTERNATIVE A:
If there is an NDA filing in the Field and in the
United States ON OR BEFORE June 30, 1998:
NDA filing in the Field and in the United States $[ ]
AND
So long as there is Regulatory Approval in the $[ ]
United States, upon the earlier of (a) January 1, 2001,
or (b) Net Sales in the United States of $100 million
in any 12-month period.
ALTERNATIVE B:
If there is an NDA filing in the Field and in the
United States AFTER June 30, 1998,
Genentech may choose either of Option 1 or Option 2
within 21 days of receiving written notice of
such NDA filing from Scios Nova:
Option 1: NDA approval in the Field and in the $[ ]
United States
OR
Option 2: NDA filing in the Field and in the $[ ]
United States
AND
So long as there is Regulatory Approval in $[ ]
the United States, upon the earlier of (e) January 1,
2001, or (f) Net Sales in the United States of $100
million in any 12-month period.
(ii) MILESTONE TWO. Upon Royalty-Bearing Sales in $[ ]
the Licensed Territory (excluding Japan) of $[ ]
in any 12-month period.
6
<PAGE>
(iii) MILESTONE THREE. Upon Regulatory Approval in $[ ]
Japan.
If each such milestone is subsequently met by Auriculin, then and only then,
Genentech shall pay again the milestones set forth in this Section 7.1(b)
within 30 days after the achievement of each of the milestones by Auriculin.
SECTION 2. All references to the Collaboration Agreement in any other
document, agreement or writing shall hereafter be deemed to refer to the
Collaboration Agreement as amended hereby.
SECTION 3. This Amendment may be executed in counterparts, each of
which shall be deemed to be an original and all of which, when taken
together, shall constitute one instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first above written.
SCIOS INC.
By: /S/ Richard L. Casey
-----------------------
Its: Chairman & CEO
-----------------------
GENENTECH, INC.
By: /S/ John F. McLaughlin
--------------------------
Its: Executive Vice President
--------------------------
7
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Scios Inc. on Form S-3 of our report dated February 6, 1996, on our audits of
the consolidated financial statements and financial statement schedules of
Scios Inc. as of December 31, 1995 and 1994 and for the years ended December
31, 1995, 1994 and 1993, which report is incorporated by reference in the
Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
San Jose, California
May 28, 1996
