850,000 SHARES
PROSPECTUS
EMISPHERE TECHNOLOGIES, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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The 850,000 shares (the "Shares") of Common Stock, par value $.01 per
share (the "Common Stock"), of Emisphere Technologies, Inc. (the "Company" or
"Emisphere" ) offered hereby are being offered for the account of Elan
International Services Ltd. (the "Selling Stockholder"). The Shares include
250,000 shares of Common Stock which the Company may issue to the Selling
Stockholder upon the exercise by it of certain warrants with an exercise price
of $16.25 per share (the "Warrants"). The Company will not receive any proceeds
from the sale of the Shares.
The Shares may be offered by the Selling Stockholder for sale through
underwriters or dealers or from time to time on the Nasdaq National Market, or
otherwise, at prices then obtainable. The Company has agreed to indemnify the
Selling Stockholder against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Selling
Stockholder and any broker executing selling orders on behalf of the Selling
Stockholder may be deemed to be underwriters within the meaning of the
Securities Act. Commissions received by underwriters or by any such broker may
be deemed to be underwriting commissions under the Securities Act. The Company
will bear all expenses in connection with the registration and sale of the
Shares being offered by the Selling Stockholder, other than commissions,
concessions or discounts to underwriters, brokers or dealers. See "Plan of
Distribution."
The Common Stock of the Company is listed on the Nasdaq National Market
under the trading symbol "EMIS." On January 31, 1997, the last reported sale
price of the Company's Common Stock on the Nasdaq National Market was $23.25
per share.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is February 4, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at its
office at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of this material can also be
obtained from the Commission's web site at "http://www.sec.gov" and at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is quoted
on the Nasdaq National Market. Reports, proxy statements and other information
concerning the Company can be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement, exhibits, schedules
thereto, and the financial statements and notes thereto filed or incorporated by
reference as a part thereof, which are on file at the offices of the Commission
and may be obtained upon payment of the fee prescribed by the Commission, or may
be examined without charge at the offices of the Commission. Statements made in
this Prospectus concerning the contents of any document referred to herein are
not necessarily complete and, in each such instance, are qualified in all
respects by reference to the applicable documents filed with the Commission. The
Registration Statement and the exhibits thereto filed by the Company with the
Commission may be inspected and copied at the locations described above.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended July 31, 1996;
(2) Quarterly Report on Form 10-Q for the fiscal quarter ended October
31, 1996;
(3) The description of the Company's preferred stock purchase rights
contained in its Registration Statement on Form 8-A, dated March 5,
1996; and
(4) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, dated September 11, 1990.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock hereunder shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
the filing of such reports and documents. The Company will provide a copy of any
or all of such documents (exclusive of exhibits unless such exhibits are
specifically incorporated by reference therein), without charge, to each person
to whom this Prospectus is delivered, including any beneficial owner, upon
written or oral request to: Emisphere Technologies, Inc., 15 Skyline Drive,
Hawthorne, New York 10532, Attention: Secretary (telephone (914) 347-2220).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the 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. See "Special Note
Regarding Forward-Looking Statements."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: uncertainties related to future
testing results and viability of the Company's products; the Company's
dependence on partnerships with pharmaceutical and other companies to develop,
manufacture and commercialize products using the Company's drug delivery
technologies; the need to obtain regulatory approval for the Company's products;
the availability, terms and development of capital; the risk of technological
obsolescence in a highly competitive industry; the Company's dependence on
patents and proprietary rights; the Company's absence of profitable operations
and need for additional capital; the Company's dependence on others to
manufacture the Company's chemical compounds; the risk of product liability and
policy limits of product liability insurance; potential liability for human
clinical trials; the Company's dependence on key personnel; the quality,
judgment and strategic decisions of management and other personnel; uncertain
availability of third-party reimbursement for commercial medical products;
general business and economic conditions; and other factors referenced in this
Prospectus and in the Company's filings with the Commission.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY BEFORE PURCHASING THE
COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE SECURITIES ACT AND THE EXCHANGE ACT. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE
RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS." SUCH FACTORS INCLUDE, AMONG OTHERS, THE RISK FACTORS SET FORTH
BELOW.
EARLY STAGE OF PRODUCT DEVELOPMENT
The Company's primary focus is on using its proprietary technologies to
discover and commercialize its proprietary synthetic chemical compounds
("carriers") that enable the oral delivery of therapeutic macromolecules and
other compounds, which has not yet resulted in a commercial product. Should its
carrier technologies prove not to be commercially successful, the Company's
prospects will be materially adversely affected.
A number of companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in clinical trials, even after showing
promising results in earlier studies or trials. Although the Company has
obtained certain favorable results to date in preclinical studies of certain
carrier compounds and Phase I clinical trials for the oral delivery of heparin,
such results may not be predictive of results that will ultimately be obtained
in future clinical trials. There can be no assurance that results of the
Company's limited animal and human studies are indicative of results which would
be achieved in additional animal studies or human clinical studies, all or some
of which will be required with respect to various of the Company's proposed
products before regulatory approval can be obtained, and there can be no
assurance that such approval will be granted. Except for heparin, the Company
has not conducted any human testing. The Company has not yet identified the
optimum formulation of carrier for any drug nor has the Company arrived at a
final manufacturing process for a finished product. Furthermore, it is possible
that effective formulation with the Company's carriers may not be possible for
certain drugs. In that event, the Company would most likely be unable to pursue
commercialization arrangements with respect to those drugs. There can be no
assurance that the Company will not encounter problems in its clinical trials
that will cause the Company to delay or suspend its clinical trials, that the
clinical trials of its products will be completed at all, that such testing will
ultimately demonstrate the efficacy of such products or that any products will
receive regulatory approval on a timely basis, if at all. If any such problems
occur, the Company could be materially adversely affected.
IMPORTANCE OF PARTNERSHIPS WITH PHARMACEUTICAL COMPANIES
Revenues from the Company's drug delivery technologies will be dependent
upon the production and sale of products utilizing the Company's technologies.
The Company does not currently possess the ability or resources necessary to
complete on its own the development, testing, regulatory approval process and
commercialization for pharmaceutical products utilizing its drug delivery
technologies and the Company does not intend independently to market products
incorporating its technologies in the foreseeable future. It is the Company's
strategy to seek to enter into agreements with pharmaceutical companies that
will assist the Company in development, testing, obtaining government approval
for, and marketing and commercializing of the various formulations of its drug
delivery technologies. Other than a joint venture between the Company and an
affiliate of the Selling Stockholder, Elan Corporation plc, for developing and
commercializing an oral heparin product, no commitments or development
agreements have been entered into. See "-- The Elan Joint Venture." The Company
has entered into feasibility and other preliminary arrangements with other
pharmaceutical companies with respect to drugs other than heparin; none has
resulted in the creation of any long term relationship or product. While the
Company is frequently engaged in discussions with pharmaceutical and other
companies, there can be no assurance that the Company will be able to enter into
additional collaborative arrangements with respect to product development
utilizing the Company's drug delivery technologies, that any existing or future
collaborative arrangements will be successful or what the terms of any
development agreements entered into will be. If the Company is unable to obtain
development assistance and funds
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from pharmaceutical companies to fund a portion of its product development costs
and to commercialize products, the Company may have to delay, scale back or
curtail one or more of its activities. In the event no other pharmaceutical
company enters into a development agreement with the Company, the Company may
not have the financial resources to undertake the commercial development of
products.
In negotiating development agreements, the Company intends to seek funding
with respect to a portion of development costs necessary to commercialize the
product or products to which the agreement applies. The Company expects that the
parties to development agreements will want the legal right to abandon a product
at any time for any reason without significant penalty and there can be no
assurance that such right will not be exercised. Further, potential development
partners may have no obligation to deal exclusively with the Company in
developing new drug delivery methods for their drugs and may pursue parallel
development of other drug delivery technologies on their own or with other
collaborative partners which may compete with the Company's oral drug delivery
technologies.
Although the Company believes that there should be sufficient economic
incentive for development partners to devote resources to seeking to
commercialize products utilizing the Company's drug delivery technologies, the
Company will have no control over the resources and attention devoted by its
partners to the development of a product and, to the extent resources devoted
are limited, the Company may be adversely affected. Moreover, the terms of any
future development agreements, if any, with respect to a particular drug may
preclude or restrict the Company from entering into alternative arrangements
with other pharmaceutical companies for the same or competing drugs.
NEED FOR REGULATORY APPROVAL OF PRODUCTS
The Company's preclinical studies and clinical trials and the
manufacturing and marketing of its carriers and technologies are subject to
extensive, costly and rigorous regulation by various governmental authorities in
the United States and other countries. The process of obtaining required
regulatory approvals from the U.S. Food and Drug Administration (the "FDA") and
other regulatory authorities often takes many years, is expensive and can vary
significantly based on the type, complexity and novelty of the product. There
can be no assurance that any technologies or carriers developed by the Company,
independently or in collaboration with others, will meet applicable regulatory
criteria to receive the required approvals for manufacturing and marketing.
Delays in obtaining United States or foreign approvals could result in
substantial additional costs to the Company and adversely affect the Company's
competitive position. In addition, delays in regulatory approvals that may be
encountered by corporate collaborators or other licensees of the Company could
adversely affect the Company's business and prospects.
The Company has neither sought nor received regulatory approval for the
sale of any products in the United States or in any foreign country. The Company
has completed a Phase I clinical trial in the United States for one of its drug
delivery technologies for heparin but there can be no assurance that the FDA
will permit further testing in a timely fashion, if at all. Delays or rejections
may be encountered for a number of reasons, including changes in FDA policy
during the period of product development and FDA regulatory review. Similar
delays may also be encountered in other countries. There can be no assurance
that even after such time and expenditures, regulatory approval will be obtained
for any products developed by the Company. If regulatory approval of a product
is granted, such approval may entail limitations on the indicated uses for which
the product may be marketed. Further, even if regulatory approval is obtained, a
marketed product, its manufacturer, and its manufacturing facilities are subject
to continual review and periodic inspections, and later discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on such product, manufacturer or facility, including withdrawal of
the product from the market. If the Company is unable to obtain regulatory
approvals for products on a timely basis, or if the Company is unable to
continue to be in regulatory compliance, the Company's business and prospects
will be materially adversely affected.
Any new dosage form of any drug is required to undergo rigorous
preclinical and clinical testing and an extensive review process mandated by the
FDA and equivalent foreign authorities prior to marketing. There can be no
assurance that the Company will develop commercially viable products, that the
necessary regulatory approvals for any of the Company's products currently under
development will be obtainable or that, if such approvals are obtainable,
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they will be forthcoming on a timely basis. These review and approval processes
can take several years and require the expenditure of substantial resources.
THE ELAN JOINT VENTURE
On September 26, 1996, the Company and an affiliate of the Selling
Stockholder, Elan Corporation plc ("Elan"), finalized the formation of a joint
venture (the "Elan Joint Venture"), pursuant to a letter of intent entered into
in October 1995, to combine Elan's drug delivery and formulation capabilities
with the Company's carrier technologies to research, develop and market oral
formulations of heparin and heparinoids. The Company and Elan are sharing the
financial benefits and expense obligations of the Elan Joint Venture on a 50/50
basis and they have equal representation on the Board of Directors of the joint
venture company (the "JV Company").
The Elan Joint Venture represents the exclusive vehicle through which the
Company will develop and market orally deliverable heparin. Because the
Company's testing of its carrier for heparin is in a more advanced state than
any others of the Company's carriers, and because the Elan Joint Venture is the
sole long-term collaborative arrangement that the Company has established with a
pharmaceutical company, the Company would be materially adversely affected if
the Elan Joint Venture does not continue or is not successful.
Risks inherent to the Elan Joint Venture (other than relating to the
product itself) include the following: (i) the Company may not have the
necessary resources to comply with its obligation to satisfy 50% of the Elan
Joint Venture's financial requirements (after exhaustion of the funds committed
by Elan), (ii) the commercialization of the product will require significant
financial resources that may ultimately not be available to the Elan Joint
Venture, in which case the Elan Joint Venture would be materially adversely
affected, (iii) a failure of either Elan or the Company to satisfy its
respective share of the Elan Joint Venture's financial requirements would
constitute a "default" under the Elan Joint Venture Agreement which could, under
procedures set forth therein, result in the non-defaulting party having the
right to invoke a forced purchase or sale by Elan or the Company of the
interests held by the other in the Joint Venture Agreement on terms that may be
disadvantageous to the Company, (iv) a change in control of the Company also
constitutes a "default", with the invocation of the purchase/sale procedure
described in (iii) above; and this provision, of itself, may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price of the
Common Stock, and may adversely effect the market price of the Common Stock, (v)
a deadlock could arise in the event of disagreements between Elan and the
Company as to matters that are not resolved through the various non-binding
arbitration procedures contained in the Joint Venture Agreement. Such deadlock
would have a material adverse affect on the Elan Joint Venture and could result
in the invocation of the purchase/sale procedure described in (iii) above or a
dissolution of the Elan Joint Venture in a manner that may be disadvantageous to
the Company, and (vi) while Elan and the Company contemplate that all benefits
of the Elan Joint Venture shall be shared on a 50/50 basis, there are certain
limited circumstances under which, by virtue of the structure of the Elan Joint
Venture, Elan may have a $4,500,000 preference over the Company in returns from
the Elan Joint Venture.
HIGHLY COMPETITIVE INDUSTRY AND RISK OF TECHNOLOGICAL OBSOLESCENCE
Drug delivery, biotechnology and pharmaceutical science are evolving
fields in which developments are expected to continue at a rapid pace. The
Company's success depends upon maintaining a competitive position in the
development of products and technologies in its areas of focus. The Company is
in competition with other pharmaceutical and biotechnology companies, research
organizations, individual scientists and non-profit organizations engaged in the
development of alternative drug delivery technologies or new drug research and
testing, as well as with entities developing new drugs which may be orally
active. The Company is aware that a number of companies are seeking to develop
new products and alternatives to injectable drug delivery, including, but not
limited to, intranasal delivery, pulmonary systems, transdermal systems and
colonic absorption systems. The Company also is aware of other companies
currently engaged in the development and commercialization of oral drug delivery
technologies and enhanced injectable systems. Many of these companies and
entities have greater research and development capabilities, experience, and
marketing, financial and managerial resources than the Company, and represent
significant competition for the Company. Acquisitions of competing biotechnology
companies by large pharmaceutical companies could
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enhance competitors' financial, marketing and other resources. Accordingly, the
Company's competitors may succeed in developing competing technologies or
obtaining regulatory approval for products more rapidly than the Company. There
can be no assurance that developments by others will not render the Company's
products or technologies uncompetitive or obsolete.
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS
The Company's success, competitive position and future revenues will
depend, in part, on its ability to obtain patent protection in various
jurisdictions related to its technologies, processes and products. The Company
has filed, and expects to continue to file, patent applications seeking such
protection. As of the date of this Prospectus, the Company has been granted
certain patents on its delivery technologies in the United States and has
certain patents issued or applications pending in various countries around the
world. The Company has patent applications relating to its drug delivery
technologies pending in the United States, including an application relating to
its heparin carrier, and has pending or expects to file corresponding patent
applications in various countries around the world. There is no guarantee that
the reissue application will be successful or that the United States Patent and
Trademark Office will not reject all of the patent claims, including those
granted in the original patent. There can be no assurance that any patent
applications relating to the Company's potential products or processes will
result in patents being issued, or that resulting patents, if any, are valid,
enforceable or will provide protection against competitors who successfully
challenge the Company's patents, obtain patents that may have an adverse effect
on the Company's ability to conduct business, or are able to circumvent the
Company's patent position. The Company has conducted database searches to
discover the existence of previous patents and to determine the state of the art
in the field of certain inventions for which patent applications were to be
filed. Database searches are not conclusive however and it is possible that
conflicting patents have been issued and/or that other parties have conducted
research or made discoveries of compounds or processes that preceded the
Company's discoveries and which could prevent the Company from obtaining patent
protection, or could narrow the scope of any protection obtained. There can be
no assurance that the manufacture, use or sale of the Company's product
candidates will not infringe patent rights of others. The Company may be unable
to avoid infringement of those patents and may have to seek a license, defend an
infringement action, or challenge the validity of the patents in court. There
can be no assurance that a license will be available to the Company, if at all,
upon terms and conditions acceptable to the Company or that the Company will
prevail in any patent litigation. Patent litigation is costly and time
consuming, and there can be no assurance that the Company will have sufficient
resources to pursue such litigation. If the Company does not obtain a license
under such patents, is found liable for infringement, or is not able to have
them declared invalid, the Company may be liable for significant monetary
damages, may encounter significant delays in bringing products to market, or may
be precluded from participating in the manufacture, use or sale of products or
methods of treatment covered by such patents. There can be no assurance that the
Company has identified United States and foreign patents that pose a risk of
infringement.
The Company's strategy involves collaborative arrangements with other
pharmaceutical companies for the development of new formulations of drugs
developed by others and, ultimately, the receipt of royalties on sales of the
new formulations of the drugs. These drugs are generally the property of the
other companies and may be the subject of patents or patent applications and
other forms of protection owned by such companies. To the extent such patents or
other forms of protection expire, become invalid or otherwise ineffective or
such drugs are covered by patents or other forms of protection owned by third
parties, sales of such drugs by the collaborating pharmaceutical company may be
restricted, limited, enjoined or may cease. Accordingly, the potential for
royalty revenues to the Company may be adversely affected.
To protect its proprietary technologies and processes, the Company also
relies in part on maintaining trade secrets protected by confidentiality
agreements with its corporate partners, employees, consultants, and certain
contractors. There can be no assurance that these agreements have not been or
will not be breached, that as a practical matter the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become generally known or be independently discovered by competitors and thus
cease being protected.
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ABSENCE OF PROFITABLE OPERATIONS; NEED FOR ADDITIONAL CAPITAL
Since its inception in April 1985, the Company has generated significant
losses from operations and for the foreseeable future the Company anticipates
that it will continue to generate significant losses from operations. At October
31, 1996, the Company's accumulated deficit was approximately $44 million. The
Company's operating revenues to date have been derived primarily from product
development funding from a limited number of pharmaceutical companies. Revenues
have been insufficient to offset the Company's operating expenses. The Company
does not expect to achieve profitability for the foreseeable future.
Profitability in the long term will depend on the Company's ability to gain
regulatory approval for a product. See "--Need for Regulatory Approval of
Products". Circumstances could arise which may result in a need to raise
additional capital in the future. The Company has in the past raised additional
capital through public offerings of its Common Stock and private equity
financings. There can be no assurance that additional equity capital will be
available on acceptable terms, or without severe dilution of the existing
stockholders, if at all. If adequate funds are not available, the Company will
be required to delay, scale back or eliminate some or all of its research or
development programs or relinquish rights to certain of its technologies,
product candidates or products that the Company would not otherwise relinquish.
DEPENDENCE ON OTHERS FOR MANUFACTURING OF THE COMPANY'S CHEMICAL COMPOUNDS
The Company currently has no manufacturing facilities for large-scale
clinical or commercial production of any compounds under consideration as
products. The Company is producing some material for research and preclinical
testing and has been supplied with larger lots of compound by contract
manufacturing companies. For the foreseeable future, the Company does not intend
to manufacture its carriers except for the foregoing limited purposes. If the
Company is unable to contract for manufacturing on acceptable terms or if the
Company cannot obtain compounds manufactured in accordance with specifications
on a timely basis, the ability to conduct preclinical and human clinical testing
will be adversely affected, resulting in the delay of product development and
submission of products for regulatory approval, which in turn could materially
impair the possibility of the Company achieving profitability.
Likewise, under the Elan Joint Venture, the Company is obligated to
provide the JV Company with a supply of carrier for the clinical testing
program. Should the Company be unable to provide the specific amounts of carrier
in the required time periods, delays to the development of oral heparin could
occur which could materially adversely affect the Company's results.
RISKS OF PRODUCT LIABILITY CLAIMS AND CURRENT LIMIT OF PRODUCT LIABILITY
INSURANCE; LIABILITY FOR HUMAN CLINICAL TRIALS
The Company has product liability insurance with a policy limit of only $1
million and the JV Company has agreed to maintain product liability insurance
with a policy limit to be determined. The testing, manufacturing and marketing
of products for humans utilizing the Company's drug delivery technologies may
expose the Company to potential product liability and other claims resulting
from their use. Liability may result from claims made directly by consumers or
by pharmaceutical companies or others selling products. Because the Company
seeks to structure future development programs with the intention of developing
commercially viable products for sale or license to pharmaceutical companies
which would complete the development, manufacturing and marketing of the
finished product, the Company intends to rely on indemnity undertakings by the
pharmaceutical companies with regard to liability. There can be no assurance
that the Company will be able to negotiate appropriate indemnity undertakings
with pharmaceutical partners or that indemnity undertakings will be effective to
protect the Company from liability or the costs of product liability litigation.
While the Company may obtain additional product liability insurance if
management determines that such insurance is desirable, there can be no
assurance that the Company will apply for, or be able to obtain, insurance on
acceptable terms, or that insurance, if obtained, would be adequate to fully
protect the Company against any potential liability. In the event of a
successful suit against the Company, if the Company does not have adequate
product liability insurance coverage, the Company will be materially adversely
affected.
In addition to product liability risks associated with sales of products,
the Company may be liable for the claims of individuals who participate in human
clinical trials of its products. The Company intends to have human clinical
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trials conducted by pharmaceutical partners, and the Company will seek to have
these partners indemnify the Company for claims arising out of the trials. There
can be no assurance that the Company will be able to negotiate appropriate
indemnity undertakings with pharmaceutical partners or that indemnity
undertakings will be effective to protect the Company from liability or the
costs of product liability litigation. While the Company has obtained, and will
seek, waivers of liability from all persons who participated or may in the
future participate in human clinical trials conducted by or on behalf of the
Company, there can be no assurance that waivers will be effective to protect the
Company from liability or the costs of product liability litigation. In the
event of a successful suit against the Company, if the Company does not have
adequate product liability insurance coverage, the Company will be materially
adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of its
executive officers and scientific and technical personnel. During the Company's
limited operating history, many key responsibilities within the Company have
been assigned to a relatively small number of individuals. The competition for
qualified personnel is intense, and the loss of services of certain key
personnel could adversely affect the business of the Company. In particular, the
loss of the services of Michael M. Goldberg, M.D., the Company's Chairman of the
Board and Chief Executive Officer, or Sam J. Milstein, Ph.D., the Company's
President and Chief Scientific Officer, could have a material adverse effect on
the Company's operations. The Company has employment agreements through July 31,
2000 with each of Drs. Goldberg and Milstein and has obtained key man life
insurance in the amount of $1 million on the lives of each of Drs.
Goldberg and Milstein.
UNCERTAIN AVAILABILITY OF THIRD-PARTY REIMBURSEMENT
The Company's commercial success could depend in part on the availability
of reimbursement from third-party payors such as government health
administration authorities, private health insurers and other organizations.
Third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. If the Company
succeeds in bringing products to market, there can be no assurance that the
Company's products will be considered cost effective or outcome effective or
that adequate third-party reimbursement will be available to enable the Company
to maintain price levels sufficient to realize an appropriate return on its
investment in product development. Legislation and regulations affecting the
pricing of pharmaceuticals may change before the Company's proposed products are
approved for marketing and any such changes could further limit reimbursement
for medical products.
POSSIBLE ADVERSE IMPACT ON HOLDERS OF COMMON STOCK; ANTITAKEOVER PROVISIONS
The Company's Board of Directors (the "Board of Directors") has the
authority, without any action by the stockholders, to issue up to 1,000,000
shares of Preferred Stock and to fix the rights and preferences of any shares of
such Preferred Stock to be issued. In addition, the Company has adopted a
stockholder rights plan involving the issuance of preferred share purchase
rights designed to cause substantial dilution to a person or group that attempts
to acquire the Company on terms not approved by the Board of Directors. Certain
provisions in the Company's Certificate of Incorporation, Bylaws and stockholder
rights plan, as well as Delaware law and the ability of the Board of Directors
to issue Preferred Stock, may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders, may discourage bids for the Common Stock at a premium over the
market price of the Common Stock, and may adversely affect the market price of,
and the voting and other rights of the holders of, Common Stock.
POTENTIAL VOLATILITY OF STOCK PRICE
The market prices for securities of biopharmaceutical companies, including
the Company's Common Stock, 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 collaborations, innovations or new products by
the
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Company or its competitors, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of drugs developed by
the Company or others and general market conditions may have a significant
effect on the market price of the Common Stock. The Company's securities are
subject to a high degree of risk and volatility. Investors should be aware that
other investment opportunities, such as interest-bearing obligations, may result
in a higher yield on investment and be less subject to fluctuation and risk of
loss than an investment in the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT OF OUTSTANDING OPTIONS AND WARRANTS
The issuance of freely tradable Common Stock upon the exercise of stock
options and warrants, as well as future sales of Common Stock by existing
stockholders, including future sales of the Shares by the Selling Stockholder,
or the perception that sales could occur, could adversely affect the market
price of the Common Stock. As of October 31, 1996, of the Company's 9,470,164
outstanding shares of Common Stock, all such shares, including the 600,000
shares of Common Stock currently held by the Selling Stockholder, are freely
transferable without restriction under the Securities Act, unless held by an
"affiliate" of the Company, as such term is defined under regulations
promulgated under the Securities Act.
The Company currently has outstanding options and warrants, including the
Warrants held by the Selling Stockholder, to purchase approximately 4 million
shares of Common Stock, at prices ranging from $1.50 to $23.25, which are
exercisable over the next several years, giving the holders of such options and
warrants an opportunity to profit from a rise in the market price of the
Company's Common Stock with a resulting dilution in the interests of the other
stockholders. The terms on which the Company may obtain additional financing
during the period when such options and warrants are exercisable may be
adversely affected by the existence of such options and warrants. The holders of
the options and the warrants are likely to exercise them at a time when the
Company would otherwise be able to obtain additional capital through an equity
financing on terms more favorable than those provided by the options and
warrants.
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THE COMPANY
Emisphere is a drug delivery company focused on the discovery and
application of proprietary carriers that enable the oral delivery of therapeutic
macromolecules and other compounds that are not currently deliverable by oral
means. The Company's proprietary technologies are based on the Company's ability
to design and synthesize carriers to allow the transport of therapeutic
molecules through biological membranes, including intestinal, nasal, sublingual,
transdermal, subcutaneous, intramuscular and intraocular membranes. The Company
has designed and synthesized a library of potential carriers and evaluated them
for their ability to enable the oral delivery of therapeutic compounds. The
Company has used its carriers to deliver heparin orally in humans and to deliver
orally in animals a variety of compounds, including heparin, insulin,
calcitonin, human parathyroid hormone, human growth hormone, interferon alpha,
desferroxamine and cromolyn. The total market for the injectable formulation of
these compounds is over $4 billion annually worldwide, and the Company believes
that the market for these compounds will expand if they are available in oral
form.
The Company's executive offices are located are located at 15 Skyline
Drive, Hawthorne, New York 10532, and its telephone number is (914) 347-2220.
USE OF PROCEEDS
The Company will not receive any proceeds from any sale of the Shares.
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SELLING STOCKHOLDER
The Selling Stockholder is an affiliate of Elan, which is party to a joint
venture with the Company. See "Risk Factors -- The Elan Joint Venture." Pursuant
to an agreement dated October 18, 1995, as amended (the "Purchase Agreement"),
between the Company and the Selling Stockholder, the Selling Stockholder
purchased 600,000 shares of Common Stock and Warrants to purchase 250,000
additional shares of Common Stock at an exercise price of $16.25 per share, and
agreed, subject to certain exceptions, not to acquire additional shares of the
Company's voting securities until September 26, 2001. During such standstill
period, the Selling Stockholder has the opportunity, in the event the Company
issues and sells voting securities, to purchase newly issued voting securities
on the same terms and conditions and in an amount that would enable the Selling
Stockholder to own the same percentage of the Company's voting securities as it
owned before such issuance and sale. The Company has agreed to effect
registration of any additional shares so purchased by the Selling Stockholder to
permit public secondary trading thereof.
PLAN OF DISTRIBUTION
Any or all of the Shares may be offered and sold to purchasers directly by
or on behalf of the Selling Stockholder from time to time in the
over-the-counter market, in privately negotiated transactions, in the Nasdaq
National Market or otherwise, at prices prevailing in such market or exchange or
as may be negotiated at the time of sale. The Shares may also be publicly
offered through agents, underwriters or dealers. In such event, the Selling
Stockholder may enter into agreements with respect to any such offering. Such
underwriters, dealers or agents may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholder
and/or the purchasers of Shares. The Selling Stockholder and any such
underwriters, dealers or agents that participate in the distribution of Shares
may be deemed to be underwriters, and any profit on the sale of the Shares by
them and any discounts, commissions or concessions received by them may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Any such underwriters, dealers and agents may engage in transactions with, and
perform services for, the Company and affiliates of the Company. At the time a
particular offer of Shares is made, to the extent required, a Prospectus
Supplement will be distributed which will set forth the aggregate number of
Shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers or agents, any discounts, concessions or
commissions and other items constituting compensation from the Selling
Stockholder and any discounts, commissions, or concessions allowed or reallowed
or paid to dealers.
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LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The financial statements and financial statement schedule, as of July 31,
1996 and 1995 and for each of the three years in the period ended July 31, 1996,
included in the Company's Annual Report on Form 10-K for the year ended July 31,
1996, incorporated by reference in this Prospectus, have been incorporated
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if givthose
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any securities other than the securities to which it relates or an offer
to sell or the solicitation of an offer to buy such securities in any
circumstancofferwtocbuy such securities in any circumstance in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof or
that the inforCompany since the date hereof or that the information contained
herein is correct at any time subsequent to its date.
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TABLE OF CONTENTS
Page
Available Information.................2
Documents Incorporated by Reference...3
Special Note Regarding
Forward-looking Statements.........4
Risk Factors..........................5
The Company..........................12
Use of Proceeds......................12
Selling Stockholder..................13
Plan of Distribution.................13
Legal Matters........................14
Experts..............................14
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850,000 SHARES
EMISPHERE TECHNOLOGIES, INC.
COMMON STOCK
(par value $.01 per share)
PROSPECTUS
February 4, 1997
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