<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1997
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CYTRX CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 58-1642740
(State or Other Jurisdiction (I.R.S. Employer Identification
of Incorporation or Organization) Number)
154 TECHNOLOGY PARKWAY
TECHNOLOGY PARK/ATLANTA
NORCROSS, GEORGIA 30092
(770) 368-9500
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
JACK J. LUCHESE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CYTRX CORPORATION
TECHNOLOGY PARK/ATLANTA
NORCROSS, GEORGIA 30092
(770) 368-9500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
GEORGE M. MAXWELL, JR. MARK W. REYNOLDS
ALSTON & BIRD LLP CHIEF FINANCIAL OFFICER
ONE ATLANTIC CENTER CYTRX CORPORATION
1201 WEST PEACHTREE STREET TECHNOLOGY PARK/ATLANTA
ATLANTA, GEORGIA 30309-3424 NORCROSS, GEORGIA 30092
(404) 881-7000 (770) 368-9500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] ______
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ] ______
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ] ______
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================
Title of Shares to be Amount Proposed Maximum Proposed Maximum Amount of
Registered to be Registered Offering Price Per Aggregate Offering Registration
Share(1) Price(1) Fee(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value per share 603,000 shares $3.813 $2,299,239.00 $696.65
=================================================================================================================
</TABLE>
(1) Pursuant to Rule 457(c), the proposed maximum offering price per share and
registration fee are based upon the average of the high and low prices of the
Registrant's Common Stock on October 30, 1997 as reported on the Nasdaq National
Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1997
603,000 SHARES
CYTRX CORPORATION
COMMON STOCK
This prospectus relates to the offering for resale of 603,000 shares
(the "Shares") of common stock, $.001 par value per share (the "Common Stock")
of CytRx Corporation, a Delaware corporation ("CytRx" or the "Company") for the
account of the Selling Stockholders identified herein. See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the
symbol "CYTR." On November 4, 1997, the last reported sale price on the Nasdaq
National Market was $4.4375 per share."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
All or a portion of the Shares may be offered by the Selling
Stockholders from time to time in transactions (which may include block
transactions) on the Nasdaq National Market or such other national securities
exchange or automated interdealer quotation system on which shares of the
Company's Common Stock are then traded, in negotiated transactions, or by a
combination of such methods of sale, at fixed prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. The Selling Stockholders may
effect such transactions by selling the Shares directly to purchasers or through
underwriters, agents or broker-dealers, and any such underwriters, agents or
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom such underwriters, agents or broker-dealers may act as agents or to
whom they may sell as principals, or both (which compensation as to a particular
underwriter, agent or broker-dealer might be in excess of customary
compensation). See "Selling Stockholders" and "Plan of Distribution" The
Company will bear all expenses in connection with the registration and sale of
the Shares being offered by the Selling Stockholders, other than discounts,
concessions or commissions to underwriters, agents or broker-dealers and fees
and expenses of counsel and other advisors to the Selling Stockholders. The
Company has agreed to indemnify the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). See "Plan of Distribution."
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are hereby incorporated by reference in
this Prospectus and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (including those portions of the Company's definitive proxy
statement for the Annual Meeting of Stockholders held on June 26, 1997
incorporated by reference therein), as amended by the Company's Amendment No. 1
to Annual Report on Form 10-K/A dated April 30, 1997;
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997 and June 30, 1997;
(c) the Company's Current Report on Form 8-K dated April 17, 1997;
(d) the Company's Current Report on Form 8-K dated June 3, 1997 as
amended by the Company's Current Report on Form 8-K/A filed with the Commission
on July 21, 1997;
(e) the Company's Amended Registration Statement on Form 8-A filed with
the Commission on April 17, 1997, as amended by the Company's Amended
Registration Statement on Form 8-A/A filed with the Commission on April 24,
1997;
(f) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, declared effective on March 1,
1996.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") subsequent to the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such reports
and documents. Any statement incorporated or deemed to be incorporated herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus. Neither the Company nor the Initial Purchasers will update
this Prospectus for events occurring subsequent to the date of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
written or oral request of such person, a copy of any or all of the foregoing
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such documents should be made in writing to the
attention of Corporate Secretary, CytRx Corporation, 154 Technology Parkway,
Technology Park/Atlanta, Norcross, Georgia 30092, Telephone: (770) 368-9500.
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<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports, proxy and information
statements and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; and at the Commission's Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants such as the Company that file electronically with the Commission.
The address of such site is http://www.sec.gov. In addition, such reports, proxy
and information statements and other information concerning the Company may be
inspected at the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed a Registration Statement on Form S-3 (together
with all amendments and exhibits filed or to be filed in connection therewith,
the "Registration Statement") with the Commission pursuant to the Securities
Act, of which this Prospectus forms a part. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained or incorporated by reference herein
concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the Commission.
FORWARD-LOOKING STATEMENTS
When used in this Prospectus and elsewhere by management or the Company
from time to time, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the Company's business strategy and means to implement the strategy,
goals, amount of capital expenditures, and likelihood of the Company's success
in developing and expanding its business. These statements are based on a number
of assumptions and estimates which are inherently subject to significant risks
and uncertainties, many of which are beyond the control of the Company, and
reflect future business decisions which are subject to change. A variety of
factors could cause actual results to differ materially from those anticipated
in the Company's forward-looking statements, some of which are set forth under
"Risk Factors" in this Prospectus and include the Company's ability to manage
growth, rapid technological change and risk of obsolescence of the Company's
products, services and technology. The Company cautions that such factors are
not exclusive. Consequently, all of the forward-looking statements made in this
Prospectus are qualified by these cautionary statements and readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions to such forward-looking statements
that may be made to reflect events or circumstances after the date hereof, or
thereof, as the case may be, or to reflect the occurrence of unanticipated
events.
THIS PROSPECTUS INCLUDES PRODUCT NAMES, TRADE NAMES, SERVICE MARKS AND
TRADEMARKS OF CYTRX, ITS SUBSIDIARIES AND OTHER COMPANIES INCLUDING, WITHOUT
LIMITATION, VAXCEL(TM), VETLIFE(TM), FLOCOR(TM), THERMAX(TM), V*NET(TM),
BENCHMARK(TM), CYTRX(R), RHEOTHRX(R), OPTIVAX(R), AND TITERMAX(R).
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<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors", "Business" and financial statements and
notes thereto, appearing elsewhere or incorporated by reference in this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
THE COMPANY
CytRx Corporation was founded in 1985 and is engaged in the development
and commercialization of pharmaceutical-related products and services including
human therapeutics focused on high-value critical-care therapies.
In addition to its development work in human therapeutics, CytRx has
created several operating subsidiaries to broaden the development of its
technologies without losing focus on its core critical-care strategy. Vaxcel,
Inc. ("Vaxcel") is developing its Optivax delivery system to enhance the
effectiveness of vaccines. Zynaxis, Inc. ("Zynaxis"), a newly acquired
wholly-owned subsidiary of Vaxcel, is developing technologies for the oral and
mucosal delivery of vaccines. Vetlife, Inc. ("Vetlife") is engaged in developing
food animal products and marketing and distributing technologies to enhance
North American beef cattle productivity. Proceutics, Inc. ("Proceutics")
provides preclinical development services to the pharmaceutical industry.
NEW BUSINESS DEVELOPMENTS
Effective May 21, 1997, Vaxcel Merger Subsidiary, Inc., a Georgia
corporation and wholly owned subsidiary of Vaxcel formed for the purpose of the
transaction ("Vaxcel Merger Sub") merged with and into Zynaxis, a Pennsylvania
corporation and publicly held biotechnology company engaged in the development
of certain vaccine technologies (the "Merger").
As part of the Merger (i) shares of common stock of Vaxcel were issued
to the existing shareholders of Zynaxis in exchange for all of the outstanding
shares of capital stock of Zynaxis and (ii) Vaxcel issued to CytRx shares of
common stock of Vaxcel and a warrant to purchase shares of common stock of
Vaxcel in exchange for CytRx's contribution to Vaxcel of $4,000,000, less the
outstanding principal and interest under a secured loan extended to Zynaxis by
CytRx.
As a result of the Merger, CytRx owns approximately 87.5% of the
outstanding common shares of Vaxcel, with the remaining 12.5% held by the former
shareholders of Zynaxis, and Zynaxis became a wholly-owned subsidiary of Vaxcel.
The Merger was treated as a purchase by Vaxcel and constituted a tax-free
reorganization for the former Zynaxis shareholders. Also in connection with the
Merger (i) warrants to purchase Zynaxis common stock were converted into
warrants for the purchase of Vaxcel common stock, and (ii) convertible notes
issued by Zynaxis were converted into the right to receive shares of Vaxcel
common stock.
As a result of the Merger, Vaxcel acquired the PLG microencapsolation
and mucoadhesive vaccine technologies of Zynaxis which have been designed for
oral and mucosal delivery. The Company believes that these Zynaxis technologies
will be complementary to Vaxcel's vaccine technologies.
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<PAGE> 6
On October 22, 1997 CytRx privately placed (the "Note Sale") with
certain investors (the "Investors"), $2,000,000 of its convertible notes (the
"Debentures"). The Debentures may be converted into Common Stock on and after
December 21, 1997 at a price of the lesser of 85% of the average closing bid
price for a share of Common Stock for the 10 days preceding the conversion, or
$5.68 per share (the "Conversion Price"). The Debentures were sold at par and
bear interest at a rate of 6% per annum. Also in connection with the Note Sale,
the Investors were issued two year warrants (the "Warrants") to purchase 40,000
shares of Common Stock at an exercise price of $5.68. The terms of the
Debentures grant CytRx the right to redeem the Debentures at 110% of par if the
Conversion Price falls below $4.00.
In addition, CytRx has the option, subject to certain conditions, to
sell to the Investors an additional $2,000,000 in value of the Debentures. Also
in connection with the Note Sale, CytRx agreed to file a registration statement
relating to the shares of Common Stock into which the Debentures are
convertible and the Warrants are exercisable, and to keep such registration
statement effective until October 22, 1999 (or such earlier date when the
holders of the Securities are able to sell all such securities immediately
without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or otherwise).
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<PAGE> 7
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should
carefully consider the risk factors set forth below, as well as the other
information contained in this Prospectus, in evaluating an investment in the
Common Stock. This Prospectus and the documents incorporated herein contain
certain forward-looking statements which are inherently uncertain. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth below and elsewhere in this Prospectus.
HISTORY OF OPERATING LOSSES; UNCERTAIN PROFITABILITY
The Company, its wholly-owned operating subsidiaries Vetlife and
Proceutics, and its majority-owned subsidiary, Vaxcel, cumulatively incurred net
losses for each of the fiscal years ended December 31, 1994, 1995 and 1996 and
for the nine months ended September 30, 1997. Reference herein to "the Company"
includes CytRx, Vetlife, Proceutics and Vaxcel. For the month ended September
30, 1997, the Company had consolidated net operating losses of approximately
$4,234,663. In view of the prior operating history of the Company, there can be
no assurance that the Company will be able to achieve profitability on a
quarterly or annual basis or that it will be able to sustain or increase its
revenue growth in future periods.
The Company will incur substantial additional losses until such time,
if any, that its primary products, including, but not limited to Flocor(TM) and
Optivax(R), have achieved significant sustained commercial sales, which will be
dependent upon a number of factors including, but not limited to, receipt of
regulatory approval for the sale of such products. Such approval is not likely
to occur for a number of years. There can be no assurance that such products of
the Company under development will be approved for sale by regulatory
authorities, that Flocor, Optivax or any other product of the Company under
development can be successfully commercialized or that the Company will achieve
significant revenues from sales of Flocor, Optivax or any other product. In
addition, there can be no assurance that the Company will achieve or sustain
profitability in the future. Failure to achieve significant revenues or
profitability would have a material adverse effect on the Company's business,
financial condition and results of operations.
VOLATILITY OF STOCK PRICE
The Common Stock is quoted on the Nasdaq National Market. The market
prices for securities of pharmaceutical and biotechnology companies (including
CytRx) have historically been highly volatile, and the market has from time to
time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. Factors such as fluctuations
in the Company's operating results, announcements of technological innovations
or new therapeutic products, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by the Company or other biotechnology and pharmaceutical companies, and general
market conditions may have a significant effect on the market price of the
Common Stock.
BUSINESS ACQUISITION
Effective May 21, 1997, Zynaxis, a publicly-held biotechnology company
engaged in the development of certain vaccine technologies, merged with Vaxcel
Merger Sub, a wholly-owned subsidiary of Vaxcel formed for the purpose of the
transaction. As a result of the Merger, Zynaxis became a wholly-owned subsidiary
of Vaxcel.
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<PAGE> 8
In connection with the Merger, all of the outstanding shares of Zynaxis
were converted into shares of Vaxcel based upon certain exchange ratios. Also in
connection with the Merger, CytRx contributed $4,000,000, less the amount
outstanding under Zynaxis' secured note payable to CytRx, and in exchange
therefor CytRx received shares of Vaxcel common stock and a warrant to purchase
shares of Vaxcel common stock. As a result of the Merger, CytRx owns
approximately 87.5% of the capital stock of Vaxcel and the former shareholders
of Zynaxis own approximately 12.5% thereof. The Merger was treated as a purchase
by Vaxcel and constituted a tax-free reorganization for the former Zynaxis
stockholders.
Also as a result of the Merger, Vaxcel acquired from Zynaxis the PLG
microencapsulation and mucoadhesive vaccine technologies. The Company deems such
Zynaxis technologies to be complementary to Vaxcel's technologies, including
Optivax. There can be no assurance that the Company can successfully market,
sell or distribute the Zynaxis technologies, or that the Zynaxis technologies
will function in accordance with the Company's expectations. Failure to market,
sell or distribute the Zynaxis technologies, or the failure of the Zynaxis
technologies to meet the expectations of the Company may have a material adverse
effect on the Company's business, financial condition and results of operations.
COMPETITION
Many companies, including large pharmaceutical, chemical and
biotechnology firms with financial resources, research and development staffs,
and facilities that are substantially greater than those of the Company, are
engaged in the research and development of pharmaceutical products that could
compete with the products under development by the Company. Furthermore, many of
the Company's existing or potential competitors have extensive experience in
research, preclinical testing, human clinical trials, obtaining Food and Drug
Administration ("FDA") and other regulatory approvals, and manufacturing and
marketing their products, or are allied with major pharmaceutical companies that
can afford them these advantages. The industry is characterized by rapid
technological advances and competitors may develop their products more rapidly
and/or such products may be more effective than those under development by the
Company or its licensees and corporate partners.
In general, competition in the pharmaceutical, chemical and
biotechnology field is based on such factors as product performance and safety,
product acceptance by physicians, patent protection, manner of delivery, ease of
use, price, distribution and marketing. The Company's products and potential
products are in various stages of development, and no assurance can be given
that any of these products or potential products will sufficiently enhance the
use of existing pharmaceutical products to generate meaningful commercial
demand.
Any product developed by the Company that gains regulatory approval
will have to compete for market acceptance and market share. An important factor
in such competition may be the timing of market introduction of competitive
products. Accordingly, the relative speed with which the Company can develop
products, complete clinical testing and the regulatory approval process, gain
reimbursement acceptance and supply commercial quantities of the product for
distribution to the market are expected to be important competitive factors.
The failure of the Company's product to generate meaningful commercial
demand, or the failure of the Company's product to gain substantial market
acceptance and market share would have a material adverse effect on the
Company's business, financial condition or results of operations.
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<PAGE> 9
COMMERCIALIZATION; LACK OF MARKETING EXPERIENCE; STRATEGIC ALLIANCES
It is anticipated that the Company will market and sell a significant
portion of its products directly. The Company has limited experience in sales,
marketing or distribution of pharmaceutical products and its success in
marketing its products will be based on a number of factors including market
size and concentration in the Company's designated markets, the size and
expertise of the Company's sales force in such designated markets and the
Company's overall strategic objectives. There can be no assurance that the
factors necessary to successfully market the Company's products will be
favorable, or that the Company will be able to obtain the expertise necessary to
successfully market its products.
A principal element of the Company's strategy is the creation and
maintenance of strategic relationships that will enable the Company to offer its
services to a larger customer base than the Company could otherwise reach
through its direct marketing efforts. Vaxcel's business strategy is to license
its products to pharmaceutical and biotechnology companies engaged in vaccine
research and development. Vaxcel has entered into option agreements for the
development of Optivax with Medeva PLC and Connaught Laboratories, Inc., and a
license agreement with Corixa Corporation. Likewise, ALK A/S, a Danish company,
executed a development and licensing agreement with Zynaxis (acquired by Vaxcel
in May 1997) which granted ALK exclusive, worldwide rights to evaluate and
develop the Zynaxis technologies for oral delivery of bioactive substances for
the treatment of allergies. In addition, VetLife's strategy is to enter into
worldwide manufacturing, marketing, and distribution alliances. Vetlife has
entered into such agreements with Ivy Laboratories, Inc. ("Ivy") and Elanco
Animal Health, a division of Eli Lilly and Company ("Elanco"). Although the
Company intends to continue to expand its direct marketing channels, the Company
believes that strategic partner relationships may offer a potentially more
effective and efficient marketing channel. Consequently, the Company's success
depends in part on the ultimate success of these relationships with these
strategic partners. A termination of one or more of the Company's relationships
with a strategic partner could have a material adverse effect on the Company's
overall performance, and with respect to the products of Vaxcel and Zynaxis,
would cause the Company to establish marketing and distribution channels for its
products.
Although the Company views its strategic relationships as a key factor
in its overall business strategy and in the development and commercialization of
its products, there can be no assurance that its strategic partners view their
relationships with the Company as significant for their own businesses or that
they will not reassess their commitment to the Company in the future. The
Company's arrangements with its strategic partners do not always establish
minimum performance requirements for the Company's strategic partners, but
instead rely on the voluntary efforts of these partners in pursuing joint goals.
In addition, even when the Company is without contractual restriction, it may be
restrained by business considerations from pursuing alternative arrangements, or
the reassessment of the strategic partners' business goals which do not
correlate with the business goals of the Company. The Company's inability to
comply with the terms of its strategic partner arrangements could result in its
strategic partners seeking alternative arrangements with other pharmaceutical or
biotechnology companies, which could have a material adverse impact on the
Company.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its ongoing
research and development activities, including preclinical studies and clinical
trials, are subject to extensive regulation by numerous federal, state and local
governmental authorities in the United States and by similar regulatory agencies
in other countries where the Company tests and markets, or intends to test and
market, its current or future products. There can be no assurance that the
Company will obtain further regulatory approvals to conduct clinical trials or
to market its current products or that the Company will obtain on a timely
basis, or at all, regulatory approvals to conduct clinical trials or to market
products that may be developed in the
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<PAGE> 10
future. Prior to marketing any product developed by the Company, or marketed
under license, the Company must undergo an extensive regulatory approval process
by the FDA and comparable regulatory authorities in foreign countries. The
regulatory process can take many years and require the expenditure of
substantial resources.
The Company must demonstrate through preclinical studies and clinical
trials that its products are safe and efficacious for use in each proposed
indication. The results from preclinical animal studies and early clinical
trials may not be predictive of results that will be obtained in large-scale
testing, and there can be no assurance that the clinical trials will demonstrate
the safety and efficacy of any products or will result in marketable products. A
number of companies in the therapeutics industry have suffered significant
setbacks in advanced clinical trials, even after experiencing promising results
in early animal and human testing. In addition, the rate of completion of the
Company's clinical trials is dependent upon, among other factors, the rate of
patient enrollment. Patient enrollment is a function of many factors, including
the size of the patient population, the nature of the protocol, the ability of
the Company to manage the clinical trial, the proximity of patients to clinical
sites and the eligibility criteria for the study. Several factors, such as
delays in planned patient enrollment, may result in increased costs and delays
or termination of clinical trials prior to completion, which could have a
material adverse effect on the Company. Preclinical studies must also be
conducted in conformity with the FDA's good laboratory practice regulations.
Clinical trials generally must meet requirements for institutional review board
oversight and informed consent, as well as regulatory agency prior review,
oversight and good clinical practice requirements.
Data obtained from preclinical and clinical activities are susceptible
to varying interpretations which could delay, limit or prevent regulatory
approval. In addition, delays or rejections may be encountered based upon
changes in the policies of regulatory authorities for new product approval
during the period of product development and regulatory review of each submitted
pre-market approval application, new drug application or other required approval
application. There can be no assurance that, even after such time and
expenditures, regulatory approvals will be obtained for any products developed
by the Company. Moreover, if FDA approval of a product is granted, such approval
will entail limitations on the indicated uses for which it may be marketed and
may impose labeling requirements which may adversely affect the Company's
ability to market its products.
The products of the Company may be regulated in other countries by
foreign agencies comparable in authority to the FDA. The process of obtaining
regulatory approval in other countries is often as costly, time-consuming and
uncertain as it is in the United States. In addition, foreign agencies may apply
different or more stringent standards than the FDA and require additional or
different clinical studies. Foreign agencies also may fail to approve the
products even if the FDA has done so.
Failure to comply with applicable regulatory requirements can result
in, among other things, fines, suspension of regulatory approvals, product
recalls, seizure of products, imposition of operating restrictions or civil
penalties, FDA refusal to approve marketing applications, and criminal
prosecutions. Further, FDA policy or similar policies of regulatory agencies in
other countries may change and additional government regulations may be
established that could prevent or delay regulatory approval of the Company's
products in such countries. The failure of the Company to obtain the necessary
regulatory approval would have a material adverse effect on the Company's
business, financial condition and results of operations.
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DEPENDENCE ON PATENT PROTECTION
The Company's success will depend, in part, upon its ability to develop
patentable products and technologies and to obtain patent protection for its
products and technologies both in the United States and in other countries. The
Company's products are covered by a number of issued United States and foreign
patents, including a patent in the name of the Company for RheothRx, the
non-purified form of Flocor. The Company has filed a number of United States and
counterpart patent applications in other countries. The Company owns some of
these patents and is the exclusive licensee of others. The Company believes that
its patents are critical to its prospects for success. There can be no assurance
that the Company's United States and foreign issued or pending applications will
offer any protection or that they will not be challenged, invalidated or
circumvented. In addition, there can be no assurance that competitors will not
obtain patents that will prevent, limit or interfere with the Company's ability
to make, use or sell its products either in the United States or in
international markets.
The Company's patent estate is subject to numerous potential threats.
Critical patent applications may not issue or may issue with limitations which
materially reduce their coverage; competitors may challenge the validity of the
Company's patents through challenges within the United States Patent and
Trademark Office and its foreign equivalents or through lawsuits in the courts;
or competitors may claim that the Company's products infringe competitors'
patents. Patent applications in the United States are maintained in secrecy
until patents issue, and patent applications in foreign countries are maintained
in secrecy for a period after filing. Accordingly, there can be no assurance
that current and potential competitors or other third parties have not filed or
will not file applications for, or have not received or will not receive,
patents and will not obtain additional proprietary rights relating to materials
or processes used or proposed to be used by the Company.
Governmental patent agencies have considerable discretion over their
internal processes, and their decisions are given great weight by the courts.
There can be no assurance that the Company's pending applications will issue, or
issue with satisfactory coverage, or that the Company's issued patents will not
be successfully challenged by a competitor.
It is possible that the Company's products or processes will infringe,
or will be found to infringe, patents not owned or controlled by the Company. If
any relevant claims of third-party patents are upheld as valid and enforceable,
the Company could be prevented from practicing the subject matter claimed in
such patents, or would be required to obtain licenses or to redesign its
products or processes to avoid infringement. There can be no assurance that such
licenses would be available at all or on terms acceptable to the Company or that
the Company could redesign its products or processes to avoid infringement.
Litigation may be necessary to defend against claims of infringement, to enforce
patents issued to the Company or to protect trade secrets and could result in a
substantial cost to and diversion of efforts by the Company or any of its
subsidiaries.
The Company also relies on trade secrets, proprietary know-how and
continuing technological innovation which it seeks to protect with
confidentiality agreements with collaborators, employees and consultants. There
can be no assurance that these agreements will not be breached, that the Company
will have adequate remedies for any breach or that the Company's trade secrets
and proprietary know-how will not otherwise become known to or be independently
discovered by competitors.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND RELATED MATTERS
The future revenues and profitability of and availability of capital
for biotechnology and pharmaceutical companies may be affected by the continuing
efforts of governmental and third-party payors to contain or reduce the costs of
health care through various means. For example, in certain foreign
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markets, pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control. While the Company cannot predict
whether any such legislative or regulatory proposals will be adopted, the
announcement or adoption of such proposals could have a material adverse effect
on the Company's business, financial condition and results of operations.
DEPENDENCE ON KEY MANAGEMENT
The Company's success will continue to depend to a significant extent
on the members of its management and scientific staff, particularly its Chief
Executive Officer, Jack J. Luchese. The Company has an employment contract with
Mr. Luchese which expires at the end of 1998. In addition, the success of Vaxcel
will depend, in large part, on Paul W. Wilson, its President and Chief Executive
Officer. Also, Vetlife's future success is significantly dependent upon its
President and Chief Executive Officer, Richard O. Shuler. As the Company
continues to grow, it will continue to hire, appoint or otherwise change senior
management and members of its scientific staff. There can be no assurance that
the Company will be able to retain its executive officers and key personnel or
attract additional qualified members to management in the future. The loss of
services of Messrs. Luchese, Wilson, Shuler, or of any other key employee could
have a material adverse effect upon the Company's business.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development activities involve the
controlled use of hazardous materials. The Company is subject to federal, state
and local laws and regulations governing the use, manufacture, storage, handling
and disposal of such materials and certain waste products. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company. The Company may be required to incur significant costs to comply
with environmental laws and regulations in the future. The Company's operations,
business, financial condition and results of operations may be materially
adversely affected by current or future environmental laws or regulations.
POTENTIAL PRODUCT LIABILITY EXPOSURE AND LACK OF INSURANCE
The Company could be exposed to possible claims for personal injury
resulting from allegedly defective products. Even if a product is approved for
commercial use by an appropriate governmental agency, there can be no assurance
that users will not claim that effects other than those intended may result from
such products. While to date no material adverse claim for personal injury
resulting from allegedly defective products has been successfully maintained
against the Company, a substantial claim, if successful, could have a material
adverse effect on the Company.
ANTI-TAKEOVER PROTECTIONS
In its 1997 annual meeting, the stockholders of the Company voted to
classify its board of directors. As a result of the classification of the board
of directors, at least two stockholder meetings, instead of one, will be
required to effect a change in the majority control of the Company board, except
in the event of vacancies resulting from removal for cause (in which case the
remaining directors would fill the vacancies so created). It should also be
noted that the classification provision will apply to every election of
directors, rather than only an election occurring after a change in control. The
classification of directors has the effect of making it more time-consuming to
change majority control of the Company's
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Board of Directors, and accordingly may cause potential purchasers of the
Company to lose interest in any potential purchase of the Company, regardless of
whether such purchase would be beneficial to the Company and its stockholders.
The Restated Bylaws of the Company provide that the number of directors
will be fixed from time to time with the approval of two-thirds of the of Board
of Directors or the affirmative vote of at least 80% of the issued and
outstanding shares of the Company's Common Stock. Moreover, the Restated Bylaws
provides that directors may only be removed with cause by the affirmative vote
of the holders of at least a majority of the outstanding shares of capital stock
of the Company then entitled to vote at an election of directors. This provision
prevents stockholders from removing any incumbent director without cause and
allows two-thirds of the incumbent directors to add additional directors without
approval of stockholders until the next annual meeting of stockholders at which
directors of that class are elected.
The Company's Restated Bylaws contain a provision requiring a
stockholder to give notice, not later than the number of days specified in Rule
148(a)(4) of the Exchange Act (currently 120 days), of a proposal or director
nomination that such stockholder desires to present at any annual or special
meeting of stockholders. Such provision prevents a stockholder from making a
proposal or a director nomination at a stockholder meeting without the Company
having advance notice of the proposal or director nomination. This provision
could make a change in control more difficult by providing the directors of the
Company with more time to prepare an opposition to a proposed change in control.
Pursuant to a Shareholder Protection Rights Agreement dated as of April
16, 1997 by and between American Stock Transfer & Trust Company, as rights
agent, and the Company (the "Rights Agreement"), each share of Common Stock is
issued one right (a "Right") which entitles the registered holder to purchase
from the Company 1/10,000th of a share (a "Unit") of Series A Junior
Participating Preferred Stock (the "Series A Participating Preferred Stock"), at
a purchase price of $30 per Unit, subject to adjustment. Until the Separation
Time, the Rights are unexercisable and attach to and transfer with the Common
Stock certificates. The "Separation Time" will occur upon the earlier of an
announcement of the acquisition by a third party (an "Acquiring Person") of 15%
or more of the Common Stock, or the commencement of a tender offer for 15% or
more of the Common Stock.
The Rights may have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors of the Company with,
where required by the Rights Agreement, the concurrence of a majority of the
continuing directors, unless the offer is conditioned on a substantial number of
Rights being acquired. However, the Rights should not interfere with any merger,
statutory share exchange or other business combination approved by a majority of
the directors since the Rights may be terminated by the Board of Directors at
any time on or prior to the close of business ten business days after
announcement by the Company that a person has become an Acquiring Person. Thus,
the Rights are intended to encourage persons who may seek to acquire control of
the Company to initiate such an acquisition through negotiations with the Board
of Directors. However, the effect of the Rights may be to discourage a third
party from making a partial tender offer or otherwise attempting to obtain a
substantial equity position in the equity securities of, or seeking to obtain
control of, the Company. To the extent any potential acquirors are deterred by
the Rights, the Rights may have the effect of preserving the incumbent
management in office. See "DESCRIPTION OF CAPITAL STOCK - Stock Purchase
Rights."
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BUSINESS
OVERVIEW
CytRx Corporation was founded in 1985 and is engaged in the development
and commercialization of pharmaceutical-related products and services including
human therapeutics focused on high-value critical-care therapies.
In addition to its development work in human therapeutics, CytRx has
created three subsidiaries to broaden the development of its technologies
without losing focus on its core critical-care strategy. Vaxcel, Inc. is
developing its Optivax(R) delivery system to enhance the effectiveness of
vaccines. Vetlife, Inc. is developing products to enhance food animal growth.
Vetlife Also Recently Recreated Its New Cattle Business Unit To Market And
Distribute Cattle Growth Promotant Products To Beef Producers. Proceutics, Inc.
provides preclinical development services to the pharmaceutical industry. In
addition, in May 1997 the Company acquired Zynaxis, Inc. which develops vaccines
for oral and mucosal delivery.
PRODUCT DEVELOPMENT
Consolidated expenditures for research and development activities were
$3.1 million, $7.1 million, and $6.8 million during the years ended December 31,
1996, 1995, and 1994, respectively, and $3.0 million for the nine month period
ended September 30, 1997.
CYTRX
CytRx's human therapeutics product development efforts are focused on
critical-care products providing target opportunities for high-value
breakthrough products to address unmet medical needs. CytRx's current product
development focus is Flocor(R), which the Company believes has the potential to
alleviate the pain anD suffering associated with sickle cell crisis.
In June 1989, the FDA informed CytRx of its decision to grant
RheothRx(R) "Orphan Drug" designation foR the treatment of sickle cell crisis.
RheothRx is the non-purified form of Flocor. The Orphan Drug Act of 1983, as
amended, provides incentive to drug manufacturers to develop drugs for the
treatment of rare diseases (e.g. diseases that affect less than 200,000
individuals in the United States, or diseases that affect more than 200,000
individuals in the United States where the sponsor does not reasonably
anticipate that its product will become profitable). As a result of the
designation of RheothRx/Flocor as an Orphan Drug, if the Company is the first
manufacturer to obtain FDA approval to market Flocor for treatment of sickle
cell crisis, the Company will obtain a seven-year period of marketing
exclusivity beginning from the date of its approval. During this period, the FDA
cannot approve the same drug for the same use from another sponsor. In March
1990, RheothRx also received Orphan Drug designation for the treatment of severe
burns.
In 1995, results from a 2,900 patient RheothRx trial indicated
unacceptable side effects at doses that provided therapeutic benefit to heart
attack victims. As a result, CytRx's licensee, Glaxo Wellcome PLC, returned the
rights to RheothRx to the Company. CytRx believes that RheothRx/Flocor still
offers opportunity in treating sickle cell crisis and other vascular-occlusive
disorders. In June 1996, CytRx was awarded a composition of matter patent on
Flocor.
Flocor is an intravenous solution that has the unique property of
improving blood flow. The Company believes that Flocor has significant potential
in treating a variety of vascular-occlusive diseases where blood flow is
restricted. CytRx has chosen the painful vascular-occlusive crisis associated
with sickle cell anemia as its first development priority. Currently there is no
effective treatment to alleviate the
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<PAGE> 15
pain and suffering sickle cell anemia patients in crisis must endure. Sickle
cell anemia primarily affects African-Americans. It is an inherited abnormality
of hemoglobin, the oxygen-carrying molecule in red blood cells. Under conditions
of low blood oxygen, which is generally caused by dehydration or stress, the
sickle cell victim's hemoglobin becomes rigid. This causes red blood cells to
lose their normal flexibility. The cells become rough, sticky and irregularly
shaped, often looking like sickles, which gives the disease its name.
These deformed cells cannot easily flow through the smaller blood
vessels of the body and tend to clump together, forming occlusions which impede
blood flow. The occlusions deprive tissues of vital oxygen which can result in
tissue death, inflammation and intense throbbing pain. Patients suffering from
sickle cell disease may experience several crisis episodes each year.
Hospitalization is required when pain becomes too much to bear. As there is
currently no effective treatment to alleviate the crisis, patients only receive
injectable morphine, fluids and rest. Aside from causing considerable pain and
suffering, these crisis episodes slowly destroy vital organs due to their
deprivation of oxygen. As a result, the life expectancy of sickle cell victims
is about twenty years shorter than those without the disease.
Estimates place the number of persons suffering from sickle cell anemia
in the U.S. at about 60,000. There are about 100,000 hospital admissions
annually to treat sickle cell patients undergoing acute vascular-occlusive
crisis caused by the disease. On average, these patients require in-patient
treatment for 7.2 days, resulting in significant healthcare costs. A recent
study indicated that each year an average sickle cell patient consumes about
$25,000 in hospital goods and services while seeking treatment for his or her
pain.
Flocor's unique surface-active properties decrease blood viscosity and
enable the rigid sickled cells to become more flexible, thus allowing easier
passage of blood cells through narrow blood vessels.
A Phase II human clinical trial conducted by Burroughs Wellcome Co. has
indicated trends towards reducing the duration of sickle cell crisis and
associated hospital stay when Flocor is used. Also, the trial indicated that
Flocor significantly reduced use of medication required to alleviate the severe
pain. CytRx has conducted small safety and dose ranging studies with the new
purified material and is preparing to conduct a larger Phase III trial.
The Company believes that Flocor has the potential to be an effective
treatment for other vascular-occlusive diseases as well. Once the sickle cell
program is underway, CytRx plans to explore the opportunities with Flocor in
significant diseases such as Acute Respiratory Distress Syndrome (ARDS) and
stroke. However, CytRx's current strategy is to focus its efforts and resources
on gaining approval for the acute crisis of sickle cell anemia.
CytRx is also developing Protoxtm as a treatment for tuberculosis as
well as for use in combination with certain antibiotic and anti-viral compounds
to enhance their uptake and resulting effectiveness. Protox is currently in
preclinical development.
VAXCEL
Vaxcel is currently engaged in the development and commercialization of
Optivax(R), the tradename for a family of proprietary nonionic block copolymers
which may augment or modulate the immune response to vaccines when administered
injectably. Vaxcel believes Optivax may improve the effectiveness and/or
convenience of existing vaccines and may contribute to the development of new
vaccines. Vaxcel and its institutional/corporate collaborators have conducted
preclinical studies in which Optivax appears to act both as a delivery system
and as a vaccine adjuvant. In addition, a Phase I human clinical trial was
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<PAGE> 16
initiated by Vaxcel in early 1996 and completed in February 1997 which indicated
both safety and adjuvant activity of Optivax in humans.
Vaxcel's business strategy is to license Optivax on a
vaccine-by-vaccine basis to pharmaceutical and biotechnology companies engaged
in vaccine research and development. Under such arrangements, these companies
would combine Optivax with their vaccines and assume responsibility for product
development, regulatory approval and marketing at their expense. In return,
Vaxcel would receive license fees, milestone payments, and royalties on sales.
At present, Vaxcel has entered into option agreements for the development of
Optivax with Medeva PLC and Connaught Laboratories, Inc. and a license agreement
with Corixa Corporation.
As a result of the merger of Zynaxis and Vaxcel Merger Sub, Vaxcel
acquired the PLG microencapsulation and mucoadhesive vaccine technologies of
Zynaxis. These technologies are complimentary to Vaxcel's technology, as Optivax
is primarily focused on enhancing the effectiveness of injectable vaccines,
while the Zynaxis technologies are primarily targeted toward development of
vaccines for oral and mucosal delivery. CytRx and Vaxcel believe the Zynaxis
oral delivery technologies may have commercial application for many marketed
vaccines currently administered by parenteral injection, as well as certain new
vaccines under development. In addition, the Zynaxis technologies can be
administered alone or in combination with other vaccine carriers, delivery
systems, and adjuvants. Similar to Optivax, Vaxcel's business strategy for the
Zynaxis technologies is to license these technologies to companies engaged in
vaccine research and development. In September 1995, ALK A/S, a Danish company,
executed a development and licensing agreement with Zynaxis which granted ALK
exclusive, worldwide rights to evaluate and develop the Zynaxis technologies for
oral delivery of bioactive substances for the treatment of allergies. ALK is a
world leader in the preparation and standardization of allergen extracts for
allergy immunotherapy. ALK is currently conducting a Phase II human clinical
trial.
VETLIFE
VetLife, a food animal health company with its North American beef
cattle implant operations in Winterset, Iowa and Overland Park, Kansas, is
focused on marketing and distributing novel technologies to enhance North
American beef cattle productivity and end-product quality without compromising
human food safety or the environment. VetLife currently markets a line of cattle
implants and value-added services to corporate feedlot operators, major beef
cattle product distributors, veterinarians and consulting nutritionists. VetLife
is also engaged in developing technologies to improve the value of food animal
products. Technologies being researched include a nonantibiotic growth promoter
for use in poultry and swine, novel adjuvants to enhance animal vaccines, and
antibiotic potentiators to overcome antibiotic resistance or reduce the level of
drug required.
In 1996, VetLife entered into worldwide manufacturing, marketing, and
distribution alliances with two companies which are pioneers and established
participants in the cattle growth implant business, Ivy Laboratories, Inc. and
Elanco Animal Health. The Ivy agreement allows VetLife to market and distribute
Ivy's line of FDA approved cattle growth products and devices in North America.
Pursuant to the Elanco Agreement, VetLife became Elanco's exclusive supplier of
cattle growth promotant products. These alliances position VetLife to offer the
most complete line of cattle implant products currently available to the United
States market.
VetLife currently offers seven cattle growth implants, including
Compudose(R) and Component(TM) E-S, E-H, E-C, T-S, T-H, and TE-S. VetLife
anticipates launching four new cattle implant products by the second quarter of
1999. All Component(TM) implants are designed to be administered by the
Component One Gun(TM) implant device, a patented, controlled-pressure implant
"gun" that permits precise implantation in one efficient motion. Utilization of
the One Gun(TM) device reduces feedlot operators' implant costs by
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<PAGE> 17
materially decreasing implant errors. VetLife also packages its Component(TM)
implants using a unique color-coded packaging system that distinguishes
different implant types.
The effectiveness of VetLife's cattle implants are enhanced by cattle
implant programs and services tailored to meet specific customer objectives.
VetLife's V*Net(TM) Implant Management System is a powerful database that helps
producers, consultants and veterinarians implement specific, real-time implant
management decisions and recommendations. The V*Net System provides access to
information on hundreds of implant management trials that enable VetLife to
design a customized implant program for any cattle producer. VetLife also has a
novel Benchmark(TM) Program which enables producers to compare their own
implant programs with othER Benchmark(TM) feedlots on a quarterly basis.
Regulations imposed by the United States government and other countries
require a demonstration of the safety and efficacy of new animal drugs in the
target animal as well as human food safety prior to marketing. See "Government
Regulation." There can be no assurance that any particular development program
of the Company will lead to the development of a marketable product, that any
such product will be approved by the appropriate regulatory agencies or that any
approved product will be profitable.
PROCEUTICS
Proceutics was formed in 1995 and commenced formal operations in
January 1996. Proceutics is targeting a growing need within biopharmaceutcal
companies by providing high-value, high-quality pharmaceutical development
services to supplement pre-IND activities. Proceutics provides a wide range of
client services including analytical method development and analysis, quality
control testing, pharmaceutics, stability program management, regulatory
compliance and consultation, manufacturing, packaging and labeling of clinical
supplies, and bioanalytical method development and analysis.
Proceutics' customer base targets three distinct drug development
segments. First are large pharmaceutical companies that have more compounds
under development than available people or facilities. The second customer
target is small biotechnology and drug development startup companies that do not
have the money and time to construct validated facilities to carry out their
testing requirements. The third group is generic drug distributors that need to
do testing in support of generic drug development.
Proceutics has found established pharmaceutical companies to be a good
customer base since they have so much work to do, need reliable outsourcing
alternatives and, when satisfied with the work, they keep sending new business.
Proceutics' business objective is to provide quality service at a fair price
that is delivered on time. The Company anticipates that Proceutics will
successfully meet the objective as Proceutics continues to add new clients, and
generates repeat business from satisfied clients.
OTHER PRODUCTS AND SERVICES
CytRx manufactures, markets and distributes TiterMax(R), an adjuvant
used to produce cell mediated anD humoral responses in research animals. The
keys to the potency of TiterMax lie in its immunostimulatory activity and the
formation of stable water-in-oil emulsions. TiterMax aids in the antigen's
effective presentation to the immune system without the toxic effects of other
research adjuvants.
CytRx also has a small group of human resource professionals who, in
addition to their services to the Company, provide recruiting services to third
parties under the name of Spectrum Recruitment Research.
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MANUFACTURING
The Company maintains a portion of its Norcross, Georgia headquarters
as a pilot manufacturing facility in order to produce the bulk clinical supply
ingredients for its product development programs. Production of the final dosage
form of materials for use in clinical trials will be performed by third party
manufacturers. The Company's pilot facility is intended for manufacture of
investigational supplies of certain of the Company's products under development
and is generally not large enough to produce quantities of product adequate for
commercial purposes. The process used in the pilot facility also may require
modification to achieve commercial scale. If the Company modifies its
manufacturing process or changes the source or location of product supply,
regulatory authorities will require the Company to demonstrate that the material
produced from the modified or new process or facility is equivalent to the
material used in the Company's clinical trials. Further, any manufacturing
facility and the quality control and manufacturing procedures used by the
Company for the commercial supply of a product must comply with applicable
Occupational Safety and Health Act ("OSHA"), Environmental Protection Act
("EPA"), and FDA standards, including Good Manufacturing Practice regulations.
Cattle growth products marketed and distributed by Vetlife are
manufactured under contract by IVY and Elanco.
PATENTS AND PROPRIETARY TECHNOLOGY
CytRx considers the protection of its discoveries and inventions
critical to its business. The Company seeks patent protection for its technology
when deemed appropriate and has filed patent applications in the United States
and selected foreign countries covering several general product areas, including
technology licensed from Emory University (see below) and others. There can be
no assurance that patent applications which have been or will in the future be
filed by the Company will result in the issuance of any patents, or, if issued,
that such patents will provide sufficient protection or be of commercial benefit
to CytRx and its licensees.
Pursuant to an agreement with Emory University ("Emory") whereby
certain basic research was performed by the Company utilizing the research
facilities and support staff at Emory, Emory will be assigned the rights to all
patents acquired as a result of discovery activities conducted at Emory on
behalf of CytRx. Emory has granted CytRx exclusive worldwide licenses to these
patents. Emory is entitled to receive royalty payments on sales made by CytRx of
products covered by the licensed patents, and on payments received by CytRx as a
result of sales of such products made by a third party. In the event that
patents are not issued with respect to a particular class of products, the
Company's license with respect to that class of products will terminate.
COMPETITION
Many companies, including large pharmaceutical, chemical and
biotechnology firms with financial resources, research and development staffs,
and facilities that are substantially greater than those of the Company, are
engaged in the research and development of pharmaceutical products that could
compete with the products under development by the Company. The industry is
characterized by rapid technological advances and competitors may develop their
products more rapidly and/or such products may be more effective than those
under development by the Company or its licensees and corporate partners. The
Company competes in this research and development environment by attempting to
develop its products and technologies in an innovative and timely fashion that
would provide the Company with an advantage in the licensing and/or marketing of
its products and technologies.
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GOVERNMENT REGULATION
Regulations imposed by the United States government and other countries
require a demonstration of the safety and efficacy of new animal drugs in the
target animal as well as human food safety prior to marketing. There can be no
assurance that any particular development program of the Company will lead to
the development of a marketable product, that any such product will be approved
by the appropriate regulatory agencies or that any approved product will be
profitable.
The marketing of pharmaceutical products requires the approval of the
FDA and comparable regulatory authorities in foreign countries. The FDA has
established guidelines and safety standards which apply to the pre-clinical
evaluation, clinical testing, manufacture and marketing of pharmaceutical
products. The process of obtaining FDA approval for a new therapeutic product
(drug) generally takes several years and involves the expenditure of substantial
resources. The steps required before such a product can be produced and marketed
for human use in the United States include preclinical studies in animal models,
the filing of an Investigational New Drug ("IND") application, human clinical
trials and the submission and approval of a New Drug Application ("NDA"). The
NDA involves considerable data collection, verification and analysis, as well as
the preparation of summaries of the manufacturing and testing processes,
preclinical studies, and clinical trials. The FDA must approve the NDA before
the drug may be marketed. There can be no assurance that the Company will be
able to obtain the required FDA approvals for any of its products.
The manufacturing facilities and processes for the Company's products,
whether manufactured directly by the Company or by a third party, will be
subject to rigorous regulation, including the need to comply with Federal Good
Manufacturing Practice regulations. The Company is also subject to regulation
under the OSHA, the EPA, the Nuclear Energy and Radiation Control Act, the Toxic
Substance Control Act and the Resource Conservation and Recovery Act.
ENVIRONMENTAL PROTECTION
The Company's pharmaceutical development center is exempt from the CFR
(40-Part 370) hazardous chemical reporting. The facility is classified as a
small quantity generator of hazardous waste, which includes radio-isotopes,
biological and chemical hazards. Such waste is removed by a qualified waste
hauler. The Company has established a Corporate Safety Committee to oversee its
Health and Safety Policy which defines procedures for identification of risks
posed to employees from hazardous material and training of employees in the
proper handling and disposal of such materials.
During 1993 and 1994 the Company incurred approximately $2.6 million to
expand and renovate its pharmaceutical development facility. These expenditures
included amounts related to the installation of a single pass air handling
system with HEPA filters for the exhaust air from Biosafety Level III and
radiological hoods. Also included were the installation of backflow prevention
devices and acid dilution basins to neutralize waste water leaving the facility.
During 1996 and 1997 compliance with federal, state and local regulations
pertaining to environmental standards did not have a material effect upon the
capital expenditures or earnings of the Company.
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EMPLOYEES
As of September 30, 1997, the Company had 72 full-time and 2 part-time
employees.
PROPERTIES
The Company's executive offices and operational facilities, consisting
of an aggregate of approximately 30,700 square feet, are located on property
owned by the Company at 150 and 154 Technology Parkway, Norcross, Georgia. These
facilities include approximately 20,000 square feet of laboratories, pilot
manufacturing, and associated space.
The Company also leases approximately 3,500 square feet of office and
warehouse space in Winterset, Iowa and 600 square feet of office space in
Overland Park, Kansas in support of Vetlife's Cattle Business Unit activities.
The above-mentioned facilities are in satisfactory condition and
suitable for the particular purposes for which they were acquired or constructed
and are adequate for present operations.
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SELLING STOCKHOLDERS
The Company expects that the Selling Stockholders offering Shares
under this Prospectus will consist almost entirely of the Investors in the Note
Sale. The Company expects that almost all of the Shares offered pursuant to
this Prospectus are shares of Common Stock into which the Debentures are
convertible or for which the Warrants are exercisable. At the time of this
Prospectus, none of the Debentures have been converted and none of the Warrants
have been exercised.
Prior to any use of this Prospectus in connection with an offering of
Shares, this Prospectus will be supplemented to set forth the names of the
Selling Stockholders intending to sell such Shares, the number of shares
beneficially owned by the Selling Stockholders and the aggregate principal
amount of Shares to be offered.
None of the Selling Stockholders is now, nor has been, an officer,
director or employee of the Company nor has had a material relationship with the
Company in the three years immediately preceding the date of this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 18,750,000
shares of Common Stock, par value $.001 per share, and 1,000 shares of Preferred
Stock, par value $.01 per share. The following description of the capital stock
is qualified in all respects by reference to the Restated Certificate of
Incorporation, and Restated Bylaws, as amended, of the Company, copies of which
are on file at the Company's principal executive offices.
COMMON STOCK
The holders of shares of the Common Stock do not have any cumulative
voting, conversion, redemption or preemptive rights. Subject to any preferential
rights of any outstanding series of preferred stock designated by the CytRx
Board of Directors from time to time, the holders of shares of the Common Stock
are entitled to such dividends as may be declared from time to time by the CytRx
Board of Directors from funds available therefor, and upon liquidation are
entitled to receive pro rata all assets available for distribution to such
holders. Except as otherwise required by law, each holder of shares of Common
Stock is entitled to one vote for each share on all matters voted on by
stockholders, including the election of directors.
PREFERRED STOCK
The Company is authorized to issue 1,000 shares of Preferred Stock, all
of which the Company has designated Series A Junior Participating Preferred
Stock. Each share of Preferred Stock is entitled to one vote, voting separately
as a class with any capital stock that comprises the Reference Package, on all
matters voted on by the stockholders, including the election of directors. In
addition, holders of Series A Participating Preferred Stock shall be paid
dividends, (a) on each date dividends or other distributions payable in Common
Stock are payable on or in respect of Common Stock comprising part of the
Reference Package, in an amount per whole share of Series A Participating
Preferred Stock equal to the aggregate amount of dividends or other
distributions (other than dividends or distributions payable in Common Stock)
that would be payable on such date to a holder of the Reference Package, and (b)
for each share of Series A Participating Preferred Stock, on the last day of
March, June, September and December of each year, $1.00, less the aggregate per
share dividend paid to such holder during the previous three month period
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<PAGE> 22
ending on such last day. Upon liquidation of the Company, each holder of
Preferred Stock is entitled to the greater of (i) $1.00 per share or (ii) the
aggregate amount distributed to a holder of a Reference Package, together with
accrued dividends to such distribution or payment date, whether or not earned or
declared. The "Reference Package" means initially, 100 shares of the Common
Stock, subject to adjustment.
STOCK PURCHASE RIGHTS
Effective April 16, 1997, the Board of Directors of the Company
declared a distribution of one Right for each outstanding share of the Company's
Common Stock to stockholders of record at the close of business on May 15, 1997
and for each share of Common Stock issued (including shares distributed from
Treasury) by the Company thereafter and prior to the Separation Time. Each Right
entitles the registered holder to purchase from the Company one Unit, equal to
1/10,000th of a share of the Company's $.01 par value per share preferred stock
at a purchase price of $30 per Unit, subject to adjustment. The description and
terms of the Rights are set forth in the Rights Agreement.
Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Common Stock and the
Separation Time will occur upon the earlier of (i) ten business days (unless
otherwise accelerated or delayed by the Board) following public announcement
that an Acquiring Person has acquired, obtained the right to acquire, or
otherwise obtained beneficial ownership of 15% or more of the then outstanding
shares of Common Stock (a "Flip-In Date"), or (ii) ten business days (unless
otherwise delayed by the Board) following the commencement of a tender offer or
exchange offer that would result in the person or group beneficially owning 15%
or more of the then outstanding shares of Common Stock. An Acquiring Person does
not include (a) any person who is a beneficial owner of 15% or more of the
Common Stock on April 16, 1997 (the date of adoption of the Rights Agreement),
unless such person or group shall thereafter acquire beneficial ownership of
additional Common Stock, (b) a person who acquires beneficial ownership of 15%
or more of the Common Stock without any intention to affect control of the
Company and who thereafter promptly divests sufficient shares so that such
person ceases to be the beneficial owner of 15% or more of the Common Stock, or
(c) a person who is or becomes a beneficial owner of 15% or more of the Common
Stock as a result of an option granted by the Company in connection with an
agreement to acquire or merge with the Company prior to a Flip-In Date.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without approval of the Board of Directors. Accordingly, the Rights may cause
potential purchasers of the Company to lose interest in any potential purchase,
regardless of whether such purchase would be beneficial to the Company and its
stockholders.
SPECIAL PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW
Certain provisions of the Company's Restated Certificate of
Incorporation and Restated Bylaws may be deemed to have an anti-takeover effect
or may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in such stockholder's best interest, including those
attempts that might result in a premium over the market price for the shares
held by a stockholder.
Classified Board of Directors. In its 1997 annual meeting, the
stockholders of the Company voted to classify its board of directors. As a
result of the classification of the board of directors, at least two stockholder
meetings, instead of one, will be required to effect a change in the majority
control of the Company board, except in the event of vacancies resulting from
removal for cause (in which case the remaining directors would fill the
vacancies so created). It should also be noted that the classification provision
will apply to every election of directors, rather than only an election
occurring after a change in
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<PAGE> 23
control. The classification of directors has the effect of making it more
time-consuming to change majority control of the Company's Board of Directors,
and accordingly may cause potential purchasers of the Company to lose interest
in any potential purchase of the Company, regardless of whether such purchase
would be beneficial to the Company and its stockholders.
Number of Directors; Removal of Directors. The Restated Bylaws of the
Company provide that the number of directors will be fixed from time to time
with the approval of two-thirds of the of Board of Directors or the affirmative
vote of at least 80% of the issued and outstanding shares of the Company's
Common Stock. Moreover, the Restated Bylaws provides that directors may only be
removed with cause by the affirmative vote of the holders of at least a majority
of the outstanding shares of capital stock of the Company then entitled to vote
at an election of directors. This provision prevents stockholders from removing
any incumbent director without cause and allows two-thirds of the incumbent
directors to add additional directors without approval of stockholders until the
next annual meeting of stockholders at which directors of that class are
elected.
Stockholder Nominations and Proposals. The Company's Restated Bylaws
contain a provision requiring a stockholder to give notice, not later than the
number of days specified in Rule 148(a)(4) of the Exchange Act (currently 120
days), of a proposal or director nomination that such stockholder desires to
present at any annual or special meeting of stockholders. Such provision
prevents a stockholder from making a proposal or a director nomination at a
stockholder meeting without the Company having advance notice of the proposal or
director nomination. This provision could make a change in control more
difficult by providing the directors of the Company with more time to prepare an
opposition to a proposed change in control.
Delaware Anti-Takeover Law. Section 203 of the Delaware General
Corporation Law (the "DGCL") ("Section 203") applies to the Company and
generally provides that a person who, together with affiliates and associates
owns, or within three years did own, 15% or more of the outstanding voting stock
of a corporation subject to the statute (an "Interested Stockholder") but less
than 85% of such stock may not engage in certain business combinations with the
corporation for a period of three years after the date on which the person
became an Interested Stockholder unless (I) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction in which the stockholder became an Interested Stockholder, (ii) the
Interested Stockholder acquired 85% or more of the outstanding voting stock of
the corporation in the same transaction that makes such person an Interested
Stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans), or (iii) subsequent to such date, the business combination is
approved by the corporation's board of directors and authorized at a
stockholders' meeting by a vote of at least two-thirds of the corporation's
outstanding voting stock not owned by the Interested Stockholder. Section 203
defines the term "business combination" to encompass a wide variety of
transactions with or caused by an Interested Stockholder, including mergers,
asset sales, and other transactions in which the Interested Stockholder receives
or could receive a benefit on other than a pro rata basis with other
stockholders.
The Company's stockholders, by adopting an amendment to the Restated
Certificate of Incorporation, may elect not to be governed by Section 203,
which election would be effective 12 months after such adoption. Neither the
Restated Certificate of Incorporation nor the Restated Bylaws presently exclude
the Company from the restrictions imposed by Section 203, and the restrictions
imposed by Section 203 apply to the Company. The provisions of Section 203
could delay or frustrate a change in control of the Company, deny stockholders
the receipt of a premium on their Common Stock and have a depressing effect on
the market price of the Common Stock. The provisions also could discourage,
impede or prevent a merger, tender offer or proxy contest, even if such event
would be favorable to the interests of stockholders.
-22-
<PAGE> 24
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is
American Stock Transfer & Trust Company, in New York, New York.
PLAN OF DISTRIBUTION
Pursuant to a Registration Rights Agreement dated as of October 22,
1997 (the "Registration Rights Agreement") between the Company and the initial
purchasers named therein, entered into in connection with the Note Sale, the
Registration Statement (the "Registration Statement") of which this Prospectus
forms a part was filed with the Commission covering the resale of the Shares.
The Company has agreed to use all reasonable efforts to keep the Registration
Statement effective until October 22, 1999 (or such earlier date when the
holders of the Securities are able to sell all such Securities immediately
without restriction pursuant to Rule 144(k) under the Securities Act or any
successor rule thereto or otherwise). The Company will be permitted to suspend
the use of this Prospectus (which is a part of the Registration Statement) in
connection with sales of Securities by holders during certain periods of time
under certain circumstances relating to pending corporate developments and
public filings with the Commission and similar events. The specific provisions
relating to the registration rights described above are contained in the
Registration Rights Agreement, and the foregoing summary is qualified in its
entirety by reference to the provisions of such agreement.
Sales of the Shares may be effected by or for the account of the
Selling Stockholders from time to time in transactions on any exchange or market
on which the Shares are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices, or at negotiated prices.
The Selling Stockholders may effect such transactions by selling the Shares
directly to purchasers, through broker-dealers acting as agents for the Selling
Stockholders, or to broker-dealers who may purchase Shares as principals and
thereafter sell the Shares from time to time in transactions on any exchange or
market on which such securities are listed or quoted, as applicable, in
negotiated transactions, through a combination of such methods of sale, or
otherwise. In effecting sales, broker dealers engaged by Selling Stockholders
may arrange for other broker-dealers to participate. Such broker-dealers, if
any, may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profits received on the resale of the Shares offered hereby and
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
At the time a particular offering of the Shares is made and to the
extent required, the name or names of the Selling Stockholders, and the terms of
the offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, concessions or commissions and other terms constituting
compensation from the Selling Stockholders, and any discounts, concessions or
commissions allowed or reallowed or paid to broker-dealers, will be set forth in
an accompanying Prospectus Supplement.
Pursuant to the Registration Rights Agreement, the Company has agreed
to pay all expenses incident to the offer and sale of the Shares offered by the
Selling Stockholders hereby, except that the Selling Stockholders will pay all
underwriting discounts, selling commissions, if any, and all fees and
-23-
<PAGE> 25
disbursements for their counsel, except for one counsel to all the Selling
Stockholders. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments the Selling Stockholders may be required to make in
respect thereof.
To comply with the securities laws of certain jurisdictions, if
applicable, the Shares offered hereby will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. Under
applicable rules and regulations under the Exchange Act, any person engaged in a
distribution of the Shares may be limited in its ability to engage in market
activities with respect to such Shares. In addition to and without limiting the
foregoing, each Selling Stockholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchase and sales of any of the Shares by the Selling
Stockholders. The foregoing may affect the marketability of the Shares.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Selling Stockholders by Alston & Bird, Atlanta, Georgia.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report (Form 10-K/A) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated by reference therein and
incorporated herein by reference. Such financial statements referred to above
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
-24-
<PAGE> 26
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. 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 AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Incorporation of Certain Documents by Reference
Summary
Risk Factors
Business
Selling Stockholders
Description of Capital Stock
Plan of Distribution
Legal Matters
Independent Auditors
</TABLE>
603,000 Shares
CYTRX CORPORATION
COMMON STOCK
PROSPECTUS
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
Common Stock are set forth in the following table. All amounts except the
Securities and Exchange Commission registration fee and the NASD filing fee are
estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................. $ 696.74
Auditors' Fees and Expenses..................................................... *
Legal Fees and Expenses......................................................... *
*
Transfer Agent and Registrar Fees............................................... *
Miscellaneous................................................................... *
Total.................................................................. $ *
========
* Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Company's Restated Certificate of Incorporation, the
Company is obligated to indemnify each of its directors and officers to the
fullest extent permitted by law with respect to all of the expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with any action, suit or
proceedings arising out of actions of such person in his official capacity and
as to actions in another capacity while holding such office.
In addition, the Company's Restated Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (a) for any breach of the director's duty of
loyalty to the Company or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived any improper personal benefit.
The Company holds an insurance policy covering directors and officers
under which the insurer agrees to pay, subject to certain exclusions, for any
claim made against the directors and officers of the Company for a wrongful act
that they may become legally obligated to pay or for which the Company is
required to indemnify the directors or officers, including liabilities under the
Securities Act. The Company believes that these provisions of its Restated
Certificate of Incorporation and Restated Bylaws are necessary to attract and
retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE> 28
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant
3.2 Restated Bylaws of the Registrant, as amended (Incorporated
herein by reference to Exhibit 4.2 to the Registrant's
registration statement or Form S-8 filed July 21, 1997)
3.3 Shareholder Protection Rights Agreement dated April 16, 1997
between CytRx Corporation and American Stock Transfer & Trust
Company as Rights Agent (Incorporated herein by reference to
Exhibit 4.1 to the Registrant's quarterly report on Form 10-Q
for the quarter ended March 31, 1997, File Number 000-15327)
4.1 See Exhibits 3.1-3.3 for provisions of the Restated
Certificate of Incorporation and Restated Bylaws, as amended,
defining the rights of the holders of Common Stock of the
Registrant
5* Opinion of Alston & Bird
23.1* Consent of Alston & Bird (included in Exhibit 5 above)
23.2 Consent of Ernst & Young
24 Powers of Attorney (see Page II-4)
</TABLE>
- ---------------
*To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its
II-2
<PAGE> 29
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.
(c) 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 reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Atlanta, and State of Georgia, on November 5, 1997.
CYTRX CORPORATION
By: /s/ Jack J. Luchese
--------------------------
Jack J. Luchese
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Jack J. Luchese and Mark W. Reynolds and each of
them, with the power to act without the other, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
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 attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
II-3
<PAGE> 30
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on November 5, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Jack J. Luchese Director, President and Chief Executive Officer
- ---------------------------------- (Principal Executive Officer)
Jack J. Luchese
/s/ Jack L Bowman Director
- ----------------------------------
Jack L. Bowman
/s/ Raymond C. Carnahan, Jr. Director
- ----------------------------------
Raymond C. Carnahan, Jr.
/s/ Max Link Director
- ----------------------------------
Max Link
/s/ Herbert H. McDade, Jr. Director
- ----------------------------------
Herbert H. McDade, Jr.
</TABLE>
II-4
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION OF
CYTRX CORPORATION
AS APPROVED BY THE BOARD OF DIRECTORS ON JUNE 26, 1997
CytRx Corporation, a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is CytRx Corporation. CytRx Corporation was
originally incorporated under the name SynthRx, Inc., and the original
certificate of incorporation of the corporation was filed with the Secretary of
State of Delaware on February 28, 1985.
2. This Restated Certificate of Incorporation was duly adopted in accordance
with Section 245 of the Delaware General Corporation Law.
3. This Restated Certificate of Incorporation merely restates and integrates but
does not further amend the provisions of the corporation's certificate of
incorporation as theretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
FIRST: The name of the corporation (hereinafter called the
"corporation") is CytRx Corporation.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the registered
agent of the corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the corporation are as follows:
To manufacture, prepare, compound, refine, distill, produce,
invent, discover, devise, develop, conduct scientific researches in
respect of and exploit the findings therefrom, acquire, assign, and
transfer formulae, concentrates, compounds, and processes for, apply,
buy, sell, import and export, and generally deal in and with at
wholesale and retail and as principal, agent, broker, distributor,
sales, financial, and special representative, licensor, licensee, and
in any other lawful capacity, pharmaceuticals, drugs and nutritional
aspects for animals and humans.
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of
Delaware.
<PAGE> 2
FOURTH: The total number of shares of all classes of stock that the
corporation shall have the authority to issue is Eighteen Million Seven Hundred
Fifty-One Thousand (18,751,000), of which Eighteen Million Seven Hundred Fifty
Thousand (18,750,000) shall be common stock, par value $.001 per share (the
"Common Stock") and One Thousand (1,000) shall be preferred stock, par value
$.01 per share (the "Preferred Stock").
The Board of Directors is hereby authorized, subject to any limitations
prescribed by law, to provide for the issuance of the Shares of Preferred Stock
in series, and by filing a Certificate pursuant to the applicable law of the
State of Delaware (hereinafter referred to as a "Preferred Stock Designation"),
to establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences, and rights of the
shares of each such series, and any qualifications, limitations or restrictions
thereof.
FIFTH: The name and the mailing address of the incorporator are as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
R. G. Dickerson 229 South State Street, Dover, Delaware
</TABLE>
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
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<PAGE> 3
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the By-Laws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning, to wit, the total
number of directors which the corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the corporation may
be exercised by the Board of Directors of the corporation; provided, however,
that any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of Section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders entitled to vote of
the corporation unless provisions for such classification shall be set forth in
this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the right to
vote at any meeting of stockholders except as the provisions of paragraph (b)
(2) of section 242 of the General Corporation Law of the State of Delaware shall
otherwise require; provided, that no share of any such class which is otherwise
denied voting power shall entitle the holder thereof to vote upon the increase
or decrease in the number of authorized shares of said class.
NINTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a
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<PAGE> 4
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
ELEVENTH: A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by Jack J. Luchese, its authorized officer this 26 day of September,
1997.
CYTRX CORPORATION
By: /s/ Jack J. Luchese
-------------------------------------
Jack J. Luchese
President and Chief
Executive Officer
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<PAGE> 5
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF THE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CYTRX CORPORATION
Pursuant to Section 151 of the
Delaware General Corporation Law
CytRx Corporation, a corporation organized under the laws of
the State of Delaware (the "Corporation"), hereby certifies that, pursuant to
the authority conferred upon the Board of Directors by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors on April
16, 1997, adopted the following resolution creating a series of 1,000 shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board") in accordance with the
provisions of its Certificate of Incorporation, as amended, a series of
Preferred Stock of the Corporation be and it hereby is created, and that the
designation and amount thereof and the voting rights or powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
1. Series A Participating Preferred Stock. There is hereby
established a series of Preferred Stock, par value $0.01 per share, of the
Corporation, and the designation and certain terms, powers, preferences and
other rights of the shares of such series, and certain qualifications,
limitations and restrictions thereon, are hereby fixed as follows:
(i) The distinctive serial designation of this
series shall be "Series A Junior Participating Preferred Stock" (hereinafter
called "this Series"). Each share of this Series shall be identical in all with
the other shares of this Series except as to the dates from and after which
dividends thereon shall be cumulative.
(ii) The number of shares in this Series shall
initially be 1,000, which number may from time to time be increased or decreased
(but not below the number then outstanding) by the Board of Directors. Shares of
this Series purchased by the Corporation shall be canceled and shall revert to
authorized but unissued shares of Preferred Stock undesignated as to series.
Shares of this Series may be issued in fractional shares, which fractional
shares shall entitle the holder, in proportion to such holder's fractional
share, to all rights of a holder of a whole share of this Series.
(iii) The holders of full or fractional shares of
this Series shall be entitled to receive, when and as declared by the Board of
Directors, but only out of funds legally available therefor, dividends, (A) on
each date that dividends or other distributions payable in Common Stock of the
Corporation are payable on or in respect of Common Stock comprising part of the
Reference Package (as defined below), in an amount per whole share of this
Series equal to the aggregate amount of dividends or other distributions (other
than dividends or distributions payable in Common Stock of the Corporation) that
would be payable on such date to a holder of
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<PAGE> 6
the Reference Package and (B) on the last day of March, June, September and
December in each year, in an amount per whole share of this Series equal to the
excess (if any) of $1.00 over the aggregate dividends paid per whole share of
this Series during the three-month period ending on such last day. Each such
dividend shall be paid to the holders of record of shares of this Series on the
date, not exceeding sixty days preceding such dividend or distribution payment
date, fixed for that purpose by the Board of Directors in advance of payment of
each particular dividend or distribution. Dividends on each full and each
fractional share of this Series shall be cumulative from the date such full or
fractional share is originally issued; provided that any such full or fractional
share originally issued after a dividend record date and on or prior to the
dividend payment date to which such record date relates shall not be entitled to
receive the dividend payable on such dividend payment date or any amount in
respect of the period from such original issuance to such dividend payment date.
The term "Reference Package" shall initially mean 10,000
shares of Common Stock, par value $.001 per share ("Common Stock"), of the
Corporation. In the event the Corporation shall at any time (A) declare or pay a
dividend on any Common Stock payable in Common Stock, (B) subdivide any Common
Stock or (C) combine any Common Stock into a smaller number of shares, then and
in each such case the Reference Package after such event shall be the Common
Stock that a holder of the Reference Package immediately prior to such event
would hold thereafter as a result thereof.
Holders of shares of this Series shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided on this Series.
So long as any shares of this Series are outstanding, no
dividend (other than a dividend in Common Stock or in any other stock ranking
junior to this Series as to dividends and upon liquidation) shall be declared or
paid or set aside for payment or other distribution declared or made upon the
Common Stock or upon any other stock ranking junior to this Series as to
dividends or upon liquidation, nor shall any Common Stock nor any other stock of
the Corporation ranking junior to or on a parity with this Series as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation (except
by conversion into or exchange for stock of the Corporation ranking junior to
this series as to dividends and upon liquidation), unless, in each case, the
full cumulative dividends (including the dividend to be due upon payment of such
dividend, distribution, redemption, purchase or other acquisition) on all
outstanding shares of this Series shall have been, or shall contemporaneously
be, paid.
(iv) In the event of any merger, consolidation,
reclassification or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of this Series shall at the same time
be similarly exchanged or changed in an amount per whole share equal to the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, that a holder of the Reference Package would be
entitled to receive as a result of such transaction.
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<PAGE> 7
(v) In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of full and fractional shares of this Series shall be entitled,
before any distribution or payment is made on any date to the holders of the
Common Stock or any other stock of the Corporation ranking junior to this Series
upon liquidation, to be paid in full an amount per whole share of this Series
equal to-the greater of (A) $1.00 or (B) the aggregate amount distributed or to
be distributed prior to such date in connection with such liquidation,
dissolution or winding up to a holder of the Reference Package (such greater
amount being hereinafter referred to as the "Liquidation Preference"), together
with accrued dividends to such distribution or payment date, whether or not
earned or declared. If such payment shall have been made in full to all holders
of shares of this Series, the holders of shares of this Series as such shall
have no right or claim to any of the remaining assets of the Corporation.
In the event the assets of the Corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to the first paragraph of this Section (v), no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of this Series upon such
liquidation, dissolution or winding up unless proportionate distributive amounts
shall be paid on account of the shares of this Series, ratably in proportion to
the full distributable, amounts for which holders of all such parity shares are
respectively entitled upon such liquidation, dissolution or winding up.
Upon the liquidation, dissolution or winding up of the
Corporation, the holders of shares of this Series then outstanding shall be
entitled to be paid out of assets of the Corporation available for distribution
to its stockholders all amounts to which such holders are entitled pursuant to
the first paragraph of this Section (v) before any payment shall be made to the
holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.
For the purposes of this Section (v), the consolidation or
merger of, or binding share exchange by, the Corporation with any other
corporation shall not be deemed to constitute a liquidation, dissolution or
winding up of the corporation.
(vi) The shares of this series shall not be redeemable.
(vii) In addition to any other vote or consent of
stockholders required by law or by the Certificate of Incorporation, as amended,
of the Corporation, each whole share of this Series shall, on any matter, vote
as a class with any other capital stock comprising part of the Reference Package
and voting on such matter and shall have the number of votes thereon that a
holder of the Reference Package would have.
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<PAGE> 8
IN WITNESS WHEREOF, CytRx Corporation has caused this Certificate of
Designation to be executed as of May 5th, 1997.
CYTRX CORPORATION
By: /s/ Jack J. Luchese
-----------------------------------------
Jack J. Luchese
President and Chief Executive Officer
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<PAGE> 1
EXHIBIT 23.2
CONSENT OF 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 CytRx
Corporation for the registration of 603,000 shares of its common stock and to
the incorporation by reference therein of our report dated February 19, 1997
with respect to the consolidated financial statements of CytRx Corporation
incorporated by reference in its Annual Report (Form 10-K/A) and the related
financial statement schedule included therein for the year ended December 31,
1996 filed with the Securities and Exchange Commission.
ERNST & YOUNG
October 29, 1997
