FILE NO. 333-46117
FILED PURSUANT TO RULE 424(b)(3)
Enzon, Inc.
SUPPLEMENT NO. 1
TO PROSPECTUS DATED FEBRUARY 13, 1999
RELATING TO 150,000 SHARES OF COMMON STOCK, $.01 PAR VALUE
The Prospectus is supplemented by deleting the section entitled "Risk
Factors" and replacing such section in its entirety with the following:
RISK FACTORS
Information contained and incorporated by reference in this Prospectus
contains "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy. No assurance can be
given that the future results covered by the forward-looking statements will be
achieved. The risk factors set forth below constitute cautionary statements
identifying important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
vary materially from the future results indicated in such forward-looking
statements. Other factors could also cause actual results to vary materially
from the future results indicated in such forward-looking statements.
An investment in the Shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors in
addition to the other information set forth and incorporated by reference in
this Prospectus before making any decision to invest in the Shares.
Accumulated Deficit and Uncertainty of Future Profitability. The Company was
originally incorporated in 1981. To date, the Company's sources of cash have
been the proceeds from the sale of its stock through public offerings and
private placements, sales of its FDA-approved products, ADAGEN(R) and
ONCASPAR(R); sales of its products for research purposes; contract research and
development fees; technology transfer and license fees; and royalty advances. At
Sept. 30, 1998, the Company had an accumulated deficit of approximately
$117,977,000. The Company expects to incur operating losses for the foreseeable
future. To date, ADAGEN and ONCASPAR are the only products of the Company which
have been approved for marketing in the United States by the FDA, having been
approved in March 1990 and February 1994, respectively. In addition, ONCASPAR
has been approved for marketing in Canada, Germany and Russia. In order to
achieve profitable operations on a continuing basis, the Company, either alone
or through its partners, must successfully manufacture, market and sell its
ADAGEN and ONCASPAR products and develop, manufacture and market the Company's
products which are under development. These products are in various stages of
development, and the period necessary to achieve regulatory approval and market
acceptance of any individual product is uncertain and typically lengthy, if
achievable at all. Potential investors should be aware of the difficulties a
biopharmaceutical enterprise such as the Company encounters, especially in view
of the intense competition in the pharmaceutical industry in which the Company
competes. There can be no assurance that the Company's plans will either
materialize or prove successful, that its products under development will be
successfully developed or that its products will generate revenues sufficient to
enable the Company to achieve profitability.
Raw Materials and Dependence Upon Suppliers. Except for PEG-hemoglobin, the
Company purchases the unmodified compounds utilized in its approved products and
products under development from outside suppliers. There can be no assurance
that the purified bovine hemoglobin used in the manufacture of PEG-hemoglobin
can be produced by the Company in the amounts necessary to expand the current
clinical trials. The Company may be required to enter into supply contracts with
outside suppliers for certain unmodified compounds. The Company does not produce
the unmodified adenosine deaminase used in the manufacture of ADAGEN, the
unmodified forms of L-asparaginase used in the manufacture of ONCASPAR and the
unmodified camptothecin used in the Company's PROTHECAN(TM) product
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which is under development and has a supply contract with an outside supplier
for the supply of each of these unmodified compounds. Delays in obtaining or an
inability to obtain any unmodified compound, including unmodified adenosine
deaminase, unmodified L-asparaginase, unmodified bovine blood, or unmodified
camptothecin on reasonable terms, or at all, could have a material adverse
effect on the Company's business, financial condition and results of operations.
In the event the Company is required to obtain an alternate source for an
unmodified compound utilized in a product which is being sold commercially or
which is in clinical development, the FDA and relevant foreign regulatory
agencies will likely require the Company to perform additional testing, which
would cause delays and additional expenses, to demonstrate that the alternate
material is biologically and chemically equivalent to the unmodified compound
previously used. Such evaluations could include chemical, pre-clinical and
clinical studies and could delay development of a product which is in clinical
trials, limit commercial sales of an approved product and cause the Company to
incur significant additional expenses. If such alternate material is not
demonstrated to be chemically and biologically equivalent to the previously used
unmodified compound, the Company will likely be required to repeat some or all
of the pre-clinical and clinical trials conducted for such compound. The
marketing of an FDA-approved drug could be disrupted while such tests are
conducted. Even if the alternate material is shown to be chemically and
biologically equivalent to the previously used compound, the FDA or relevant
foreign regulatory agency may require the Company to conduct additional clinical
trials with such alternate material.
The Company's quality assurance department has observed increased levels of
particulates in certain batches of ONCASPAR, which were manufactured by the
Company. These batches were not shipped and the Company's recent rejection rate
for the manufacture of this product is significantly higher than it has been
historically. The Company is currently engaged in an extensive review of its
manufacturing procedures for this product and believes that the problem may be
related to certain materials which are used in the filing process, although this
has not yet been determined. The Company has been in discussions with the FDA
regarding this problem. The Company and the FDA have agreed to temporary
labeling and distribution modifications for ONCASPAR, until the current
manufacturing problem is resolved. The Company, rather than RPR, will
temporarily distribute ONCASPAR directly to patients, on an as needed basis, in
order to institute the additional inspection and labeling procedures prior to
distribution. Upon resolution of the existing manufacturing problem, it is
expected that RPR will resume the normal distribution of ONCASPAR. This
manufacturing problem is isolated to ONCASPAR only.
Patents and Proprietary Technology. The Company has licensed, and been issued, a
number of patents in the United States and other countries and has other patent
applications pending to protect its proprietary technology. Although the Company
believes that its patents provide certain protection from competition, there can
be no assurance that such patents will be of substantial protection or
commercial benefit to the Company, will afford the Company adequate protection
from competing products, will not be challenged or declared invalid, or that
additional United States patents or foreign patent equivalents will be issued to
the Company. The scope of patent claims for biotechnological inventions is
uncertain and the Company's patents and patent applications are subject to this
uncertainty. The Company is aware of certain issued patents and patent
applications belonging to third parties, and there may be other patents and
patent applications, containing subject matter which the Company or its
licensees or collaborators may require in order to research, develop or
commercialize at least some of the Company's products. There can be no assurance
that licenses under such patents and patent applications will be available on
acceptable terms or at all. If the Company does not obtain such licenses, it or
its partners 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 products requiring such licenses could be foreclosed. If
the Company does obtain such licenses it will in all likelihood be required to
make royalty and other payments to the licensors, thus reducing the profits
realized by the Company from the products covered by such licenses. In certain
cases, the Company has obtained opinions of patent counsel that certain of such
patents, including patents relevant to PEG-hemoglobin held by Biopure Inc. and
patents relevant to PEG-Intron A held by Hoffman La Roche, are not infringed by
the products of the Company or its collaborators or would not be held to be
valid if litigated. Such opinions have been relied upon by the Company and its
collaborators in continuing to pursue development of the subject product. Such
opinions are not binding on any court and there can be no assurance that such
opinions will prove to be correct and that a court would find any of the claims
of such patents to be invalid or that the Company or its collaborators does not
infringe such patents. The Company is aware that certain organizations are
engaging in activities that infringe certain of the Company's PEG technology and
SCA patents. The Company expects that there may be
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significant litigation in the industry regarding patents and other proprietary
rights and, such litigation, it could consume a substantial amount of the
Company's resources. In addition, the Company relies heavily on its proprietary
technologies for which pending patent applications have been filed and on
unpatented know-how developed by the Company. Insofar as the Company relies on
trade secrets and unpatented know-how to maintain its competitive technological
position, there can be no assurance that others may not independently develop
the same or similar technologies. Although the Company has taken steps to
protect its trade secrets and unpatented know-how, third-parties nonetheless may
gain access to such information. The Company has two research and license
agreements with The Green Cross Corporation ("Green Cross") regarding rHSA. The
Company and Yoshitomi Pharmaceutical Industries, Ltd. ("Yoshitomi"), the
successor to Green Cross' business, are currently in arbitration to resolve the
amount of royalties that will be due the Company, if any. Yoshitomi has filed
documents in such arbitration seeking a declaratory judgment that under its
agreement with the Company no royalties are payable. Any adverse decision from
such an arbitration proceeding could result in a material adverse effect to the
Company's future business, financial condition and results of operations.
Research Corporation Technologies, Inc. ("Research Corporation") held the
original patent upon which the PEG Process is based and had granted the Company
a license under such patent. Research Corporation's patent for the PEG Process
in the United States and its corresponding foreign patents have expired.
Although the Company has obtained several improvement patents in connection with
the PEG Process, there can be no assurance that any of these patents will enable
the Company to prevent infringement or that competitors will not develop
competitive products outside the protection that may be afforded by these
patents. The Company is aware that others have also filed patent applications
and have been granted patents in the United States and other countries with
respect to the application of PEG to proteins and other compounds. Based upon
the expiration of the Research Corporation patent, other parties will be
permitted to make, use, or sell products covered by the claims of the Research
Corporation patent, subject to other patents, including those held by the
Company. There can be no assurance that the expiration of the Research
Corporation patent will not have a material adverse effect on the business,
financial condition and results of operations of the Company.
Limited Sales and Marketing Experience; Dependence on Marketing Partners. Other
than ADAGEN, which the Company markets on a worldwide basis to a small patient
population, the Company does not engage in the direct commercial marketing of
any of its products and therefore does not have significant sales and marketing
experience. For certain of its products, the Company has provided exclusive
marketing rights to its corporate partners in return for royalties to be
received on sales. With respect to ONCASPAR, the Company has granted exclusive
marketing rights in North America and the Pacific Rim to RPR. As discussed above
in " - Raw Materials and Dependence Upon Suppliers", currently, the Company,
rather than RPR, will temporarily distribute ONCASPAR directly to patients, on
an as needed basis, in order to institute additional inspection and labeling
procedures prior to distribution. Upon resolution of the existing manufacturing
problem, it is expected that RPR will resume the normal distribution of
ONCASPAR. This manufacturing problem is isolated to ONCASPAR only. The Company
has also granted exclusive marketing rights in Europe and Russia to Medac Gmbh
and in Israel to Tzamal Pharma Ltd. The Company expects to retain marketing
partners to market ONCASPAR in other foreign markets, principally South America,
and is currently pursuing arrangements in this regard. There can be no assurance
that such efforts will result in the Company concluding such arrangements.
Regarding the marketing of certain of the Company's other future products, the
Company expects
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to evaluate whether to create a sales force to market certain products in the
United States or to continue to enter into license and marketing agreements with
others for United States and foreign markets. These agreements generally provide
that all or a significant portion of the marketing of these products will be
conducted by the Company's licensees or marketing partners. In addition, under
certain of these agreements, the Company's licensees or marketing partners may
have all or a significant portion of the development and regulatory approval
responsibilities. There can be no assurance that the Company will be able to
control the amount and timing of resources that any licensee or marketing
partner may devote to the Company's products or prevent any licensee or
marketing partner from pursuing alternative technologies or products that could
result in the development of products that compete with the Company's products
and the withdrawal of support for the Company's products. Should the licensee or
marketing partner fail to develop a marketable product (to the extent it is
responsible for product development) or fail to market a product successfully,
if it is developed, the Company's business, financial condition and results of
operations may be adversely affected. There can be no assurance that the
Company's marketing strategy will be successful. Under the Company's marketing
and license agreements, the Company's marketing partners and licensees may have
the right to terminate the agreements and abandon the applicable products at any
time for any reason without significant payments. The Company is aware that
certain of its marketing partners are pursuing parallel development of products
on their own and with other collaborative partners which may compete with the
licensed products and there can be no assurance that the Company's other current
or future marketing partners will not also pursue such parallel courses.
Reimbursement from Third-Party Payors. Sales of the Company's products will be
dependent in part on the availability of reimbursement from third-party payors,
such as governmental health administration authorities, private health insurers
and other organizations. Government and other third-party payors are
increasingly sensitive to the containment of health care costs and are limiting
both coverage and levels of reimbursement for new therapeutic products approved
for marketing, and are refusing, in some cases, to provide any coverage for
indications for which the FDA and other national health regulatory authorities
have not granted marketing approval. There can be no assurance that such
third-party payor reimbursement will be available or will permit the Company to
sell its products at price levels sufficient for it to realize an appropriate
return on its investment in product development. Since patients who receive
ADAGEN will be required to do so for their entire lives (unless a cure or
another treatment is developed), lifetime limits on benefits which are included
in most private health insurance policies could permit insurers to cease
reimbursement for ADAGEN. Lack of or inadequate reimbursement by government and
other third party payors for the Company's products would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Government Regulation. The manufacturing and marketing of pharmaceutical
products in the United States and abroad is subject to stringent governmental
regulation and the sale of any of the Company's products for use in humans in
the United States will require the prior approval of the FDA. Similar approvals
by comparable agencies are required in most foreign countries. The FDA has
established mandatory procedures and safety standards which apply to the
clinical testing, manufacture and marketing of pharmaceutical products.
Pharmaceutical manufacturing facilities are also regulated by state, local and
other authorities. Obtaining FDA approval for a new therapeutic may take several
years and involve substantial expenditures. ADAGEN was approved by the FDA in
March 1990. ONCASPAR was approved by the FDA in February 1994, in Germany in
November 1994 and in Canada in 1997 in each case for patients with acute
lymphoblastic leukemia who are hypersensitive to native forms of L-asparaginase.
ONCASPAR was approved in Russia for therapeutic use in a broad range of cancers.
Except for these approvals, none of the Company's other products have been
approved for sale and use in humans in the United States or elsewhere. There can
be no assurance that the Company will be able to obtain FDA approval for any of
its other products. In addition, any approved products are subject to continuing
regulation, and noncompliance by the Company with applicable requirements can
result in criminal penalties, civil penalties, fines, recall or seizure,
injunctions requiring suspension of production, orders requiring ongoing
supervision by the FDA or refusal by the government to approve marketing or
export applications or to allow the Company to enter into supply contracts.
Failure to obtain or maintain requisite governmental approvals or failure to
obtain or maintain approvals of the scope requested, will delay or preclude the
Company or its licensees or marketing partners from marketing their products, or
limit the commercial use of the products, and thereby may have a material
adverse affect on the Company's business, financial condition and results of
operations.
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Intense Competition and Risk of Technological Obsolescence. Many established
biotechnology and pharmaceutical companies with resources greater than those of
the Company are engaged in activities that are competitive with the Company's
and may develop products or technologies which compete with those of the
Company. The Company is aware that other companies are engaged in utilizing PEG
technology in developing drug products. There can be no assurance that the
Company's competitors will not successfully develop, manufacture and market
competing products utilizing PEG technology or otherwise. Other drugs or
treatment modalities which are currently available or that may be developed in
the future, and which treat the same diseases as those which the Company's
products are designed to treat, may be competitive with the Company's products.
There can be no assurance that the Company will be able to compete successfully
against current or future competitors or that such competition will not have a
material adverse effect on the Company's business, financial condition and
results of operations. Rapid technological development by others may result in
the Company's products becoming obsolete before the Company recovers a
significant portion of the research, development and commercialization expenses
incurred with respect to those products. The Company's success, in large part,
depends upon developing and maintaining a competitive position in the
development of products and technologies in its area of focus. There can be no
assurance that the Company's competitors will not succeed in developing
technologies or products that are more effective than any which are being sold
or developed by the Company or which would render the Company's technologies or
products obsolete or noncompetitive. The Company's failure to develop and
maintain a competitive position with respect to its products and/or technologies
would have a material adverse effect on its business, financial condition and
results of operations.
Uncertainty of Market Acceptance. The Company's products, ONCASPAR and ADAGEN,
have been approved by the FDA to treat patients with acute lymphoblastic
leukemia and a rare form of severe combined immunodeficiency disease,
respectively. Neither product has become widely used due to the small patient
population and limited indications approved by the FDA. The Company's current
research and development efforts are directed towards developing new
technologies to aid in drug delivery. Assuming that the Company is able to
develop such technologies and secure the requisite FDA approvals, the market
acceptance of any such products will depend upon the acceptance by the medical
community of the use of such technologies. There can be no assurance that any
additional products will be approved by the FDA or that, if approved, the
medical community will use them. In addition, the use of any such new products
will depend upon the extent of third party medical reimbursement, increased
awareness of the effectiveness of such technologies and sales efforts by the
Company or any marketing partner. The Company's proprietary PEG technology has
received only limited market acceptance to date. Failure of the Company to
develop new FDA-approved products and to achieve market acceptance for such
products would have a material adverse effect on the Company's business,
financial condition and results of operation.
Potential Product Liability. The use of the Company's products during testing or
after regulatory approval entails an inherent risk of adverse effects which
could expose the Company to product liability claims. The Company maintains
product liability insurance coverage in the total amount of $10 million for
claims arising from the use of its products in clinical trials prior to FDA
approval and for claims arising from the use of its products after FDA approval.
There can be no assurance that the Company will be able to maintain its existing
insurance coverage or obtain coverage for the use of its other products in the
future. There can be no assurance that such insurance coverage and the resources
of the Company would be sufficient to satisfy any liability resulting from
product liability claims or that a product liability claim would not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Future Capital Needs; Uncertainty of Additional Financing. The Company's current
sources of liquidity are its cash reserves, and interest earned on such cash
reserves, sales of ADAGEN and ONCASPAR, sales of its products for research
purposes, and license fees. There can be no assurance as to the level of sales
of the Company's FDA-approved product, ADAGEN and ONCASPAR, or the amount of
royalties realized from the commercial sale of ONCASPAR pursuant to the
Company's licensing agreements. Total cash reserves, including short term
investments, as of September 30, 1998, were approximately $23,033,000. Based
upon its currently planned research and development activities and related costs
and its current sources of liquidity, the Company anticipates its current cash
reserves will be sufficient to meet its capital and operational requirements for
the foreseeable future. The Company's future needs and the adequacy of available
funds will depend on numerous factors, including without limitation, the
successful commercialization of
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its products, progress in its product development efforts, the magnitude and
scope of such efforts, progress with preclinical studies and clinical trials,
progress with regulatory affairs activities, the cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the development of
strategic alliances for the marketing of its products. There can be no assurance
that the Company will not require additional financing for its currently planned
capital and operational requirements. In addition, the Company may seek to
acquire additional technology, enter into strategic alliances and engage in
additional research and development programs, which may require additional
financing. The Company does not have any committed sources of additional
financing, and there can be no assurance that additional funding, if necessary,
will be available on acceptable terms, if at all. To the extent the Company is
unable to obtain financing, it may be required to curtail its activities or sell
additional securities. There can be no assurance that any of the foregoing fund
raising activities will successfully meet the Company's anticipated cash needs.
If adequate funds are not available, the Company's business, financial condition
and results of operations will be materially and adversely affected.
Dividend Policy and Restrictions. The Company has paid no dividends on its
Common Stock since its inception and does not plan to pay dividends on its
Common Stock in the foreseeable future. Except as may be utilized to pay the
dividends payable on the Company's Series A Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock"), any earnings which the Company may
realize will be retained to finance the growth of the Company. In addition, the
terms of the Series A Preferred Stock restrict the payment of dividends on other
classes and series of stock.
Possible Volatility of Stock Price. Historically, the market price of the
Company's Common Stock has fluctuated over a wide range and it is likely that
the price of the Common Stock will fluctuate in the future. Announcements
regarding technical innovations, the development of new products, the status of
corporate collaborations and supply arrangements, regulatory approvals, patent
or proprietary rights or other developments by the Company or its competitors
could have a significant impact on the market price of the Common Stock. In
addition, due to one or more of the foregoing factors, in one or more future
quarters, the Company's results of operations may fall below the expectations of
securities analysts and investors. In that event, the market price of the
Company's Common Stock could be materially and adversely affected.
Shares Eligible for Future Sale. As of December 8, 1998, the Company had
approximately 35,955,000 shares of Common Stock outstanding and after giving
effect to the offering of 112,500 shares of Common Stock issuable upon exercise
of the Warrants described in "Selling Stockholders" which are offered hereby,
but assuming no additional shares are issued pursuant to outstanding options,
warrants or convertible securities, would have had approximately 36,068,000
shares of Common Stock outstanding. The 112,500 shares offered hereby are
"restricted securities," as that term is defined in Rule 144 under the
Securities Act, which when sold pursuant to the Registration Statement will be
freely transferrable without restrictions under the Securities Act, assuming
such Shares are held by non-affiliates of the Company. Of the other shares of
Common Stock outstanding, approximately 28,189,953 shares will be immediately
available for sale without restriction in the public market and approximately
1,654,240 and 2,398,114 shares will be eligible for sale under Rule 144 and Rule
144(k) of the Securities Act, respectively. In addition, the approximately
243,000 shares of Common Stock issuable upon conversion of the Series A
Preferred Stock will be immediately available for sale without restriction in
the public market when issued. Certain holders of the Company's securities are
entitled to registration rights with respect to an aggregate of approximately
8,179,000 shares of Common Stock, including approximately 1,201,000 shares
underlying outstanding warrants. Of such shares, approximately 7,044,000 shares
are registered currently on Form S-3 registration statements which includes the
registration statement of which this Prospectus forms a part. The approximately
4,015,000 shares of Common Stock underlying outstanding options which are held
by employees, directors and consultants are registered on Form S-8 registration
statements. Sales of substantial amounts of such shares in the public market or
the prospect of such sales could adversely affect the market price of the Common
Stock.
Anti-takeover Considerations. The Company has the authority to issue up to
3,000,000 shares of Preferred Stock of the Company in one or more series and to
fix the powers, designations, preferences and relative rights thereof without
any further vote of shareholders. The issuance of such Preferred Stock could
dilute the voting powers of holders of Common Stock and could have the effect of
delaying, deferring or preventing a change in control of the Company.
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Certain provisions of the Company's Articles of Incorporation and By-laws,
including those providing for a staggered Board of Directors, as well as
Delaware law, may operate in a manner that could discourage or render more
difficult a takeover of the Company or the removal of management or may limit
the price certain investors may be willing to pay for shares of Common Stock.
The Date of this Supplement is January 14, 1999.
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