<PAGE>
As filed with the Securities and Exchange Commission on March 15, 1995
REGISTRATION NO. 33- _______________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
ALLIANCE PHARMACEUTICAL CORP.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1644018
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3040 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(619) 558-4300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
DUANE J. ROTH
PRESIDENT
3040 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(619) 558-4300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
Copies to:
MELVIN EPSTEIN, ESQ. STEPHANIE W. ABRAMSON, ESQ.
STROOCK & STROOCK & LAVAN MORGAN, LEWIS & BOCKIUS
7 HANOVER SQUARE 101 PARK AVENUE
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10178
(212) 806-5400 (212) 309-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are being
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]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
<S> <C> <C> <C> <C>
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Common Stock, par value $0.01 per share 2,500,000 $5.875 $14,687,500 $5,065
=========================================================================================================
</TABLE>
(1) All of these shares are to be offered both in the United States and in
certain countries outside the United States. Those shares offered outside
the United States may be resold from time to time in the United States in
transactions requiring registration under the Securities Act of 1933, as
amended.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the last sale price of the registrant's
Common Stock as reported on the Nasdaq National Market on March 13, 1995.
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 14, 1995
2,500,000 SHARES
[LOGO]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company in an offering in the United States (the "U.S. Offering") and in a
concurrent offering in certain countries outside of the United States (the
"International Offering" and, together with the U.S. Offering, the "Offerings").
The offering price per share of Common Stock in the U.S. Offering and the
International Offering is identical. The Company's Common Stock is traded over-
the-counter on the Nasdaq National Market under the symbol "ALLP." On
March 13, 1995, the closing price of the Common Stock was $5.875 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
<TABLE>
<CAPTION>
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.
<S> <C> <C> <C>
===============================================================================
Price to Proceeds to
Public Fee /(1)/ Company /(2)/
- -------------------------------------------------------------------------------
Per Share............................ $ $ $
- -------------------------------------------------------------------------------
Total/(3)/........................... $ $ $
===============================================================================
</TABLE>
(1) The Common Stock is being offered on an all or none basis by the Company
principally to selected institutional investors. Oppenheimer & Co., Inc.
and Cowen & Company have been retained to act, on a best efforts basis, as
agents for the Company in connection with the U.S. Offering. Oppenheimer &
Co., Inc., Cowen & Company and ABB Aros Fondkommission AB have been
retained to act, on a best efforts basis, as agents for the Company in
connection with the International Offering. Oppenheimer & Co., Inc., Cowen
& Company and ABB Aros Fondkommission AB are referred to herein as the
"Placement Agents." The Company has agreed (i) to pay the Placement Agents
a fee in connection with the Offerings and to reimburse them for certain
out-of-pocket expenses, (ii) to indemnify Oppenheimer & Co., Inc. and Cowen
& Company against certain liabilities under the Securities Act of 1933, as
amended, and (iii) to indemnify the Placement Agents against certain
liabilities in connection with the International Offering. See "Plan of
Distribution."
(2) The termination date of the Offerings is April , 1995, subject to earlier
termination if all the shares are sold and to extension by the mutual
agreement of the Company and the Placement Agents. The closing of the
Offerings is conditioned on the sale of all 2,500,000 shares. Prior to the
closing date of the U.S. Offering, all investor funds will promptly be
placed in escrow with Citibank, N.A., as escrow agent for funds collected
in connection with the U.S. Offering (the "U.S. Escrow Agent"), and prior
to the closing of the International Offering, all investor funds will
promptly be placed in escrow with Citibank, N.A. in London, England, as
escrow agent for funds collected in connection with the International
Offering (the "International Escrow Agent" and, with the U.S. Escrow Agent,
the "Escrow Agents"), in each case in an escrow account established for the
benefit of the investors. Upon receipt of notice from the Escrow Agents
that investors have affirmed purchase of the Common Stock and deposited the
requisite funds in the applicable escrow account, the Company will deposit
with each Escrow Agent the applicable Common Stock to be credited to the
accounts of the investors and will collect the investor funds from the
Escrow Agents. In the event that investor funds are not received in the
full amount necessary to satisfy the requirements for the Offerings, all
funds deposited with the Escrow Agents in the escrow accounts will promptly
be returned to the investors. See "Plan of Distribution."
(3) Before deducting expenses of the Offerings estimated at $300,000 payable by
the Company.
The date of this Prospectus is _________, 1995.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994, which was filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended by Form 10-K/A filed on March 10, 1995, the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1994, which was filed with the Commission pursuant to the
Exchange Act on November 10, 1994, as amended by Form 10-Q/A for such
quarter filed on March 10, 1995, and the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 1994, which was filed with
the Commission pursuant to the Exchange Act on February 10, 1995, as
amended by Form 10-Q/A for such quarter filed on March 10, 1995, and the
information under the caption "Description of the Company's Securities"
contained in the Company's Registration Statement on Form 8-A, dated
October 25, 1984, with respect to the Company's Common Stock, are
incorporated herein by reference and made a part of this Prospectus as of
the date hereof. All reports subsequently filed pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Common Stock offered hereby shall be deemed to be
incorporated by reference into this Prospectus. Any statement contained
herein 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 document which is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents which have been incorporated by
reference in this Prospectus, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents
so incorporated. Requests for such copies should be directed to Gwen
Rosenberg, Alliance Pharmaceutical Corp., 3040 Science Park Road, San
Diego, California 92121, telephone (619) 558-4300.
AVAILABLE INFORMATION
This Prospectus is part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") which the Company has filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). The Registration
Statement relates to the Common Stock being offered in the United States in
the U.S. Offering. The Registration Statement also relates to shares of
Common Stock that will be sold outside the United States in the
International Offering, but that may be resold from time to time in the
United States in transactions requiring registration under the Securities
Act. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Company and the Common Stock, reference is
made to the Registration Statement. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified
in its entirety by such reference.
2
<PAGE>
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements
and other information with the Commission. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048, and
at its Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Common Stock is listed on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at
the offices of the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and consolidated
financial statements contained in this Prospectus or previously filed with
the Securities and Exchange Commission. Unless otherwise noted, all
financial information, share and per share data in this Prospectus assume
no issuance of shares of Common Stock issuable upon the exercise of
outstanding warrants, options and convertible securities. As used in this
Prospectus, the terms "Company" and "Alliance" refer to Alliance
Pharmaceutical Corp. and its consolidated subsidiaries.
THE COMPANY
Alliance is a pharmaceutical research and development company that
focuses on the application of scientific discoveries which can be
developed into innovative drug products. Alliance has entered into
agreements with institutions and inventors for the rights to their
discoveries and is adding value to these discoveries by defining the
product, market and regulatory strategies prior to seeking collaborative
relationships with multinational pharmaceutical companies for the delivery
of these products to the market. Alliance intends to seek to enter into
similar agreements and, through this approach, Alliance believes it can
play an important role in the development of innovative pharmaceutical
products.
Three of the products under development by Alliance are based upon
perfluorochemical ("PFC") technologies. The Company's primary drug
substance is perflubron, an eight-carbon brominated PFC. Alliance has in
various stages of development three products which are based on PFC
technologies and which address significant medical needs: Oxygent(TM),
an intravascular oxygen carrier designed to reduce the need for donor
blood transfusions during surgery, which is in clinical development;
LiquiVent(TM), an intrapulmonary agent for use in the treatment of acute
respiratory failure, which is in clinical development; and Imagent(R) US,
a diagnostic ultrasound imaging agent, which is in preclinical
development. In addition, the Company is evaluating its antigenized
antibody technology for potential use in the production of novel vaccines
and immune modulators.
Oxygent (an emulsion containing perflubron) is an intravascular oxygen
carrier for use as a temporary "blood substitute" to provide oxygen to
tissues during elective surgeries where substantial blood loss is
anticipated. Oxygent has several potential advantages over the use of
allogeneic (donor) blood: it does not transmit infectious disease, is
compatible with all blood types and has a shelf life in excess of one
year. Oxygent is intended for use with autologous blood collection
techniques including predonation, hemodilution, and salvage.
4
<PAGE>
In August 1994, the Company entered into a license agreement (the
"License Agreement") with Ortho Biotech, Inc. and The R.W. Johnson
Pharmaceutical Research Institute, a division of Ortho Pharmaceutical
Corporation, subsidiaries of Johnson & Johnson (collectively referred to
as "Ortho"), which provides Ortho with worldwide marketing rights to the
Company's injectable PFC emulsions capable of transporting oxygen for
therapeutic use, including Oxygent. The Company has conducted early-stage
clinical trials with Oxygent in surgical patients. The product will be
jointly developed by Alliance and Ortho, with Ortho responsible for
substantially all of the remaining costs of development. Ortho will pay
Alliance royalties based on sales of the product after commercialization.
In conjunction with the License Agreement, Johnson & Johnson Development
Corporation purchased $15.0 million of the Company's convertible preferred
stock. In addition, Ortho paid Alliance an initial license fee of $4.0
million and will make other payments upon the achievement of certain
milestones.
LiquiVent (sterile perflubron) is in clinical development for use as
an intrapulmonary agent to treat acute respiratory failure, a disorder
that can result from many causes, including serious infections, traumatic
shock, severe burns and inhalation of toxic substances, and is
characterized by impairment of normal lung function. The Company is
conducting separate early-stage clinical trials with LiquiVent in
premature infants, pediatric patients, and adults with acute respiratory
distress syndrome ("ARDS"), the most severe form of acute respiratory
failure. The U.S. Food and Drug Administration (the "FDA") has granted
the Company Subpart E status (expedited review) for development of the
product in the treatment of ARDS.
Imagent US is a PFC-based intravenous contrast agent for enhancement
of ultrasound images of blood flow abnormalities (perfusion defects),
which can occur as a result of myocardial infarctions, blood clots, or
solid tumors. The product is currently in preclinical development.
The Company's fourth current project utilizes its antigenized
antibody technology to develop a prototype vaccine for an infectious
disease and a prototype tolerogen for an autoimmune disease. Antigenized
antibodies use human immunoglobulin as a platform to carry specific
peptides to modulate the immune system. Depending on the disease and
antigen, antigenized antibodies can be used to either stimulate antibody
production (as in a vaccine) to prevent disease or to down-regulate
antibody production (as in a tolerogen) to treat certain autoimmune
disorders.
5
<PAGE>
The Company's headquarters are located at 3040 Science Park Road, San
Diego, California 92121, and its telephone number is (619) 558-4300.
6
<PAGE>
<TABLE>
The Offerings
<S> <C>
Common Stock offered 2,500,000 shares
Common Stock to be outstanding after the Offerings 23,912,370 shares
Use of Proceeds To fund preclinical testing and clinical
trials, research and development, and other
general corporate purposes
Nasdaq National Market symbol ALLP
</TABLE>
<TABLE>
Summary Consolidated Financial Data
Years Ended June 30, Six Months Ended
December 31,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Statement of Operations
Data:
Total revenues $ 1,717 $ 1,582 $ 1,805 $ 2,370 $ 409 $ 252 $ 7,209
Loss from operations (14,363) (18,494) (24,304) (28,802) (38,508) (18,688) (15,724)
Other income - net 1,902 792 2,538 2,422 1,562 951 575
Dividends on preferred
stock (219)
Net loss applicable to $(12,461) $(17,702) $(21,766) $(26,380) $(36,946) $(17,737) $(15,368)
common shares
Net loss per share of $(0.94) $(1.24) $(1.25) $(1.39) $(1.83) $(0.93) $(0.72)
Common Stock
Weighted average 13,255 14,258 17,344 18,946 20,226 19,109 21,385
number of shares
outstanding
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
-------------------------
As
Actual Adjusted/(1)/
--------- -------------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments $ 20,100 $ 33,606
Working capital 20,877 34,383
Total assets 52,864 66,370
Long-term debt and other 518 518
Accumulated deficit (174,492) (174,492)
Stockholders' equity 48,615 62,121
</TABLE>
- ----------------
/(1)/ Adjusted to give effect to the sale of the 2,500,000 shares of Common
Stock offered hereby, after deducting the Placement Agents' fee and
estimated offering expenses. See "Use of Proceeds" and "Capitalization."
7
<PAGE>
RISK FACTORS
An investment in the Common Stock offered in the Offerings
involves a high degree of risk. The following factors should be carefully
considered in evaluating the Company and its business:
Limited Product Revenues; History of Operating Losses.
Substantially all of the Company's revenues to date have consisted of
licensing fees, milestone payments and payments to fund research and
development activities under joint development and license agreements. The
Company has had net operating losses since its inception and expects such
losses to continue unless and until such time as revenues are sufficient
to fund its continuing operations. As of December 31, 1994, the Company
had an accumulated deficit of $174,492,000, of which approximately $34.3
million reflects non-cash charges from the Company's acquisition by merger
of Fluoromed Pharmaceutical, Inc. on February 24, 1989. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Future Capital Needs; Uncertainty of Additional Financing. The
Company believes that its existing capital resources, including expected
revenues from the License Agreement, investments, and product sales, as
well as the net proceeds from the Offerings and income earned thereon, will
be adequate to satisfy its capital requirements for approximately 12
months. The Company will need additional financing to support its long-
term product development programs. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in its research and development programs, progress with
preclinical testing and clinical trials, the time and cost involved in
obtaining regulatory approvals, patent costs, competing technological and
market developments, changes in existing collaborative relationships, the
Company's ability to establish development, sales, and marketing
arrangements, and the cost of manufacturing scale-up, if necessary. No
assurance can be given that adequate financing will be available to the
Company in the future.
Reliance on Collaborative Partners; Future Collaborations. The
Company has entered into the License Agreement to support the development
and commercialization of Oxygent and to raise capital. Pursuant to the
License Agreement, the Company has granted significant licensing rights.
The Company's strategy is to seek additional collaborations; however, there
can be no assurance that the Company will be able to negotiate acceptable
collaborative arrangements in the future, or that any current or future
arrangements will ultimately be successful. Under the License Agreement,
the Company will depend on Ortho for development and regulatory approval of
products in certain markets. The termination of the License Agreement,
which can occur on three months' advance notice, or any other future
collaborative arrangement could adversely affect the Company's research,
development or, ultimately, product distribution plans. See "Business -
Collaborative Relationships."
Uncertainty of Development Efforts. The Company's products
require substantial development efforts. The Company may encounter
unforeseen technological or scientific problems (including side effects)
which may force abandonment or substantial change in the development of a
specific product or process, or technological change or product
developments by others, any of which may have a material adverse effect on
the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -Liquidity and Capital Resources."
Government Regulation. The production and marketing of the
Company's products and its research and development activities are subject
to regulation for safety and efficacy by numerous government authorities in
the United States and other countries. To date, the Company has received
regulatory approval for the commercial sale of only two of its products.
Clinical
8
<PAGE>
trials and the marketing and manufacturing of the Company's products are
subject to the testing and approval process of the FDA and foreign
regulatory authorities. The process of obtaining regulatory clearances or
approvals is costly and time consuming. The Company cannot predict how long
preclinical and clinical trials will take or whether they will be
successful; nor can the Company predict how long the necessary regulatory
approvals or clearances will take. Therefore, there can be no assurance
that the necessary clearances or approvals will be obtained, or obtained on
a timely basis. Delays in obtaining regulatory approval in the United
States or other countries would adversely affect the marketing of products
developed by the Company. The effect of governmental regulations which
might arise from future legislative or administrative action cannot be
predicted. See "Business - Government Regulation."
Health Care Reimbursement and Reform. The Company's ability to
commercialize its products will depend in part on the availability to end-
users of reimbursement for the cost of the Company's products and related
treatment by government health administration authorities, private health
coverage insurers and other organizations. The reimbursement status of
newly approved health care products is uncertain and there can be no
assurance that adequate patient insurance coverage will be available to
permit the Company to maintain price levels sufficient for the realization
of a satisfactory return on its investment in product development. In
addition, the public and the federal government have recently focused
significant attention on reforming the health care system in the United
States. A number of health care reform measures have been suggested,
including price controls on pharmaceutical products. Public discussion of
such measures is likely to continue, and concerns about the potential
effects on different proposals have been reflected in the volatility of
the stock prices for companies in the health care and related industries.
The adoption of such reform proposals could have a material adverse effect
on the Company and its businesses.
Limited Manufacturing Capability and Experience. The Company
currently operates a pilot manufacturing facility and has constructed an
intermediate scale-up manufacturing plant at its San Diego headquarters for
the production of perflubron-based emulsions for use in research and
development and clinical trials. The Company believes that, if such
products are approved by the FDA, the intermediate scale-up plant has
adequate capacity to support the market introduction of its emulsion
products. However, there can be no assurance that FDA approval will be
obtained or obtained on a timely basis. Pursuant to the License Agreement,
Ortho may elect to manufacture the product itself after market
introduction, or continue to require the Company to do so at a negotiated
price. If it is required to manufacture the product, the Company will need
to construct a commercial production facility. The Company has not
selected a site or obtained any regulatory approvals. Construction of a
facility will depend upon regulatory approvals, product development and
capital resources, among other things. See "Business - Manufacturing."
9
<PAGE>
Unpredictability of Patent Protection; Proprietary Technology.
The Company believes that its success will depend largely on its ability to
obtain and maintain patent protection for its own inventions and licenses
for the use of patents owned by third parties. The Company has obtained
patents covering certain intermediate and high concentration PFC
emulsions. The Company has filed, and when appropriate will file, other
patent applications with respect to its products and processes in the
United States and in foreign countries. There can be no assurance, however,
that the Company will develop any additional products and processes which
may be patentable or that any additional patents will be issued. It is
possible that patents issued to the Company or any patents licensed to the
Company may be challenged successfully, that the Company may infringe
patents of third parties unintentionally, and that the Company may have to
alter its products or manufacturing processes to take into account the
patents of third parties, causing additional unexpected costs and delays in
product development. The Company also attempts to protect its proprietary
products and processes by relying on trade secret laws and non-disclosure
and confidentiality agreements with its employees and certain other persons
who have access to its products or processes. No assurance can be given
that others will not develop such products or processes independently or
obtain access to such products or processes. To the extent that others
develop or obtain similar products or processes, the Company's competitive
position may be affected adversely. See "Business - Patents."
Dependence Upon Key Personnel. The Company's success in
developing marketable products and achieving a competitive position will
depend, in part, on its ability to retain qualified scientific and
management personnel. Competition for such personnel is intense, and no
assurance can be given that the Company will be able to retain such
personnel. Scientific advisors to the Company are employed by or have
consulting arrangements with third parties which may conflict with their
obligations to the Company. The Company's anticipated growth and expansion
into technologies will require additional expertise and are expected to
place additional demands on the Company's management and financial
resources.
Competition; Rapid Technological Change. Competition in the
health care field is intense. The Company faces competition from larger
companies which have substantially greater research and development,
managerial, and financial resources. Such competitors may develop more
effective products on a more timely basis. Rapid technological development
may result in the Company's products or processes becoming obsolete before
they are marketed or before the
10
<PAGE>
Company recovers a significant portion of the related research,
development, and commercialization expenses. See "Business - Competition."
Product Liability Claims and Uninsured Risks. Products or
processes that may be developed, licensed, or sold by the Company may
expose the Company to potential liability from claims by end-users of such
products or of products manufactured by such processes, or by manufacturers
or others selling such products, either directly or as a component of other
products. The Company currently maintains limited product liability
insurance coverage. There can be no assurance that the Company will be
able to maintain such coverage or obtain additional coverage on acceptable
terms, or that such insurance will provide adequate coverage against all
potential claims.
Volatility of Stock Price; Liquidation Preference; and Lack of
Dividends. The market prices for securities of biopharmaceutical companies
have historically been highly volatile. Announcements concerning the
Company or its competitors, including the results of testing and clinical
trials, technological innovations, or commercial products, government
regulations, developments concerning proprietary rights, including patents
and litigation matters, a change in status of a corporate partner, public
concern relating to the commercial value or safety of the Company's
products and stock market conditions in general may have a significant
impact on the price of the Common Stock.
The Company has 1,500,000 shares of preferred stock outstanding.
Such preferred stock is entitled to an annual $0.50 per share preferential
dividend, and has a liquidation preference of $10.00 per share plus all
accumulated but unpaid dividends.
The Company has not paid dividends on its Common Stock since its
inception and does not intend to pay any such dividends in the foreseeable
future. Further, the Company is required to pay cumulative dividends on
its outstanding preferred stock prior to paying any dividends on its Common
Stock. The Company has incurred losses and, thus, has had a deficiency in
fixed charges and preferred stock dividend coverage since inception. For
the years ended June 30, 1990, 1991, 1992, 1993 and 1994 and the six months
ended December 31, 1993 and 1994 the coverage deficiency was $12,461,000,
$17,702,000, $21,766,000, $26,380,000, $36,946,000, $17,737,000 and
$15,368,000, respectively.
Shares Eligible for Future Sales. As of December 31, 1994,
3,256,688 shares of Common Stock (or 13% of the total number of shares
outstanding on a fully diluted basis) are issuable upon the exercise of
outstanding options and warrants. Additional shares may be issuable upon
the conversion of preferred stock. The existence of such outstanding
warrants, options and convertible securities, as well as certain
registration rights, may adversely affect the terms on which the Company
may obtain additional equity financing. The holders of the outstanding
warrants and options are likely to exercise their securities at a time when
the Company would otherwise be able to obtain capital on terms more
favorable than those provided by the exercise or conversion prices thereof.
Immediate and Substantial Dilution. Investors in the Offerings
will experience immediate and substantial dilution in book value per share.
See "Dilution."
11
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offerings are estimated to be
$13,506,000, assuming a public offering price of $5.875 per share. Such net
proceeds will be used to fund research, preclinical testing, and clinical
trials for the Company's products under development, and for other general
corporate purposes. Pending such application, the Company intends to
deposit such proceeds in interest-bearing bank accounts or to invest them
in short-term, high-grade, interest-bearing securities. The Company
believes it will need additional financing to support its long-term product
development programs. No assurance can be given that adequate financing
will be available to the Company. See "Risk Factors-Future Capital Needs;
Uncertainty of Additional Financing" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
DILUTION
As of December 31, 1994, the net tangible book value of the
Company was approximately $31,446,000, or $1.37 per share. "Net tangible
book value per share" represents the amount of total tangible assets of the
Company reduced by the total liabilities and divided by the number of
shares of Common Stock outstanding (after giving effect to the conversion
of the outstanding shares of Preferred Stock into Common Stock on a one to
one basis). After giving effect to the sale of the 2,500,000 shares of
Common Stock offered in the Offerings, at an assumed public offering price
of $5.875 per share, the pro forma net tangible book value of the Common
Stock as of December 31, 1994 (after the deduction of the Placement Agents'
fee and other estimated expenses of the Offerings) would have been
approximately $44,952,000, or $1.77 per share. This represents an immediate
increase in net tangible book value of $0.40 per share to existing
shareholders and an immediate dilution of $4.11 per share to new investors
purchasing shares of Common Stock in the Offerings. "Dilution per share"
represents the difference between the price per share of Common Stock paid
by the new investors in the Offerings and the net tangible book value per
share at December 31, 1994 as adjusted to give effect to the Offerings.
The following table illustrates the dilution per share taking
into account estimated expenses of the Offerings:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per share.......................... $5.88
Net tangible book value per share as of December 31, 1994........ $1.372
Increase to present shareholders attributable to the Offerings... .40
-----
Pro forma net tangible book value per share after the Offerings.. 1.77
-----
Dilution to investors in the Offerings........................... $4.11
=====
</TABLE>
The foregoing calculations take into account the Placement Agents' fee
and other estimated expenses of the Offerings. See "Plan of Distribution."
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1994 and as adjusted to give effect to the sale of the Common Stock
offered in the Offerings and the application of the net proceeds therefrom. See
"Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1994
-----------------------
As
Actual Adjusted
--------- ---------
(In thousands)
<S> <C> <C>
Long-term debt & other $ 518 $ 518
Stockholders' equity:
Preferred stock $.01 par value - 5,000,000 shares authorized; 1,500,000 15 15
shares issued and outstanding
Common Stock $.01 par value - 50,000,000 shares authorized; 21,407,787
issued and outstanding as of December 31, 1994; 23,907,787 shares as
adjusted 214 239
Additional paid-in capital 222,878 236,359
Accumulated deficit (174,492) (174,492)
--------- ---------
Total stockholders' equity 48,615 62,121
--------- ---------
Total capitalization $ 49,133 $ 62,639
========= =========
</TABLE>
At December 31, 1994, there were 3,256,688 shares of Common Stock reserved
for issuance upon the exercise of outstanding options and warrants. For a
description of the conversion features of the preferred stock, see "Note 8 of
Notes to Audited Financial Statements" contained herein.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data set forth below for the
fiscal years ended June 30, 1992, 1993, and 1994 and the consolidated balance
sheet data at June 30, 1993 and 1994 are derived from, and are qualified by
reference to, the audited consolidated financial statements included elsewhere
herein. The consolidated statement of operations data for the fiscal years ended
June 30, 1990 and 1991, and the consolidated balance sheet data at June 30,
1990, 1991, and 1992, are derived from audited consolidated financial statements
previously filed with the Commission. The consolidated statement of operations
data for the six months ended December 31, 1993 and 1994 and the consolidated
balance sheet data at December 31, 1993 and 1994 are derived from unaudited
consolidated financial statements previously filed with the Commission, but, in
the opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and reflect all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the financial
position and results of operations for such periods.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
---------------------------------------------------------- ---------------------
1990 1991 1992 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Statement Of Operations Data:
Total revenues $ 1,717 $ 1,582 $ 1,805 $ 2,370 $ 409 $ 252 $ 7,209
Operating expenses:
Research and development 10,148 15,092 20,922 24,767 31,605 15,555 18,981
General and administrative 5,932 4,984 5,187 6,405 7,312 3,385 3,952
-------- -------- -------- --------- --------- --------- ---------
Total operating expenses 16,080 20,076 26,109 31,172 38,917 18,940 22,933
-------- -------- -------- --------- --------- --------- ---------
Loss from operations (14,363) (18,494) (24,304) (28,802) (38,508) (18,688) (15,724)
Other income -- net 1,902 792 2,538 2,422 1,562 951 575
-------- -------- -------- --------- --------- ---------
Dividends on preferred stock (219)
---------
Net loss applicable to
common shares $(12,461) $(17,702) $(21,766) $ (26,380) $ (36,946) $ (17,737) $ (15,368)
======== ======== ======== ========= ========= ========= =========
Net loss per share of Common Stock $ (0.94) $ (1.24) $ (1.25) $ (1.39) $ (1.83) $ (0.93) $ (0.72)
======== ======== ======== ========= ========= ========= =========
Weighted average number of shares 13,255 14,258 17,344 18,946 20,226 19,109 21,385
outstanding ======== ======== ======== ========= ========= ========= =========
Year Ended June 30, December 31,
1990 1991 1992 1993 1994 1993 1994
---------------------------------------------------------- --------- ---------
(In thousands)
Balance Sheet Data:
Cash, cash equivalents and short- $ 30,570 $ 16,812 $ 66,420 $ 39,542 $ 21,056 $ 38,497 $ 20,100
term investment
Total assets 59,451 44,848 97,976 72,537 53,132 70,865 52,864
Total current liabilities 2,127 2,026 2,667 2,946 2,959 5,862 3,731
Total long-term debt and other 8,490 8,967 756 447 348 397 518
Accumulated deficit (56,549) (74,251) (96,017) (122,397) (159,343) (140,134) (174,492)
Stockholders' equity 48,834 33,855 94,553 69,144 49,825 64,606 48,615
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(References to years are to the Company's fiscal years ended June 30.)
Alliance has devoted substantial resources to research and development
related to its pharmaceutical products based upon perfluorochemical ("PFC")
and emulsion technologies. The Company has been unprofitable since
inception and expects to incur operating losses for at least the next
several years due to continued requirements for research and development,
preclinical testing and clinical trials, regulatory activities, commercial
manufacturing start-up, and the establishment of a sales and marketing
organization and/or arrangements therefor. The amount of net losses and
the time required by the Company to achieve profitability are highly
uncertain. There can be no assurance that the Company will be able to
achieve profitability at all or on a sustained basis.
Liquidity and Capital Resources
Through December 1994, the Company financed its activities primarily
from public and private sales of equity and funding from marketing and
related agreements with corporate partners. In August 1994, the Company and
Ortho entered into the License Agreement, which granted to Ortho a
worldwide exclusive license to market injectable PFC emulsions capable of
transporting oxygen for therapeutic use, including Oxygent (a temporary
blood substitute). As a result of the License Agreement, license and
research revenues are expected to continue to increase in 1995. Under the
License Agreement, Ortho paid to Alliance an initial fee of $4.0 million
and will make additional payments upon the achievement of certain
milestones. Ortho is responsible for substantially all the remaining costs
of developing the products and will pay Alliance a royalty based upon sales
of products after commercialization. As of December 31, 1994, the Company
had recorded a receivable of $3.1 million (received in February 1995),
representing funding due from Ortho for development costs incurred. In
conjunction with the License Agreement, Johnson & Johnson Development Corp.
("J&JDC") purchased 1.5 million shares of Alliance convertible preferred
stock for $15.0 million and obtained a three year warrant to purchase
300,000 shares of Alliance Common Stock at $15 per share. The Company has
financed substantially all of its office and research facilities and
related leasehold improvements under operating lease arrangements.
The Company had net working capital of $20.9 million at December 31,
1994, compared to $19.4 million at June 30, 1994. The Company's cash, cash
equivalents, and short-term investments declined to $20.1 million at
December 31, 1994, from $21.1 million at June 30, 1994. The decrease
resulted primarily from cash used for operating expenses of $18.7 million
and from property, plant, and equipment additions of $0.5 million. These
uses of cash were offset by $15.0 million received from the sale of
convertible preferred stock to J&JDC and from $4.0 million of license
revenue attributable to the License Agreement. Capital expenditures for
1995 are expected to be comparable to those incurred during 1994. The
Company's operations
15
<PAGE>
to date have consumed substantial amounts of cash, and are expected to
continue to do so over the foreseeable future.
During 1994, Alliance provided approximately $1.1 million to a majority-
owned subsidiary of the Company, Astral, Inc. ("Astral"), for its research
activities. During the six months ended December 31, 1994, Alliance
provided an additional approximately $1.1 million to Astral for its
research activities. The Company intends to consider additional
technologies that may be available to Astral or it for licensing and/or
research agreements. The Company intends to seek outside sources of funding
for the operations of Astral or to fund any such other agreements. There
can be no assurance that such funding will be available on favorable terms,
if at all. If new license and research agreements are added and outside
sources of funding are not available, research funding for these activities
is expected to increase significantly.
The Company continually reviews its product development activities in an
effort to allocate its resources to those product candidates that the
Company believes have the greatest commercial potential. Factors considered
by the Company in determining the products to pursue include projected
markets, the medical need for such products, potential for regulatory
approval and reimbursement under the existing health care system, technical
feasibility, expected and known product attributes, and estimated costs to
bring the product to market. Based on these and other factors, the Company
may from time to time reallocate its resources among its product
development activities. Additions to products under development or changes
in products being pursued can substantially and rapidly change the
Company's funding requirements.
In December 1993, the Company entered into an agreement with its primary
supplier of raw material for certain products. Under the terms of the
agreement, the Company is obligated to fund the supplier at defined minimum
levels. All costs associated with the contract are charged to expense as
incurred.
The Company expects to incur substantial additional expenditures
associated with product development. The Company will seek additional
collaborative research and development relationships with suitable
corporate partners for its non-licensed products. There can be no
assurance that such relationships, if any, will successfully reduce the
Company's funding requirements.
16
<PAGE>
Alliance anticipates that its current capital resources, including
expected revenues from the License Agreement, its investments, product
sales, and the net proceeds from the Offerings, including income earned
thereon, will be adequate to satisfy its capital requirements and fund
current and planned operations for approximately twelve months. If the net
proceeds of the Offerings are not sufficient, the Company will have to seek
other sources of financing. There can be no assurance that funds from these
sources would be available on favorable terms, if at all. If adequate funds
are not available, the Company may be required to delay, scale back, or
eliminate one or more of its product development programs, or obtain funds
through arrangements with collaborative partners or others that may require
the Company to relinquish rights to certain of its technologies, product
candidates, or products that the Company would not otherwise relinquish.
The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research and development
programs, progress with preclinical testing and clinical trials, the time
and cost involved in obtaining regulatory approvals, patent costs,
competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish
development arrangements, the cost of manufacturing scale-up, if necessary,
and the establishment of an effective sales and marketing organization
and/or arrangements therefor.
While the Company believes that it can produce materials for the initial
market launch of its emulsion products at its existing San Diego facility,
it may need to expand its commercial manufacturing capability for all of
its products in the future. This expansion may occur in stages, each of
which would require regulatory approval, and product demand could at times
exceed supply capacity. The Company has not selected a site or obtained any
regulatory approvals for construction of a commercial production facility
for its products. The projected location and completion date of any
production facility will depend upon regulatory and development activities,
among other factors. The Company cannot predict the amount that it will
expend for the construction of such a production facility, and there can be
no assurance as to when or whether the FDA will determine that such
facility conforms with Good Manufacturing Practices. Pursuant to the
License Agreement, Ortho may elect to manufacture the emulsion products
referred to therein, or require the Company to manufacture such products
at a negotiated price.
The Company's business is subject to significant risks, including the
uncertainties associated with the lengthy regulatory approval process,
obtaining and enforcing patents important to the Company's business, and
possible competition from other products. Even if the Company's products
appear promising at an early stage of development, they may not reach the
market for a number of reasons. Such reasons include, but are not limited
to, the possibilities that the potential products will be found ineffective
or harmful during clinical trials, failure to receive necessary regulatory
approvals, difficulties in manufacturing on a large scale, failure to
obtain market acceptance, and the inability to commercialize because of
proprietary rights of third parties. The research, development, and market
introduction of new products will require the application of considerable
technical and financial resources by Alliance, while revenues generated
from such products, assuming they are developed successfully, may not be
realized for several years. Other material and unpredictable factors which
could affect operating results include, without limitation, the uncertainty
of the timing of product approvals and introductions and of sales growth;
the ability to obtain necessary raw materials at cost effective prices or
at all; the effect of possible technology and/or other business
acquisitions or transactions; and the increasing
17
<PAGE>
emphasis on controlling health care costs and potential legislation or
regulation of health care pricing.
The Company and certain of its officers and directors are named as
defendants in a lawsuit filed by certain stockholders in September 1992.
The Company believes it has meritorious defenses and intends to defend
vigorously against the claims brought by the stockholders in the action.
The Company believes the eventual outcome of the litigation will not have a
material adverse effect on the Company's financial condition.
Results of Operations
Six Months Ended December 31, 1994 as Compared to Six Months Ended
December 31, 1993
The Company's license and research revenue increased to $7.1 million for
the six months ended December 31, 1994, compared to $102,000 for the
six months ended December 31, 1993. The increase was due to $4.0 million
of license and $3.1 million of research revenues derived from the License
Agreement. The Company expects license and research revenue to increase
significantly during 1995, compared to 1994, due to the License Agreement.
The Company incurred total operating expenses of $22.9 million for the
six months ended December 31, 1994. Operating expenses include a $2.9
million charge for purchases of raw material for certain products currently
being developed, $1.8 million for Oxygent (temporary blood substitute)
costs incurred prior to execution of the License Agreement, $0.5 million
for products no longer promoted or developed by Alliance, and a $1.7
million charge for capitalized product rights. The $2.9 million charge for
purchase of raw materials arises under a December 1993 agreement the
Company entered into with its primary supplier. Under the agreement, the
Company is obligated to fund the supplier at defined minimum levels. All
costs associated with the contract are charged to research and development
expense as incurred. In January 1994, the Company regained from Boehringer
Ingelheim International GmbH ("BII") all marketing and manufacturing rights
to Imagent (diagnostic imaging agents) and Oxygent products outside of
North America. In conjunction with the acquisition of the marketing and
manufacturing rights from BII, the Company recorded product rights of $1.8
million, based on the value of warrants issued to acquire the rights. The
unamortized portion ($1.7 million) of these product rights was charged to
research and development expense when the Company licensed these product
rights to Ortho.
Research and development expenses increased by 22% to $19.0 million for
the six months ended December 31, 1994, compared to $15.6 million for the
six months ended December 31, 1993. The growth in expenses is primarily a
result of the increases discussed above and increased staffing to support
growth in research and development efforts. These expenses were partially
offset by a reduction in payments to universities and outside consultants.
General and administrative expenses increased by 17% to $4.0 million for
the six months ended December 31, 1994, compared to $3.4 million for the
six months ended December 31,
18
<PAGE>
1993. The increase in general and administrative expenses was primarily due
to increased professional fees.
Investment income and other was $575,000 for the six months ended
December 31, 1994, compared to $951,000 for the six months ended December
31, 1993. The decline was primarily a result of lower average cash
balances.
Operating losses may fluctuate from period to period as a result of
differences in the timing of revenues earned and expenses incurred and such
fluctuations may be substantial. The Company's historical results are not
necessarily indicative of future results.
Fiscal Year 1994 as Compared to Fiscal Year 1993
The Company had net product revenue of $246,000 for 1994 compared to
$50,000 for 1993. In August 1993, the Company received FDA approval to
market Imagent/(R)/ GI, a product developed and marketed by the Company.
The increase in net product revenue from 1993 to 1994 was primarily
attributable to sales of Imagent GI and Sat Pad /TM/ (also developed and
marketed by the Company). Sales of Imagent GI and Sat Pad have not been
expected to provide significant revenue to the Company, and substantial
increases are not anticipated. In September 1994, the Company discontinued
promotional activities for Imagent GI. The majority of the Company's
products are in development stage and there can be no assurance as to
whether or when it will be able to increase its revenues significantly.
License and research revenue decreased to $163,000 for 1994 compared to
$2.3 million for 1993. The Company's 1993 license and research revenue was
primarily derived from its agreements with BII (the "BII Agreements"). In
July 1993, the BII Agreements were modified, which resulted in BII
discontinuing all contract payments.
Research and development expenses increased by 28% to $31.6 million for
1994 compared to $24.8 million for 1993. The growth in expenses reflects
increases in staffing, costs of preclinical testing and clinical trials,
and additional laboratory supplies and equipment associated with the growth
of the Company's research and development efforts. Due to the Company's
discontinuance of Imagent GI promotional activities, the Company reduced
its perflubron inventories to the estimated net realizable value from sales
of Imagent GI, resulting in a charge of $2.1 million. The Company expects
that research and development expenses for 1995 will increase at a rate
comparable to that experienced in 1994.
General and administrative expenses increased by 14% to $7.3 million for
1994 compared to $6.4 million for 1993. The increases were principally due
to increases in staffing to support the
19
<PAGE>
growth of product research and development efforts and professional
fees. General and administrative expenses for 1995 are expected to
increase at a rate comparable to that experienced in 1994.
Investment and other income was $1.6 million for 1994 compared to $2.4
million for 1993. The decline in investment revenue was primarily a
result of lower average cash and short-term investment balances.
Fiscal Year 1993 as Compared to Fiscal Year 1992
The Company's revenues increased by 31% to $2.4 million for 1993
compared to $1.8 million in 1992. The Company's revenues were primarily
derived from the BII Agreements. License and research revenue, including
reimbursement of clinical trial costs primarily from BII, totaled $2.3
million for 1993 compared to $1.8 million in 1992.
For 1993, the Company had net product revenue of $50,000 compared to
$9,000 in 1992. The increase in net product revenue from 1992 to 1993 was
primarily attributable to revenue from Sat Pad sales which commenced in
March 1993.
Research and development expenses increased by 18% to $24.8 million for
1993 compared to $20.9 million for 1992. The growth in expenses reflects
increases in staffing, costs of clinical trials and preclinical testing,
additional laboratory supplies and equipment, and expansion of the
Company's facilities associated with the growth of its research and
development efforts. In addition, the Company incurred a one-time charge of
$1.7 million in 1992 related to its acquisition of BioPulmonics, Inc.
General and administrative expenses increased by 23% to $6.4 million for
1993 compared to $5.2 million for 1992. The increases were principally due
to increases in staffing and the expansion of the Company's facilities to
support the growth in product research and development efforts.
Interest income was $2.4 million for 1993 compared to $2.9 million for
1992. The decline in interest revenue was primarily a result of lower
average cash balances and decreases in available market interest rates.
Interest expense was $6,000 for 1993 compared to $349,000 for 1992. The
decrease in interest expense was primarily a result of the conversion of
the $8.0 million of subordinated notes to shares of the Company's common
stock in November 1991.
20
<PAGE>
BUSINESS
OVERVIEW
Alliance is a pharmaceutical research and development company that
focuses on the application of scientific discoveries which can be developed
into innovative drug products. Based on its perfluorochemical technologies,
the Company has two drug products in early clinical studies: Oxygent/TM/,
for use as a temporary oxygen carrier to reduce or eliminate the
requirement for allogeneic (donor) blood transfusions during elective
surgery ("blood substitute"); and LiquiVent/TM/, an intrapulmonary drug for
use in treating patients with acute respiratory failure to reduce the
morbidity associated with conventional mechanical ventilation therapy.
Imagent/(R)/ US, a PFC-based contrast agent for enhancement of ultrasound
images of blood flow abnormalities (perfusion defects), which can occur as
a result of myocardial infarction, blood clots, or solid tumors is in the
preclinical phase. The Company is also in early research and development of
antigenized antibody technology for potential use in producing novel
vaccines directed against infectious diseases and for use in regulating
autoimmune disorders.
Over the past several years, the health care industry has experienced
significant and rapid change. One of these changes is the rapid pace at
which scientific discoveries are being made. These discoveries often occur
in the universities and medical centers where the researchers and
clinicians work toward identifying the basic causes of disease and
potential targets for new therapies. The Company believes that research and
development companies such as Alliance are in a position to collaborate
with inventors to develop innovative pharmaceutical products based on the
intellectual property arising from these discoveries. Alliance has
developed significant experience defining pharmaceutical formulation,
designing manufacturing processes, conducting preclinical pharmacology and
toxicology studies, and conducting early-phase human testing in accordance
with regulatory guidelines. The final phase of drug development requires
greater resources and involves the completion of late-phase human testing,
obtaining worldwide regulatory approvals, building large-scale
manufacturing capacity, and implementing marketing strategies.
Multinational pharmaceutical companies with established capabilities and
expertise are in a stronger position to perform these tasks.
Alliance has entered into agreements with institutions and inventors for
the rights to their discoveries and is adding value to these discoveries by
defining the product, market and regulatory strategies prior to seeking
collaborative relationships with multinational pharmaceutical companies for
the delivery of these products to the market. Alliance intends to seek to
enter into similar agreements and, through this approach, Alliance believes
it can play an important role in the development of innovative
pharmaceutical products.
PRODUCTS
21
<PAGE>
Three of the products currently under development by Alliance are
based upon perfluorochemical ("PFC") technologies. PFCs are clear,
colorless and non-flammable liquids, are twice as dense as water, and are
biochemically inert. Alliance's primary drug substance is perflubron
(perfluorooctyl bromide), an eight-carbon brominated PFC that, along with
other attributes, produces a stable emulsion.
OXYGENT. Oxygent (an emulsion containing perflubron) is an
intravascular oxygen carrier for use as a temporary "blood substitute" to
provide oxygen to tissues during elective surgeries where substantial blood
loss is anticipated. Oxygent has several potential advantages over the use
of allogeneic (donor) blood; it does not transmit infectious disease, is
compatible with all blood types and has a shelf life exceeding one year.
According to the 1994 estimates of The National Institutes of Health,
the risks per unit of blood transfused in the U.S. are 1:2,500 for
bacterial infections; 1:3,000 for hepatitis; 1:100,000 for fatal hemolytic
reactions (clerical error); and 1:250,000 for HIV infections (AIDS). To
avoid these risks, certain techniques can be employed that allow use of the
patient's own (autologous) blood. These techniques include (1) predonation,
in which patients donate several units of their blood in the six weeks
leading up to surgery, (2) perioperative hemodilution, in which several
units of their blood are removed just prior to the surgery and are replaced
with a plasma expander, and (3) salvage, where a "cell saver" is used to
collect shed blood lost during the surgical procedure. In the future, drugs
such as erythropoietin, serine protease inhibitors, and oxygen-carrying
drugs may increase the utilization of these techniques by improving both
their safety and effectiveness. Oxygent is intended for use with any of the
above-mentioned autologous blood collection techniques. During surgery,
when a blood transfusion is indicated, Oxygent would be given instead to
maintain an adequate level of oxygen delivery despite a lower red blood
cell concentration, thereby delaying the need for transfusion. This delay
allows for the majority of the previously removed autologous blood to be
reinfused at the end of the procedure, providing a safe red blood cell
concentration level for recovery while avoiding donor blood.
The Oxygent dose for surgical applications is expected to provide the
equivalent oxygen delivery of approximately two units of red blood cells.
It is estimated that approximately three million patients are at risk of
receiving one or more units of blood during elective surgeries annually in
the United States.
The Company conducted early-stage clinical trials with Oxygent in
surgical patients and, in conjunction with Ortho, is continuing the
clinical development of the product. See "-Collaborative Relationships."
LIQUIVENT. LiquiVent (sterile perflubron) is in clinical development
for use as an intrapulmonary agent to treat acute respiratory failure, a
disorder that can result from many
22
<PAGE>
causes, including serious infections, traumatic shock, severe burns, or
inhalation of toxic substances. Acute respiratory failure is generally
characterized by an excessive inflammatory response, which leads to
blockage of the small airways and collapse of alveoli, resulting in
inadequate gas exchange and impairment of normal lung function.
Approximately 700,000 patients in the United States are placed on
mechanical gas ventilators each year for treatment of lung dysfunction due
to acute injuries or exacerbations of chronic lung diseases. The most
urgent need for these patients is to improve their blood oxygenation;
however, the prolonged use of high ventilatory pressures or high
concentrations of inspired oxygen can be damaging to the lungs. Each year,
approximately 150,000 patients in the United States suffering from
respiratory failure progress to the most severe form, referred to as acute
respiratory distress syndrome ("ARDS"), where the risk of death is 40-60%.
LiquiVent is intended to be used in a technique called partial liquid
ventilation ("PLV"). In this procedure, the drug is administered through
an endotracheal tube into the lungs of a patient being supported by a
mechanical ventilator. The initial goal of LiquiVent/PLV therapy is to open
collapsed alveoli to improve pulmonary function and gas exchange. Once this
has been accomplished, ventilator pressure and oxygen concentration may be
lowered to minimize ventilator-induced lung trauma. In clinical studies,
LiquiVent has also been observed to encourage the migration of mucus and
alveolar debris to the central airways, where suctioning is made easier. In
conjunction with a possible direct LiquiVent anti-inflammatory effect, the
ability to remove such debris may significantly reduce the excessive
inflammatory response associated with acute respiratory failure and enhance
the effectiveness of other therapeutic interventions, all serving to
potentially reduce patient recovery time.
The Company is conducting separate early-stage clinical trials with
LiquiVent in premature infants, pediatric patients, and adults with ARDS.
The FDA has granted the Company Subpart E status (expedited review) for the
product in connnection with the treatment of ARDS. See "-Government
Regulation."
IMAGENT US. Imagent US is a contrast agent that is an aqueous
dispersion of PFC vapor-containing microbubbles. The gas bubbles are
highly echogenic and, when delivered intravenously, generate signals that
enhance ultrasonic images. Imagent US is intended to be used to enhance
ultrasound images of blood flow abnormalities (perfusion defects), which
can occur as a result of myocardial infarctions, blood clots or solid
tumors. Approximately 18 million scans of the heart, vasculature, and
abdominal organs are performed annually in the United States. More than 50%
of these procedures may potentially benefit from a cost-effective contrast
agent. In preclinical studies,
23
<PAGE>
Imagent US has been found to enhance the ultrasound signal from perfused
tissues and blood vessels using both gray-scale and color Doppler imaging
techniques.
To be successful in the marketplace, ultrasound contrast agents should
provide enhanced diagnostic images during several minutes of scanning, be
easy to use, and have a shelf life greater than one year. Imagent US is
being developed to meet these requirements. It has the potential for
assessing general vascular disease, cardiac (ventricular) function and,
most importantly, myocardial perfusion. The agent may also be useful in
detecting space-occupying lesions (such as solid tumors) in organs such as
the liver.
The Company has evaluated multiple formulations for Imagent US, each of
which has advantages for certain applications. Imagent US is in the
preclinical phase and the Company estimates that it will file an IND to
begin clinical trials around the end of 1995.
ANTIGENIZED ANTIBODIES. Antigenized antibodies utilize the human
immunoglobulin as a platform to carry specific peptides to modulate the
immune system. The presentation of the peptide is accomplished by use of
genetic engineering techniques to make a substitution in the
complementarity determining regions (CDR) of the antibody. Depending on the
disease and the antigen, antigenized antibodies can be used to either
stimulate antibody production (as in a vaccine) to prevent disease or to
down-regulate antibody production (as in a tolerogen) to treat certain
autoimmune disorders. Antigenized antibodies provide for a delivery system
with advantages over the free peptide, including its half-life in blood
circulation and the ability of the peptide to stimulate both a cellular and
a humoral antibody response. In this manner a cost-effective combination
vaccine or vaccine/tolerogen therapy can be engineered by using a common
platform and a common manufacturing process. Further chemical modification
of these molecules may obviate the requirement for adjuvants during
immunization or tolerization. The Company, through its Astral subsidiary,
is developing a prototype vaccine for an infectious disease and a prototype
tolerogen for an autoimmune disease.
Collaborative Relationships
In August 1994, the Company entered into the License Agreement, which
provides Ortho with worldwide marketing rights to the Company's injectable
PFC emulsions capable of transporting oxygen for therapeutic use, including
Oxygent. The product will be jointly developed by Alliance and Ortho, with
Ortho being responsible for substantially all of the remaining costs of
development. Ortho paid Alliance an initial license fee of $4.0 million
and will make other payments upon the achievement of certain milestones.
In addition, Ortho will pay to Alliance a royalty based upon its sales of
the product after commercialization. In conjunction
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with the License Agreement, J&JDC purchased 1.5 million shares of
Alliance convertible preferred stock for $15.0 million and obtained a
three year warrant to purchase 300,000 shares of Common Stock at $15 per
share. See "Note 7 of Notes to Audited Consolidated Financial Statements."
In November 1994, the Company entered into a license agreement with
Glaxo Group, Ltd. ("Glaxo") for the use of the Company's fluorinated
surfactants in certain metered-dose inhalers ("MDI") in delivering Glaxo's
respiratory drug formulations. Glaxo is responsible for the development
and marketing of MDI products incorporating the Company's surfactant. The
agreement provides for an initial license fee and milestone payments to
Alliance, which are not expected to exceed $2.5 million in the aggregate,
with royalties to Alliance following commercialization.
The Company intends to seek and evaluate collaborative relationships for
the marketing of LiquiVent and Imagent US on terms conceptually similar to
those contained in the License Agreement.
Manufacturing
The Company manufactures all of its products for preclinical and
clinical trials. Oxygent is produced in Alliance's San Diego facility,
which includes both pilot-scale (18 liter) and intermediate-scale (250
liter) production capability. The Company believes that, if and when
approved by the FDA, the intermediate scale-up facility will provide
sufficient production capacity for future clinical trials and market
launch. A larger commercial-scale facility will be required for products in
the future. Under the terms of the License Agreement, Ortho has the right
to elect to manufacture Oxygent itself or have the Company continue to do
so, which election must be made at or prior to the filing of the New Drug
Application. If Alliance manufactures Oxygent for Ortho, the transfer price
will be determined by Ortho's net sales price for the product, provided
that Alliance will not transfer it for less than Alliance's burdened cost.
The Company has not selected a commercial-scale site or obtained any
regulatory approvals. Construction of such a facility will depend upon
regulatory approvals, product development, and capital resources, among
other things.
LiquiVent is manufactured for clinical trials at the Company's
Otisville, New York facility. It is the same drug substance for which
Alliance obtained FDA approval in August 1993 as an oral contrast agent for
magnetic resonance imaging (Imagent GI). As a result, certain chemistry,
manufacturing, and control requirements for perflubron have been accepted
by the FDA, which may benefit the Company in the regulatory review process
for certain products.
Imagent US is manufactured for preclinical studies at the San Diego
facility, using a proprietary process to form PFC vapor containing dry
microbubbles which are reconstituted with
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sterile water just prior to use. The existing process is satisfactory for
production of quantities of Imagent US for clinical trials and to support
introductory marketing after commercialization.
Patents
The Company has six issued U.S. patents related to or covering PFC
emulsions which are the basis for its Oxygent product. The issued patents
and other pending patent applications cover specific details of emulsified
PFCs which are covered by product-by-process claims, method claims
describing their manufacture, and some composition claims. These broadly
cover high concentration PFC emulsions, typically 40-125% weight per volume
(although some are limited to 75-125% weight per volume), and manufacturing
methods.
In September 1994, Alliance received a United States patent for its
preferred method of using blood substitutes to facilitate oxygen delivery.
The patent is pending in Europe, Japan, and other countries. The issued
claims cover a method for facilitating autologous blood use in conjunction
with administering oxygen enriched gas and oxygen carriers that contain
fluorochemicals, as well as those derived from human, plant, or recombinant
hemoglobin, in order to reduce or eliminate the need for allogeneic blood
transfusions during surgery.
The method of completely filling the lungs with PFCs to perfuse the
lungs as a means of oxygenation has been known for many years and thus, as
a broad method of treatment, is not patentable. The Company has discovered
that partially filling the lungs with oxygen-carrying PFCs can enhance
respiratory gas exchange utilizing conventional gas ventilators. This
potentially significant improvement in gas exchange may be the preferred
method of treatment for patients with acute respiratory failure. The
Company has filed and obtained a license to patent applications on this
method and has patent applications pending which cover the use of PFCs to
deliver drugs to the lungs and to wash debris from, and open, collapsed
lungs. The Company also has patent applications pending which cover
apparatus for liquid ventilation using PFCs.
The Company has filed four patent applications concerning the
composition, manufacture and use of novel stabilized microbubble
compositions, which are based on its discovery that PFC gases, in
combination with appropriate surfactants, can stabilize microbubbles that
are effective for ultrasonic imaging.
The Company has patents that have issued in the U.S. and abroad, and
additional pending patents, covering its novel fluorinated surfactants.
These compounds may be useful in oxygen-carrying or drug-transport
compositions, and in liposomal formulations that have therapeutic and
diagnostic applications. Additional fluorinated compounds disclosed in
pending applications may be employed in cosmetics, protective creams, and
lubricating agents. Compositions that can be structured as emulsions,
microemulsions, and gels may be useful as contrast enhancement agents
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for radiography and scintigraphy. The Company also has pending applications
relating to microstructures (tubules, helixes, fibers) that may have uses
in the biomedical field, biomolecular engineering, microelectronics, and
electro-optics.
Competition
The biotechnology and pharmaceutical industries are highly competitive.
There are many pharmaceutical companies, biotechnology companies, public
and private universities and research organizations actively engaged in
research and development of products which may be similar to Alliance's
products. Many of the Company's existing or potential competitors have
substantially greater financial, technical and human resources than the
Company and may be better equipped to develop, manufacture and market
products. These companies may develop and introduce products and processes
competitive with or superior to those of the Company. There can be no
assurance that the Company will be able to compete successfully with such
companies.
Well-publicized side effects associated with the transfusion of
allogeneic (donor) blood have spurred efforts to develop a blood
substitute. Two primary approaches have shown promise as temporary oxygen
carriers: PFC emulsions and hemoglobin solutions. Hemoglobin development
efforts include: stroma-free, chemically modified hemoglobin from human or
bovine red blood cells, and the use of genetic engineering to produce
recombinant hemoglobin. There are several companies working on hemoglobin
solutions as a blood substitute, some of which have entered clinical
trials. Recently, a major U.S. pharmaceutical company announced a
manufacturing and marketing collaboration with a company developing a
recombinant hemoglobin-based blood substitute. The Green Cross Corporation
of Japan developed a first-generation PFC emulsion, Fluosol, which was
marketed in the U.S. as an adjunct to percutaneous transluminal coronary
angioplasty; however, Green Cross Corporation recently announced that it
was withdrawing the product from the market due to its limited sales
volume. The Company believes that its PFC-based emulsion product compares
favorably with Fluosol for several reasons, including its higher oxygen-
carrying capacity, its greater stability and its ease of use. Alliance is
aware of two other companies developing PFC-based temporary oxygen
carriers, one of which has entered clinical trials.
Although liquid ventilation therapy has been in the research phase for
the last two decades, the Company is unaware of any potential competition
which has reached the clinical trial stage. However, other companies may be
evaluating PFC liquids with the possibility of entering this field. The
Company believes that its patent position and stage of research and
development give it an advantage over potential competitors.
A number of larger companies currently market a broad range of contrast
agents. One U.S. pharmaceutical company has recently gained FDA approval
to market an ultrasound contrast
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agent and other companies are known to be developing similar products. One
of these companies is believed to have a product in Phase III clinical
trials, another has reported that it has completed a Phase II clinical
trial, and a third is believed to be in Phase II clinical trials.
Product Liability Claims and Uninsured Risks
The sale or use of the Company's present products and any other products
or processes that may be developed or sold by the Company may expose the
Company to potential liability from claims by end users of such products or
by manufacturers or others selling such products, either directly or as a
component of other products. While the Company has product liability
insurance, there can be no assurance that the Company will continue to
maintain such insurance or that it will provide adequate coverage. If the
Company is held responsible for damages in a product liability suit, the
Company's financial condition could be materially and adversely affected.
Government Regulation
The Company's products require governmental approval before production
and marketing can commence. The regulatory approval process is
administered by the FDA in the United States and by similar agencies in
foreign countries. The process of obtaining regulatory clearances or
approvals is costly and time consuming. The Company cannot predict how
long the necessary clearances or approvals will take or whether it will be
successful in obtaining them.
Generally, all potential pharmaceutical products must successfully
complete two major stages of development prior to receiving marketing
approval by the governing regulatory agency. These are preclinical and
clinical testing.
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In preclinical testing, potential compounds are tested both in vitro and
in animals to gain safety information prior to administration in humans.
Knowledge is obtained regarding the effects of the compound on bodily
functions as well as its absorption, distribution, metabolism and
elimination.
In clinical testing, a three-phase progression of studies includes:
<TABLE>
<CAPTION>
PHASE DESCRIPTION PURPOSE
- ------- -------------------------------------- ----------------------------------------
<S> <C> <C>
I The first trials of a new drug in To gain preliminary human
humans; the drug is given for a short pharmacology and safety information
period to a small number of healthy concerning the drug
volunteers or patients suffering from
the disease for which the drug is
intended
II Pilot studies on a small number of To determine if the drug has the
patients in the population for which intended effect and to approximate the
the drug is intended therapeutic range
III Expanded trials in the target patient Pivotal studies to determine the
population optimal dosages, and
efficacy of the drug
</TABLE>
Following completion of these studies, a new drug application must be
submitted to and approved by the FDA in order to market the product in the
United States. Similar applications are required in foreign countries.
There can be no assurance that, upon completion of the foregoing trials,
the results will be considered adequate for government approval. If and
when approval is obtained to market a product, the FDA's (or applicable
foreign agency's) regulations will govern manufacturing and marketing
activities.
The FDA has established a designation to speed the availability of new
therapies for life-threatening or severely debilitating diseases. This
designation, defined in Subpart E of the FDA's investigational new drug
regulations, may expedite clinical evaluation and regulatory review of some
new drugs, such as LiquiVent, which has been so designated.
Perflubron is an eight-carbon halogenated fluorocarbon liquid. Certain
halogenated fluorocarbons (primarily the gaseous chlorofluorocarbons) have
been implicated in stratospheric ozone depletion. The FDA issued a Finding
of No Significant Impact under the National Environmental Protection Act in
connection with the approval for marketing Imagent GI, a
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perflubron-based drug; however, perflubron remains subject to regulation by
governmental agencies.
In addition to FDA regulation, the Company is subject to regulation by
various governmental agencies including, without limitation, the Drug
Enforcement Administration, the United States Department of Agriculture,
the Environmental Protection Agency, the Occupational Safety and Health
Administration, and the California State Department of Health Services,
Food and Drug Branch. Such regulation, by governmental authorities in the
United States and other countries, may impede or limit the Company's
ability to develop and market its products.
Legal Proceedings
The Company and certain of its officers and directors are named as
defendants in a lawsuit filed by certain stockholders in September 1992.
The Company believes it has meritorious defenses and intends to defend
vigorously against the claims brought by the stockholders in the action.
The Company believes the eventual outcome of the litigation will not have a
material adverse effect on the Company's financial condition.
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MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------- --- -----------------------------------------
<S> <C> <C>
Duane J. Roth 45 President, Chief Executive Officer,
Chief Operating Officer, Director
Harold W. DeLong 46 Executive Vice President - Business
Development and Marketing
Theodore D. Roth 43 Executive Vice President, Chief
Financial Officer, Secretary
B. Jack DeFranco 49 Vice President - Marketing
N. Simon Faithfull, M.D., Ph.D. 54 Vice President - Medical Research
Henry A. Graham, Ph.D. 51 Vice President - Technology Development
Ronald M. Hopkins, Ph.D. 53 Vice President - Research and Development
Gordon L. Schooley, Ph.D. 48 Vice-President - Clinical Research and
Regulatory Affairs
Elias Lazarides, Ph.D. 44 President and Chief Operating Officer of
Astral
Carroll O. Johnson 61 Director
Stephen M. McGrath 58 Director
Donald E. O'Neill 68 Director
Helen M. Ranney, M.D. 74 Director
Jean G. Riess, Ph.D. 57 Director
Thomas F. Zuck, M.D. 60 Director
</TABLE>
DUANE J. ROTH. Mr. Roth has been President and Chief Executive Officer
since 1985 and Chairman since October 1989. Prior to joining Alliance, Mr.
Roth served as President of Analytab Products, Inc., an American Home
Products company involved in manufacturing and marketing medical
diagnostics, pharmaceuticals and devices. For the previous ten years, he
was employed in various sales, marketing and general management capacities
by Ortho Diagnostic Systems, Inc., a Johnson & Johnson company, which is a
manufacturer of diagnostic and pharmaceutical products. Mr. Roth's brother,
Theodore D. Roth, is an Executive Vice President of the Company.
HAROLD W. DELONG. Mr. DeLong has been Executive Vice President-
Business Development and Marketing for the Company since February 1989. Mr.
DeLong has been employed for the past 21 years in the medical diagnostics
and pharmaceutical industry in various sales, marketing and management
positions. From 1985 to 1988, Mr. DeLong was Vice\
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President, Sales and Marketing for Murex Corporation, a company
participating in the infectious disease diagnostics market. From 1984 to
1985, he was Director, Sales and Marketing for the Immunocytometry Systems
Division of Becton Dickinson. Between 1973 and 1984, Mr. DeLong was
employed by Ortho Diagnostic Systems, Inc., where his last position was
Director of the Hemostasis and Chemistry Products business units.
THEODORE D. ROTH. Mr. Roth has been Executive Vice President and Chief
Financial Officer of the Company since November 1987 and Secretary since
1990. For more than ten years prior to joining the Company, he was General
Counsel of SAI Corporation, a company in the business of operating
manufacturing concerns, and General Manager of Holland Industries, Inc., a
manufacturing company. Mr. Roth received his J.D. from Washburn University
and an LL.M. in Corporate and Commercial Law from the University of
Missouri in Kansas City. He is the brother of Mr. Duane J. Roth, the
Chairman of the Company.
B. JACK DEFRANCO. Mr. DeFranco has been Vice President-Marketing for
Alliance since January 1991. He has nearly 22 years experience in sales and
marketing in the medical products industry. He was President of
Orthoconcept Inc., a private firm marketing orthopedic and urological
devices from 1986 through 1990. Prior to 1986, he was Director of Marketing
and New Business Development for Smith and Nephew Inc., which markets
orthopedic and general wound-care products and he served in various sales
and marketing positions with Ortho Diagnostic Systems, Inc. Mr. DeFranco
received an M.B.A. from Fairleigh Dickinson University.
N. SIMON FAITHFULL, M.D., PH.D. Dr. Faithfull has been Vice
President-Medical Research for the Company since September 1990. Dr.
Faithfull joined Alliance after serving as Director of Medical Research for
Delta Biotechnology Ltd. from 1989 to 1990. From 1986 to 1989, he was
Senior Lecturer in Anesthesia at the University of Manchester (UK), and
held various academic appointments and clinical anesthesia positions at
Erasmus University (Netherlands), Tulane University and the University of
Alabama (Birmingham) for more than 15 years prior to 1986. He has served as
Secretary of the International Society on Oxygen Transport to Tissue. He
received his Ph.D. from Erasmus University, Rotterdam and his M.D. from
London University.
HENRY A. GRAHAM, PH.D. Dr. Graham has been Vice President-Technology
Development since January 1990. In his 22 years in industrial research, he
has directed groups involved in the development of biological and
immunodiagnostic products. Prior to joining Alliance, he worked for Johnson
& Johnson for 17 years on a broad range of projects including injectable
human biologicals, immunohematology reagents, immunoassay reagents and
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instrument systems. Dr. Graham was Director of Product Development for at
least five years prior to 1990. Much of his work has been on the
development of methods to assure the safety of blood products by the
detection of blood-transmitted diseases and the assurance of compatibility.
During his tenure at Johnson & Johnson, he was the recipient of several
awards, including the Corporate Medal for Outstanding Research. Dr. Graham
received a Ph.D. in immunology from Rutgers University.
RONALD M. HOPKINS, PH.D. Dr. Hopkins has been Vice President-Research
and Development since May 1990. Prior to joining Alliance, Dr. Hopkins
spent almost 20 years with Mallinckrodt Medical, Inc., a subsidiary of
Imcera Group, Inc. His responsibilities at Mallinckrodt primarily involved
identification and development of various diagnostic x-ray, magnetic
resonance, ultrasound and radiopharmaceutical imaging agents as well as
angiographic catheters. In addition to product development, Dr. Hopkins has
extensive experience in cardiovascular pharmacology and toxicology
research, as well as sterile pharmaceutical formulation and production. Dr.
Hopkins received a Ph.D. in pharmacology from the University of Maryland.
GORDON L. SCHOOLEY, PH.D. Dr. Schooley has been Vice President-
Clinical Research and Regulatory Affairs since January 1989. From 1987
through 1988, Dr. Schooley was a senior manager at Newport Pharmaceuticals
where he had worldwide responsibility for regulatory affairs and clinical
research services. From 1979 to 1987, Dr. Schooley was a research director
with Allergan Pharmaceuticals, a subsidiary of SmithKline Beckman. Dr.
Schooley received his M.S. from Brigham Young University and a Ph.D. from
the University of Michigan.
ELIAS LAZARIDES, PH.D. President & COO, Astral, Inc. Dr. Lazarides
joined Astral in November 1994. Prior to joining Astral, Dr. Lazarides was
Executive Director of Pharmacology at Merck Research Laboratories, where he
managed a very broad range of drug discovery programs in cardiovascular and
ocular pharmacology. Dr. Lazarides joined the Division of Biology at the
California Institute of Technology in 1977, where he was promoted to
Professor in 1985. He has been the recipient of numerous awards and
academic honors, including an NIH Career Development Award, a Camille and
Henry Dreyfus Foundation Teacher-Scholar Award, the Achievement Award of
the Tokyo Society of Medical Sciences. Dr. Lazarides received his B.S. from
Wesleyan University in Connecticut and a Ph.D. from Harvard University.
CARROLL O. JOHNSON. Mr. Johnson has served as a director of the
Company since 1989. He has been President of Research Management, Inc.
("RMI") since 1985, an independent contract research organization which
provides services to the pharmaceutical
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industry in the implementation of clinical trials. Previously, he served
for 25 years in various research, sales and marketing positions with
several pharmaceutical companies, including Pharmacia Laboratories, Inc.,
where he created a national sales force which introduced three major
products.
STEPHEN M. MCGRATH. Mr. McGrath has served as a director of the
Company since 1989. He is an Executive Vice President of Oppenheimer & Co.,
Inc. ("Oppenheimer") and serves as the Director of its Corporate Finance
Department. Prior to his employment by Oppenheimer in 1983, he was with
Warner-Lambert Company for eleven years and was responsible for the
development and implementation of a strategic restructuring program that
substantially altered the nature of such company. Before joining Warner-
Lambert Company, Mr. McGrath was Controller and Assistant Treasurer of
Sterling Drug, Inc. and a certified public accountant for Price Waterhouse
& Co.
DONALD E. O'NEILL. Mr. O'Neill has served as a director of the Company
since 1991. He retired from Warner-Lambert Company in 1991 after 20 years
of service. During his tenure, he held various managerial positions,
including President of the Parke-Davis Group, President of the Health
Technologies Group and President - International Operations. At the time of
his retirement from Warner-Lambert Company, he held the offices of
Executive Vice President of the corporation and President and Chairman of
its International Operations. He is a director of New Jersey Resources
Corporation, Targeted Genetics Corp., Scios-Nova, Inc., MDL Information
Systems, Inc., and Immunogen, Inc.
HELEN M. RANNEY, M.D. Dr. Ranney has served as a director of the
Company since 1991. She is Professor Emerita, Department of Medicine,
University of California at San Diego, having served as Chairman of the
Department from 1973 through 1986. From 1986 through 1991, she was
Distinguished Physician of the U.S. Department of Veterans Affairs. She
formerly was Professor of Medicine at Albert Einstein College of Medicine
(New York) and at the State University of New York, Buffalo. Dr. Ranney is
a member of many professional societies, including the National Academy of
Sciences, the Institute of Medicine, the Association of American Physicians
(past President) and the American Society of Hematology (past President).
She has more than 150 publications, primarily relating to blood and blood
disorders. Dr. Ranney served on the Board of Directors of Squibb Corp.
prior to its merger with Bristol-Myers. She received her M.D. from the
College of Physicians and Surgeons, Columbia University.
JEAN G. RIESS, PH.D. Professor Riess has served as a director of
the Company since 1989. He has been the Director of Laboratorie de Chimie
Moleculaire at the University of Nice for over 20 years. He has been an
active researcher since receiving a Ph.D. from the University of
Strasbourg, with numerous patents and over 300 publications. For the
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<PAGE>
past 15 years Dr. Riess has focused on chemistry related to
perfluorochemical emulsions for medical application. In this field, his
research group has been active in synthesis of tailored perfluorochemicals,
in emulsion technology, in synthesis of fluorinated surfactants and in the
physical chemistry of emulsion stabilization. Dr. Riess is responsible for
the Corporation's research efforts at its affiliated company, Applications
et Transferts de Technologies Avancees in Nice, France.
THOMAS F. ZUCK, M.D. Dr. Zuck has served as a director of the Company
since 1990. He is Professor of Transfusion Medicine and Director of
Hoxworth Blood Center at the University of Cincinnati Medical Center. He is
currently President of the Council of Community Blood Centers. Dr. Zuck was
formerly director of the Division of Blood and Blood Products at the Office
of Biologics Research & Review within the FDA. He has served in numerous
scientific professional societies, including as President of the American
Association of Blood Banks, was Editor-in-Chief of the journal Transfusion
and has more than 60 publications to his credit. Dr. Zuck is a retired U.S.
Army Colonel, where he was a Commander of the Letterman Army Institute of
Research and, for many years, involved with the Army's blood substitute
development program. Dr. Zuck received his LL.B. from Yale Law School and
his M.D. from Hahnemann Medical College.
35
<PAGE>
PLAN OF DISTRIBUTION
The Common Stock is being offered for sale by the Company on a best
efforts, all or none, basis principally to selected institutional investors
in the U.S. Offering and in the International Offering (collectively, the
"Offerings"). Oppenheimer & Co., Inc. and Cowen & Company (the "U.S.
Placement Agents") have been retained pursuant to a placement agency
agreement (the "U.S. Placement Agency Agreement") to act as the exclusive
agents for the Company in connection with the U.S. Offering.
The Company has also entered into a placement agency agreement (the
"International Placement Agency Agreement") with Oppenheimer & Co., Inc.,
Cowen & Company and ABB Aros Fondkommission AB (the "International
Placement Agents"; and together with the U.S. Placement Agents, the
"Placement Agents") pursuant to which the International Placement Agents
shall act as the exclusive agents for the Company in connection with the
International Offering to persons other than U.S. persons. As used herein,
the term "U.S. person" means: (i) any natural person resident in the United
States or any corporation organized or incorporated under the laws of the
United States (other than a branch or agency thereof located outside the
United States), (ii) any branch or agency located in the United States of a
corporation incorporated or partnership organized under the laws of any
jurisdiction other than the United States, (iii) any account managed or
held on a non-discretionary basis for any person, corporation or
partnership referred to in clause (i) or (ii), and (iv) any account
(including any estate or trust) managed or held on a discretionary basis by
a person, corporation or partnership referred to in clause (i) or (ii). The
term "United States" means the United States of America, its territories
and its possessions, any state of the United States and the District of
Columbia.
The Company has agreed to pay to the Placement Agents a fee equal to
6% of the proceeds of the Offerings and to reimburse them in the aggregate
for expenses incurred by them in connection with such Offerings, in an
amount up to $150,000 in the aggregate.
The closing of the Offerings is conditioned upon the sale of all of
the 2,500,000 shares offered hereby and shall occur simultaneously.
None of the Placement Agents nor the International Placement Agents
are obligated or intend to themselves take (or purchase) any of the Common
Stock. It is anticipated that the Placement Agents will obtain indications
of interest from potential investors for the amount of the Offerings and
that effectiveness of the Registration Statement will not be requested and
no investor funds will be accepted until indications of interest have been
received by the U.S. Placement Agents and/or the International Placement
Agents for the full amount of the Offerings. Confirmations and definitive
prospectuses (or definitive offering materials in the case of non-U.S.
investors) will be distributed to all investors at the time of pricing,
informing investors of the closing date, which will be scheduled for five
business days after pricing. No investor funds will be accepted prior to
effectiveness of the Registration Statement. Prior to the closing date, all
U.S. investor funds will promptly be placed in escrow with Citibank, N.A.,
as escrow agent (the "U.S. Escrow Agent"), in an escrow account established
for the benefit of U.S. investors. The U.S. Escrow Agent will invest such
funds in accordance with Rule 15c2-4 promulgated under the Exchange Act.
All non-U.S. investor funds will be placed in escrow with Citibank, N.A. in
London, England, as escrow agent (the "International Escrow Agent"; and
together with the U.S. Escrow Agent, the "Escrow Agents") in an escrow
account established for the benefit of non-U.S. investors. Prior to the
closing date, the Escrow Agents will advise the Company that payment for
the purchase of the Common Stock has been affirmed by investors and that
investors have deposited the requisite funds in the respective escrow
accounts at the Escrow Agents. Upon receipt of such notice, the Company
will deposit with each Escrow Agent the Common Stock to be credited to the
respective accounts of investors within and without the United States, as
appropriate. Investor funds, together with interest thereon, if any, will
be collected by the Company through the facilities of each Escrow Agent, as
appropriate, on the scheduled closing date. Neither the U.S. Offering nor
the International Offering will continue after the closing date. In the
event that investor funds are not received in the full amount necessary to
satisfy the requirements of the Offerings, all funds deposited in the
escrow accounts will promptly be returned.
The Placement Agents have entered into an Agreement Among Agents
pursuant to which each International Placement Agent has agreed that it is
not arranging for the sale of the Common Stock to any
U.S. person in the International Offering.
The Company has agreed to indemnify the U.S. Placement Agents against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments that the U.S. Placement Agents may be required to
make in respect thereof. The Company has agreed to indemnify the
International Placement Agents against certain liabilities in connection
with the International Offering, or to contribute to payments that the
International Placement Agents may be required to make in respect thereof.
Certain officers and directors of the Company have agreed that they
will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable
for, or any rights to purchase or acquire, Common Stock for a period of
ninety (90) days after the date of this Prospectus, without the prior
written consent of the U.S. Placement Agents.
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<PAGE>
LEGAL MATTERS
The legality of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Stroock & Stroock & Lavan.
Certain legal matters will be passed on for the U.S. Placement Agents by
Morgan, Lewis & Bockius. The information under "Risk Factors" and
"Business -- Patents" with respect to patents and patent laws has been
reviewed by Knobbe, Martens, Olson & Bear.
EXPERTS
The consolidated financial statements of Alliance Pharmaceutical Corp.
at June 30, 1994, and for the year then ended, appearing and incorporated
by reference in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and incorporated herein by
reference, and are included and incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
The consolidated financial statements of Alliance Pharmaceutical Corp.
at June 30, 1993 and for each of the two years in the period then ended,
appearing and incorporated by reference in this Prospectus and Registration
Statement from the Company's Annual Report on Form 10-K for the year ended
June 30, 1994 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is also included and
incorporated herein by reference. Such financial statements have been so
included and incorporated by reference in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors F-2
Report of Deloitte & Touche LLP, Independent Auditors F-3
Consolidated Balance Sheets at June 30, 1993 and 1994 and
December 31, 1994 (unaudited) F-4
Consolidated Statements of Operations for each of the three years
in the period ended June 30, 1994 and for the six months ended
December 31, 1993 (unaudited) and 1994 (unaudited) F-5
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended June 30, 1994 and the six
months ended December 31, 1994 (unaudited) F-6
Consolidated Statements of Cash Flows for each of the three years
in the period ended June 30, 1994 and the six months ended
December 31, 1993 (unaudited) and 1994 (unaudited) F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Alliance Pharmaceutical Corp.
We have audited the accompanying consolidated balance sheet of Alliance
Pharmaceutical Corp. and subsidiaries as of June 30, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of Alliance Pharmaceutical Corp. and subsidiaries for the years ended June 30,
1993 and 1992, were audited by other auditors whose report, dated July 27, 1993,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1994 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Alliance
Pharmaceutical Corp. and subsidiaries at June 30, 1994, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Ernst & Young LLP
San Diego, California
August 16, 1994
F-2
<PAGE>
Independent Auditors' Report
- ----------------------------
The Board of Directors of
Alliance Pharmaceutical Corp.:
We have audited the accompanying consolidated balance sheet of Alliance
Pharmaceutical Corp. and Subsidiaries (the "Company") as of June 30, 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended June 30, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at June 30, 1993, and
the results of its operations and its cash flows for each of the two years in
the period ended June 30, 1993 in conformity with generally accepted accounting
principles.
Deloitte & Touch LLP
New York, New York
July 27, 1993
F-3
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30,
------------------------------- December 31,
Notes 1993 1994 1994
----- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 5,316,000 $ 1,902,000 $ 5,946,000
Short-term investments (cost of $14,854,000
at December 31, 1994) 2 34,226,000 19,154,000 14,154,000
Research revenue receivable 8 501,000 -- 3,100,000
Inventories and other current assets 3 2,648,000 1,349,000 1,408,000
------------- ------------- -------------
Total current assets 42,691,000 22,405,000 24,608,000
Property, plant and equipment-net 3 9,620,000 10,165,000 9,861,000
Purchased technology-net 1 18,194,000 17,033,000 16,452,000
Other assets-net 3 2,032,000 3,529,000 1,943,000
------------- ------------- -------------
$ 72,537,000 $ 53,132,000 $ 52,864,000
============= ============= =============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 1,664,000 $ 1,074,000 $ 1,692,000
Accrued expenses 1,079,000 1,885,000 2,039,000
Current portion of long-term debt 203,000 -- --
------------- ------------- -------------
Total current liabilities 2,946,000 2,959,000 3,731,000
Other 7 447,000 348,000 518,000
Stockholders' Equity: 4,5,8
Preferred stock-$.01 par value; authorized 5,000,000
shares, 1,500,000 issued and outstanding at
December 31, 1994 -- -- 15,000
Common stock-$.01 par value; 30,000,000 shares
authorized at June 30, 1993 and 1994 and 50,000,000
shares authorized at December 31, 1994;
19,000,120 shares, 21,372,054 shares and
21,407,787 shares issued and outstanding at
June 30, 1993 and 1994 and December 31, 1994,
respectively 190,000 214,000 214,000
Additional paid-in capital 190,671,000 208,954,000 222,878,000
Capital arising from acquisition of subsidiary 800,000 -- --
Deferred compensation (120,000) -- --
Accumulated deficit (122,397,000) (159,343,000) (174,492,000)
------------- ------------- -------------
Total stockholders' equity 69,144,000 49,825,000 48,615,000
------------- ------------- -------------
$ 72,537,000 $ 53,132,000 $ 52,864,000
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Years ended June 30, December 31,
--------------------------------------------- -----------------------------
Notes 1992 1993 1994 1993 1994
-------- ----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product revenue - net $ 9,000 $ 50,000 $ 246,000 $ 150,000 $ 109,000
License and research revenue 5,8 1,796,000 2,320,000 163,000 102,000 7,100,000
------------ ------------ ------------ ------------ ------------
1,805,000 2,370,000 409,000 252,000 7,209,000
Operating expenses:
Research and development 20,922,000 24,767,000 31,605,000 15,555,000 18,981,000
General and administrative 5,187,000 6,405,000 7,312,000 3,385,000 3,952,000
------------ ------------ ------------ ------------ ------------
26,109,000 31,172,000 38,917,000 18,940,000 22,933,000
------------ ------------ ------------ ------------ ------------
Loss from operations (24,304,000) (28,802,000) (38,508,000) (18,688,000) (15,724,000)
Other income - net 2,538,000 2,422,000 1,562,000 951,000 575,000
------------ ------------ ------------ ------------ ------------
Net loss $(21,766,000) $(26,380,000) $(36,946,000) $(17,737,000) $(15,149,000)
Dividends on preferred stock -- -- -- -- (219,000)
------------ ------------ ------------ ------------ ------------
Net loss applicable to
common shares $(21,766,000) $(26,380,000) $(36,946,000) $(17,737,000) $(15,368,000)
============ ============ ============ ============ ============
Net loss per share $ (1.25) $ (1.39) $ (1.83) $ (0.93) $ (0.72)
============ ============ ============ ============ ============
Weighted average number
of shares outstanding 17,344,000 18,946,000 20,226,000 19,109,000 21,385,000
============ ============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Years in the Period Ended June 30, 1994 and
the Six Months Ended December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital
Additional arising from
Common stock Preferred stock paid-in acquisition of Accumulated Deferred
Shares Amount Shares Amount capital subsidiary deficit compensation
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1991 14,512,000 $145,000 -- $ -- $108,847,000 $ $ (74,251,000) $(886,000)
Sale of common stock -
public offering 3,151,000 32,000 66,946,000
Exercise of stock options
and warrants 608,000 6,000 4,990,000
Acquisition of
BioPulmonics, Inc. 13,000 316,000 1,544,000
Issuance of common stock
in connection with
subordinated debentures 533,000 5,000 7,736,000
Issuance of stock options
below fair market value 450,000 (225,000)
Amortization of deferred
compensation 664,000
Net loss (21,766,000)
---------- -------- --------- ------- ------------ ---------- ------------- ---------
Balances at June 30, 1992 18,817,000 188,000 -- -- 189,285,000 1,544,000 (96,017,000) (447,000)
Exercise of stock options
and warrants 109,000 1,000 449,000
Installment payment
related to acquisition
of BioPulmonics, Inc. 69,000 1,000 876,000 (744,000)
Issuance of stock in
satisfaction of
employer matching
contribution to 401(k)
savings plan 5,000 61,000
Amortization of deferred
compensation 327,000
Net loss (26,380,000)
---------- -------- --------- ------- ------------ ---------- ------------- ---------
Balances at June 30, 1993 19,000,000 190,000 -- -- 190,671,000 800,000 (122,397,000) (120,000)
Sale of common stock -
private placement 2,180,000 22,000 15,228,000
Exercise of stock options
and warrants 75,000 1,000 199,000
Installment payment
related to acquisition
of BioPulmonics, Inc. 105,000 1,000 921,000 (800,000)
Issuance of warrants in
connection with
acquisition of product
rights 1,840,000
Issuance of stock in
satisfaction of employer
matching contribution
to 401(k) savings plan 12,000 95,000
Amortization of deferred
compensation 120,000
Net loss (36,946,000)
---------- -------- --------- ------- ------------ ---------- ------------- ---------
Balances at June 30, 1994 21,372,000 214,000 -- -- 208,954,000 -- (159,343,000) --
Exercise of stock options
and warrants 36,000 225,000
Issuance of preferred stock 1,500,000 15,000 14,618,000
Cumulative effect of change
in accounting for
investments in available-
for-sale securities (127,000)
Change in unrealized gains
and losses on available-
for-sale securities (573,000)
Net loss (15,149,000)
Dividends on preferred stock (219,000)
---------- -------- --------- ------- ------------ ---------- ------------- ---------
Balances at December 31, 1994 21,408,000 $214,000 1,500,000 $15,000 $222,878,000 $ -- $(174,492,000) $ --
========== ======== ========= ======= ============ ========== ============= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
Years ended June 30, December 31,
-------------------------------------------- ---------------------------
1992 1993 1994 1993 1994
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net loss $(21,766,000) $(26,380,000) $(36,946,000) $(17,737,000) $(15,149,000)
------------ ------------- ------------- ------------ ------------
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 2,123,000 2,633,000 3,073,000 1,562,000 1,458,000
Non-cash compensation - net 889,000 388,000 215,000
Acquired research and development 1,744,000 1,686,000
Changes in assets and liabilities:
Inventories and other (1,259,000) (1,628,000) 1,331,000 (3,100,000)
Accounts payable and accrued expenses
and other 195,000 330,000 285,000 2,917,000 441,000
------------ ------------ ------------ ------------ ------------
Net adjustments 3,692,000 1,723,000 4,904,000 4,479,000 485,000
------------ ------------ ------------ ------------ ------------
Net cash used in operating activities (18,074,000) (24,657,000) (32,042,000) (13,258,000) (14,664,000)
------------ ------------ ------------ ------------ ------------
Financing Activities:
Payments of long-term debt (339,000) (149,000) (3,000)
Issuance of common stock, warrants and
convertible notes 71,974,000 450,000 15,450,000 13,029,000 14,859,000
Restricted cash (323,000) 17,000
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities 71,312,000 318,000 15,447,000 13,029,000 14,859,000
------------ ------------ ------------ ------------ ------------
Investing activities:
Short-term investments (41,888,000) 16,727,000 15,072,000 15,282,000 4,300,000
Property, plant and equipment (3,630,000) (2,539,000) (1,891,000) (816,000) (451,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities (45,518,000) 14,188,000 13,181,000 14,466,000 3,849,000
------------ ------------ ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents 7,720,000 (10,151,000) (3,414,000) 14,237,000 4,044,000
Cash and cash equivalents at beginning
of period 7,747,000 15,467,000 5,316,000 5,316,000 1,902,000
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 15,467,000 $ 5,316,000 $ 1,902,000 $ 19,533,000 $ 5,946,000
============ ============ ============ ============ ============
Supplemental disclosure of cash flow
information:
Interest paid $ 343,000 $ 13,000 $ - $ - $ -
============ ============ ============ ============ ============
Supplemental disclosure of non-cash investing
and financing activities:
Preferred stock dividend $ 219,000
Common stock issued for BioPulmonics, Inc.
installment payment $ 877,000 $ 922,000
Issuance of warrants in connection with
acquisition of product rights $ 1,840,000
Conversion of subordinated notes to equity,
net $ 7,741,000
Net assets of BioPulmonics, Inc. acquired $ 311,000
BioPulmonics, Inc. liabilities satisfied
with common stock $ 216,000
Deferred compensation resulting from stock
options granted $ 225,000
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
- ----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to June 30, 1994, except for Note 8, is
unaudited.)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Alliance Pharmaceutical Corp. ("Alliance") and its subsidiaries
(collectively, the "Company") are engaged in the development, manufacturing, and
early-stage marketing of medical and pharmaceutical products.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Alliance and
its wholly owned subsidiaries, BioPulmonics, Inc. ("BioPulmonics") and Rosanin
Corporation, and its majority-owned subsidiaries, Astral, Inc. (formerly known
as Advax Pharmaceutical, Inc.) and Applications et Transferts de Technologies
Avancees. All significant intercompany accounts and transactions have been
eliminated. Certain amounts in 1992 and 1993 have been reclassified to conform
to the 1994 presentation.
Cash, Cash Equivalents, and Short-Term Investments
- --------------------------------------------------
Cash and cash equivalents consist of cash and highly liquid investments,
primarily U.S. government securities and corporate obligations, with original
maturities of less than 90 days when purchased. Short-term investments are
carried at amortized cost which approximates market.
Accounting For Investments In Debt and Equity Securities
- --------------------------------------------------------
In July 1994, the Company adopted Statement of Financial Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company's management has classified its investment securities
as available-for-sale and records holding gains or losses as a separate
component of stockholders' equity. The cumulative effect of the change resulted
in an adjustment to stockholders' equity of $127,000 at July 1, 1994.
Concentration of Credit Risk
- ----------------------------
Cash, cash equivalents, and short-term investments are financial
instruments which potentially subject the Company to concentration of credit
risk. The Company invests its excess cash primarily in U.S. government
securities and marketable debt securities of financial institutions and
corporations with strong credit ratings. The Company has established guidelines
relative to diversification and maturities that maintain safety and liquidity.
These guidelines are periodically reviewed and modified to take advantage of
trends in yields and interest rates. The Company has not experienced any
material losses in its investments.
Property, Plant, Equipment, and Other Assets
- --------------------------------------------
Buildings, furniture, and equipment are stated at cost and depreciation is
computed using the straight-line method over the estimated useful lives of 4 to
25 years. Leasehold improvements are amortized using the straight-line method
over the shorter of the estimated useful lives of the assets or the lease term.
Patent, product, and technology rights are amortized using the straight-line
method over 5 to 15 years.
Purchased Technology
- --------------------
The purchased technology was acquired by virtue of the merger of Fluoromed
Pharmaceutical, Inc. into a subsidiary of the Company in fiscal 1989. The
technology acquired is the Company's core perfluorochemical ("PFC") technology
and was valued based on an analysis of the present value of future earnings
anticipated from this technology at that time. The Company identified
alternative future uses for the PFC technology, including the Oxygent (temporary
blood substitute) and LiquiVent (intrapulmonary oxygen carrier) products.
The PFC technology is the basis for the Company's main drug development
programs and is being amortized over a 20 year life. Amortization of purchased
technology is included in research and development expense. Accumulated
amortization was $5,032,000, $6,193,000 and $6,774,000 at June 30, 1993 and 1994
and December 31, 1994, respectively.
The carrying value of purchased technology is reviewed periodically based
on the projected cash flows to be received from license fees, milestone
payments, royalties and other product revenues. If such cash flows are less than
the carrying value of the purchased technology, the difference will be charged
to expense.
Research and Development Expenses
- ---------------------------------
Research and development expenditures are charged to expense as
incurred.
F-8
<PAGE>
Income Taxes
- ------------
The Company adopted Financial Accounting Standards Board Statement No.
109, Accounting for Income Taxes ("Statement 109"), as of July 1, 1993.
Statement 109 is an asset and liability approach that requires the recognition
of deferred assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. Prior years' financial statements have not been restated and the
adoption of Statement 109 had no impact on the results of operations for the
year ended June 30, 1994.
Net Loss Per Share
- ------------------
Net loss per share is based on the weighted average number of shares
outstanding during the respective years and does not include common stock
equivalents since their effect on the net loss per share would be anti-dilutive.
Interim Financial Information
- -----------------------------
The financial statements for the six months ended December 31, 1993 and
1994 are unaudited, but include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position at those dates and the operating results
and cash flows for those periods. Results for the interim periods are not
necessarily indicative of results to be expected for the entire year.
2. INVESTMENTS
Short-term investments are recorded at estimated fair market value at
December 31, 1994, and consist primarily of treasury securities, and corporate
obligations with maturities of more than three months. The Company has
classified all of its investments as available-for-sale securities. The
following table summarizes available-for-sale securities at December 31, 1994:
<TABLE>
<CAPTION>
Available-for-Sale Securities
-------------------------------------------
Gross
Unrealized Estimated Fair
Cost Losses Value
----------- ---------- --------------
<S> <C> <C> <C>
U.S. Government Securities $ 6,215,000 $535,000 $ 5,680,000
Corporate Obligations 8,639,000 165,000 8,474,000
Cash and Cash Equivalents 5,946,000 5,946,000
----------- -------- -----------
$20,800,000 $700,000 $20,100,000
=========== ======== ===========
</TABLE>
The gross realized losses on sales of available-for-sale securities totaled
$80,000 for the six months ended December 31, 1994. There were no gross realized
gains.
The amortized cost and estimated fair value of debt and marketable
securities at December 31, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because the issuants
of the securities may have the right to prepay obligations without prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Due in one year or less $10,314,000 $10,314,000
Due after one year through three years 4,995,000 4,740,000
Due after three years 5,491,000 5,046,000
----------- -----------
$20,800,000 $20,100,000
=========== ===========
</TABLE>
3. FINANCIAL STATEMENT DETAILS
Property, Plant, and Equipment - Net
- ------------------------------------
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1993 1994 1994
----------- ------------ ------------
<S> <C> <C> <C>
Land $ 225,000 $ 225,000 $ 225,000
Buildings 300,000 300,000 300,000
Building improvements 1,344,000 1,561,000 1,571,000
Furniture, fixtures, and
equipment 7,866,000 9,467,000 9,895,000
Leasehold improvements 3,293,000 3,356,000 3,369,000
----------- ----------- -----------
13,028,000 14,909,000 15,360,000
Less accumulated depreciation
and amortization (3,408,000) (4,744,000) (5,499,000)
----------- ----------- -----------
$ 9,620,000 $10,165,000 $ 9,861,000
=========== =========== ===========
</TABLE>
Inventories and Other Current Assets
- ------------------------------------
Inventories and other current assets consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1993 1994 1994
----------- ----------- ------------
<S> <C> <C> <C>
Inventories $ 1,828,000 $ 384,000 $ 217,000
Loan receivable 135,000 197,000 757,000
Interest receivable 433,000 362,000 226,000
Deferred financing costs 126,000
Other 252,000 280,000 208,000
----------- ----------- ------------
$ 2,648,000 $ 1,349,000 $ 1,408,000
=========== =========== ============
</TABLE>
In fiscal 1995, the Company discontinued the promotion of Imagent(R) GI.
Accordingly, the Company established a reserve as of June 30, 1994 to reduce its
inventories of perflubron to the estimated net realizable value from sales of
Imagent GI.
F-9
<PAGE>
Other Assets - Net
- ------------------
Other assets consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1993 1994 1994
----------- ----------- ------------
<S> <C> <C> <C>
Product, technology, and patent rights (see Note 5)
(net of accumulated amortization of $935,000, $1,387,000
and $1,355,000 at June 30, 1993 and 1994, and December 31,
1994, respectively) $ 895,000 $2,494,000 $ 717,000
Other 1,137,000 1,035,000 1,226,000
---------- ---------- ----------
$2,032,000 $3,529,000 $1,943,000
=========== ========== ==========
</TABLE>
4. STOCKHOLDERS' EQUITY
Stock Option Plans
- ------------------
The Company has an Incentive Stock Option Plan (the "1983 Plan") which
provides for the granting of options to purchase up to an aggregate of 500,000
shares of the Company's common stock to employees of the Company. All such
options have been granted. Options granted under the 1983 Plan generally vest
in installments of 30 percent, 25 percent, 20 percent, 15 percent, and 10
percent of the number of shares initially subject to the options, commencing 12,
24, 36, 48, and 59 months, respectively, from the date of grant and are
exercisable for a period of five years from the date of grant.
The Company also has two Non-Qualified Stock Option Programs (the "1983
Program" and the "1991 Plan"). These programs provide for the granting of
options to purchase shares of the Company's common stock (up to an aggregate of
2,500,000 shares and 1,000,000 shares for the 1983 Program and the 1991 Plan,
respectively) to directors, officers, and other employees and consultants. The
optionees, dates of grant, option price (which for the 1991 Plan cannot be less
than 80 percent of the fair market value of the common stock on the date of
grant), and terms of the options, which cannot exceed ten years for both the
1983 Program and 1991 Plan, are determined by the Board of Directors. In May
1994, the Board of Directors amended and restated the 1991 Plan, approved by the
stockholders in November 1994, to, among other things, increase the number of
shares available under the 1991 Plan by 1,000,000 shares and to allow the
issuance of incentive stock options.
F-10
<PAGE>
The following table summarizes stock option activity through June 30,
1994:
<TABLE>
<CAPTION>
Weighted
Shares Average Price
--------- -------------
<S> <C> <C>
Balance at June 30, 1991 1,225,432
Granted 511,000 $21.06
Exercised (181,966) $ 6.75
Terminated/Expired (5,492) $ 9.68
---------
Balance at June 30, 1992 1,548,974
Granted 408,210 $12.04
Exercised (102,941) $ 5.50
Terminated/Expired (44,340) $22.77
---------
Balance at June 30, 1993 1,809,903
Granted 564,550 $ 9.42
Exercised (74,666) $ 2.81
Terminated/Expired (51,215) $11.57
---------
Balance at June 30, 1994 2,248,572
=========
Available for future grant under the
1983 Program 16,985
=========
Available for future grant under the
1991 Plan, as amended and restated,
and approved by the stockholders
in November 1994 963,600
=========
</TABLE>
At June 30, 1994, 1,406,235 options were vested and exercisable.
Certain of the options granted from July 1, 1990 through June 30, 1992
were granted with exercise prices below fair market value at the date of the
grant. The Company has recorded such difference as deferred compensation, which
was amortized as compensation expense ratably over the vesting period of each
option.
Warrants
- --------
In December 1993, the Company issued a warrant to purchase 500,000 shares
of common stock through December 2000 at an exercise price of $12 per share (see
Note 5). At June 30, 1994, the Company had warrants outstanding to purchase
736,813 shares of common stock at prices ranging from $6.95 to $15.96 per share.
The warrants expire on various dates from July 1994 through December 2000. The
cash proceeds that would be received upon the exercise of all outstanding
warrants at June 30, 1994 would be $8,290,000.
Acquisition of Biopulmonics, Inc.
- ---------------------------------
In December 1991, the Company purchased all the outstanding stock of
BioPulmonics in a transaction recorded using the purchase method of accounting.
The total purchase price was $3,055,000, payable in four installments, of which
at least 80 percent of the consideration was to be paid in the Company's common
stock. Accordingly, the minimum amount of the aggregate purchase price to be
financed through the Company's common stock was recorded as capital arising from
the acquisition of a subsidiary and the remaining balance was recorded as debt.
In December 1993, the Company made its third installment payment (of
$1,000,000) to the former BioPulmonics' stockholders with substantially all of
such payment made in the Company's common stock. The Company will pay
BioPulmonics' stockholders additional consideration of $1,000,000 (at least 80%
of which must be in common stock) in or before June 1995.
F-11
<PAGE>
Should the Company elect not to continue development of the technology acquired
from BioPulmonics, the Company may transfer all the outstanding capital stock of
BioPulmonics back to the former BioPulmonics' stockholders in lieu of making the
final payment.
5. MARKETING AGREEMENT
In May 1989, the Company entered into a marketing agreement with
Boehringer Ingelheim International GmbH ("BII") (the "Marketing Agreement"),
which provided BII with marketing and manufacturing rights to certain of the
Company's products in all countries outside North America. In addition, the
Company and BII shared in the funding of research, development, and the conduct
of clinical trials of certain perfluorochemical products. The Company earned
license and research revenues of $2,200,000 and $1,753,000 under the agreement
during fiscal 1993 and 1992, respectively. In June 1993, the Company and BII
modified the Marketing Agreement and BII discontinued its research funding, and,
in January 1994, the Company regained all marketing and manufacturing rights
previously granted to BII in exchange for a warrant to purchase 500,000 shares
of the Company's common stock through December 2000 at $12 per share. The
Company has the right to call the warrant if its stock price achieves certain
levels. In conjunction with the acquisition of the marketing and manufacturing
rights from BII, the Company has recorded product rights of $1,840,000 (the
estimated fair value of the warrant). The cost of these rights was charged to
expense in the first quarter of fiscal 1995, when the Company licensed these
product rights to Ortho Biotech, Inc. (see Note 8).
6. INCOME TAXES
Significant components of the Company's deferred tax assets as of June 30,
1994 are shown below. A valuation allowance of $58,173,000, of which $16,160,000
is related to 1994, has been recognized to offset the deferred tax assets as
realization of such assets is uncertain.
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 48,686,000
Research and development credits 6,236,000
Capitalized research expense 3,372,000
Other - net (121,000)
------------
Total deferred tax assets 58,173,000
Valuation allowance for deferred tax
assets (58,173,000)
------------
Net deferred tax assets $ 0
============
</TABLE>
Approximately $1,698,000 of the valuation allowance for deferred tax
assets relates to stock option deductions which, when recognized, will be
allocated to contributed capital.
At June 30, 1994, the Company had federal and various state net operating
loss carryforwards of approximately $128,303,000 and $62,995,000, respectively.
The difference between the federal and state tax loss carryforwards is primarily
attributable to the capitalization of research and development expenses for
California tax purposes and the fifty percent limitation on California loss
carryforwards. The federal and various state tax loss carryforwards will begin
expiring in fiscal 1998 and 1996,
F-12
<PAGE>
respectively, unless previously utilized. The Company also has federal and state
research and development tax credit carryforwards of $5,431,000 and $1,239,000,
respectively, which will begin expiring in fiscal 1998 unless previously
utilized.
Federal and California tax laws limit the utilization of income tax net
operating loss and credit carryforwards that arise prior to a change of control
of the Company. However, the Company believes that such limitations will not
have an impact on the utilization of the carryforwards.
7. COMMITMENTS AND CONTINGENCIES
The Company leases certain office and research facilities in San Diego and
certain equipment under operating leases. Provisions of the facilities lease
provide for abatement of rent during certain periods and escalating rent
payments during the lease terms based on changes in the Consumer Price Index.
Rent expense is recognized on a straight-line basis over the term of the leases.
Minimum annual commitments related to operating lease payments at June
30, 1994 are as follows:
<TABLE>
<CAPTION>
Years ending June 30,
- ------------------------
<S> <C>
1995 $ 1,839,000
1996 1,837,000
1997 1,863,000
1998 1,908,000
1999 1,962,000
Thereafter 2,471,000
-----------
Total $11,880,000
===========
</TABLE>
Rent expense for fiscal 1992, 1993, and 1994 and the six months ended
December 31, 1993 and 1994 was $1,168,000, $1,886,000, $2,286,000, $1,224,000
and $980,000, respectively.
In order to obtain a commitment for a long-term supply of raw material for
both clinical trials and anticipated future production requirements, the Company
entered into an agreement with a vendor under which the Company is obligated to
make payments to the vendor based, in part, upon the achievement of certain
milestones. The minimum payments are anticipated to commence during 1995 and
will continue for a 26-month period. The Company's total minimum future
commitment is estimated not to exceed $3.5 million.
During September 1992, the Company and certain of its officers and
directors were named as defendants in several lawsuits filed by certain
shareholders. The actions have been consolidated into one class action lawsuit.
The complaint claims, among other things, that the defendants failed to disclose
certain problems with two of the Company's products under development, which
conduct is alleged to have falsely portrayed the Company's financial condition.
The complaint seeks unspecified damages and fees. The Company believes it has
meritorious defenses and intends to vigorously defend against the claims brought
by the shareholders in the action. The Company believes the eventual outcome of
the litigation will not have a material adverse effect on the Company's
financial condition.
F-13
<PAGE>
8. SUBSEQUENT EVENT
In August 1994, the Company executed a license agreement with Ortho
Biotech, Inc. and The R.W. Johnson Pharmaceutical Research Institute, a division
of Ortho Pharmaceutical Corporation (collectively referred to as "Ortho"), which
provides Ortho with worldwide marketing and, at its election, manufacturing
rights to the Company's injectable perfluorochemical ("PFC") emulsions capable
of transporting oxygen for therapeutic use. Ortho will pay to Alliance a
royalty based upon its sales of the product after commercialization. In
addition, Ortho will pay to Alliance an initial license fee and other payments
upon the achievement of certain milestones. Ortho will also be responsible for
the remaining costs of developing the products. As of December 31, 1994, the
Company had recorded a receivable of $3.1 million, representing funding due from
Ortho for development costs incurred. Such amounts are recorded as research
revenue in the statements of consolidated operations. Concurrent with execution
of the license agreement, Johnson & Johnson Development Corp. ("J&JDC") agreed
to purchase 1.5 million shares of Alliance convertible preferred stock for $15.0
million and obtain a warrant to purchase 300,000 shares of Alliance common stock
at $15 per share during the next three years. The preferred stock is
convertible into common shares upon the earlier of: 1) Alliance common stock
trading for an average price per share of at least $20 for twenty consecutive
days; 2) termination of the license agreement; or 3) June 30, 1998. Each share
of the preferred stock will be converted into a number of common shares based
upon the lower of the average price of Alliance common stock at the time of
conversion or $20 per share. Prior to conversion, each share of preferred stock
is entitled to one-half vote on matters on which shareholders are entitled to
vote. The preferred stock carries a cumulative annual dividend of $0.50 per
share. J&JDC will have certain registration rights for common stock obtained by
conversion of the preferred stock or exercise of the warrant.
F-14
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY PLACEMENT AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AT ANY TIME AFTER THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Incorporation of Certain Documents by Reference.... 2
Available Information.............................. 2
Prospectus Summary................................. 4
Risk Factors....................................... 8
Use of Proceeds.................................... 12
Dilution........................................... 12
Capitalization..................................... 13
Selected Consolidated Financial Data............... 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 15
Business........................................... 21
Management......................................... 31
Plan of Distribution............................... 36
Legal Matters...................................... 37
Experts............................................ 37
Index to Consolidated Financial Statements......... F-1
</TABLE>
================================================================================
================================================================================
[LOGO OF ALLIANCE PHARMACEUTICAL CORP.]
ALLIANCE PHARMACEUTICAL CORP.
2,500,000
SHARES OF COMMON STOCK
--------------
PROSPECTUS
--------------
IN THE UNITED STATES AND CERTAIN COUNTRIES OUTSIDE THE UNITED STATES:
OPPENHEIMER & CO., INC.
COWEN & COMPANY
IN SWEDEN AND CERTAIN OTHER COUNTRIES OUTSIDE THE UNITED STATES:
ABB AROS FONDKOMMISSION A B
, 1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the offering, all of which
will be borne by the Registrant, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee................................ $ 5,065
N.A.S.D. Filing Fee................................. 1,969
Printing Costs...................................... 35,000
Legal Fees and Expenses............................. 50,000
Placement Agents Expense Reimbursement.............. 150,000
Escrow Agent Fees................................... 15,000
Accounting Fees and Expenses........................ 25,000
Miscellaneous....................................... 17,966
--------
Total............................................... $300,000
</TABLE>
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Article VI of the By-Laws of the Registrant and
to Sections 721-727 of the New York Business Corporation Law, which, among
other things and subject to certain conditions, authorize the Company to
indemnify each of its officers and directors against certain liabilities
and expenses incurred by such persons in connection with claims made by
reason of their being such officers or directors.
II-1
<PAGE>
ITEM 16. EXHIBITS
1.1 Form of U.S. Placement Agency Agreement*
1.2 Form of U.S. Escrow Agreement*
3. Restated Certificate of Incorporation of the Company, as amended,
dated December 1, 1994
5. Opinion of Stroock & Stroock & Lavan
10. Material Contracts
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Deloitte & Touche LLP, Independent Auditors
23.3 Consent of Stroock & Stroock & Lavan (included in Exhibit 5)
23.4 Consent of Knobbe, Martens, Olson & Bear
24. Powers of Attorney
-------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act 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;
(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 paragraph (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any 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 offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in
II-2
<PAGE>
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized in the City of San Diego, State
of California, on March 14, 1995.
ALLIANCE PHARMACEUTICAL CORP.
By:\s\Duane J. Roth
President
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------- ---------------------------- --------------
<S> <C> <C>
\s\ Duane J. Roth President, Chief Executive March 14, 1995
- --------------------------------
Duane J. Roth Officer and Director
\s\ Theodore D. Roth Executive Vice President March 14, 1995
- --------------------------------
Theodore D. Roth and Chief Financial Officer
\s\ Tim T. Hart Controller, Chief Accounting March 14, 1995
- --------------------------------
Tim T. Hart Officer
\s\ Carroll O. Johnson* Director March 14, 1995
- --------------------------------
Carroll O. Johnson
\s\ Stephen M. McGrath* Director March 14, 1995
- --------------------------------
Stephen M. McGrath
\s\ Helen M. Ranney, M.D.* Director March 14, 1995
- --------------------------------
Helen M. Ranney, M.D.
\s\ Donald E. O'Neill* Director March 14, 1995
- --------------------------------
Donald E. O'Neill
\s\ Jean Riess, Ph.D.* Director March 14, 1995
- --------------------------------
Jean Riess, Ph.D.
\s\ Thomas F. Zuck, M.D.* Director March 14, 1995
- --------------------------------
Thomas F. Zuck, M.D.
</TABLE>
*By: /s/ Theodore D. Roth
----------------------------
Theodore D. Roth
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
-------------
Page Number
-----------
1.1 Placement Agency Agreement*
1.2 Escrow Agreement*
3. Restated Certificate of Incorporation of the Company, as
amended, dated December 1, 1994
5. Opinion of Stroock & Stroock & Lavan
10. Material Contracts**
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Deloitte & Touche LLP, Independent Auditors
23.3 Consent of Stroock & Stroock & Lavan***
23.4 Consent of Knobbe, Martens, Olson & Bear
24. Power of Attorney
___________________
* To be filed by amendment.
** Included in Exhibit 1.1
*** Contained in Exhibit 5.
<PAGE>
EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALLIANCE PHARMACEUTICAL CORP.
Under Section 805 of the Business Corporation Law
We, the undersigned, Duane Roth and Theodore D. Roth, being
respectively the President and the Secretary of Alliance Pharmaceutical Corp.,
hereby certify:
1. The name of the corporation is Alliance Pharmaceutical Corp. (hereinafter
called the "Corporation"). The name under which the Corporation was formed is
Otisville Biologics, Inc.
2. The Certificate of Incorporation was filed in the office of the Secretary of
State on the 23rd day of February, 1983.
3. The Certificate of Incorporation of the Corporation, as amended heretofore,
is further amended to increase the number of authorized shares of common stock,
par value $.01 per share, from 30,000,000 shares to 50,000,000 shares.
4. To effect the foregoing amendment, Article 4 of the Certificate of
Incorporation of the Corporation, relating to the authorized capital stock of
the Corporation, is hereby amended to read in its entirety as follows:
4. The total number of shares of stock which the Corporation is
authorized to issue is 55,000,000 of which 50,000,000 shares shall be designated
Common Stock, $.01 par value per share, and 5,000,000 shares shall be designated
Preferred Stock, $.01 par value per share. The relative rights, preferences and
limitations of the shares of each class are as follows:
(a) The Preferred Stock authorized hereby may be issued (i) in such
series and with such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or other
special rights, and with such qualifications, limitations or restrictions
thereon, as the Board of Directors shall fix by resolution, and (ii) in such
number of shares in each series as the Board of Directors, by resolution or
resolutions, shall fix; provided that the aggregate number of all shares of
Preferred Stock issued does not exceed the number of shares of Preferred Stock
authorized hereby.
<PAGE>
(b) Holders of Common Stock shall be entitled to such dividend, liquidation
and voting rights and such other rights and privileges as are provided by the
New York Business Corporation Law, subject to the rights of holders of Preferred
Stock issued pursuant to the provisions of paragraph (a) above.
(c) One million five hundred thousand (1,500,000) shares of the
Corporation's preferred stock, par value $.01 per share, are designated "Series
A Preferred Stock" (hereinafter referred to as the "Series A Preferred Stock"),
and shall have the voting powers, designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions as follows:
1. Definitions.
1.1. "Common Stock" shall mean the shares of the Common Stock of the
Corporation, par value $.01 per share, and any stock into which such Common
Stock may hereafter be changed.
1.2. "Conversion Date" shall mean the date on which the Series A
Preferred Stock converts to Common Stock pursuant to Section 5.1.1.
1.3. "Conversion Rate" shall mean the rate at which shares of Common
Stock are to be received upon conversion of one share of the Series A Preferred
Stock which is determined by dividing the Current Market Price per share of
Common Stock into $10.00; provided that (i) in the event of a conversion
pursuant to Section 5.1.1(b), the Current Market Price per share shall be deemed
to be not less than $5.00, and (ii) in the event of a conversion pursuant to
Section 5.1.1(c) the Current Market Price shall be deemed to be $20.00. The
Conversion Rate, and the amounts specified in clauses (i) and (ii) in the
previous sentence shall be subject to adjustment pursuant to Section 5.
1.4. "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of
-2-
<PAGE>
additional consideration in cash or property, for Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event.
1.5. "Current Market Price" per share of Common Stock at any date
herein specified shall mean the average of the daily market prices for the
twenty (20) consecutive Trading Days ending one (1) day prior to such date. The
market price for each such Trading Day shall be the last reported sales price on
the principal exchange on which the Common Stock is listed, or, if it is not so
listed, the NASDAQ National Market System or on the over-the-counter market.
1.6. "Division Amounts" shall mean the $5.00 amount referred to in
clause (i) of the proviso in Section 1.3 and the $20.00 amount referred to in
clause (ii) of such proviso.
1.7. "Junior Stock" shall mean the Common Stock or any other class or
series of capital stock of the Corporation which at the time of issuance is not
declared to be senior to or on a parity with the Series A Preferred Stock as to
rights upon liquidation or dividends.
1.8. "License Agreement" shall mean that certain License Agreement
dated as of August 16, 1994 by and among the Corporation, Ortho Biotech, Inc.
and the R.W. Johnson Pharmaceutical Research Institute.
1.9. "Person" shall mean any individual, corporation, association,
company, business trust, partnership, joint venture, joint-stock company, trust,
unincorporated organization or association or government or any agency or
political subdivision thereof.
1.10. "Trading Day" shall mean any day on which trading takes place
(a) if the Common Stock is then listed or admitted to trading on a national
securities exchange, on the principal national securities exchange on which the
Common Stock is then listed or admitted to trading; or (b) if not, in the over-
the-counter-market and prices reflecting such trading are published by
-3-
<PAGE>
the National Association of Securities Dealers Automated Quotation System.
2. Dividends. Before any dividends (other than dividends payable in
Common Stock) on any Junior Stock shall be declared or paid or set apart for
payment, the holders of shares of Series A Preferred Stock shall be entitled to
receive cash dividends, when and as declared by the Board of Directors, at the
annual rate of $.50 per share, and no more, payable annually on the first day of
June in each year, to holders of record on such date, not exceeding thirty (30)
days preceding such dividend payment date, as may be determined by the Board of
Directors in advance of the payment of each particular dividend. Such dividends
shall be cumulative.
Whenever, at any time, the full dividend as aforesaid for the current
dividend period shall have been paid or declared and set apart for payment on
the then outstanding Series A Preferred Stock, the Board of Directors may
declare dividends on any Junior Stock, subject to the respective terms and
provisions (if any) applying thereto, and the Series A Preferred Stock shall not
be entitled to share therein.
3. Liquidation or Dissolution.
3.1. Preference. Subject to the prior rights of the Corporation's
creditors and holders of securities senior to the Series A Preferred Stock in
respect of distributions upon liquidation, dissolution or winding-up of the
Corporation, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of Series A Preferred
Stock shall be entitled to receive ten dollars ($10.00) per share, plus an
amount equal to any accumulated dividends through the date of such liquidation,
dissolution or winding-up. The amount of dividends "accumulated" on any share
of Series A Preferred Stock as at any annual dividend date shall be deemed to be
the amount of any unpaid dividends accumulated thereon to and including such
annual dividend date, whether or not earned or declared, and the amount of
dividends "accumulated" on any share of Series A Preferred Stock as at any date
other than an annual dividend date shall be calculated as the amount of any
unpaid dividends accumulated thereon, whether or not earned or declared, at the
rate of $.125 per share for each full three-month period preceding such date and
ending on September 1, December 1, March 1 or June 1. If, upon any such
liquidation, dissolution or winding-up of the Corporation, the assets
-4-
<PAGE>
distributable among the holders of Series A Preferred Stock (and any series of
preferred stock ranking in parity with the Series A Preferred Stock in respect
of distributions upon liquidation, dissolution or winding-up of the Corporation)
shall be insufficient to permit the payment in full to such holders of the
preferential amount payable to such holders determined as aforesaid, then the
holders of Series A Preferred Stock (and any such series) will share ratably in
any distribution of the Corporation's assets in proportion to the respective
preferential amounts that would have been payable if such assets were sufficient
to permit payment in full of all such amounts. After payment of the full amount
of the liquidating distribution to which the holders of Series A Preferred Stock
are entitled, holders of Junior Stock (other than Common Stock) shall be paid
any preferential amounts payable to such holders. Thereafter, the holders of
Series A Preferred Stock will share pro rata with the holders of Common Stock
(and the holders of Junior Stock entitled to share pro rata with Common Stock in
liquidating distributions), based on the number of shares of Common Stock into
which the Series A Preferred Stock is then convertible, any further distribution
of assets by the Corporation. Under this Section 3, a distribution of assets in
any dissolution, winding-up or liquidation shall not include (a) any
consolidation or merger of the Corporation with or into any other corporation,
(b) any dissolution, liquidation or winding-up of the Corporation immediately
followed by reincorporation of a successor corporation or (c) a sale or other
disposition of all or substantially all of the Corporation's assets in
consideration for the issuance of equity securities of another corporation,
provided that the consolidation, merger, dissolution, liquidation, winding-up,
sale or other disposition (i) does not amend, alter, or change the preferences
or rights of the Series A Preferred Stock or the qualifications, limitations or
restrictions thereof in a manner that adversely affects the Series A Preferred
Stock or (ii) is done in accordance with Sections 5.2, 5.3 or 5.4 hereof.
4. Voting Rights. The holders of Series A Preferred Stock shall have the
right to vote, together with the holders of all the outstanding shares of Common
Stock and not by class, except as otherwise required by New York law, on all
matters on which holders of Common Stock shall have the right to vote. Each
holder of Series A Preferred Stock shall have the right to cast one-half (0.5)
vote for each share of Series A Preferred Stock held by such holder.
-5-
<PAGE>
5. Conversion Rights.
5.1. Conversion of Series A Preferred Stock. The Series A Preferred
Stock shall convert into fully paid and non-assessable shares of Common Stock at
the Conversion Rate as follows:
5.1.1. The Series A Preferred Stock shall convert into Common
Stock on the earlier of the following:
(a) June 30, 1998;
(b) Termination of the License Agreement (unless termination of the
License Agreement is as a result of the liquidation of the Corporation, the
appointment of a receiver or trustee for substantially all of the property or
assets of the Corporation, or the Corporation makes an assignment for the
benefit of creditors, in each case, in accordance with the License Agreement);
or
(c) At such time as the Current Market Price per share of Common Stock
is equal to or greater than $20.00, subject to adjustment pursuant to Section
5.2.
5.1.2. Upon conversion, the Corporation shall send written notice to
the holders of Series A Preferred Stock. Any notice of conversion shall contain
the Conversion Date, the Conversion Rate and the number of shares into which the
holder's Series A Preferred Stock is converted. Upon conversion of Series A
Preferred Stock, the shares of Series A Preferred Stock so converted shall have
the status of authorized and unissued Series A Preferred Stock, and the number
of shares of Series A Preferred Stock which the Corporation shall have authority
to issue shall include the number of shares of Series A Preferred Stock so
converted. Upon such conversion, certificates representing the Series A
Preferred Stock shall thereafter be deemed to represent the appropriate number
of shares of Common Stock into which the Series A Preferred Stock is converted.
Upon conversion pursuant to Section 5.1.1(a) or (c), the holders of Series A
Preferred Stock shall receive accumulated dividends paid in cash or, at the
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election of the Corporation, in Common Stock at the Current Market Price used to
determine the Conversion Rate upon conversion. In the event of a conversion
pursuant to Section 5.1.2(b), no accumulated dividends shall be paid to the
holders of Series A Preferred Stock. After conversion the holder of any shares
of Series A Preferred Stock shall deliver to the Corporation during regular
business hours, at such place as may be designated by the Corporation, the
certificate or certificates for the shares to be converted, duly endorsed or
assigned in blank, or to the Corporation (if required by it), accompanied by
written notice stating the name or names (with address) in which the certificate
or certificates for the shares of Common Stock are to be issued. Conversion
shall be deemed to have been effected on the Conversion Date.
5.1.3. No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. If more than one share
of Series A Preferred Stock shall be surrendered for conversion at any one time
by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series A Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment
in respect of such fractional interest in an amount determined on the basis of
the then current fair market value of a share of Common Stock as determined by
the Board of Directors of the Corporation, in good faith. Fractional interests
shall not be entitled to dividends, and the holders thereof shall not be
entitled to any rights as stockholders of the Corporation in respect of such
fractional interests.
5.2. Adjustments for Subdivisions, Stock Dividends, Combinations, or
Consolidation of Common Stock. In the event the outstanding shares of Common
Stock shall be increased by way of stock issued as a dividend for no
consideration or subdivided (by stock split, or otherwise) into a greater number
of shares of Common Stock, the Division Amounts then in effect shall,
concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Division Amounts then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
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<PAGE>
5.3. Other Distributions. In the event the Corporation shall declare
a distribution payable in securities of the Corporation other than shares of
Common Stock, securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, or assets (excluding cash dividends) then, in
each such case for the purpose of this Section 5.3, the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of such distribution
as though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Series A Preferred Stock would be
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
5.4. Reorganizations and Recapitalizations. If at any time or from
time to time there shall be a reorganization or recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
transaction provided for in Section 5.2 or Section 5.3 of this Certificate of
Designation), then, as a condition of such reorganization or recapitalization,
provision shall be made so that the holders of the Series A Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock the number of shares of stock or other securities or property of
the Corporation or otherwise to which a holder of Common Stock deliverable upon
conversion would have been entitled on such reorganization or recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of the
Series A Preferred Stock after the reorganization or recapitalization to the end
that the provisions of this Section 5 (including adjustment of the Conversion
Rate and the Division Amounts then in effect and the number of shares receivable
upon conversion of the Series A Preferred Stock) shall be applicable after that
event in as nearly an equivalent manner as may be practicable.
5.5. Reservation of Shares. The Corporation agrees that, so long as
any share of Series A Preferred Stock shall remain outstanding, the Corporation
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized capital stock, for the purpose of issue upon conversion of the
Series A Preferred Stock, the full number of shares of Common Stock then
issuable upon conversion of all outstanding shares of Series A Preferred Stock.
If the Common Stock shall be listed on any national securities exchange, the
Corporation at its expense shall include in a listing application all of the
shares of Common Stock reserved for issuance upon conversion of the Series A
Preferred Stock (subject to issuance or notice of issuance to the exchange)
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<PAGE>
and will similarly apply for and use its best efforts to procure the listing of
any further Common Stock reserved for issuance upon conversion of the Series A
Preferred Stock at any subsequent time as a result of adjustments in the
Conversion Rate or otherwise.
5.6. Validity of Shares. The Corporation agrees that it will from
time to time take all such actions as may be requisite to assure that all shares
of Common Stock which may be issued upon conversion of any share of the Series A
Preferred Stock will, upon issuance, be legally and validly issued, fully paid
and non-assessable and free from all taxes, liens and charges with respect to
the issue thereof.
5.7. Taxes. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery
(but not transfer) of shares of Common Stock upon conversion of the Series A
Preferred Stock.
5.8. Abandonment of Action. If the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution requiring an adjustment pursuant to Section 5 and
shall, thereafter and before the distribution to stockholders thereof, legally
abandon its plan to pay or deliver such dividend or distribution, then
thereafter no adjustment to the holders of Series A Preferred Stock shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
5.9. Notice Provisions.
5.9.1. Whenever the Conversion Rate shall be adjusted pursuant to
Section 5 hereof, the Corporation shall forthwith deliver to the holders of
Series A Preferred Stock a certificate signed by an officer of the Corporation,
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the Conversion
Rate and the Division Amounts.
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<PAGE>
5.9.2. In case the Corporation shall propose (a) to pay any
dividend payable in stock of any class to the holders of its capital stock or to
make any other distribution to the holders of its Common Stock, (b) to offer to
the holders of its Common Stock rights to subscribe for or to purchase any
Convertible Securities, Common Stock or shares of stock of any class or any
other securities, rights or options, (c) to effect any reclassification of its
Common Stock (other than a reclassification involving only the subdivision or
combination of outstanding shares of Common Stock), (d) to effect any capital
reorganization, (e) to effect any consolidation, merger or sale, transfer or
other distribution of all or substantially all its property, assets or business,
or (f) to effect the liquidation, dissolution or winding-up of the Corporation,
then, in each such case, the Corporation shall give to each holder of Series A
Preferred Stock a notice of such proposed action, which shall specify the date
on which a record is to be taken for the purposes of such stock dividend,
distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution or winding-up is to take place and the date of participation therein
by the holders of Common Stock, if any such date is to be fixed, and shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Common Stock and the Conversion Rate
and the Division Amounts after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be so given in the case
of any action covered by (a) or (b) above at least ten (10) days prior to the
record date for determining holders of the Common Stock for purposes of such
action and, in the case of any other such action, at least ten (10) days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the earlier.
6. No Pre-emptive Rights. No holder of Series A Preferred Stock shall
have any pre-emptive or preferential right of subscription to any shares of
stock of the Corporation, or to options, warrants or other interests therein or
therefor, or to any obligations convertible into stock of the Corporation,
issued or sold, or any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, from time to time may
determine and at such price or prices as the Board of Directors from time to
time may fix pursuant to the authority conferred by the Corporation's
Certificate of Incorporation.
7. Covenants. In addition to any other rights provided by law, so long
as any shares of Series A Preferred Stock are outstanding, this Corporation
shall not, without first obtaining
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<PAGE>
the affirmative vote or written consent of the holders of not less than sixty-
six and two-thirds percent (66-2/3%) of the Series A Preferred Stock:
(a) Amend or repeal any provisions of the Corporation's Certificate of
Incorporation which action would adversely affect the rights, preferences, or
privileges of the Series A Preferred Stock;
(b) Alter or change the designations, powers, rights, preferences or
privileges, or the qualification, limitations or restrictions of the Series A
Preferred Stock; or
(c) Increase the authorized number of shares of Series A Preferred Stock or
other preferred stock of the Corporation; or
(d) Authorize, create, or issue any new class or series of stock or any
other securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to dividends, redemptions or upon liquidation or dissolution of the
Corporation; or
(e) Reclassify the shares of Common Stock or any other Junior Stock into
shares of any class or series of capital stock (i) ranking either as to payment
of dividends, distribution of assets or redemptions, prior to or on parity with
the Series A Preferred Stock, or (ii) which in any manner adversely affects the
holders of Series A Preferred Stock.
5. The manner in which the foregoing amendment of the Certificate of
Incorporation was authorized is as follows: The Board of Directors of the
Corporation adopted the amendment at a meeting held on August 30, 1994 and the
holders of a majority of the outstanding voting securities of the Corporation
entitled to vote adopted the amendment at the annual meeting of shareholders
held on November 14, 1994.
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<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite each of our names below and do hereby affirm, under the penalties of
perjury, that the statements contained therein have been examined by us and are
true and correct.
Date: November 22, 1994
/s/ Duane J. Roth
--------------------------------------
Name: Duane J. Roth
Title: President
/s/ Theodore D. Roth
---------------------------------------
Name: Theodore D. Roth
Title: Secretary
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EXHIBIT 5
(212) 806-5400
March 14, 1995
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, California 92121
Gentlemen:
We have acted as counsel to Alliance Pharmaceutical Corp., a New York
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-3
(the "Registration Statement") relating to the proposed public offering (the
"Offering") by the Company of 2,500,000 shares of its common stock, par value
$.01 per share (the "Common Stock").
As such counsel, we have examined copies of the Amended and Restated Certificate
of Incorporation and By-Laws of the Company, each as
<PAGE>
Alliance Pharmaceutical Corp.
March 14, 1994
amended to the date hereof, the Registration Statement, the Prospectus which
forms a part of the Registration Statement and originals or copies of such
corporate minutes, records, agreements and other instruments of the Company,
certificates of public officials and other documents, and have made such
examinations of law, as we have deemed necessary to form the basis for the
opinion hereinafter expressed. In our examination of such materials, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
copies submitted to us. As to various questions of fact material to such
opinion, we have relied, to the extent we deemed appropriate, upon
representations and statements of officers and representatives of the Company
and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to be experts on, or to
express any opinion herein concerning, any law other than the laws of the State
of New York and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that the Common
Stock to be offered by the Company, when and if issued under the circumstances
contemplated in the Registration Statement, will be legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is
<PAGE>
Alliance Pharmaceutical Corp.
March 14, 1994
required under Section 7 of the Act or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
/s/ STROOCK & STROOCK & LAVAN
STROOCK & STROOCK & LAVAN
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Alliance
Pharmaceutical Corp.) and to the use and incorporation by reference therein of
our report dated August 16, 1994, with respect to the consolidated financial
statements of Alliance Pharmaceutical Corp. included in its Annual Report (Form
10-K) for the year ended June 30, 1994, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
San Diego, California
March 13, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE, INDEPENDENT AUDITORS
We consent to the use and incorporation by reference in this Registration
Statement of Alliance Pharmaceutical Corp. on Form S-3 of our report dated July
27, 1993, appearing in the Prospectus, which is part of this Registration
Statement, and appearing in the Annual Report on Form 10-K of Alliance
Pharmaceutical Corp. for the year ended June 30, 1994, and to the reference to
us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
New York, NY
March 13, 1995
<PAGE>
EXHIBIT 23.4
March 7, 1995
Alliance Pharmaceutical Corp.
3040 Science Park Road
San Diego, California 92121
Re: Alliance Pharmaceutical Corp. (the "Company")
Registration Statement on Form S-3
Gentlemen:
We hereby consent to the reference to our firm under the caption "Legal Matters"
in the prospectus forming a part of the above-referenced Registration Statement.
Very truly yours,
KNOBBE, MARTENS, OLSON & BEAR
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Duane J. Roth and Theodore D. Roth, 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 a registration statement on Form S-3 or such
other form as counsel to Alliance Pharmaceutical Corp. (the "Corporation") may
recommend in connection with the registration of common stock of the
Corporation, as approved by a special committee of the Board of Directors of the
Corporation appointed as of February 27, 1995, and any and all 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 agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact, agent, or their substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have each caused this power of attorney
to be executed as of the date set forth beside their name.
/s/ Carroll O. Johnson Director March 14, 1995
- ----------------------------
Carroll O. Johnson
/s/ Stephen M. McGrath Director March 14, 1995
- ----------------------------
Stephen M. McGrath
/s/ Helen M. Ramsey Director March 14, 1995
- ----------------------------
Helen M. Ramsey
/s/ Donald E. O'Neill Director March 14, 1995
- ----------------------------
Donald E. O'Neill
/s/ Jean Riess Director March 14, 1995
- ----------------------------
Jean Riess, Ph.D.
/s/ Thomas F. Zuck Director March 14, 1995
- ----------------------------
Thomas F. Zuck, Ph.D.
