<PAGE>
PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-23423
333-89073
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED MAY 28, 1997
2,000,000 Shares
[LOGO] EMISPHERE TECHNOLOGIES, INC.
Common Stock
Our common stock is quoted on the Nasdaq National Market under the symbol
EMIS. On October 27, 1999, the last reported sale price of our common stock on
the Nasdaq National Market was $12.69 per share.
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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price.................................... $11.00 $22,000,000
Underwriting discounts and commissions .................. $ 0.63 $ 1,260,000
Proceeds to Emisphere, before expenses................... $10.37 $20,740,000
</TABLE>
We have granted the underwriter an option for a period of 30 days to
purchase up to 300,000 additional shares of common stock.
Hambrecht & Quist LLC is acting as the underwriter of this offering. The
underwriter expects to deliver the shares against payment in New York, New York
on November 2, 1999.
------------
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page S-6.
------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus supplement. Any representation to the
contrary is a criminal offense.
Hambrecht & Quist
October 28, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement Page
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<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-6
Use of Proceeds............................................................ S-14
Capitalization............................................................. S-15
Dilution................................................................... S-16
Underwriting............................................................... S-17
Legal Matters.............................................................. S-18
Experts.................................................................... S-18
Where You Can Find More Information........................................ S-19
</TABLE>
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ABOUT THIS PROSPECTUS SUPPLEMENT
We have prepared this prospectus supplement to restate our prospectus
dated May 28, 1997. This prospectus supplement supersedes the prospectus dated
May 28, 1997 and the prospectus supplement dated July 21, 1997.
We maintain a web site at "www.emisphere.com." Information presented on
our web site does not constitute part of this prospectus supplement.
Unless we indicate otherwise, information in this prospectus supplement
assumes that the underwriter will not exercise its over-allotment option.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus supplement or incorporated by
reference into this prospectus supplement constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include (without limitation)
statements regarding: planned or expected studies and trials of oral
formulations that utilize our technology; the timing of the development and
commercialization of our products; potential products that may be developed
using our technology; the potential market size, advantages or therapeutic uses
of our liquid oral heparin formulation or any other product; and the
sufficiency of our available capital resources to meet our funding needs. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
among others, the following: the success of our oral heparin product and our
ability to find a marketing partner to help us commercialize it; the viability
of our product candidates, most of which, other than liquid oral heparin, are
in the early stages of development; the need to obtain regulatory approval for
our liquid oral heparin and other product candidates; our dependence on
collaborative partners to develop and commercialize products and our ability to
fund such efforts with or without partners; the risk of technological
obsolescence and risks associated with our highly competitive industry; our
lack of profitable operations and need for additional capital; our dependence
on patents and proprietary rights; our dependence on others to manufacture our
compounds; the risk of product liability and policy limits of product liability
insurance; potential liability for human clinical trials; our dependence on key
personnel and 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 referred to or incorporated by reference into this prospectus
supplement.
S-2
<PAGE>
SUMMARY
This summary highlights information contained elsewhere in this prospectus
supplement and the documents incorporated by reference. This summary is not
complete and does not contain all of the information that you should consider
before investing in our common stock. You should read this entire prospectus
supplement and the documents incorporated by reference carefully before making
an investment decision.
Emisphere Technologies, Inc.
Emisphere Technologies, Inc. is a biopharmaceutical company specializing
in the oral delivery of therapeutic macromolecules and other compounds that are
not currently deliverable by oral means. Our objective is to become a leader in
the development of oral macromolecule delivery. Our lead product in development
is a liquid oral heparin formulation for the prevention of blood clots in high-
risk surgery patients. We have completed Phase I and Phase II clinical studies
for this product. We are finalizing the Phase III protocol with the FDA and
plan to begin Phase III trials in late 1999. In addition, we have developed
with Novartis Pharma AG a capsule form of a Novartis therapeutic protein that
is currently in a Phase I clinical study.
Our focus is on developing oral delivery formulations of marketed drugs
that are limited in use because they must be administered intravenously or by
injection. The drugs we target for development, such as heparin, may be off-
patent but their markets are large enough to interest pharmaceutical partners
in an oral formulation. We believe combining available drugs with our carriers
to create orally administrable formulations reduces development risk because
the underlying compound has already been approved for use and its safety and
efficacy are therefore well established. We also believe that our technology
offers a relatively inexpensive route to generating significant new product
opportunities.
We seek opportunities to collaborate with pharmaceutical companies to
apply our oral delivery technology to their therapeutic compounds, whether
currently marketed or in development. Since 1997, we have been engaged in a
research collaboration with Novartis under which Novartis may acquire an
exclusive license to market products utilizing our technologies. Novartis is
currently in a Phase I clinical study with a capsule form of a protein using
our technology. We also have license agreements with Eli Lilly & Company under
which we have granted Lilly exclusive worldwide licenses to use our
technologies to develop and commercialize products involving the oral delivery
of two of Lilly's compounds. Both candidates are currently in preclinical
development. In addition, we are conducting a number of feasibility studies
with pharmaceutical and biotechnology companies for various injectable
compounds.
During 1999, we purchased all of Elan Corporation plc's interest in the
joint venture we formed in 1996 to develop and market oral forms of heparin. We
believe that the complete ownership and control of the technology and rights
relating to our oral heparin products will allow for more rapid clinical
development and commercialization and greater flexibility in negotiating with a
pharmaceutical partner for the marketing rights to these products.
Traditional drug delivery companies have developed technologies to control
the release of drugs and improve dosing regimens. However, there is an emerging
group of drug delivery companies, including Emisphere, that are developing
technologies that offer alternatives to the existing route of drug
administration, including oral administration of previously injectable drugs.
Oral dosage forms of pharmaceuticals are the safest, and typically most
convenient, dosage forms. We believe oral dosage forms are the largest product
segment of the pharmaceutical industry and that the potential market for many
drugs could be expanded by using novel delivery mechanisms for drugs that are
currently available only in an injectable form. We have demonstrated the oral
delivery of heparin in humans and the oral delivery of a variety of other
compounds in animals (including erythropoietin, insulin, human growth hormone,
calcitonin, human parathyroid hormone, cromolyn and deferoxamine). We believe
that annual worldwide sales of injectable formulations of these compounds are
over $8.0 billion and that the market for these compounds could be larger if
oral dosage forms were available.
S-3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by us.......................... 2,000,000 shares
Common stock to be outstanding after this offering.. 14,152,806 shares
Use of proceeds..................................... To fund a portion of the Phase III
clinical program for our liquid oral
heparin formulation, to continue
research and development and for
general corporate purposes. See "Use
of Proceeds."
Nasdaq National Market symbol....................... EMIS
</TABLE>
Unless we specifically state otherwise, the information in this prospectus
supplement does not take into account the issuance of up to 300,000 shares of
common stock which the underwriter has the option to purchase solely to cover
over-allotments. If the underwriter exercises its over-allotment option in
full, 14,452,806 shares of common stock will be outstanding after this
offering.
The number of shares of common stock to be outstanding immediately after
this offering is based upon our shares outstanding as of October 6, 1999 and
does not take into account 4,980,690 shares of common stock issuable upon
exercise of options outstanding at a weighted average exercise price of $10.74
per share, and 848,747 shares available for future grants under our existing
stock option plan and employee stock purchase plan.
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Our principal offices are located at 765 Old Saw Mill River Road,
Tarrytown, New York 10591, and our telephone number is (914) 347-2220.
S-4
<PAGE>
Summary Financial Data
(in thousands, except per share data)
The table below summarizes our financial data for the five fiscal years
ending July 31, 1999. We derived this summary data from our audited financial
statements, which are incorporated by reference from our Annual Report on Form
10-K for the fiscal year ended July 31, 1999. You should read this summary
financial data together with our audited financial statements and the notes to
those audited financial statements.
<TABLE>
<CAPTION>
Fiscal Year Ended July 31,
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1995 1996 1997 1998 1999
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue.......................... $ 33 $ 3,131 $ 5,401 $15,868 $ 10,180
Costs and expenses:
Research and development........ 5,802 6,605 7,724 15,190 22,850
Acquisition of in-process
research and development....... -- -- -- -- 9,686
Loss in Ebbisham Ltd............ -- -- 2,550 4,044 3,092
General and administrative...... 2,404 3,337 3,416 5,344 6,051
------- ------- ------- ------- --------
Total costs and expenses....... 8,206 9,942 13,690 24,578 41,679
------- ------- ------- ------- --------
Operating loss................... (8,173) (6,811) (8,289) (8,710) (31,499)
Other income and expense......... 389 703 968 1,644 817
------- ------- ------- ------- --------
Net loss......................... $(7,784) $(6,108) $(7,321) $(7,066) $(30,682)
======= ======= ======= ======= ========
Net loss per share--basic and
diluted......................... $ (1.03) $ (0.72) $ (0.77) $ (0.66) $ (2.63)
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
July 31, 1999
-----------------------
Actual As Adjusted(1)
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<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and marketable securities........ $17,805 $38,226
Working capital......................................... 13,360 33,781
Total assets.......................................... 38,476 58,897
Accumulated deficit..................................... (87,805) (87,805)
Stockholders' equity.................................... 11,287 31,708
</TABLE>
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(1) Adjusted to reflect this offering. See "Use of Proceeds."
S-5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all of the
other information contained in, or incorporated by reference into, this
prospectus supplement before purchasing our common stock. Investing in our
common stock involves a high degree of risk. Any of the following risks could
materially harm our business, operating results and financial condition and
could result in a complete loss of your investment.
Risks Related to Emisphere Technologies
We are highly dependent on the success of our oral heparin product and we need
to find a marketing partner in order to commercialize it.
Our leading product candidate is a liquid oral heparin USP formulation for
the treatment of deep vein thrombosis. Heparin is currently not available in
oral form. We are finalizing the Phase III protocol with the FDA and expect to
begin Phase III clinical trials for this product before the end of December
1999. The outcome of clinical trials is inherently subject to uncertainty, as
is the FDA's drug approval process. We therefore cannot assure you that the
Phase III trials will be successful or that our liquid oral heparin product
will ultimately receive FDA approval.
The manufacture, marketing and distribution of pharmaceuticals is a
formidable undertaking. We do not have the financial resources or expertise to
bring oral heparin to market on our own. For the past three years, our efforts
to develop oral heparin were conducted through our joint venture with Elan. In
July 1999, the joint venture was terminated. As a result, we assumed sole
responsibility for Phase III development and funding. We expect to use a
portion of the net proceeds of this offering to complete the Phase III clinical
trials. However, we will need to find a third party with significant resources
to become our partner in developing, manufacturing, marketing and distributing
oral heparin. We cannot assure you that we will be able to identify a suitable
partner or that we can negotiate favorable terms for our relationship with that
partner. Without a partner, we will need additional funding to complete Phase
III trials.
The success of our liquid oral heparin product will also depend on market
acceptance by doctors, patients and third-party payors. We believe that the
market for heparin would expand if an orally administered version were
available, but we cannot assure you that our oral heparin product will be
welcomed and accepted by doctors, patients and third-party payors. In addition,
our liquid oral heparin product will compete with other forms of heparin and
other anti-coagulants that are produced and marketed by major pharmaceutical
companies with significantly greater resources.
If oral heparin is not approved or we are unable to develop it into a
commercially viable product, our prospects will suffer significantly. We have
no other products that are beyond early Phase I clinical studies.
Our product candidates are in various stages of development, and we cannot be
certain that any will be suitable for commercial purposes.
To be profitable, we must successfully research, develop, obtain
regulatory approval for, manufacture, introduce, market and distribute our
products under development. The time frame necessary to achieve these goals for
any individual product is long and uncertain. Before we can sell any of our
products under development, we must demonstrate through preclinical (animal)
studies and clinical (human) trials that each product is safe and effective for
human use for each targeted indication. We cannot be certain that we will be
able to begin, or continue, our planned clinical trials for our product
candidates, or if we are able, that our product candidates will prove to be
safe and will produce their intended effects.
A number of companies in the drug delivery, biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical
trials, even after showing promising results in earlier studies or trials. We
cannot assure you that favorable results in any preclinical study or early
clinical trial will mean that favorable results will ultimately be obtained in
future clinical trials. Nor can we assure you that results of our limited
animal and human studies are indicative of results that would be achieved in
future animal studies
S-6
<PAGE>
or human clinical studies, all or some of which will be required in order to
have our proposed products obtain regulatory approval. Similarly, we cannot
assure you that any of our product candidates will be approved by the FDA. With
the exception of our clinical studies for oral heparin, we have not completed
any other human clinical studies using our carrier technologies.
Our future business success depends heavily upon regulatory approvals which can
be difficult to obtain for a variety of reasons, including cost.
Our preclinical studies and clinical trials, as well as the manufacturing
and marketing of our 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 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 candidates. We cannot assure you that any technologies or
carriers developed by us, either independently or in collaboration with others,
will meet the applicable regulatory criteria in order to receive the required
approvals for manufacturing and marketing. Delays in obtaining United States or
foreign approvals could result in substantial additional costs to us, and,
therefore, could adversely affect our ability to compete with other companies.
Additionally, delays in obtaining regulatory approvals encountered by others
with whom we collaborate, or other licensees of ours, could also adversely
affect our business and prospects.
If regulatory approval of a product is granted, the approval may place
limitations on the intended uses of the product we wish to commercialize, and
may restrict the way in which we are permitted to market the product.
We are dependent upon collaborative partners to develop and commercialize
compounds using our carriers.
A key part of our strategy is to form collaborations with pharmaceutical
companies that will assist us in developing, testing, obtaining government
approval for and commercializing oral forms of therapeutic compounds using our
drug delivery technologies. We do not currently possess the ability or
resources necessary to reach these goals alone, and we do not currently intend
independently to market products incorporating our technologies in the
foreseeable future. Other than our strategic alliances with Novartis and Lilly,
we have no commitments or development agreements currently in effect.
Accordingly, we cannot assure you that:
. we will be able to enter into collaborative arrangements to develop
products utilizing our drug delivery technologies;
. any existing or future collaborative arrangements will be successful;
or
. milestones in these agreements will be met.
If we are unable to obtain development assistance and funds from other
pharmaceutical companies to fund a portion of our product development costs and
to commercialize products, we may have to delay, scale back or curtail one or
more of our activities.
Our strategic alliances with Novartis and Lilly may not result in
commercializable products.
Novartis recently initiated a Phase I study in the United Kingdom of a
capsule form of a product resulting from the application of our carrier
technology to a protein macromolecule selected by Novartis. We cannot assure
you that the results desired by Novartis will be achieved or that, even if
achieved, Novartis will exercise its option to license the product for further
commercial development. In December 1999, the research and development phase of
the collaboration, which led to the Phase I study, will end and funding from
Novartis to us for that research and development will cease. Novartis may
choose to commence further research and development regarding a second
compound.
S-7
<PAGE>
While our license agreements with Lilly provide for payments upon reaching
milestones and for royalties in the event a product is successfully
commercialized by Lilly, there is no provision for minimum royalty payments
and, therefore, no guarantee that we will ever receive additional revenues from
the license agreements. The strategic alliance does not require Lilly to use
our technologies exclusively, and we are aware of collaborations between Lilly
and others pursuing non-oral delivery of one of the proteins that is the
subject of our strategic alliance with them. In addition, the strategic
alliance represents the exclusive vehicle through which we may develop and
market orally deliverable products based on the subject proteins and our
carrier technologies.
In September 1998, Lilly formally selected one of our proprietary carriers
for clinical testing of an oral formulation of Lilly's therapeutic protein for
the treatment of osteoporosis. Lilly subsequently incurred unexpected results
with respect to the injectable form of the protein and suspended its
development. As a result, we are awaiting further direction from Lilly on the
project.
We have incurred substantial losses since inception and expect to incur further
losses.
Since our inception in 1986, we have generated significant losses from
operations and we anticipate that we will continue to generate significant
losses from operations for the foreseeable future. At July 31, 1999, our
accumulated deficit was approximately $87.8 million. Operations to date have
been funded with the proceeds from collaborative research agreements, public
and private equity and debt financings and income earned on investments.
We expect to experience a substantial increase in oral heparin clinical
development expenses in fiscal 2000 as the product enters into Phase III
clinical trials, the most expensive phase of the clinical development process.
We will no longer receive funding from our former joint venture partner, Elan.
As a result, we believe that we will continue to incur increasing operating
losses and will require substantial additional financial resources to complete
our oral heparin clinical development program and other research and
development efforts.
We require substantial additional funding.
We will require substantial additional funding in order to complete our
oral heparin clinical development, continue our other research and product
development programs and preclinical testing and clinical trials of other
product candidates, fund our operating expenses, pursue regulatory approvals of
our product candidates, and establish manufacturing and marketing capabilities.
In order to assure funding for our future operations, we will need to obtain a
marketing partner for our liquid oral heparin product and may be required to
obtain financing for Phase III development on our own until a partner is found.
However, we cannot assure you that we will be successful in attracting a
marketing partner or in raising additional capital. In the event that a
marketing partner for our liquid oral heparin product is not found, we expect
that cash, cash equivalents, and marketable securities on-hand, combined with
either additional financing or delaying clinical trials and curtailing
operations will allow us to meet our liquidity requirements into the second
quarter of fiscal 2001.
In the past we have raised additional capital through public and private
equity and debt financings. We cannot assure you that additional capital will
be available on acceptable terms or without severe dilution to the existing
stockholders, if at all. If adequate funds are not available, we will be
required to delay, scale back or eliminate some or all of our research and
development programs.
If we cannot adequately protect our patent and proprietary rights, our business
will suffer.
Our success will depend, in part, on our ability to obtain patent
protection for our products, processes and technologies, to preserve our trade
secrets, and to operate without infringing the proprietary rights of third
parties, in various jurisdictions. We have been granted 39 patents on our drug
delivery technologies in the United States which will expire beginning in 2007.
S-8
<PAGE>
We cannot assure you that any patent applications relating to our
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 challenge our patents, obtain patents that may have an
adverse effect on our ability to conduct business, or are able to circumvent
our patent position. We cannot assure you that we will have the necessary
financial resources to enforce any of our patents.
The manufacture, use or sale of our product candidates may infringe the
patent rights of others. We may be unable to avoid infringement of those
patents and we may have to seek a license, defend an infringement action, or
challenge the validity of those patents in court. We cannot assure you that a
license will be available to us, if at all, on terms and conditions acceptable
to us or that we will prevail in any patent litigation. If we do not obtain a
license under these patents, are found liable for infringement, or are not able
to have the patents declared invalid, we 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 these patents. We cannot assure you that we
have identified or will identify in the future, United States and foreign
patents that pose a risk of infringement.
Part of our 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 those drugs. These drugs are generally the property of the
pharmaceutical companies and may be the subject of patents or patent
applications and other forms of protection owned by the pharmaceutical
companies. To the extent those patents or other forms of protection expire,
become invalid or otherwise ineffective, or to the extent those drugs are
covered by patents or other forms of protection owned by third parties, sales
of those drugs by the collaborating pharmaceutical company may be restricted,
limited or enjoined, or may cease. Accordingly, the potential for royalty
revenues to us may be adversely affected.
To protect our proprietary technologies and processes, we rely in part on
maintaining trade secrets protected by confidentiality agreements with our
partners, employees, consultants and contractors. Nevertheless, we cannot
assure you that these agreements will provide adequate protection for our trade
secrets and other proprietary information in the event of any unauthorized use
or disclosure or in the event others lawfully develop the information.
We are dependent on third parties to manufacture our products.
We currently have no manufacturing facilities for large-scale clinical or
commercial production of any compounds under consideration as products. For the
foreseeable future, we intend to rely on third parties to manufacture our
carriers and potential products.
These third-party manufacturers must comply with the applicable FDA good
manufacturing practice regulations, which include quality control and quality
assurance requirements as well as maintenance of records and documentation.
Manufacturing facilities are subject to ongoing periodic inspection by the FDA
and corresponding state agencies, including unannounced inspections, and must
be licensed before they can manufacture any of our carriers or products. We
cannot assure you that our present or future suppliers will be able to comply
with the applicable good manufacturing practice regulations and other FDA
regulatory requirements. After regulatory approvals are obtained, later
discovery of previously unknown problems or failure to comply with the
regulatory requirements may result in restrictions on the marketing of a
product, withdrawal of the product from the market, seizures, injunctions or
criminal sanctions.
We may face product liability claims related to participation in clinical
trials or the use or misuse of our products.
We have product liability insurance with a policy limit of $5.0 million
per occurrence. The testing, manufacturing and marketing of products for humans
utilizing our drug delivery technologies may expose us
S-9
<PAGE>
to potential product liability and other claims resulting from their use. While
we intend to have human clinical trials conducted by contract research
organizations or our pharmaceutical partners, and to have these parties
indemnify us for claims arising out of those trials, we cannot assure you that
indemnity undertakings, if any, will be sufficient. Similarly, while we have
obtained, and will seek to obtain, waivers of liability from all persons who
participate in human clinical trials conducted by us or on our behalf, we
cannot assure you that waivers will be effective to protect us from liability
or the costs of litigation.
Liability may also result from claims made directly by consumers or by
pharmaceutical companies or others selling our products. We seek to structure
future development programs with pharmaceutical companies that would complete
the development, manufacturing and marketing of the finished product, but the
indemnity undertakings for product liability claims secured by us with the
pharmaceutical companies may later prove to be insufficient. While we may
obtain additional product liability insurance if we determine that such
insurance is desirable, we cannot assure you that the insurance we obtain would
be adequate to fully protect us. In the event of a successful suit against us,
if we do not have adequate product liability insurance coverage, we will be
materially adversely affected.
We are dependent on our key personnel and will need to attract and retain
additional key personnel in the future.
Our success depends upon the continued contributions of our executive
officers and scientific and technical personnel. During our operating history,
many key responsibilities within our company have been assigned to a relatively
small number of individuals. The competition for qualified personnel is
intense, and the loss of services of key personnel could adversely affect our
business. In particular, the loss of the services of Michael M. Goldberg, M.D.,
our Chairman of the Board and Chief Executive Officer, could have a material
adverse effect on our operations. We have an employment agreement through July
2000 with Dr. Goldberg, and have obtained key man insurance in the amount of
$1.0 million on his life.
In addition, we rely on members of our scientific advisory board and
consultants to assist us in formulating our research and development strategy.
All of the members of the scientific advisory board and all of our consultants
are otherwise employed and each such member or consultant may have commitments
to other entities that may limit their availability to us or other interests
that may conflict with our interests.
Risks Related to Our Industry
We face rapid technological change and intense competition.
Our success depends, in part, upon maintaining a competitive position in
the development of products and technologies in an evolving field in which
developments are expected to continue at a rapid pace. We compete with other
drug delivery, biotechnology and pharmaceutical 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 that may be orally
active. Many of these competitors have greater research and development
capabilities, experience, and marketing, financial and managerial resources
than we do, and, therefore, represent significant competition for us.
Additionally, acquisitions of, investments in, or collaborations with
competing drug delivery or biotechnology companies by large pharmaceutical
companies could enhance a competitor's financial, marketing and other
resources. Consolidation among drug delivery and biotechnology companies could
have a similar effect. Accordingly, our competitors may succeed in developing
competing technologies or obtaining government approval for products before we
do. Developments by others may render our product candidates, or the
therapeutic compounds used in combination with our product candidates,
noncompetitive or obsolete.
S-10
<PAGE>
Our products, when developed and marketed, may compete with existing
injectable versions of the same drug, some of which are well established in the
marketplace and manufactured by formidable competitors. For example, our oral
heparin products will compete with injectable heparin, low molecular weight
heparin, and warfarin, an oral anti-coagulant. These products are marketed
throughout the world by very large companies such as Pharmacia & Upjohn, Inc.,
Rhone-Poulenc S.A. and E.I. DuPontde Nemours & Co.
The unavailability of third-party reimbursement may limit the use of our
products, which would adversely affect our business.
The commercial success of our carrier products and technologies are
substantially dependent on whether third-party reimbursement is available for
the use of our products by hospitals, clinics and doctors. The continuing
efforts of government and insurance companies, health maintenance organizations
and other third-party payors of health care costs to contain or reduce costs of
health care may affect our future revenues and profitability, as well as the
availability of capital. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, such as those we are currently
developing. If we do succeed in bringing products to market, we cannot
guarantee that the products will be considered by third-party payors to be cost
effective or outcome effective, or that adequate third-party reimbursement will
be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development. Likewise,
legislation and regulations affecting the pricing of pharmaceuticals may change
before our proposed products are approved for marketing.
Commercialized products are subject to continuing regulation.
Even if our products receive regulatory approval, either in the United
States or internationally, we will continue to be subject to extensive
regulatory requirements. These regulations are wide ranging and govern, among
other things:
. adverse drug experience reporting regulations;
. product promotion;
. product manufacturing, including good manufacturing practice ("GMP")
requirements; and
. product changes or modifications.
If we fail to comply or maintain compliance with such laws and
regulations, we may be fined and barred from selling our products. If the FDA
believes that we are not in compliance with the law, it can:
. seize our products;
. mandate a recall;
. stop future sales through injunctive procedures; and
. assess civil and criminal penalties against us.
We may be adversely affected by the "Year 2000" problem.
The "Year 2000" problem relates to many currently installed computers,
software, and other equipment that are not capable of distinguishing 21st
century dates from 20th century dates. As a result, systems used by many
companies, in a very wide variety of applications, will experience operating
difficulties unless they are modified, upgraded, or replaced to process
adequately information involving, related to or
S-11
<PAGE>
dependent upon the century change. If one of our business systems or the
business system of a third party dealing with us fails because of the inability
of the business system to properly read a 21st century date, the results could
have a material adverse effect on our operations.
We have established a team to address our Year 2000 risk. The team has
reviewed our infrastructure and believes that it has identified substantially
all of the major business systems used in connection with our internal
operations. We have completed the process of identifying and correcting the
major business systems that needed to be modified, upgraded, or replaced. Costs
incurred to date to correct Year 2000 problems have not been material to our
results of operations.
We also recognize the risk that suppliers of products, services, and
collaborators with whom we transact business on a worldwide basis may not
comply with Year 2000 requirements. We have initiated formal communications
with significant suppliers and collaborators to determine the extent to which
we are vulnerable if these third parties fail to remediate their own Year 2000
issues. We are unable to determine, at this time, the probability that any
material supplier or collaborator will not be able to correct any Year 2000
problem in a timely manner. In the event any such third parties cannot provide
us with products, services, or continue to collaborate with us, our results of
operations could be materially adversely affected.
Risks Relating to Our Common Stock
Anti-takeover provisions of our corporate charter documents, Delaware law, and
our agreements with collaborators may affect the price of our common stock.
Our Board of Directors has the authority to issue up to 1,000,000 shares
of preferred stock and to determine the rights, preferences and privileges of
those shares without any further vote or action by our stockholders. Of these
1,000,000 shares, 200,000 are currently designated Series A Junior
Participating Cumulative Preferred Stock in connection with our stockholders'
rights plan, and the remaining 800,000 shares remain available for future
issuance. Your rights as a holder of common stock may be adversely affected by
the rights of the holders of any preferred stock that may be issued in the
future. Additional provisions of our certificate of incorporation and by-laws
could have the effect of making it more difficult for a third party to acquire
a majority of our outstanding voting common stock. These include provisions
that classify our board of directors, limit the ability of stockholders to take
action by written consent, call special meetings, remove a director for cause,
amend the by-laws or approve a merger with another company.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law which prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, either alone or together with affiliates and associates, owns (or
within the past three years, did own) 15% or more of the corporation's voting
stock.
We also have a stockholder's right's plan, commonly referred to as a
"poison pill," that makes it difficult, if not impossible, for a person to
acquire control of us without the consent of our Board of Directors.
In addition, we have contractual "standstill" agreements with Lilly,
Novartis and Elan which generally prohibit each company from acquiring shares
of our outstanding voting stock above specified levels. We may enter into
additional standstill agreements with future collaboration partners and with
prospective collaboration partners before we begin negotiating collaborations
with them.
S-12
<PAGE>
Our stock price has been and may continue to be volatile.
The trading price for our common stock has been and is likely to continue
to be highly volatile. The market prices for securities of drug delivery,
biotechnology and pharmaceutical companies, have historically been highly
volatile. Factors that could adversely affect our stock price include:
. fluctuations in our operating results;
. announcements of technological collaborations, innovations or new
products by us or our competitors;
. governmental regulation;
. developments in patent or other proprietary rights;
. public concern as to the safety of drugs developed by us or others;
. the results of preclinical testing and clinical studies or trials by us
or our competitors;
. litigation; and
. general market conditions.
Future sales of common stock, or the prospect of future sales, may depress our
stock price.
Sales of a substantial number of shares of common stock, or the perception
that sales could occur, could adversely affect the market price of our common
stock. As of July 31, 1999, we have outstanding options to purchase up to
3,625,739 shares of common stock which are currently exercisable and additional
options to purchase up to 1,223,989 shares of common stock are exercisable over
the next several years. In addition, an aggregate of 25,000 shares of common
stock have been reserved for issuance under our Directors' Deferred
Compensation Plan, of which 3,348 shares are currently issuable. The holders of
these options or rights have an opportunity to profit from a rise in the market
price of our common stock with a resulting dilution in the interests of the
other stockholders. The existence of these options or rights may adversely
affect the terms on which we may obtain additional financing.
S-13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be approximately
$20.4 million after deducting underwriting discounts and estimated offering
expenses. We intend to use the net proceeds of this offering for:
. Phase III clinical testing of our liquid oral heparin formulation;
. continuing research and development; and
. the remainder, if any, for general corporate purposes.
The degree to which we will use proceeds from this offering for these
different purposes will depend on when and if we find a marketing partner for
our oral heparin products. If we do not enter into a marketing partnership for
oral heparin in the near future we will need to seek additional funding in
order to complete Phase III trials.
Numerous factors, including the progress of our Phase III trials, the rate
of our progress in our research and development programs, the results of other
preclinical and clinical studies and the timing of regulatory approvals, may
affect the amounts we spend on each proposed use. Expenditures will also depend
upon the extent to which we establish collaborative research or marketing
arrangements with other companies, the availability of other financing and
other factors.
Pending application of the proceeds from this offering, we intend to
invest the net proceeds in short-term, investment-grade, interest-bearing
instruments.
S-14
<PAGE>
CAPITALIZATION
The table below describes our capitalization at July 31, 1999 and our
capitalization as adjusted to reflect the offering and the application of the
net proceeds of the offering, which are estimated to be $20.4 million after
deducting underwriting discounts and estimated offering expenses.
<TABLE>
<CAPTION>
July 31, 1999
------------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Debt:
Senior convertible notes(1)............................... $ 2,648 $ 2,648
Note payable.............................................. 20,000 20,000
-------- --------
22,648 22,648
Stockholders' equity:
Preferred Stock, par value $.01 per share, 1,000,000
shares authorized; no shares issued and outstanding,
actual and as adjusted................................... $ -- $ --
Common Stock, par value $.01 per share, 40,000,000 shares
authorized; 12,181,468 shares issued (12,137,968
outstanding) actual; 14,181,468 shares issued (14,137,968
outstanding) as adjusted(2).............................. 122 142
Additional paid-in capital................................ 99,162 119,563
Accumulated deficit....................................... (87,805) (87,805)
Net unrealized gain on marketable securities.............. 1 1
Less 43,500 shares of Common Stock held in treasury, at
cost..................................................... (193) (193)
-------- --------
Total stockholders' equity............................. $ 11,287 $ 31,708
-------- --------
Total capitalization....................................... $ 33,935 $ 54,356
======== ========
</TABLE>
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(1) The outstanding balance of our senior convertible notes plus accrued
interest were paid in full on September 15, 1999.
(2) Does not include (i) 4,821,251 shares of common stock issuable upon the
exercise of options outstanding and 994,224 shares available for future
grant under our existing stock option plans and employee stock purchase
plan and (ii) 3,348 shares of common stock issuable under our Directors'
Deferred Compensation Stock Plan and 21,652 shares available for future
issuance under that plan.
S-15
<PAGE>
DILUTION
At July 31, 1999, we had a net tangible book value of $2.9 million or
$0.24 per share of our common stock. Net tangible book value per share
represents the amount of our total assets less intangible assets such as
purchased technology and deferred financing costs, less total liabilities,
divided by the number of shares of our common stock outstanding. Without taking
into account any changes in net tangible book value after July 31, 1999, other
than the offering, after deducting underwriting discounts and estimated
offering expenses, our pro forma net tangible book value at July 31, 1999 would
have been $23.3 million, or $1.65 per share. This represents an immediate
dilution in pro forma net tangible book value of $9.35 per share to new
investors purchasing shares of common stock in this offering and an immediate
increase in pro forma net tangible book value of $1.41 per share to our
existing stockholders. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share to be paid by a new investor.... $11.00
Net tangible book value per share before offering............... $0.24
Increase in net tangible book value per share attributable to
new investors.................................................. 1.41
-----
Pro forma net tangible book value per share after offering...... 1.65
------
Dilution per share to new investors............................. $ 9.35
======
</TABLE>
The computation above is based on the number of shares of our common stock
outstanding as of July 31, 1999 which does not include 4,821,251 shares of
common stock issuable upon the exercise of options outstanding and 994,224
shares available for future grant under our existing stock option plan and
employee stock purchase plan. In addition, an aggregate of 25,000 shares of
common stock have been reserved for issuance under our Directors' Deferred
Compensation Plan, of which 3,348 shares are currently issuable. To the extent
that shares are issued under these plans in the future, there will be further
dilution to new investors.
S-16
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement,
Hambrecht & Quist LLC, the underwriter of this offering, has agreed to purchase
from us all of the shares of our common stock offered by this prospectus
supplement.
The underwriting agreement provides that the obligations of the
underwriter are subject to certain conditions precedent, including the absence
of any material adverse change in our business and the receipt of certificates,
opinions and letters from us, our counsel and independent auditors. The
underwriter has committed to purchase all shares of common stock if any are
purchased.
The underwriter proposes to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus supplement and to selected dealers at such price less a concession
not in excess of $0.37 per share. The underwriter may allow, and the dealers
may reallow, a concession not in excess of $0.10 per share to other dealers.
After the public offering of the shares, the offering price and other selling
terms may be changed by the underwriter.
We have granted to the underwriter an option, exercisable no later than 30
days after the date of this prospectus supplement, to purchase up to 300,000
additional shares of common stock at the public offering price, less the
underwriting discount, set forth on the cover page of this prospectus
supplement. The underwriter may exercise the option in whole or in part, and we
will be obligated, pursuant to the option, to sell shares to the underwriter to
the extent the option is exercised. The underwriter may exercise the option
only to cover over-allotments made in connection with the sale of common stock
offered in this prospectus supplement.
The following table summarizes the compensation that we will pay to the
underwriter in connection with this offering:
<TABLE>
<CAPTION>
Total
---------------------
Without
Per Over- With Over-
Share Allotment Allotment
----- ---------- ----------
<S> <C> <C> <C>
Underwriting discounts and commissions............. $0.63 $1,260,000 $1,449,000
</TABLE>
The offering of the shares is made for delivery when, as and if accepted
by the underwriter and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. Hambrecht & Quist LLC reserves the
right to reject an order for the purchase of shares in whole or in part.
We have agreed to indemnify Hambrecht & Quist LLC against liabilities,
including liabilities under the Securities Act, and to contribute to payments
Hambrecht & Quist LLC may be required to make with regard to those potential
liabilities.
We and all of our executive officers and directors have agreed not to
offer, sell, contract to sell, or otherwise dispose of any shares of common
stock, options or warrants to acquire shares of common stock or securities
exchangeable for or convertible into shares of common stock during the period
from the date of this prospectus supplement continuing through the date 90 days
after the date of this prospectus supplement without the prior written consent
of Hambrecht & Quist LLC, except, in our case, pursuant to our employee benefit
plans, qualified stock plans and other employee compensation plans existing on
the date of this prospectus supplement and pursuant to currently outstanding
options and rights.
The underwriter may over-allot or effect transactions which stabilize,
maintain or otherwise affect the market price of the common stock at levels
above those which might otherwise prevail in the open market, including by
entering stabilizing bids or effecting syndicate covering transactions. A
stabilizing bid means the placing of any bid or effecting of any purchase for
the purpose of pegging, fixing or maintaining the price of
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the common stock. A syndicate covering transaction means the placing of any bid
on behalf of the underwriting syndicate or the effecting of any purchase to
reduce a short position created in connection with an offering. These
transactions may be effected on the Nasdaq National Market, in the over-the-
counter market, or otherwise. This stabilizing, if commenced, may be
discontinued at any time.
In connection with this offering, the underwriter and selling group member
(if any) who is a qualified market maker on the Nasdaq National Market may
engage in passive market making transactions in our common stock on the Nasdaq
National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934, as amended. During the business day prior to
the pricing of the offering before the commencement of offers or sales of our
common stock, passive market makers must comply with applicable volume and
price limitations and must be identified as such. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid of such security; if all independent bids are lowered below the passive
market maker's bid, however, such bid must then be lowered when certain
purchase limits are exceeded.
We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $319,000.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York will pass
upon the validity of the common stock and other legal matters related to this
offering for us. Morgan, Lewis & Bockius LLP, New York, New York will pass upon
legal matters related to this offering for the underwriter.
EXPERTS
The financial statements, as of July 31, 1999 and 1998 and for each of the
three years in the period ended July 31, 1999, included in our Annual Report on
Form 10-K for the year ended July 31, 1999 and incorporated by reference in
this prospectus supplement, have been incorporated herein in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
S-18
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission. You can read and copy these reports, proxy
statements and other information at the Commission's Public Reference Room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. Call (800) SEC-0330
for more information on the Public Reference Room. The Commission maintains an
Internet site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. The site's address is "www.sec.gov."
We have filed a Registration Statement on Form S-3 under the Securities
Act with respect to this offering. For further information regarding us and
our common stock you should refer to the Registration Statement and its
exhibits and schedules.
The Commission allows us to "incorporate by reference" the information in
documents that we file with them. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus supplement,
and information in documents that we file later with the Commission will
automatically update and supersede this information.
We incorporate by reference the documents listed below and any future
filings we make with the Commission under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act:
(1) Our Annual Report on Form 10-K for the fiscal year ended July 31, 1999;
(2) Our Current Report on Form 8-K dated October 28, 1999;
(3) The description of our preferred stock purchase rights contained in our
Registration Statement on Form 8-A, dated March 5, 1996; and
(4) The description of our Common Stock contained in our Registration
Statement on Form 8-A, dated September 11, 1990.
We also incorporate by reference into this prospectus supplement all
documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus supplement and prior to the
termination of this offering.
We will provide a copy of any or all of these documents (other than
exhibits unless the exhibits are specifically incorporated by reference into
the document), without charge, upon written or oral request to: Emisphere
Technologies, Inc., 765 Old Saw Mill River Road, Tarrytown, NY 10591,
Attention: Secretary, telephone (914) 347-2220.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus supplement shall be deemed to be
modified or superseded for the purposes of this prospectus supplement to the
extent that a statement contained in this prospectus supplement or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference modifies or supersedes that statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus supplement.
S-19
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2,000,000 Shares
[LOGO] EMISPHERE TECHNOLOGIES, INC.
Common Stock
------------------
PROSPECTUS SUPPLEMENT
------------------
Hambrecht & Quist
------------------
October 28, 1999
------------------
You should rely only on information contained in this prospectus
supplement. We have not authorized anyone to provide you with information
different from that contained in this prospectus supplement. We are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus supplement is accurate only as of the date of this prospectus
supplement, regardless of the time of delivery of this prospectus supplement or
of any sale of our common stock.
We have not taken any action in any jurisdiction outside the United States
to permit a public offering of the common stock or possession or distribution
of this prospectus supplement in any such jurisdiction. Persons who come into
possession of this prospectus supplement in jurisdictions outside the United
States are required to inform themselves about and to observe any restrictions
as to this offering and the distribution of this prospectus supplement
applicable to that jurisdiction.
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