<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1998
REGISTRATION NO. 333-48837
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
CYTRX CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 58-1642740
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
</TABLE>
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
154 TECHNOLOGY PARKWAY
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: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]______
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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| | Proposed | Proposed |
| Amount | Maximum | Maximum | Amount of
Title of Shares | To Be | Aggregate Price | Aggregate | Registration
To Be Registered | Registered | Per Unit | Offering Price | Fee
- --------------------|---------------|-------------------|-----------------|--------------
Common Stock, $.001 | | | |
par value | 450,000* | $2.53125** | $1,139,062.50** | $336.03
- -----------------------------------------------------------------------------------------
</TABLE>
* The registration fee for the remaining 932,427 shares registered hereunder
has been previously paid by the registrant pursuant to the registrant's
earlier registration statements on Form S-3 (File Nos. 33-44618, 33-63002 and
33-93820) and all amendments relating to the foregoing, and on this
registration statement on Form S-3 (File No. 333-48837) filed on March 27,
1998.
** Estimated solely for the purpose of determining the registration fee pursuant
to Rule 457(c) based on the average of the high and low prices of the
Registrant's Common Stock on May 20, 1998 as reported on the Nasdaq National
Market.
Pursuant to Rule 429, the Prospectus which forms a part of this Registration
Statement shall also relate to 682,427 (as adjusted to reflect a 1-for-4 reverse
stock split effective February 6, 1996) shares of Common Stock registered for
resale by the Selling Stockholder pursuant to the Company's earlier registration
statements on Form S-3 (File Nos. 33-44618, 33-63002 and 33-93820), and all
amendments relating to the foregoing.
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.
================================================================================
<PAGE>
PROSPECTUS
1,382,427 SHARES
CYTRX CORPORATION
COMMON STOCK
____________________
The shares offered hereby (the "Shares") consist of 1,382,427 shares of
common stock, $.001 par value per share, of CytRx Corporation, a Delaware
corporation ("CytRx" or the "Company"), together with a Series A Junior
Participating Preferred Stock Purchase Right that is associated with each share
(the "Common Stock"), that are reserved for issuance upon the exercise of
certain warrants issued to Jack J. Luchese (the "Selling Stockholder"). The
Shares being offered pursuant to this Prospectus by the Selling Stockholder
would have represented approximately 15.3% of the total shares of Common Stock
of the Company outstanding as of May 21, 1998 if the warrants had been
exercised on that date. The Selling Stockholder is the President and Chief
Executive Officer of the Company and Chairman of the Board of Directors of the
Company. The Shares may be offered from time to time by the Selling
Stockholder. All expenses of registration incurred in connection herewith are
borne by the Company, but all selling and other expenses incurred by the Selling
Stockholder will be borne by the Selling Stockholder. The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholder.
The Selling Stockholder has not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on The Nasdaq Stock Market
at the market price then prevailing, although sales may also be made in
negotiated transactions or otherwise. The Selling Stockholder and the brokers
and dealers through whom sales of the Shares may be made may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and their commissions or discounts and other compensation may
be regarded as underwriters' compensation. See "Plan of Distribution."
The Company's Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the symbol "CYTR." On May 20, 1998
the last reported closing price of the Common Stock was $2.75 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 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.
THE DATE OF THIS PROSPECTUS IS MAY 26, 1998
<PAGE>
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, 1997 filed with the Commission on March 30, 1998, as amended on
Form 10-K/A filed with the Commission on May 26, 1998;
(b) the description of the Series A Junior Participating Preferred Stock
Purchase Rights contained in the Company's 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;
(c) 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;
(d) the Company's Current Report on Form 8-K/A filed with the Commission
on July 21, 1997 regarding the acquisition of Zynaxis, Inc. ("Zynaxis"),
including the financial statements attached as Exhibit 99.1 thereto;
(e) the Company's Current Report on Form 8-K filed with the Commission on
February 19, 1998 regarding the disposition by Proceutics, Inc. ("Proceutics")
of substantially all of its non-real estate assets;
(f) the Company's Current Report on Form 8-K filed with the Commission on
May 1, 1998 regarding the disposition of substantially all of the assets of
VetLife, Inc. ("VetLife"), including the restated consolidated financial
statements attached as Exhibit 99.1 thereto;
(g) the Company's Current Report on Form 8-K filed with the Commission on
May 26, 1998 regarding the disposition of the two buildings owned by CytRx and
Proceutics and including supplemental pro forma condensed financial statements
regarding the sale of VetLife, Proceutics and the disposition of the two
buildings, and the acquisition of Zynaxis; and
(h) the Company's Quarterly Report on Form 10-Q for the quarter ended March
30, 1998 filed with the Company on May 15, 1998.
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.
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.
-2-
<PAGE>
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, Inc. 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)/.
-3-
<PAGE>
THE COMPANY
GENERAL
CytRx Corporation was founded in 1985 and is engaged in the development and
commercialization of pharmaceutical-related products and services, primarily
involving human therapeutics focused on high-value critical care therapies (the
"Core Business"). The Company's principal executive offices are located at 154
Technology Parkway, Technology Park/Atlanta, Norcross, Georgia 30092, telephone
number: (770) 368-9500. References herein to "the Company" include CytRx and
each of its subsidiaries.
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 incurred net losses for each of the fiscal years ended December
31, 1995, 1996 and 1997. For the year ended December 31, 1997, the Company had
consolidated net operating losses of approximately $6.1 million. Since its
inception, the Company has been primarily engaged in the Core Business. The
Company's consolidated net operating losses to date have been generated
primarily from the research and development activities associated with its Core
Business and the Company's lack of significant operating revenues. The Company
will incur substantial additional losses until such time, if any, that its
primary products, including, but not limited to Flocor and Optivax, 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. In view of the prior operating history of the Company,
there can be no assurance that the Company will ever 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.
DISPOSITION OF CERTAIN OPERATING SUBSIDIARIES; SUBSTANTIAL DECREASE IN COMPANY'S
REVENUES
On February 16, 1998 the Company sold substantially all of the non-real
estate assets of Proceutics for approximately $2.1 million. On April 17, 1998,
CytRx and VetLife sold substantially all of the assets of VetLife for
approximately $3.5 million in cash, an unsecured subordinated promissory note in
the principal amount of $4.0 million, and contingent payments of up to $5.5
million based on the sales of certain of the purchaser's products. On May 11,
1998, CytRx and Proceutics sold two buildings that they owned at 150 and 154
Technology Parkway, Norcross, Georgia for approximately $4.5 million. The sales
were consummated to increase the capital available for funding the clinical
trials and continued research and development for the Company's pharmaceutical
products, including FLOCOR. The Company's divested businesses accounted for
substantially all of the Company's revenues for the year ended December 31,
1997. The lack of future revenues from these services may require the Company to
obtain additional financing to fund the necessary testing and data collection
procedures prescribed by the U.S. Food and Drug Administration ("FDA") for the
commercialization of any products for human use. There can be no assurance that
the Company will be able to obtain additional financing on terms satisfactory to
it. The inability to obtain such funds and to continue the Company's clinical
trials and research and development activities could have a material adverse
effect on the Company's business.
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS AND
TECHNOLOGIES
The Company's products and technologies are in various stages of
development and significant amounts of money and time will be required to
develop and commercialize them. Research and development activities, by their
nature, preclude definitive statements as to the time required and costs
involved in reaching certain objectives. Therefore, actual research and
development costs could exceed budgeted amounts, and estimated time frames may
require extension. Cost overruns due to unanticipated regulatory delays or
demands, unexpected adverse side effects or insufficient therapeutic efficacy
would prevent or substantially slow development efforts and ultimately could
have a material adverse effect on the Company and its partners. If the Company
or its partners encounter technical problems in the further development of the
Company's products or technologies, the Company could be required either to
abandon or substantially modify its development programs. There can be no
assurance that any of the Company's products or technologies will prove to be
safe and effective and there can be no assurance that any of the Company's
products or technologies will be approved by the U.S. FDA or equivalent foreign
authorities or that, if approved, such products or technologies will be accepted
in the market or can be commercialized in a profitable manner. Furthermore, the
Company's products and technologies could produce adverse side effects after
commercialization. There can be no assurance that the Company will be able to
overcome all of these obstacles and successfully develop and commercialize any
of its products or technologies.
NEED FOR FUTURE FINANCING
The Company's financial resources are limited and the amount of funding
that it will require to develop and commercialize its products and technologies
is highly uncertain. Adequate funds may not be available when needed or on
terms satisfactory to the Company. Lack of funds may cause the Company to
delay, reduce and/or abandon certain or all aspects of its research and
development programs. The initiation of the Phase III clinical trial for FLOCOR
and related activities in preparation for commercialization has greatly
increased the Company's need for capital. Management believes that cash and
investments on hand, combined with interest income, operating revenues and the
proceeds from the Company's divestitures of its non-core businesses and the sale
of its real estate assets will be sufficient to satisfy the Company's projected
liquidity and working capital needs through late 1999, but it is likely that
additional funding will be required to accomplish the necessary testing and data
collection procedures prescribed by the U.S. FDA for the commercialization of
any products for human use. Definitive statements as to the time required and
costs involved in reaching certain objectives for the Company's products are
difficult to project due to the uncertainties of the medical research field.
Requirements could vary depending upon the results of research, competitive and
technological developments, and the time and expense required for governmental
approval of products, some of which factors are beyond management's control. The
Company may seek additional funding for its research and development activities
through a variety of financing mechanisms, including the issuance of equity
securities. Any such financing could dilute the Company's existing shareholders.
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
-4-
<PAGE>
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 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
application. 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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<PAGE>
INTELLECTUAL PROPERTY RISKS
The Company's success will depend, in part, upon its ability to develop
patentable products and technologies and to obtain effective patent protection
for its products and technologies both in the United States and in other
countries. The Company believes that its patents are critical to its prospects
for success and that the Company has perfected its patent and trademark rights
in those jurisdictions where it anticipated selling and marketing its
technologies. 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 that
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.
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 could 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.
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 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.
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<PAGE>
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 perform better than or as well as products that may be
being developed by the Company's competitors, or that the Company's competitors
will not develop products or technologies that will render the Company's
products and technologies obsolete or less competitive.
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. 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 products to generate adequate
commercial demand, or the failure of the Company's products to gain substantial
market acceptance and market share, could have a material adverse effect on the
Company's business, financial condition or results of operations.
LACK OF MARKETING EXPERIENCE
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 and 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.
LACK OF NEEDED STRATEGIC THIRD-PARTY RELATIONSHIPS
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, products and technologies 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. Indeed, at the present
time Vaxcel does not own or have the right to any vaccines or antigens that can
be used with Optivax or the Zynaxis technologies and Vaxcel's success is
dependent upon its ability to license its technologies to vaccine manufacturers
for use with their vaccines. 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 its ability to
enter into relationships with strategic partners and the ultimate performance of
the strategic partners. There can be no assurance that the Company will be able
to negotiate needed strategic relationships in the future or that once those
strategic relationships have been formed, they will not be terminated. With
respect to the products of Vaxcel and Zynaxis, the inability of the Company to
form relationships with strategic partners would cause the Company to establish
marketing and distribution channels for its products.
Although the Company views 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 strategic partners would view their
relationships with the Company as significant for their own businesses or that
they would not reassess their commitment to the Company after entering into the
relationship. The Company's arrangements with
-7-
<PAGE>
strategic partners may not establish minimum performance requirements for the
Company's strategic partners, but instead may rely on the voluntary efforts of
these partners in pursuing joint goals. In addition, even if not restricted by
contract, the Company 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 strategic partner
arrangements could result in strategic partners seeking alternative arrangements
with other pharmaceutical or biotechnology companies, which could have a
material adverse impact on the Company.
IMPACT OF TECHNOLOGY TRANSFER ACT OF 1986; BAYH-DOLE ACT
The Company has a wide variety of copolymers available for its use, some of
which were in-licensed from Emory University and others which were developed by
the Company. Optivax is the tradename for a family of proprietary nonionic block
copolymers that augment or modify the immune response to vaccines when
administered primarily by injection. Optivax copolymers act both as a delivery
system by targeting vaccines to cells of the immune system and as an adjuvant
because of its ability to augment the immune system's response to vaccines. The
development of certain Optivax copolymers in-licensed from Emory University was
supported with federal funds. Federal funds were not used, however, to support
the development of certain other Optivax copolymers developed by the Company. At
present, the Company is only developing Optivax copolymers that have not been
supported by federal funds. If Vaxcel were to pursue commercialization of
Optivax copolymers that utilized federal funds during development, such Optivax
copolymers would be subject to the Technology Transfer Act of 1986 or the Bayh-
Dole Act, whereby the federal government retains a non-exclusive right to make,
have made, or sell any invention that results from the activities of the federal
government or the use of federal funds. If the federal government were to
exercise any of such rights in the future, the business and financial condition
of Vaxcel could be materially adversely affected.
HEALTH CARE REFORM INITIATIVES
Health care reform remains an area of increasing national and international
attention. Several proposals to modify the current health care system in the
United States to improve access and control costs currently are being considered
by both federal and state governments. Any such reform measures could adversely
affect the amount of reimbursement available from governmental or private payers
or could affect the ability to set prices for newly approved products. Similar
proposals are being considered by governmental officials in other significant
pharmaceutical markets, including Europe. It is uncertain what proposals will be
adopted or what actions governmental or private payers for health care goods and
services may take in response to proposed or actual legislation in the United
States or other important markets. Any such health care reform proposals may
materially adversely affect the business of the Company.
NO ASSURANCE OF ADEQUATE REIMBURSEMENT
The success of the Company's products and technologies in the United States
and other significant markets will depend in part upon the extent to which a
consumer will be able to obtain reimbursement for the cost of such products from
government health administration authorities, private health insurers and other
organizations. Uncertainty exists as to the reimbursement status of any newly
approved product. Government and other third-party payors are increasingly
attempting to contain health care costs by refusing, in some cases, to provide
any coverage for uses of approved products for disease indications for which the
FDA has not granted marketing approval and by limiting both coverage and the
level of reimbursement for new technologies approved for marketing by the FDA.
If adequate coverage and reimbursement levels are not provided by government and
third-party payors for use of the Company's products or technologies, the market
acceptance of such products or technologies would be adversely affected. Even if
a product is approved for marketing, there can be no assurance that patients
will have sufficient resources to pay for the therapy or that governmental or
private payers will provide adequate reimbursement for such product, if at all.
The Company has initiated discussions with consultants or other advisors that
will assist the Company in identifying, targeting and communicating with
government and other third-party payors, to develop the Company's strategy for
seeking adequate reimbursement from such payors. The Company will not be able
to finalize its strategy for any product until it has obtained all of the
required regulatory approvals for the product, and established the market price
of the product.
-8-
<PAGE>
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 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.
RISKS RELATED TO INADEQUATE SUPPLY OF MATERIALS; DEPENDENCE ON SUPPLIERS AND
MANUFACTURERS
Management believes that the Company has an adequate supply of materials on
hand to meet the Company's needs for 2 to 3 years (both drug substance and
formulated drug product) which management anticipates to be sufficient to
complete the anticipated studies necessary for filing a New Drug
Application/Product License Application with the FDA. However, it is possible
that delays and complications, among other factors, could make the Company's
current supply inadequate. If the Company is unable to obtain additional
materials, such inability could have a material adverse effect on the Company's
business.
The Company requires three suppliers of materials or services to
manufacture its product; (i) a supplier of the raw drug substance, (ii) a
supplier of the purified drug which is refined from the raw drug substance and
(iii) a manufacturer who can formulate and sterile fill the purified drug
substance into the finished drug product. The raw drug substance is currently
widely available at commercial scales from numerous manufacturers. The Company
has not entered into a formal agreement with any supplier for the raw drug
substance because of its wide availability. To obtain the purified drug
substance, the Company has entered into an agreement with a French company.
Management believes that such agreement provides for adequate material to meet
the Company's needs for the next 2 to 3 years. There can be no assurance that
the Company's relationship with such supplier will continue or that the Company
will be able to obtain additional purified drug substance if the Company's
current supply is inadequate. Such inability to obtain additional purified drug
substance in amounts and at prices acceptable to the Company could have a
material adverse effect on the Company's business. To meet the need for
manufacture of the Company's finished drug product, the Company has entered into
a supply agreement with the Hospital Products Division of Abbott Laboratories.
The inability of the Company to maintain such relationship on terms acceptable
to the Company could have a material adverse effect on the Company's business.
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. 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 Mr. Luchese 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
The Company could be exposed to possible claims for personal injury
resulting from allegedly defective products or technologies. 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 or technologies has
been successfully maintained against the Company, a substantial claim, if
successful, could have a material adverse effect on the Company. The Company
maintains product liability insurance covering the use of its products in human
clinical trials, and may extend coverage under this insurance to institutions or
individuals who are collaborating with the Company for the development of its
products. The Company will obtain product liability coverage to protect third-
party manufacturers of the Company's products only if required by the agreement
with such manufacturer.
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
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<PAGE>
operating results, announcements of regulatory developments, technological
innovations or new therapeutic products, 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. Also as a result of the Merger, Vaxcel acquired the PLG
microencapsulation and mucoadhesive vaccine technologies of Zynaxis. Neither of
such technologies are final product. They were designed to be combined with a
vaccine to formulate a final product for oral delivery. Based on their current
stage of development, it will take several additional years to generate
sufficient data for FDA approval of oral vaccines containing either technology.
The Company deems such Zynaxis technologies to be complementary to Vaxcel's
technologies, including Optivax. However, 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.
ANTI-TAKEOVER PROTECTIONS
At 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 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 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
provide that directors may only be removed for 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 14a-8(a)(4)
promulgated under the Exchange Act or any amendment or successor to such rule
(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.
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<PAGE>
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"), on May 15, 1997 the Company
distributed a dividend with respect to each share of Common Stock outstanding on
such date of 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 (the "Exercise Price"), 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 ten business days (unless changed by the Board of Directors
as provided in the Rights Agreement) after an announcement of the acquisition by
a third party (an "Acquiring Person") of 15% or more of the Common Stock, or ten
business days (unless changed by the Board of Directors as provided in the
Rights Agreement) after the commencement of a tender offer for 15% or more of
the Common Stock. If a Flip-In Date occurs (i.e., the close of business ten
----
days following announcement by the Company that a person has become an Acquiring
Person), Rights owned by the Acquiring Person or any affiliate or associate
thereof or any transferee thereof will automatically become void and, subject to
the right of the Board of Directors to cause the Company to exchange shares of
Common Stock for the Rights or to terminate the Rights, each other Right will
automatically become a right to buy, for the Exercise Price, that number of
shares of Common Stock having a market value equal to twice the Exercise Price.
After a Flip-In Date occurs, the Company may not consolidate or merge with, or
sell 50% or more of its assets or earning power to, any person, if the Company's
Board of Directors is controlled by the Acquiring Person, unless proper
provision is made so that each Right would thereafter become a right to buy, for
the Exercise Price, that number of shares of common stock of such other person
having a market value of twice the Exercise Price.
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 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.
The existence of the foregoing provisions in the Company's bylaws, and the
existence of the Rights Agreement, could adversely affect the market price of
the Common Stock, as the market may be willing to pay less for shares of Common
Stock as a result of a decreased probability of a change in control.
Impediments to a change in control could 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.
Further, the foregoing provisions could have the effect of preserving encumbent
management in office.
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends in the past on its Common Stock
and does not anticipate paying any such cash dividends in the foreseeable
future. Earnings, if any, will be retained to finance future growth.
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<PAGE>
SELLING STOCKHOLDER
All of the Shares are being sold by Jack J. Luchese, the Selling
Stockholder. The Selling Stockholder will receive all of the proceeds from the
sale of the Shares. The following table sets forth, as of the date of this
Prospectus, certain information with respect to the ownership of shares of
Common Stock by the Selling Stockholder.
<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES
BENEFICIALLY
NUMBER OF NUMBER OF OWNED AFTER
NAME OF SELLING STOCKHOLDER SHARES OWNED SHARES OFFERED OFFERING
- --------------------------- ------------ -------------- -----------
<S> <C> <C> <C>
JACK J. LUCHESE 711,663(1) 1,382,427 *
</TABLE>
(1) Includes 669,927 shares of Common Stock that are subject to warrants or
stock options that are currently exercisable or will become exercisable within
60 days of the date of this Prospectus.
* Less than one percent.
The Selling Stockholder has served as President and Chief Executive Officer
of the Company since March 13, 1989, and was elected as a director effective
March 24, 1989, the date upon which the Selling Stockholder executed an
employment agreement. The Selling Stockholder was elected Chairman of the Board
of Directors of the Company at the Company's annual meeting of June 8, 1995.
Under his original employment agreement and certain amendments thereto, the
Selling Stockholder received warrants to purchase an aggregate of 2,500,000
shares of Common Stock, the underlying shares of which have been registered
pursuant to Company's registration statements on Form S-3 (Registration Nos. 33-
44618 and 33-63002). As amended and restated on February 20, 1995, to extend the
Selling Stockholder's term of employment with the Company, the employment
agreement consolidates (through cancellation and reissuance) all warrants
previously granted to the selling stockholder (the "Amended and Restated
Employment Agreement"). In addition, the Amended and Restated Employment
Agreement granted the Selling Stockholder an additional 229,706 warrants, the
underlying shares of which were registered pursuant to the Company's
registration statement on Form S-3 (Registration No. 33-93820). As a result of a
reverse 1-for-4 stock split effective February 6, 1996, these previously granted
warrants are now warrants to purchase 682,427 shares of Common Stock. Of these
warrants, warrants to purchase 657,427 shares of Common Stock have vested, with
warrants to purchase an additional 6,250 shares vesting at the beginning of each
calendar quarter.
On March 26, 1996, June 26, 1997 and April 8, 1998, the Selling Stockholder
was granted additional warrants to purchase 200,000 shares of Common Stock at a
price of $3.6875 per share, 50,000 shares of Common Stock at a price of $4.125
per share, and 450,000 shares of Common Stock at a price of $2.9375 per share,
respectively. The shares underlying these warrants were registered pursuant to
the registration statement on Form S-3 of which this Prospectus is a part. The
warrant to purchase 200,000 shares of Common Stock vests based upon the
achievement of certain corporate financing milestones. The warrant to purchase
50,000 shares of Common Stock vests as to 6,250 shares of Common Stock on each
of March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 and
as to the remaining 25,000 shares of Common Stock if the price of the Company's
Common Stock reaches $20.00 per share by December 31, 1999. The warrant to
purchase 450,000 shares of Common Stock vests upon the achievement of certain
milestones regarding the price per share of the Company's Common Stock.
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<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholder may be sold from time
to time by the Selling Stockholder, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on one or more exchanges or in
the over-the-counter market, or otherwise at prices and at terms then prevailing
or at prices related to the then-current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following methods,
without limitation: (a) a block trade in which the broker-dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; (d) an exchange distribution in accordance
with the rules of such exchange; and (e) face-to-face transactions between the
Selling Stockholder and purchasers without a broker-dealer. In effecting sales,
brokers or dealers engaged by the Selling Stockholder may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from the Selling Stockholder in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
might be sold under Rule 144 rather than pursuant to this Prospectus.
Upon the Company being notified by the Selling Stockholder that any
material arrangement has been entered into with a broker for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplemental Prospectus will
be filed, if required, pursuant to Rule 424(c) under the Securities Act,
disclosing (a) the name of each such broker-dealer, (b) the number of shares
involved, (c) the price at which such shares were sold, (d) the commissions paid
or discounts or concessions allowed to such broker-dealer(s), where applicable,
(e) that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this Prospectus, as
supplemented, and (f) other facts material to the transaction.
The Company is bearing all costs relating to the registration of the
Shares. Any commissions or other fees payable to broker-dealers in connection
with any sale of the Shares will be borne by the Selling Stockholder.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon the Company
by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 filed on March 30, 1998, as amended on Form 10-K/A filed on
May 26, 1998 and the restated consolidated financial statements of the Company
included in the Company's Current Report on Form 8-K filed on May 1, 1998 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements referred to above are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Zynaxis, Inc. and subsidiaries for
the year ended December 31, 1996 incorporated by reference in this registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in the report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
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<PAGE>
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 THE 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........................... 2
Available Information..................................................... 3
Forward-Looking Statements................................................ 3
The Company............................................................... 4
Risk Factors.............................................................. 4
Selling Stockholder....................................................... 12
Plan of Distribution...................................................... 13
Legal Matters............................................................. 13
Experts................................................................... 13
</TABLE>
1,382,427 SHARES
CYTRX CORPORATION
COMMON STOCK
___________________________
PROSPECTUS
___________________________
May 26, 1998
<PAGE>
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.
No portions of these fees will be borne by the Selling Stockholder.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................................. $248.91
Nasdaq National Market Listing Fee................................................... 0.00
Accountants' Fees and Expenses....................................................... 5,000.00*
Legal Fees and Expenses.............................................................. $10,000.00*
----------
Total............................................................................. $15,248.91*
==========
</TABLE>
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Registrant was amended in 1986 so
as to eliminate personal liability of the members of the Board of Directors to
the fullest extent permitted by law. Specifically, Article Eleventh of the
Certificate of Incorporation provides as follows:
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 addition, the Certificate of Incorporation and By-Laws of the Registrant
provide for indemnification of all officers and directors of the Registrant to
the fullest extent permitted by law. In particular, Article Nine of the
Certificate of Incorporation provides as follows:
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
II-1
<PAGE>
a director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Article Five of the Corporation's By-Laws provides as follows:
1. MANDATORY INDEMNIFICATION. The corporation shall indemnify, to
the fullest extent permissible under Delaware law, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action or suit by or in the right of the corporation
to procure a judgment in its favor, by reason of the fact that he or she is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
2. MANDATORY ADVANCEMENT OF EXPENSES. Expenses reasonably and
actually incurred by a director, officer, employee, or agent in the course of
defending any suit under paragraph 1 of this Article V shall be paid by the
corporation in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director,
officer, employee, or agent to repay such amounts if it is ultimately determined
that he is not entitled to be indemnified by the corporation. The corporation
shall pay these expenses as they are incurred by the person who may be entitled
to indemnification.
3. CONTINUATION OF RIGHT TO INDEMNIFICATION. The indemnification
and advancement of expenses expressly provided by this bylaw shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
4. INTENT OF BYLAW. The intent of this Article V is to provide the
broadest possible rights to indemnification to the directors, officers,
employees, and agents of the corporation permissible under the law of Delaware
and not to affect any other right to indemnification that may exist.
Section 145 of the Delaware General Corporation Law provides as follows:
(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
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(b) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, 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.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
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(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement, vote
of stockholders or disinterested directors, or otherwise. The Court of Chancery
may summarily determine a corporation's obligation to advance expenses
(including attorneys' fees).
Section 102(b)(7) of the Delaware General Corporation Law enables a
corporation in its certificate of incorporation to eliminate or limit personal
liability of members of this board of directors or governing body for violations
of a director's fiduciary duty of care. However, directors remain liable for
breaches of duties of loyalty, failing to act in good faith, engaging in
intentional misconduct, knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal under Delaware General
Corporation Law Section 174 or obtaining an improper personal benefit. In
addition, equitable remedies for breach of fiduciary duty, such as injunction or
recession, are available.
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 registrant for a wrongful act
that they may become legally obligated to pay or for which the registrant is
required to indemnify the directors or officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") 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,
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<PAGE>
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.
In addition, 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 such directors or officers may become legally obligated to pay
or for which the Company is required to indemnify the directors and officers,
including liability under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
Number EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant (Incorporated
herein by reference to Exhibit 3.1 to the Registrant's registration
statement on Form S-3 filed November 5, 1997, Registration No.
333-39607)
4.2 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, Registration No. 333-31717)
4.3 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)
5* Opinion of Alston & Bird LLP
23.1* Consent of Alston & Bird LLP (included in Exhibit 5 above)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Arthur Andersen LLP
24 * Powers of Attorney
</TABLE>
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
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(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities being offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
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 May 26, 1998.
CYTRX CORPORATION
By: /s/ Jack J. Luchese
-------------------
Jack J. Luchese
President and Chief Executive
Officer
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 May 26, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Jack J. Luchese Director, President and Chief Executive Officer
- ------------------------------ (Principal Executive Officer)
Jack J. Luchese
/s/ Mark W. Reynolds* Chief Financial Officer (Principal Financial
- ------------------------------ Officer and Principal Accounting Officer)
Mark W. Reynolds
/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>
- ------------
* Signed by Jack J. Luchese on behalf of such individual pursuant to the
power-of-attorney previously filed herewith.
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EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) Amendment No. 1 and related Prospectus of
CytRx Corporation for the registration of 700,000 shares of its common stock and
to the incorporation by reference therein of our report dated February 27, 1998
with respect to the consolidated financial statements of CytRx Corporation
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1997 as amended by Amendment No. 1 on Form 10-K/A on May 26, 1998
and the related financial statement schedule included therein, and to the
incorporation by reference therein of our report dated February 27, 1998 (except
for Note 12, as to which the date is April 17, 1998) with respect to the
restated consolidated financial statements of CytRx Corporation for the year
ended December 31, 1997 included in its Current Report on Form 8-K dated May 1,
1998 filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
May 18, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Pre-Effective Amendment No. 1 to Form S-3 Registration
Statement of our report dated January 21, 1997 with respect to the consolidated
financial statements of Zynaxis, Inc. and subsidiaries for the year ended
December 31, 1996 included in CytRx Corporation's Amendment No. 1 to Form 8-K
filed on June 3, 1997 and to all references to our Firm included in this
Pre-Effective Amendment No. 1 to Form S-3 Registration Statement.
Philadelphia, Pa.,
May 20, 1998
