<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AGOURON PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 33-0061928
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
_______________________
10350 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037
(619) 622-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PETER JOHNSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037
(619) 622-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
_______________________
COPIES TO:
HARRY J. PROCTOR, ESQ. JOHN P. MCENROE, ESQ.
FERRIS & BRITTON, A P.C. PAUL, WEISS, RIFKIND, WHARTON & GARRISON
401 WEST "A" STREET, SUITE 1600 1285 AVENUE OF THE AMERICAS
SAN DIEGO, CALIFORNIA 92101 NEW YORK, NEW YORK 10019-6064
_______________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER SHARE (2) AGGREGATE OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value....... 2,300,000 $28.56 $65,693,750 $22,653.02
====================================================================================================================================
</TABLE>
(1) Includes 300,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Calculated in accordance with Rule 457(c) under the Securities Act of 1933.
_______________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
<PAGE>
AGOURON PHARMACEUTICALS, INC.
________________________
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-3
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-3 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ------------------------------- ----------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus........ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges................ Prospectus Summary; Risk Factors;
Incorporation of Certain Information
by Reference
4. Use of Proceeds.................. Use of Proceeds
5. Determination of Offering
Price........................... Inapplicable
6. Dilution......................... Dilution
7. Selling Security Holders......... Inapplicable
8. Plan of Distribution............. Outside Front Cover Page; Underwriting
9. Description of Securities
to be Registered................ Outside Front Cover Page; Description of
Securities
10. Interests of Named Experts
and Counsel..................... Inapplicable
11. Material Changes................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business
12. Incorporation of Certain
Information by Reference........ Incorporation of Certain Information by
Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities..................... Inapplicable
</TABLE>
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus; one is to be
used in connection with an offering in the United States (the "U.S. Prospectus")
and one to be used in connection with a concurrent offering outside the United
States and Canada (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus will be identical in all respects except for the
alternate and additional pages that follow the form of the U.S. Prospectus.
Each of the alternate and additional pages for the International Prospectus
included herein is labeled accordingly.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 4, 1995
2,000,000 SHARES
[LOGO OF AGOURON PHARMACEUTICALS, INC.]
COMMON STOCK
____________________
All of the shares of Common Stock offered hereby are being sold by Agouron
Pharmaceuticals, Inc. Of the 2,000,000 shares of Common Stock offered, 1,600,000
are being offered hereby in the United States (the "U.S. Shares") and 400,000
shares are being offered in a concurrent international offering outside the
United States and Canada. The price to the public and aggregate underwriting
discounts and commissions per share will be identical for both offerings. See
"Underwriting."
The Common Stock is traded on The Nasdaq Stock Market under the symbol
AGPH. On August 2, 1995, the closing sale price of the Common Stock as reported
by Nasdaq was $28.50 per share. See "Price Range of Common Stock and Dividend
Policy."
____________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 5.
____________________
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.
<TABLE>
<CAPTION>
=============================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions/(1)/ Company/(2)/
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ---------------------------------------------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option/(3)/ $ $ $
=============================================================================================
</TABLE>
/(1)/ See "Underwriting."
/(2)/ Before deducting expenses estimated at $350,000, which are payable by the
Company.
/(3)/ Assuming exercise in full of the 45-day option granted by the Company to
the Underwriters to purchase up to 300,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
____________________
The U.S. Shares are offered by the U.S. Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the U.S. Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock offered hereby will be made in New York City on
or about ____________, 1995.
____________________
PAINEWEBBER INCORPORATED ROBERTSON, STEPHENS & COMPANY
____________________
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ STOCK MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
EXCHANGE ACT. SEE "UNDERWRITING."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Agouron's Annual Report on Form 10-K for the fiscal year ended June 30, 1995
and the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A having an effective date of June 16, 1987
(file number 0-15609), are hereby incorporated by reference in this Prospectus,
except as superseded or modified herein. All documents filed with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of this Prospectus and
prior to the termination of the offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
Agouron will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Such
requests should be directed to the Chief Financial Officer at Agouron's
executive offices at 10350 North Torrey Pines Road, La Jolla, California 92037;
(619) 622-8000.
DESCRIPTION OF PAGE TWO (COLORED PICTURE):
Color artistic rendering of three-dimensional chemical structures of AG337 and
AG1343 transitioning into intravenous, capsule and tablet formulations, together
with the following descriptive text:
"AG337 An inhibitor of the enzyme thymidylate synthase, AG337 is being evaluated
in phase II clinical trials as a drug for the treatment of malignant solid
tumors."
"AG1343 An inhibitor of the enzyme HIV protease, AG1343 is being evaluated in
phase II clinical trials as a drug for the treatment of HIV infection and AIDS."
Company Logo
Agouron Pharmaceuticals, Inc.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. The shares of Common Stock offered hereby involve
a high degree of risk. Investors should carefully consider the information set
forth under the heading "Risk Factors."
THE COMPANY
Agouron Pharmaceuticals, Inc. ("Agouron" or the "Company") is a pioneer and
leader in technologies for the atom by atom design of novel synthetic drugs
based upon the molecular structures of target proteins which play key roles in
human disease. The Company is conducting phase II clinical trials of two drugs
generated by these design technologies: AG1343 for treatment of HIV infection
and AG337 for treatment of malignant solid tumors. In addition, ten preclinical
programs are in progress for discovery and development of other new drugs in
the fields of cancer, viral diseases and immuno-inflammatory disease.
AG1343, an orally administered inhibitor of the enzyme HIV protease, is
presently the subject of a series of four-week pilot phase II studies evaluating
alternative doses of the drug. Preliminary results have been reported from the
evaluation of the first two dose levels of AG1343 in capsule form in a total of
20 HIV-infected patients in England. In nearly all of these patients, AG1343
reduced the amount of HIV and/or increased the number of CD4+ T cells (primary
cells of the immune system) detectable in blood. AG1343 was reported to be safe
and well tolerated in the English study. Four-week studies of higher dose
levels of AG1343 in tablet form are presently in progress at two centers in the
United States. If satisfied by the results of these pilot phase II studies,
Agouron intends to initiate large-scale pivotal trials in calendar 1995 which,
if successful, could lead to the submission of a New Drug Application ("NDA") to
the U.S. Food and Drug Administration ("FDA") for AG1343 in calendar 1997.
AG337, an inhibitor of the enzyme thymidylate synthase ("TS"), is being tested
clinically as a chemotherapeutic agent for treatment of malignant solid tumors
associated with cancer of the colon, lung, prostate, pancreas, liver and
head/neck. In a majority of more than 50 evaluable patients treated to date in
six ongoing phase II studies in the United States, an intravenous formulation of
AG337 has stabilized previously progressive malignant disease and, in some
patients, caused significant reductions in the mass of solid tumors. An oral
formulation of AG337 is also being developed. If satisfied with the results of
these phase II studies, Agouron intends to initiate pivotal trials of AG337 in
one or more types of solid tumors in calendar 1995 which, if successful, could
lead to the submission of a NDA for AG337 in calendar 1997.
Agouron's goal is to become profitable from the sale of differentiated drugs
generated principally from its own drug discovery and development efforts. To
augment its technical capabilities, to enhance the likelihood of successful
commercialization of its products and to offset some of its operating costs, the
Company has entered into certain collaborative research and development
arrangements with other companies. Agouron has generally retained significant
commercial rights in drugs developed in its collaborative research and
development programs. The Company anticipates that any successfully developed
products will be commercialized through its own direct sales and marketing
activities in certain markets or, where appropriate, through manufacturing and
marketing relationships with other pharmaceutical companies.
In collaboration with the pharmaceutical division of Japan Tobacco Inc.
("JT"), Agouron is engaged in the development of AG1343 for treatment of HIV
infection, as well as in the design of drugs for treatment of infections caused
by hepatitis C, the herpes family of viruses and rhinoviruses -- the most
frequent cause for the common cold. Under agreements with JT, Agouron retains
exclusive commercial rights to these anti-viral products in the United States,
Canada and Mexico, generally subject to the payment either of royalties or a
share of profits to JT.
In collaboration with Syntex (U.S.A.) Inc. (now a subsidiary of Roche
Holdings, Inc.) ("Roche"), Agouron is pursuing the design and development of
inhibitors of matrix metalloproteases ("MMPs") intended to intervene in the
degradation of bone and connective tissue in arthritis, and in the invasion,
growth and metastasis of malignant solid tumors. Agouron retains exclusive
commercial rights to products from the collaboration in the field of cancer,
subject to the payment of royalties to Roche.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.... 2,000,000 shares of Common Stock, no
par value ("Common Stock")
Common Stock to be Outstanding
after the Offering..................... 9,359,282 shares /(1)/
Use of Proceeds........................ For research, preclinical and
clinical product development, to
establish sales, marketing and
manufacturing capabilities and for
capital expenditures, working capital
and other corporate purposes. See
"Use of Proceeds."
Nasdaq Stock Market Symbol............. AGPH
</TABLE>
- -------------
/(1)/ Based on the shares outstanding at June 30, 1995. Excludes (i) 2,585,692
shares of Common Stock issuable upon the exercise of options outstanding
at June 30, 1995 under the Company's stock option plans, (ii) 340,672
shares of Common Stock available for future grants under such plans and
(iii) 45,000 shares of Common Stock issuable upon the exercise of warrants
outstanding at June 30, 1995.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 4,795 $ 6,847 $ 9,970 $17,651 $ 27,961
Research and development costs and expenses......... 9,353 13,142 17,404 23,957 36,317
Net loss............................................ (6,621) (9,132) (9,829) (9,462) (12,939)
Net loss per common share........................... (1.42) (1.47) (1.40) (1.31) (1.77)
Shares used in computing per share amount........... 4,674 6,199 6,997 7,241 7,296
<CAPTION>
JUNE 30, 1995
--------------------------------------
ACTUAL AS ADJUSTED/(1)/
------------- --------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments... $20,244 $73,244
Working capital..................................... 8,837 61,837
Total assets........................................ 27,097 80,097
Long-term liabilities............................... 1,884 1,884
Stockholders' equity /(2)/.......................... 12,591 65,591
</TABLE>
- -------------
/(1)/ As adjusted to give effect to the sale of 2,000,000 shares of Common
Stock in this offering, assuming a public offering price of $28.50 per
share and net proceeds of approximately $53,000,000. See "Use of
Proceeds."
/(2)/ The Company has never declared or paid dividends on its Common Stock.
4
<PAGE>
RISK FACTORS
An investment in the shares being offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the shares of Common Stock offered hereby.
EARLY STAGE OF PRODUCT DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT;
TECHNOLOGICAL UNCERTAINTY
The Company has not yet completed the development of any products and does not
expect to have any products commercially available for several years, if at all.
While the Company has received regulatory approval to begin human clinical
testing for three of its compounds, these and other compounds currently being
developed by the Company will require further research and development,
including extensive additional preclinical and human clinical testing, prior to
submission of any regulatory application for commercial sale of such compounds.
There can be no assurance that further research and development will be
successful or will result in drugs that will qualify for approval by regulatory
authorities for commercial sale. In addition, clinical testing of a
pharmaceutical product is itself subject to approvals by various governmental
regulatory authorities. No assurance can be given that the Company will be
permitted by regulatory authorities to conduct planned additional clinical
testing of the Company's compounds in any particular country of the world,
including the United States, or that, if permitted, such additional clinical
testing will prove that such drugs are safe and efficacious to the extent
necessary to permit the Company to obtain marketing approvals for them from
regulatory authorities. The Company may encounter problems or delays relating
to research and development, regulatory approval and manufacturing and the
failure to address such problems or delays could have a material adverse effect
on the Company's business and prospects. Even if FDA and foreign regulatory
approvals for the marketing of any products being developed by the Company are
obtained, there can be no assurance that such products will be accepted and
successful in the marketplace.
While the Company believes it has demonstrated the utility of certain of its
potential products in initial preclinical testing and in initial phase I and
phase II human clinical trials, extensive further preclinical and clinical
testing of these potential products is required before the Company can obtain
marketing approval from regulatory authorities. Furthermore, results obtained
in initial preclinical studies or in initial phase I and phase II human clinical
trials are not necessarily indicative of results that will be obtained in
subsequent or more extensive preclinical or clinical testing. Additionally, no
drug discovered by use of structure-based drug design has yet been successfully
developed, approved by FDA or marketed. Furthermore, one of the Company's
potential products, AG1343, is an HIV protease inhibitor which has not been
extensively tested in large-scale clinical trials. Technological uncertainty
exists regarding the development of resistance to HIV protease inhibitors by
human subjects. There can be no assurance that disease resistance will not
limit the efficacy of the Company's HIV protease inhibitor. Within the
pharmaceutical industry, treatment of the disease indications being pursued by
the Company, especially HIV infection, AIDS and cancer, has proven difficult.
There can be no assurance that drugs resulting from the approach of protein
structure-based drug design employed by the Company will overcome the
difficulties of drug discovery and development in these or other fields or
result in commercially successful products.
UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING
Before obtaining regulatory approvals for the commercial sale of any of its
products, Agouron must undertake extensive preclinical and clinical testing to
demonstrate their safety and efficacy in humans. To date, the Company has
conducted initial preclinical testing of certain of its drugs and has tested
AG1343 and AG337 only in limited numbers of patients in phase I and phase II
clinical studies in Europe and the United States. The results of initial
preclinical and clinical testing of these and other products under development
by the Company are not necessarily predictive of results that will be obtained
from subsequent or more extensive preclinical and clinical testing.
Additionally, the Company has made and may in the future make changes to the
formulation of its drugs and/or to the processes for manufacturing its drugs.
Any such future changes in formulation or manufacturing processes could result
in delays in conducting further preclinical and clinical testing, in unexpected
adverse results in further preclinical and clinical testing, and/or in
additional development expenses. Furthermore, there can be no assurance that
clinical studies of products under development will demonstrate the safety and
efficacy of such products at all or to the extent necessary to obtain regulatory
approvals of such products. Companies in the industry have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. The failure to adequately demonstrate the safety and efficacy of a
therapeutic product under
5
<PAGE>
development could delay or prevent regulatory approval of the product, and would
have a material adverse effect on the Company.
Any drug is likely to produce some toxicities or undesirable side effects in
animals and in humans when administered at sufficiently high doses and/or for
sufficiently long periods of time. In an attempt to evaluate the potential
toxicities or side effects of AG1343, AG337 and AG331, the Company has conducted
initial toxicology studies of these compounds in animals. On the basis of
results to date from such toxicological studies, the Company has selected for
human clinical testing dose levels of its drugs and periods of exposure to its
drugs which, in the Company's judgment, are unlikely to produce unacceptable
toxicities or side effects in humans. However, there can be no assurance that
unacceptable toxicities or side effects will not occur at any dose level at any
time in the course of toxicological studies or of human clinical trials of the
Company's drugs. The appearance of any such unacceptable toxicities or side
effects in toxicology studies or in human clinical trials could cause the
Company or regulatory authorities to interrupt, limit, delay or abort the
development of any of the Company's drugs and could ultimately prevent their
being approved by FDA or foreign regulatory authorities for any or all targeted
indications. Even after being approved by FDA or foreign regulatory
authorities, products may later exhibit adverse effects that prevent their
widespread use or necessitate their withdrawal from the market. There can be no
assurance that any products under development by the Company will be safe when
administered to patients.
The rate of completion of clinical trials is dependent upon, among other
factors, the rate of enrollment of patients. Patient accrual is a function of
many factors, including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study and the
existence of competitive clinical trials. Delays in planned patient enrollment
in the Company's current trials or future clinical trials may result in
increased costs, program delays or both, which could have a material adverse
effect on the Company. There can be no assurance that if clinical trials are
completed the Company will be able to submit a NDA as scheduled or that any such
application will be reviewed and approved by FDA in a timely manner, or at all.
HISTORY OF OPERATING LOSSES
To date, most of the Company's revenues have consisted of funds received
pursuant to collaborative research and development arrangements, grants from the
National Institutes of Health ("NIH") and interest income. The Company has not
generated revenues from the commercialization of any products. The Company has
had net operating losses since its inception and, as of June 30, 1995, had an
accumulated deficit of approximately $63,500,000. The Company expects to incur
substantial net operating losses for at least the next several years. Such
losses may fluctuate from quarter to quarter depending on several factors
including the status of the Company's research, development and clinical trial
programs and on the timing and receipt of fees from collaborative relationships.
Such losses will continue unless and until such time as product approvals are
obtained and product sales generate sufficient revenue to offset expenses and
generate sufficient cash flow to fund continuing operations. The Company's
ability to achieve a profitable level of operations is dependent on successfully
completing the development of certain of its products. There can be no
assurance that any or all of these events will occur or that the Company will
ever achieve product revenues or profitable operations.
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL
The Company has expended more than $120,000,000 on research and development
activities and intends in the future to expend substantial additional funds to
continue research and development activities, conduct preclinical studies and
tests, conduct human clinical trials, establish manufacturing, sales and
marketing capabilities and market any approved products. Additional funds may
be required in connection with collaborative arrangements with others and for
working capital and other general corporate needs.
The Company believes that its current capital resources, existing contractual
commitments, a JT milestone payment of $24,000,000 and the proceeds of this
offering, will enable it to maintain its current and planned operations through
at least fiscal 1997. However, no assurance can be given that JT will make its
milestone payment or that there will be no change in the Company's operations
that would consume available resources more rapidly than anticipated.
Additional funding will be required before the commercialization of any
products. The Company's future capital requirements will depend on many
factors, including the progress of research and development, the scope and
results of preclinical studies and clinical trials, the cost, timing and outcome
of regulatory reviews, the rate of technological advances, the market acceptance
of any approved Company products, administrative and legal expenses and
competitive factors. To the extent the Company's capital resources are
insufficient to meet current or planned operating requirements, the Company will
seek to obtain additional funds
6
<PAGE>
through equity or debt financings, collaborative or other arrangements with
corporate partners, licensees and others, and from other sources, which may have
the effect of diluting the holdings of existing shareholders. No assurance can
be given that additional financing will be available when needed or on terms
acceptable to the Company. If adequate funds are not available, the Company may
be required to delay or eliminate expenditures for certain of its programs or to
license third parties to commercialize products or technologies that the Company
would otherwise seek to develop and commercialize itself, any of which would
have a material adverse effect on the Company. See "Use of Proceeds."
DEPENDENCE ON OTHERS
The Company's strategy for development and commercialization of certain of its
products entails entering into various arrangements with corporate partners,
licensees and others, and upon the subsequent success of these partners,
licensees and others in performing preclinical and clinical testing, obtaining
regulatory approvals, manufacturing and marketing. These arrangements may
require the Company to transfer certain material rights to such corporate
partners, licensees and others. In the event the Company determines to license
or sublicense certain of its commercial rights, there can be no assurance such
arrangements will not result in reduced product revenue to the Company. While
the Company believes its partners, licensees and others will have an economic
motivation to succeed in performing their contractual responsibilities, the
amount and timing of resources to be devoted to these activities will be
controlled by others. Consequently, there can be no assurance that any revenues
or profits will be derived from such arrangements, that any of the Company's
current strategic arrangements will be continued or that the Company will be
able to enter into future collaborations.
Under the provisions of certain agreements entered into between the Company
and JT, JT has agreed to collaborate on the discovery, development,
commercialization and marketing of certain novel therapeutic drugs including
AG1343, anti-hepatitis C and anti-herpes drugs and to make certain payments
related thereto to the Company. In the event JT fails to make any of the
anticipated payments, or otherwise delays in the making of any of the payments,
such event could have a material adverse effect on the Company. See "Business
- -- Research and Development Agreements -- Japan Tobacco Inc."
LACK OF MANUFACTURING CAPABILITIES
The Company has not yet manufactured at a commercial scale and currently does
not have the facilities to manufacture its product candidates in commercial
quantities under current good manufacturing practices ("GMP") prescribed by FDA.
To be successful, if approved by FDA, the Company's products must be
manufactured in commercial quantities under GMP and at acceptable costs.
Although the Company is producing clinical quantities of certain chemical
compounds in certain of its laboratory facilities that have undergone GMP
inspections and been approved by the State of California, and has business
relationships with manufacturers to supply significant portions of its clinical
trial material requirements, the current facilities and manufacturing
relationships of the Company are not adequate to meet anticipated commercial
production needs. Therefore, the Company will need to develop additional
manufacturing facilities and/or be dependent upon its collaborators, licensees
or upon contract manufacturers for the commercial manufacture of products it may
develop. The Company has no experience in such commercial manufacturing and no
assurance can be given that the Company will be able to make the transition to
commercial production successfully or be able to arrange for contract
manufacturing. In the event the Company is unable to obtain contract
manufacturing on acceptable terms, its ability to commercialize or timely
deliver its products at acceptable cost may be adversely affected.
LACK OF SALES AND MARKETING CAPABILITIES
The Company has no experience in the sales, marketing and distribution of
pharmaceutical products and will have to develop a pharmaceutical sales force
and/or rely on collaborators, licensees or on arrangements with others to
provide for the sales, marketing and distribution of any products approved by
FDA or foreign regulatory authorities. There can be no assurance that the
Company will be able to establish sales, marketing and distribution capabilities
or make arrangements with its collaborators, licensees or others to perform such
activities or that such efforts will be successful. Further, there can be no
assurance that any products, if approved, will gain market acceptance.
7
<PAGE>
PATENTS AND PROPRIETARY TECHNOLOGY
The Company seeks to protect its proprietary technology by means of patents,
trade secrets and unpatented proprietary know-how. The Company has applied for,
and will in the future apply for United States and foreign patents, patents for
certain of its technology and products. Most of the Company's products are
expected to be synthetic chemical compounds, the patentability of which will be
determined under principles and procedures well established by the United States
Patent Office under United States patent law. No assurance can be given that
the Company's patent applications will issue as patents or that any patents that
may be issued will provide Agouron with adequate protection for the covered
products or technology.
Many of the processes and much of the know-how of importance to the Company's
technology are dependent upon the skills, knowledge and experience of its
scientific and technical personnel; such skills, knowledge and experience are
not patentable. To help protect its rights, the Company requires all employees,
significant consultants and advisors, and collaborators to enter into
confidentiality agreements with Agouron. There can be no assurance, however,
that these agreements will provide adequate protection for the Company's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure. Further, in the absence of patent protection,
the Company may be exposed to competitors who independently develop
substantially equivalent technology or otherwise gain access to the Company's
trade secrets, know-how or other proprietary information. There can be no
assurance that the Company's activities will not infringe on the patents or
proprietary rights of others. The commercial success of the Company will also
depend in part on not infringing patent or proprietary rights of others and not
breaching any licenses granted to the Company. There can be no assurance that
the Company will be able to obtain a license to any technology that it may
require to conduct its business or that, if obtainable, such technology can be
licensed at a reasonable cost. Failure by the Company to obtain a license to
any technology that it may require to commercialize any of its products may have
a material adverse effect on the Company.
The cost of obtaining and enforcing patent protection and of protecting
proprietary technology may involve a substantial commitment of the Company's
resources. Any such commitment may divert resources from other areas of the
Company.
TECHNOLOGICAL CHANGE AND COMPETITION
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid technological change. The Company believes that industry-
wide interest in the application of protein structure-based drug design and
related technology will continue and may accelerate as the technology becomes
more widely understood. Competitors of the Company in the United States and
abroad are numerous and include, among others, pharmaceutical, biotechnology and
chemical companies, universities and other research organizations. For example,
the Company is aware of several pharmaceutical companies that have HIV protease
inhibitors, some of which are in more advanced stages of clinical development
than AG1343, including those of Abbott Laboratories, Inc., Merck & Co., Inc. and
Roche Holdings, Inc. There can be no assurance that these competitors will not
succeed in developing technologies and products that are more effective than any
which have been or are being developed by the Company or which would render the
Company's technology and products obsolete and noncompetitive.
Many of the Company's competitors have substantially greater financial and
technical resources and production and marketing capabilities and experience
than the Company. In addition, many of the Company's competitors have
significantly greater experience than the Company in conducting preclinical
testing and human clinical trials of new pharmaceutical products and in
obtaining FDA and other regulatory approvals of products. Accordingly, certain
of the Company's competitors may succeed in obtaining regulatory approval for
products more rapidly or effectively than the Company. If the Company commences
commercial sales of its products, it will also be competing with respect to
manufacturing efficiency and sales and marketing capabilities, areas in which it
currently has no experience.
GOVERNMENT REGULATION
Preclinical studies, clinical trials and the production and marketing of the
Company's products and its ongoing research and development activities are
subject to regulation by numerous governmental authorities in the United States
and other countries. Rigorous preclinical and clinical testing and obtaining
regulatory approvals can take many years and require the expenditure of
substantial resources. Failures or delays by the Company or its collaborators
or licensees in obtaining regulatory approvals would adversely affect the
marketing
8
<PAGE>
of products developed by the Company and the Company's ability to receive
product revenues or royalties. Further, there can be no assurance that the
Company or its collaborators or licensees will be able to obtain necessary
regulatory approvals. There can be no assurance that clinical data will be
accepted by regulatory agencies or that any approvals will be granted on a
timely basis, if at all. Any significant delays or requests to provide
additional data in the approval process could have a material adverse effect on
the Company. See "Business -- Government Regulation."
If regulatory approval of a drug is obtained, such approval may involve
limitations and restrictions on the drug's use. In addition, any marketed drug
and its manufacturer are subject to continual governmental review and any
subsequent discovery of previously unrecognized problems could result in
restrictions on the product or manufacturer, including, without limitation,
withdrawal of the product from the market. Failure of the Company to comply
with applicable regulatory requirements can, among other things, result in
fines, suspension of regulatory approvals, product recalls, seizure of products,
operating restrictions or criminal prosecution.
Additionally, the Company is or may become subject to various federal, state
and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with Agouron's research and development work. The Company is
unable to predict the extent of restrictions that might arise from any
governmental or administrative action.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT AND PRODUCT PRICING
The Company's ability to commercialize products successfully will depend in
part on reimbursement of the costs of such products and related treatments at
acceptable levels from government authorities, private health insurers and other
organizations, such as health maintenance organizations ("HMOs"). There can be
no assurance that reimbursement in the United States or foreign countries will
be available for any products the Company may develop or, if available, will not
be decreased in the future, or that reimbursement amounts will not reduce the
demand for, or the price of, the Company's products, thereby adversely affecting
the Company's business.
Third-party payors are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed health care in the United
States and the concurrent growth of organizations, such as HMOs, which can
control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for pharmaceutical
products. The cost containment measures that health care providers are
instituting and the effect of any health care reform could materially adversely
affect the Company's ability to sell its products if successfully developed and
approved. Moreover, the Company is unable to predict what additional
legislation or regulation, if any, relating to the health care industry or
third-party coverage and reimbursement may be enacted in the future or what
effect such legislation or regulation would have on the Company's business.
PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The testing, marketing and sale of human health care products entail an
inherent risk of allegations of product liability and there can be no assurance
that product liability claims will not be asserted against the Company, its
collaborators or its licensees. The Company currently has only limited amounts
of product liability insurance for clinical trials and there can be no assurance
that the Company will be able to obtain or maintain product liability insurance
on acceptable terms or that such insurance will provide adequate coverage
against any potential claims. Furthermore, there can be no assurance that any
collaborators and licensees of Agouron will agree to indemnify the Company, be
sufficiently insured or have a sufficient net worth to protect the Company from
any product liability claims.
USE OF HAZARDOUS MATERIALS
The Company's research and development activities involve the controlled use
of hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
the Company could be held liable for any damages that result and any liability
could have a material adverse effect on the financial condition of the Company.
9
<PAGE>
ATTRACTION AND RETENTION OF PERSONNEL
The future success of the Company will depend in large part on its ability to
continue to attract and retain highly qualified scientific, technical and
managerial personnel. Competition for such personnel is intense and there can
be no assurance that Agouron will be able to attract and retain the personnel
necessary for the development of its business. In addition, much of the know-
how developed by the Company resides in its scientific and technical personnel
and such know-how is not readily transferable to other scientific and technical
personnel. Further, the Company's anticipated growth and expansion into areas
and activities requiring additional expertise, such as manufacturing and
marketing, will require the addition of new technical and management personnel
and the development of additional expertise by existing personnel. The loss of
or failure to recruit scientific, technical and managerial personnel could have
a material adverse effect on the Company.
DILUTION; ABSENCE OF DIVIDENDS
Purchasers of shares of Common Stock in this offering will experience
immediate and substantial dilution in the net tangible book value of their
shares. Further dilution will occur upon the exercise of outstanding stock
options and warrants, the expiration dates of which do not occur for a number of
years. The Company has never declared or paid dividends on its Common Stock to
date and does not anticipate paying any dividends in the foreseeable future.
See "Dilution."
VOLATILITY OF STOCK PRICE
The market price of the Common Stock has in recent years fluctuated
significantly and it is likely that the price of the Common Stock will fluctuate
in the future. Announcements by the Company or others regarding its existing
and future collaborations, results of clinical trials, scientific discoveries,
technological innovations, commercial products, patents or proprietary rights or
regulatory actions may have a significant adverse effect on the market price of
the Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by Agouron from the sale of Common Stock
offered hereby, after deducting estimated underwriting discounts and commissions
and offering expenses, are estimated to be $53,000,000 ($61,000,000 if the
Underwriters' over-allotment option is exercised in full), assuming a public
offering price of $28.50 per share. The Company currently intends to use the
net proceeds in the following approximate amounts: product research,
development and preclinical and clinical testing, $38,000,000; sales, marketing
and manufacturing infrastructure, $10,000,000; capital equipment and facilities,
including scientific equipment and computers, $5,000,000; and the balance of the
net proceeds, if any, will be added to the Company's working capital and made
available for general corporate purposes. The amounts actually expended for
each purpose may vary significantly depending upon a number of factors,
including the status of competitive products, the progress of the Company's
research and development programs, timing of regulatory approvals, technological
advances and determinations as to the commercial potential of the Company's
products. In addition, the Company's research and development expenditures will
vary as projects are added, expanded or terminated as a result of variations in
funding from existing or future collaborative partners. The Company reserves
the right to reallocate the proceeds of this offering in response to these and
related contingencies. To the extent the offering proceeds are less than
estimated herein, the Company would expect to reduce the proceeds allocated to
clinical and preclinical testing. The Company believes that its current capital
resources, existing contractual commitments, a $24,000,000 milestone payment
from JT and the net proceeds of this offering will enable it to maintain its
current and planned operations through at least fiscal 1997. Additional funding
will be required before the commercialization of any products. See "Risk
Factors -- Additional Financing Requirements and Access to Capital."
Until applied to any of the foregoing uses, the net proceeds of the offering
will be invested by the Company in interest-bearing deposit accounts,
certificates of deposit or similar financial instruments. The Company will
invest its liquid assets in a manner that will not subject it to regulation
under the Investment Company Act of 1940.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1995 and as adjusted to reflect the sale of the shares of Common Stock
offered hereby. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term liabilities............................... $ 1,884 $ 1,884
-------- --------
Stockholders' equity:
Common Stock, no par value, 75,000,000 shares
authorized, 7,359,282 shares issued and
outstanding and 9,359,282 shares
outstanding as adjusted/(1)/..................... 76,113 129,113
Accumulated deficit............................... (63,522) (63,522)
-------- --------
Total stockholders' equity........................ 12,591 65,591
-------- --------
Total capitalization.............................. $ 14,475 $ 67,475
======== ========
</TABLE>
- ---------------
/(1)/ Excludes 2,926,364 shares reserved for issuance under the Company's Stock
Option Plans (of which 2,585,692 shares were subject to outstanding
options) and 45,000 shares reserved for issuance under outstanding
warrants.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock trades on The Nasdaq Stock Market under the symbol AGPH. The
following table sets forth the high and low sale prices as reported by Nasdaq
for the fiscal periods indicated.
<TABLE>
<S> <C> <C>
FISCAL 1994
Quarter ended September 30.............. $10 1/4 $ 7 3/4
Quarter ended December 31............... 12 1/2 8 3/4
Quarter ended March 31.................. 16 3/4 9 1/2
Quarter ended June 30................... 14 1/4 9 3/4
FISCAL 1995
Quarter ended September 30.............. 13 3/4 9 3/4
Quarter ended December 31............... 13 1/4 10
Quarter ended March 31.................. 19 10 7/8
Quarter ended June 30................... 27 1/4 15
FISCAL 1996
Quarter ending September 30, 1995
(through August 2)..................... 30 3/4 23 1/4
</TABLE>
On August 2, 1995, the last sale price of the Common Stock as reported by The
Nasdaq Stock Market was $28.50 per share. There were approximately 5,000
beneficial owners of the Common Stock as of such date.
The Company has not declared any dividends on the Common Stock and does not
intend to declare any cash dividends on the Common Stock in the foreseeable
future.
12
<PAGE>
DILUTION
As of June 30, 1995, the net tangible book value of the Company was
$12,591,000, or $1.71 per share of Common Stock. Net tangible book value per
share is equal to net tangible assets (tangible assets of the Company less total
liabilities) divided by the 7,359,282 shares of Common Stock outstanding. After
giving effect to the sale of the 2,000,000 shares of Common Stock by the Company
in this offering and the receipt of the estimated net proceeds therefrom, the
pro forma net tangible book value of the Company as of June 30, 1995 would have
been $65,591,000, or $7.01 per share of Common Stock. This represents an
immediate increase in net tangible book value of $5.30 per share to existing
shareholders and an immediate dilution of $21.49 per share to new investors.
The following table illustrates the pro forma dilution of a new investor's
equity in a share of Common Stock as of June 30, 1995:
<TABLE>
<S> <C> <C>
Assumed public offering price........................... $28.50
Net tangible book value before offering................. $ 1.71
Increase attributable to new investors.................. 5.30
------
Pro forma net tangible book value after offering........ 7.01
------
Dilution of net tangible book value to new investors.... $21.49
======
</TABLE>
13
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following data for the years ended June 30, 1991, 1992, 1993, 1994 and
1995 have been derived from financial statements audited by Price Waterhouse
LLP, independent accountants. The information presented below should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
June 30, 1995 and Management's Discussion and Analysis of Financial Condition
and Results of Operations and the financial statements and related notes
included elsewhere in this Prospectus. See "Incorporation of Certain
Information by Reference."
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract.......................... $ 3,781 $ 5,307 $ 8,266 $16,301 $ 26,722
Interest.......................... 1,014 1,540 1,704 1,350 1,239
------- ------- ------- ------- --------
Total revenues.................... 4,795 6,847 9,970 17,651 27,961
------- ------- ------- ------- --------
Expenses:
Research and development.......... 9,353 13,142 17,404 23,957 36,317
General and administrative........ 1,880 2,519 2,127 2,961 4,358
Interest.......................... 183 318 268 195 225
------- ------- ------- ------- --------
Total expenses.................... 11,416 15,979 19,799 27,113 40,900
------- ------- ------- ------- --------
Net loss............................... $(6,621) $(9,132) $(9,829) $(9,462) $(12,939)
======= ======= ======= ======= ========
Net loss per common share.............. $(1.42) $(1.47) $(1.40) $(1.31) $(1.77)
======= ======= ======= ======= ========
Shares used in computing
per share amounts.................... 4,674 6,199 6,997 7,241 7,296
BALANCE SHEET DATA:
Working capital................... $ 8,978 $35,115 $29,933 $21,039 $ 8,837
Total assets...................... 15,672 45,625 41,721 37,178 27,097
Long-term liabilities............. 1,179 3,050 2,613 2,285 1,884
Stockholders' equity.............. 10,620 37,517 33,757 24,852 12,591
Dividends per common share/(1)/... -- -- -- -- --
</TABLE>
/(1)/ The Company has never declared or paid dividends on the Common Stock.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company has been primarily engaged in the research and development of
human pharmaceuticals utilizing protein structure-based drug design since its
inception in 1984. Such research and development has been funded from the
Company's equity-derived working capital, through collaborative arrangements
with other companies and through grants from the National Institutes of Health.
The Company's net operating losses incurred since inception are primarily a
result of the Company's independent research and development activities. Net
losses for the fiscal years ended June 30, 1993, 1994 and 1995 were $9,829,000,
$9,462,000 and $12,939,000. As product sales may not begin for several years
and preclinical and clinical development activities and costs are increasing in
certain research and development programs, it is anticipated that net operating
losses will continue and will increase in the next several years.
RESULTS OF OPERATIONS
Collaborative research and development agreements with Japan Tobacco Inc.
("JT"), Syntex (U.S.A.) Inc. (now a subsidiary of Roche Holdings, Inc.)
("Roche"), Schering-Plough Corporation ("Schering") and Eli Lilly and Company
("Lilly") accounted for approximately 94%, 94% and 97% of the Company's total
contract revenue for 1993, 1994 and 1995. Total contract revenue for 1994
increased approximately 97% over 1993 due principally to the effect of a full
year of activities on the collaborative programs covered by the 1992 agreement
with JT ("JT 1992") and the June 1993 collaborative agreement with Roche, and
the initiation of work on additional collaborative programs with JT under an
expanded research agreement established in February 1994 ("JT 1994"). Partially
offsetting these increases was the absence of any funding in 1994 from Lilly due
to the completion of a collaborative research program in April 1993. Total
contract revenues for 1995 increased approximately 64% over 1994 due principally
to an anti-HIV collaboration with JT initiated in December 1994 ("JT HIV"), the
effect of a full year of program activities associated with JT 1994 and
increased activities for research programs with Roche. These increases were
partially offset by the absence of funding in 1995 from Schering due to the
completion of a collaborative research program in April 1994. The Company
anticipates that its contract revenues for 1996 will exceed the level of such
revenues recognized in 1995.
Interest income decreased by approximately 21% from 1993 to 1994 and 8% from
1994 to 1995, primarily due to a generally declining portfolio of cash, cash
equivalents and short-term investments which were utilized to fund operations.
The Company anticipates that interest income will increase in 1996.
Research and development spending increased by approximately 38% from 1993 to
1994 and by approximately 52% from 1994 to 1995, due principally to staff-
related expenses and third-party costs associated with increasing preclinical
and clinical development activities associated with the Company's leading
product candidates: AG337 for the treatment of cancer and AG1343 for the
treatment of HIV infections and AIDS. Collaborator-funded program expenditures
representing 55%, 45% and 65% of total research and development costs and
expenses in 1993, 1994 and 1995, generated a significant majority of the
increases in research and development costs and expenses. The Company's self-
funded research and development programs generated approximately 45%, 55% and
35% of total research and development costs and expenses in 1993, 1994 and 1995.
Of such self-funded costs during 1993, 1994 and 1995, approximately 60%, 44% and
49% was dedicated to the preclinical and clinical development of anti-
proliferative drugs in the Company's most advanced programs. The Company
anticipates that total research and development costs and expenses will increase
in 1996 in response to expanding drug design efforts on various projects and
increasing preclinical and clinical studies associated with several of the
Company's product development programs.
General and administrative costs and expenses represented approximately 11% of
total costs and expenses in each of 1993, 1994 and 1995. The increase in
absolute dollar spending for such costs from 1993 to 1994 was due mainly to
certain administrative costs associated with the JT collaborations and increased
occupancy costs related to additional leased facilities. The increase from 1994
to 1995 was due to increasing average staff levels (approximately 36%) and
staff-related expenditures and certain administrative costs associated with the
JT collaborations. The Company anticipates that total general and
administrative costs and expenses will increase in 1996 due to additional staff,
costs associated with planned facility expansion and increasing commercial
development and sales and marketing activities.
15
<PAGE>
Interest expense declined by approximately 27% from 1993 to 1994 and increased
by approximately 15% from 1994 to 1995 due to fluctuations in interest rates and
the level of debt and capital lease obligations from year to year.
FINANCIAL CONDITION
Liquidity and Capital Resources
Since its inception, the Company's cash expenditures have substantially
exceeded its revenues and the Company has relied primarily on equity, lease and
debt financing and various collaborative arrangements to fund its operations and
capital expenditures. To date, the Company has raised net equity proceeds of
approximately $76,100,000, principally from corporate and venture capital
investors and through its public offerings in calendar 1987, 1989 and 1991. The
Company believes that its current capital resources, existing contractual
commitments, a JT milestone payment of $24,000,000 and the net proceeds of this
offering, are sufficient to meet its operating needs through fiscal 1997. This
belief is based on current research and clinical development plans, the current
regulatory environment, historical industry experience in the development of
therapeutic drugs and general economic conditions. However, if the JT milestone
payment is not received, the Company will need additional financing to meet the
planned operating needs of fiscal 1997. Such needs would include the
expenditure of substantial funds to continue research and development
activities, conduct existing and planned preclinical studies and tests, conduct
human clinical trials and establish certain manufacturing, sales and marketing
capabilities. The Company believes that additional funding will be required
before the commercialization of any products. As a result, the Company
anticipates pursuing various financing alternatives such as collaborative
arrangements and additional public offerings or private placements of Company
common or preferred stock. If such alternatives are not available, the Company
may be required to delay or eliminate expenditures for certain of its potential
products under development or to license third parties to commercialize products
or technologies that the Company would otherwise seek to develop itself.
Capital Expenditures
During 1995, capital expenditures totaled $2,032,000 compared with $1,829,000
and $3,186,000 during 1994 and 1993, of which $17,000, $58,000 and $85,000 were
financed through capital lease obligations. Of the total capital expenditures
during 1993, 1994 and 1995, approximately $1,202,000, $119,000 and $130,000
represented leasehold improvement costs associated with certain of the Company's
scientific and administrative facilities. With the exception of the leasehold
improvement costs incurred during 1993, 1994 and 1995, virtually all of the
capital expenditures during 1993, 1994 and 1995 represented laboratory equipment
and scientific instrumentation necessary to support an expanding research and
development effort.
Capital expenditures during 1996 are expected to be approximately $2,200,000
to support product manufacturing, development and research activities. The
Company may utilize lease or debt financing for certain expenditures if
available on acceptable terms.
16
<PAGE>
BUSINESS
OVERVIEW
Agouron is a pioneer and leader in technologies for the atom by atom design of
novel synthetic drugs based upon the molecular structures of target proteins
which play key roles in human disease. The Company is conducting phase II
clinical trials of two drugs generated by these design technologies: AG1343 for
treatment of HIV infection, and AG337 for treatment of malignant solid tumors.
In addition, ten preclinical programs are in progress for discovery and
development of other new drugs in the fields of cancer, viral diseases and
immuno-inflammatory disease.
AG1343, an orally administered inhibitor of the enzyme HIV protease, is
presently the subject of a series of four-week pilot phase II studies evaluating
alternative doses of the drug. Preliminary results have been reported from the
evaluation of the first two dose levels of AG1343 in capsule form in a total of
20 HIV-infected patients in England. In nearly all of these patients, AG1343
reduced the amount of HIV and/or increased the number of CD4+ T cells (primary
cells of the immune system) detectable in blood. AG1343 was reported to be safe
and well tolerated in the English study. Four-week studies of higher dose
levels of AG1343 in tablet form are presently in progress at two centers in the
United States. If satisfied by the results of these pilot phase II studies,
Agouron intends to initiate large-scale pivotal trials in calendar 1995 which,
if successful, could lead to the submission of a NDA for AG1343 in calendar
1997.
AG337, an inhibitor of the enzyme thymidylate synthase ("TS"), is being tested
clinically as a chemotherapeutic agent for treatment of malignant solid tumors
associated with cancer of the colon, lung, prostate, pancreas, liver and
head/neck. In a majority of more than 50 evaluable patients treated to date in
six ongoing phase II studies in the United States, an intravenous formulation of
AG337 has stabilized previously progressive malignant disease and, in some
patients, caused significant reductions in the mass of solid tumors. An oral
formulation of AG337 is also being developed. If satisfied with the results of
these phase II studies, Agouron intends to initiate pivotal trials of AG337 in
one or more solid tumors in calendar 1995 which, if successful, could lead to
the submission of a NDA for AG337 in calendar 1997.
Agouron's goal is to become profitable from the sale of differentiated drugs
generated principally from its own drug discovery and development efforts. To
augment its technical capabilities, to enhance the likelihood of successful
commercialization of its products and to offset some of its operating costs, the
Company has entered into certain collaborative research and development
arrangements with other companies. The Company has generally retained
significant commercial rights in drugs developed in its collaborative research
and development programs. The Company anticipates that any successfully
developed products will be commercialized through its own direct sales and
marketing activities in certain markets or, where appropriate, through
manufacturing and marketing relationships with other pharmaceutical companies.
In collaboration with the pharmaceutical division of JT, Agouron is engaged in
the development of AG1343 for treatment of HIV infection, as well as in the
design of drugs for treatment of infections caused by hepatitis C, the herpes
family of viruses and rhinoviruses -- the most frequent cause for the common
cold. Under agreements with JT, Agouron retains exclusive commercial rights to
these anti-viral products in the United States, Canada and Mexico, generally
subject to the payment either of royalties or a share of profits to JT.
In collaboration with Roche, Agouron is pursuing the design and development of
inhibitors of matrix metalloproteases ("MMPs") intended to intervene in the
degradation of bone and connective tissue in arthritis, and in the invasion,
growth and metastasis of malignant solid tumors. Agouron retains exclusive
commercial rights to products from the collaboration in the field of cancer,
subject to the payment of royalties to Roche.
RESEARCH AND DEVELOPMENT PROGRAMS
Agouron's research and development programs concentrate in three areas of
human disease: cancer, viral diseases and immuno-inflammatory disease. All of
Agouron's drug discovery programs apply the Company's core technologies for the
atom by atom design of small synthetic drug molecules based upon the three
dimensional molecular architecture of proteins that play key roles in human
disease. See "Drug Design Technology."
17
<PAGE>
The following table outlines Agouron's preclinical and clinical research and
development programs. Some of these programs are being pursued by Agouron
independently while others are being undertaken in collaboration with other
companies.
<TABLE>
<CAPTION>
PROGRAM INDICATION PROTEIN TARGET DEVELOPMENT STAGE PARTNER
- ----------------------- ------------------ -------------------- ----------------- -------
<S> <C> <C> <C> <C>
CANCER
AG337- i.v. Solid Tumors TS Phase II None
AG337- oral Solid Tumors TS Phase I None
AG331 Solid Tumors TS Phase I None
GART Solid Tumors GART Preclinical None
MMP Metastasis Collagenase Preclinical Roche
AICART Solid Tumors AICART Research None
cdk4 Solid Tumors cdk4 Research None
VEGF Receptor Solid Tumors kdr Research None
VIRAL DISEASE
AG1343 HIV Infection HIV Protease Phase II JT
Rhinovirus Common Cold RhV 3C Protease Research JT
Cytomegalovirus CMV Infection CMV Protease Research JT
Herpes simplex Herpes Infection HSV-1 Protease Research JT
Hepatitis C Viral Diseases Hepatitis C Protease Research JT
IMMUNO-INFLAMMATORY
DISEASE
MMP Arthritis Stromelysin Research Roche
AICART Inflammation AICART Research None
Calcineurin Immuno-suppression Calcineurin Research None
</TABLE>
CANCER
Overview
The development of new drugs for treatment of cancer is a primary scientific
and commercial focus of the Company. Cancer is the second leading cause of
death in the United States and most developed nations. While much progress has
been made in the treatment of certain forms of cancer, most existing anti-cancer
drugs display limited efficacy and significant toxicities that restrict their
clinical usefulness. As a result, there remains a critical need for anti-cancer
drugs which are less toxic and more efficacious either as tumoricidal (tumor-
killing) or tumoristatic (tumor-controlling) agents.
Agouron believes that the next generation of agents for treatment of the most
common human cancers should have a target other than DNA, should be more capable
of evading drug resistance and should retain activity against non-proliferating
tumor cells. The Company's anti-cancer drug discovery and development programs
are aimed at meeting these criteria by focusing on the discovery and development
of inhibitors of the following enzymes: thymidylate synthase (TS); glycinamide
ribotide formyltransferase ("GART"); matrix metalloproteases (MMPs);
aminoimidazole carboxamide ribonucleotide formyltransferase (AICART); cyclin
dependent kinase 4 ("cdk4"); and a receptor for Vascular Endothelial Growth
Factor ("VEGF"). Three of these enzyme targets (TS, GART and AICART) have a
common structural motif that permits lead inhibitors from one program to be
useful in others.
TS Inhibitors: AG337 and AG331
The enzyme TS catalyzes a critical step in the synthesis of DNA and is
especially crucial to cancer cells undergoing uncontrolled proliferation.
Independent research has established that the efficacy of the anti-tumor drug 5-
fluorouracil derives from its ability to inactivate TS. Inhibition of TS kills
tumor cells by inducing programmed cell death -- a form of natural cellular
suicide by which normal cell growth is usually regulated. It has been Agouron's
goal to design highly specific inhibitors of TS that overcome the several
limitations of 5-fluorouracil. In particular, Agouron has focused on the design
of TS inhibitors of novel chemical character that it believes may be capable of
penetrating fatty membranes and tissues, circumventing some of the more common
forms of drug resistance and passing into and out of cells by passive diffusion,
allowing for much greater clinical control of toxicity and for a broader
spectrum of anti-tumor activity. Two compounds to emerge from Agouron's
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TS program are currently in clinical development: AG337 is in phase II clinical
testing and AG331 is currently in phase I clinical testing.
Phase I studies of AG337 initially conducted at the medical hospital of the
University of Newcastle upon Tyne in England, under the sponsorship of the
British Cancer Research Campaign, evaluated first an intravenous ("i.v.")
formulation and then an oral formulation of AG337. In these phase I studies,
which were ultimately extended into the United States and involved a total of 45
advanced cancer patients, the maximum tolerated 5-day dose of AG337 was
determined through a series of dose escalations. On the basis of these studies,
a dose of 1000mg/m/2//day was determined to be appropriate for phase II efficacy
studies. The phase I studies demonstrated that AG337 i.v. was well tolerated:
at the maximum tolerated dose, the predominant toxicities were determined to be
myelosuppression (suppression of bone marrow activity) of short duration and
mucositis (mouth sores) which could frequently be mitigated with a simple
mouthwash. A subsequent phase I study involving 32 patients in England
demonstrated that oral administration of AG337 resulted in a pharmacokinetic and
safety profile similar to that of the i.v. formulation.
In the fall of 1994, the Company initiated six phase II trials of the i.v.
formulation of AG337. The six studies, now being carried out at ten clinical
sites in the United States, are evaluating 5-day courses of treatment with AG337
in patients with malignant solid tumors associated with cancer of the colon,
lung, liver, pancreas, prostate or head/neck. The design of these phase II
trials provides that a study of AG337 against any tumor type will be expanded to
approximately 30 patients if a sustained reduction in tumor mass of 50% or
greater is observed in one or more of the first 14 evaluable patients to be
treated.
Certain preliminary results from the phase II studies have become available.
In a majority of more than 50 evaluable patients enrolled in the six studies,
AG337 has stabilized previously progressive malignancy and, in some patients,
caused measurable reductions in tumor mass. In one or more patients with cancer
of the liver or head/neck confirmed reductions in tumor mass of greater than 50%
have been observed, qualifying AG337 for expanded phase II studies in these
diseases in accordance with the study design. Agouron expects to select one or
two of these malignant diseases in which to pursue pivotal phase III clinical
trials aimed at qualifying AG337 for registration. If successful, such pivotal
trials could permit the Company to file a NDA covering both the oral and i.v.
formulations of AG337 in calendar 1997. See "Risk Factors -- Uncertainty
Associated with Clinical Trials."
Phase I clinical studies of an i.v. formulation of AG331 are being completed
at the University of Southern California in Los Angeles and at the Fox Chase
Cancer Center in Philadelphia. In these dose escalation studies, AG331 has been
well tolerated until the occurrence of potentially dose limiting liver toxicity
at a dose of 800mg/m/2//day; the pharmacokinetic and safety data from the
studies are presently being evaluated. Because of the encouraging performance
of AG337 in phase I and early phase II testing, AG331 is being treated by the
Company as a "backup" to AG337.
To date, the Company has self-funded the development of AG337 and AG331 and
retains all commercial rights to these compounds.
GART Inhibitors and MMP Inhibitors
Based upon the current status of its preclinical programs, the Company
anticipates selecting its next clinical development compound(s) from the GART
and/or MMP programs.
GART is an enzyme in a biochemical pathway through which tumor cells
synthesize purines, essential components of DNA. With the exception of liver
cells, all normal human tissues obtain purines via an alternative pathway (the
purine salvage pathway). The Company believes that inhibitors of GART will show
a high degree of selectivity for tumor cells and less significant bone marrow
toxicity than other chemotherapeutic agents.
Independent research has shown MMPs to be involved in many disease states.
Within the cancer field, certain MMPs have been associated with tumor growth,
the metastasis of tumor cells to secondary sites within the body and the growth
of new blood vessels (angiogenesis), through which tumor cells obtain nutrients
and growth factors. The Company believes that MMPs thus represent a new
opportunity for the discovery of novel tumoristatic agents. The Company further
believes that orally active inhibitors of certain combinations of MMPs, but not
of all MMPs, are most likely to have the optimal safety and efficacy profiles of
superior tumoristatic agents.
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In both the GART and MMP programs, Agouron has generated active and potent
inhibitors of target enzymes which have displayed biological activity in
preclinical test systems in vitro and in vivo. The Company expects to select
one or more development compounds for scale-up and preclinical toxicology
studies from either or both the GART and MMP programs during calendar 1995. The
Company retains all commercial rights in drugs discovered in the GART program
and, subject to payment of royalties to Roche, for MMP inhibitors in the field
of cancer. The Company is pursuing the discovery of MMP inhibitors in
collaboration with Roche. See "Immuno-Inflammatory Disease" and "Research and
Development Agreements -- Roche."
AICART Inhibitors
The enzyme AICART catalyzes a rate-determining step in the purine biosynthetic
pathway and represents a second target for anti-cancer drugs which are active by
virtue of their anti-purine effects. Research has shown that inhibiting the
rate-limiting enzyme in such a pathway produces the most significant effects on
the growth of cells dependent on that pathway. The scientific rationale for
GART as a target for new anti-tumor drugs applies equally to AICART. Agouron
scientists believe that two inhibitors of the purine pathway -- an inhibitor of
GART and an inhibitor of AICART -- may be highly synergistic in producing anti-
tumor activity when administered in combination.
The Company's scientists have solved the three-dimensional molecular structure
of AICART and are engaged in design, synthesis and evaluation of AICART
inhibitors intended to be efficacious in the treatment of cancer. The Company
presently retains all commercial rights to any compounds resulting from this
program.
cdk4
Cyclin dependent kinases are enzymes that play roles in regulating the
transitions between phases in the life cycles of all cells. The member of this
family of enzymes known as cdk4 has been implicated by independent research in
driving cells from a quiescent phase to the highly proliferative phase
characteristic of malignancies -- particularly in familial melanomas, esophageal
carcinomas and pancreatic cancers. Agouron has recently initiated a drug
discovery program aimed at the design of selective small molecule drugs with the
potential to inhibit the activity of cdk4 and therefore block the transition of
cancer cells into their proliferative phase.
VEGF Receptor
The process known as angiogenesis, the formation of new blood vessels, is a
key factor in the maintenance and progression of several disease states
including the metastasis of malignant tumors. The ability of cancer cells to
carry out angiogenesis depends in part upon the activity of a protein known as
Vascular Endothelial Growth Factor (VEGF) which by binding to a receptor known
as kdr, triggers the growth of endothelial cells. Agouron has recently
initiated a drug discovery program whose objective is the design of drugs that
block the kdr receptor for VEGF and therefore compromise the ability of tumors
to carry out a key process in angiogenesis.
VIRAL DISEASES
Overview
The development of new drugs for the treatment of certain viral diseases is
another scientific and commercial focus of the Company. The Company is
presently conducting programs aimed at discovery and/or development of four
classes of anti-viral drugs which block viral proteases, enzymes required by
several families of pathogenic viruses to carry out replication and infection.
Agouron's anti-viral drug programs include HIV protease inhibitors (AG1343),
rhinovirus 3C protease inhibitors, herpes virus protease inhibitors and
hepatitis C protease inhibitors. Agouron is developing its anti-viral drugs in
collaboration with JT. See "Research and Development Agreements -- Japan
Tobacco Inc."
HIV Protease Inhibitor: AG1343
Research and development of drugs for treatment of HIV infection and AIDS in
the pharmaceutical industry has thus far produced both successes and
disappointments. Initially, scientists were optimistic that blocking the
essential HIV enzyme reverse transcriptase ("RT") would prove sufficient to
defeat the replication of HIV and curb the progression of HIV infection to AIDS.
As a result of research and development efforts by several pharmaceutical
companies, several RT inhibitors are now approved for use in the United States.
However, the clinical usefulness of this first generation of anti-HIV drugs has
generally been limited by their toxicity and by the ability of HIV to mutate
into forms that are resistant to them. The dependency of all the currently
approved
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<PAGE>
anti-HIV drugs upon the same mechanism of action is one of the reasons that the
success of existing therapies in treating HIV and AIDS has so far been limited.
For this reason, it has been a high priority at Agouron, as well as at other
pharmaceutical companies, to discover and develop new anti-HIV drugs that work
by a mechanism of action other than inhibition of RT.
Inhibitors of the enzyme HIV protease are widely regarded as one of the most
promising new classes of anti-HIV drugs. HIV protease is an enzyme that
performs an essential role in the infectious cycle of HIV. Research shows that
inhibition of the protease enzyme renders HIV unable to form new infectious
virus. Several other companies also are conducting clinical development of
drugs in this class. Agouron believes that the most successful HIV protease
inhibitors will be those with the most favorable combination of potency, safety
and convenience of formulation and schedule of administration. See
"Competition" and "Risk Factors -- Technological Change and Competition."
Phase I safety and pharmacokinetic studies have been completed and pilot phase
II efficacy trials are in progress in human subjects for AG1343, an orally
administered inhibitor of HIV protease being developed by Agouron. Results from
a phase Ia study of 12 healthy volunteers in England indicated that single oral
doses of AG1343 of up to 800mg were well tolerated and produced plasma
concentrations of up to 4000ng/ml. In a phase Ib study of 14 healthy
volunteers, multiple oral doses (400mg two times per day or 300mg three times
per day) over a seven day period were also well tolerated and resulted in
average minimum plasma concentrations in excess of levels required to inhibit
95% of HIV replication in vitro. In both studies, AG1343 was reported to be
safe and well tolerated.
A series of four-week pilot phase II clinical studies are evaluating the
safety and acute anti-HIV efficacy of several daily doses of AG1343 administered
orally to HIV-infected subjects. To date, the Company has reported only
preliminary results from a four-week study of a capsule formulation of AG1343 in
the first two dosing groups treated in England. In 10 patients who received
doses of 257 mg of active drug three times daily, AG1343 produced reductions of
HIV in patients' blood from pre-treatment levels of up to 99% and an average
maximum of 80%. In 10 other patients who have received doses of 515 mg of
active drug twice daily, AG1343 produced reductions in HIV from pre-treatment
levels of up to 99% and average maximum reductions of 91%. In both dosing
groups, the average amount of HIV in the blood of patients was substantially
below pre-treatment levels at the end of four weeks of treatment. CD4+ T cells
in the patients enrolled in the first two dosing groups increased by up to 491
cells per cubic millimeter of blood and by more than 140 cells on average.
Additional phase II studies of daily doses of 1000mg, 1200mg and 1500mg of
AG1343 in a tablet formulation are currently in progress in the United States.
To date, the drug has been reported to be safe and well tolerated in the pilot
phase II studies. Based on presently available results, the Company intends to
initiate a program of phase II/III clinical studies during calendar 1995. Such
studies will evaluate the safety and efficacy of AG1343 used alone and used in
combination with other agents. The Company's current development plans are
aimed at permitting Agouron to file a NDA for AG1343 in calendar 1997 if
clinical trials are successful. See "Risk Factors -- Uncertainty Associated
with Clinical Trials."
Rhinovirus 3C Protease Inhibitors
Rhinoviruses are believed to be the single most frequent cause of the common
cold. While rhinovirus infections are a periodic annoyance to most normal
individuals, they produce more severe and prolonged symptoms in people with
asthma, emphysema and chronic obstructive pulmonary disease. The family of
rhinoviruses has eluded attempts to develop a useful vaccine because it contains
more than 100 serotypes. However, all known strains of rhinoviruses depend on a
critical enzyme, the 3C protease, at several stages of their life-cycle for
production of new infectious viruses. It has been shown both by independent
research and by Agouron scientists that inactivating this enzyme halts
rhinovirus production in vitro. Because there is no known natural counterpart
for the 3C protease enzyme in humans, Agouron scientists believe that the
potential for toxicity from a selective inhibitor of the rhinovirus 3C protease
is low.
Agouron's rhinovirus protease research has resulted in the design of potent,
selective rhinovirus 3C protease inhibitors currently being evaluated in
preclinical pharmacological studies of anti-viral activity, cellular toxicity
and oral bioavailability. It is the Company's goal to select one such inhibitor
for development in calendar 1996.
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CMV and HSV-1 Protease Inhibitors
Among the most clinically significant members of the family of herpes viruses
are herpes simplex virus-1 (HSV-1) and cytomegalovirus (CMV). Like HIV and
rhinoviruses, HSV-1 and CMV each contain a protease enzyme essential for virus
maturation and infection. Agouron believes that these protease enzymes
represent targets for a new class of anti-viral drugs with the potential for low
toxicity. Agouron scientists are currently seeking to solve the three-
dimensional structures of the targeted protease enzymes from both HSV-1 and CMV
in preparation for application of its drug design technologies. No inhibitor of
HSV-1 or CMV has yet been selected by Agouron for development.
Hepatitis C Protease Inhibitors
The ability to treat infection by hepatitis C virus represents a significant
unmet clinical need, particularly in Asian countries. Hepatitis C virus depends
upon a key protease enzyme for the production of new infectious viruses. As no
human counterpart of the hepatitis C protease enzyme is known, Agouron
scientists believe that the potential for toxicity of selective hepatitis C
protease inhibitors is low. Agouron's anti-hepatitis C project is an early
stage research program in which no inhibitor has been selected for development.
IMMUNO-INFLAMMATORY DISEASE
Overview
Another scientific and commercial focus of the Company is the development of
drugs for treatment of immuno-inflammatory disease. These include MMP
inhibitors for use against degenerative diseases such as rheumatoid arthritis
and osteoarthritis, AICART inhibitors for use as anti-inflammatory agents and
immuno-suppressive agents for treatment of various neuro-degenerative disorders.
MMP Inhibitors
In addition to their role in the growth and metastasis of solid tumors, MMPs
display high levels of enzymatic activity in such degenerative diseases as
rheumatoid arthritis and osteoarthritis. Certain members of the MMP family are
associated most closely with these disease states and, Agouron believes, offer
targets for orally active drugs with potential for minimal toxicity. If
successfully developed, the Company believes such selective inhibitors of
certain MMPs have the potential to interrupt the progression of arthritic
disease itself rather than just to treat the symptoms. The Company has retained
a royalty position in any products resulting from the collaborative program with
Roche used to treat arthritis and other degenerative bone diseases. See
"Research and Development Agreements -- Roche."
AICART Inhibitors
AICART is being pursued by Agouron scientists as a target for the development
of novel anti-inflammatory drugs. It is widely believed that the anti-
inflammatory effects observed following administration of low doses of the anti-
cancer drug methotrexate result from the drug's indirect inhibition of AICART.
Used for chronic therapy, methotrexate accumulates in the liver and other
tissues and frequently results in serious toxicity. Agouron scientists believe
that inhibitors of AICART designed to avoid accumulation in tissues may be
superior anti-inflammatory drugs for conditions such as arthritis. The
Company's initial lead compounds in this program are being used to validate this
assertion. Having solved the three-dimensional molecular structure of the
AICART enzyme, Agouron scientists believe they are uniquely positioned to
initiate protein structure-based drug design of novel inhibitors of the AICART
enzyme intended to be efficacious in the treatment of inflammatory disease. No
candidate for development has yet been identified in this program. The Company
presently retains all commercial rights to any compounds resulting from this
program.
Calcineurin Inhibitors
Company scientists have solved the three-dimensional molecular structure of a
key enzyme involved in the activation of cells involved in the immune response.
This enzyme, calcineurin, is the indirect site of action of the two most
commonly used drugs for post-organ transplant immuno-suppressive therapy --
cyclosporin and FK506. Agouron scientists believe that intervention in this
pathway by direct, rather than indirect, inhibition of calcineurin may provide a
superior class of immuno-suppressive drugs with the potential for reduced
toxicity. The Company also intends to explore the clinical potential of
calcineurin inhibitors in various neuro-degenerative
22
<PAGE>
disorders. No candidate for development has yet been identified in this program.
The Company presently retains all commercial rights to any compounds resulting
from this program.
DRUG DESIGN TECHNOLOGY
Common to all of Agouron's drug discovery programs is the design of novel
drugs based upon the structure of proteins which play key roles in human
disease. It is the centrality of this protein structure-based approach to
rational drug design which distinguishes the Company from most other
pharmaceutical and biotechnology companies.
Background: Conventional Drug Discovery
Historically, the pharmaceutical industry has relied upon drug discovery by
screening--sifting through vast inventories of naturally-occurring and man-made
chemicals in search of previously undiscovered substances with therapeutic uses.
While screening has been the basis for the discovery of virtually all drugs
currently in use, the Company believes it has become an increasingly
unsatisfactory approach as it is both costly and inefficient and the rate of
discovery of new therapeutic compounds has declined over the last decade. Most
importantly, there remain many important therapeutic needs for which screening-
based research has failed to yield acceptably safe and effective drugs.
The Idea of Designing Drugs
With the ability to synthesize chemical compounds of predetermined
composition, came the desire to overcome the limitations and unpredictability of
screening by building molecules specifically designed to perform therapeutic
tasks. This vision of "rational drug design" was made more plausible by the
discovery that, despite many differences between them, drugs work according to
the same general scheme.
Nearly every drug molecule works through a structural interaction with a
"target" or "receptor" molecule or protein which play key roles in all
biological processes. In the most common model for this interaction, the drug
molecule inserts itself into a functionally important crevice of its target
protein like a key in a lock, binds there and either induces or, more commonly,
inhibits the protein's normal function. This universal drug-target scheme
suggested a powerful alternative approach to drug discovery: if it were
possible to identify in advance the appropriate protein target for a given
therapeutic need and if enough were known about the distinguishing structure of
that target protein, it ought to be feasible to design the structure of an ideal
drug to interact with it.
Protein Structure-Based Drug Design
Agouron's scientists have developed an approach for drug discovery which
exploits the three-dimensional structures of molecular targets. At the heart of
the Company's strategy is the analytical technique of protein x-ray
crystallography, which enables Agouron scientists to determine the three-
dimensional atomic structures of target proteins and the drugs which bind to
them. The Company's approach to drug design integrates genetic engineering
techniques, which allow the identification, purification and modification of
appropriate target proteins, with innovations in protein x-ray crystallography
and the use of increasingly sophisticated programs run on high speed computers
which permit chemists to predict and simulate molecular structure, dynamics and
energetics.
Genetic Engineering
In contrast to the biotechnology industry, Agouron employs genetic engineering
techniques to produce proteins not as products, but as drug targets. Genetic
engineering techniques can assist scientists in identifying appropriate
molecular targets for particular therapeutic objectives, produce target proteins
in sufficient amounts to permit structural studies and modify proteins to probe
the connections between a target protein's structure and function.
Protein X-ray Crystallography
The only method which has been successful in determining the precise three-
dimensional atomic structure of large proteins is an analytic technique known as
protein x-ray crystallography. Agouron believes it has assembled the largest
and most experienced group of protein crystallographers in the pharmaceutical
industry.
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<PAGE>
X-ray crystallographic studies require that a target protein be in crystalline
form. Once such crystals are obtained, a single crystal is bombarded with a
powerful x-ray beam. The protein crystal diffracts the x-ray beam and generates
a definitive diffraction pattern. A complex analytical process involving
extensive mathematical computations is then performed on the x-ray diffraction
data. From the results of these calculations, it is possible to determine the
exact three-dimensional structure of the target protein. It is this elusive
information which provides the critical starting point for three-dimensional
drug design.
Drug Design
Having determined the architecture of the target protein in three-dimensional
atomic detail and having identified its functionally critical regions, Agouron
chemists, crystallographers and molecular biologists are positioned to begin the
process of drug design. The structure of the target protein along with
representations of its chemical and electronic properties (most of which can be
computed accurately if the protein structure is known) are displayed on an
interactive computer graphics system. Ideas for the structure of a drug
molecule which complements the unique structure and electronic environment of
the target protein are developed by members of the design team and are then
simulated and evaluated on the computer with the aid of more than 100
specialized analytical software programs.
The most promising computer designs of drug candidates are chemically
synthesized by the Company's medicinal chemists. As in conventional drug
development strategies, experimental measurements are taken of the ability of
such a newly synthesized drug candidate to produce the intended effect upon the
target protein. Company crystallographers then re-determine the structure of
the protein target, now in combination with the candidate drug molecule, and are
able to see in detail the structural interactions actually achieved by the
candidate drug with its target. Agouron scientists are positioned to relate the
performance of such a compound measured by familiar biochemical techniques to
its structural interactions with the target as revealed crystallographically.
The design team can then incorporate the results of this specialized analysis
into the next generation of its compounds.
In summary, Agouron's drug design methodology consists of iterative cycles of
design, simulation, synthesis, structural assessment and redesign. Its power
lies in the ability of Agouron's drug design team to see the primary event in
drug action -- the interaction of the drug with its target -- as it actually
occurs and to be guided in the design and optimization of drugs by the details
of this interaction. This "look" at the heart of drug and target interaction is
provided by Agouron's protein x-ray crystallography research group, which the
Company believes to be unique in the pharmaceutical industry by virtue of its
configuration and experience.
RESEARCH AND DEVELOPMENT AGREEMENTS
The Company has funded its research and development primarily from working
capital generated from both private and public sales of Agouron equity,
corporate collaborative arrangements and federal grants. The Company has an
ongoing program of business development which may, from time-to-time, lead to
the establishment of corporate collaborations in addition to those noted below.
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with JT to collaborate
on the discovery, development and commercialization of novel therapeutic drugs
which act on key proteins related to the human immune system (JT 1992). In
February 1994, the Company expanded its strategic alliance with JT into the
field of anti-viral drugs for the treatment of infections caused by hepatitis C,
the herpes family of viruses and rhinoviruses (JT 1994). In December 1994, the
Company added its anti-HIV drug, AG1343, to the JT collaboration with the
execution of a worldwide development and licensing agreement (JT HIV). In
January 1995, JT 1992 was canceled by mutual agreement and JT 1992 resources
were reallocated to JT 1994 programs.
Under the provisions of JT 1994, JT has agreed to make certain research
payments of not less than $8,000,000 to the Company over a two-year period
ending December 1996. Such payments could approximate more than $21,000,000
over a four-year period if certain technical milestones are achieved. In
addition, JT made an up-front payment of $7,778,000, which is being amortized to
revenue over a twenty-four month period. Under the provisions of JT HIV, JT has
made payments of $6,000,000 to Agouron representing an initial payment of
$2,500,000 and a milestone payment of $3,500,000 in recognition of the
satisfactory completion of a phase I clinical study. A second milestone payment
of $24,000,000 is to be made by JT, at its election,
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subsequent to the receipt of results from a pilot phase II clinical study of
AG1343. The Company anticipates such payment will be received in calendar 1995.
If the milestone payment is not made, all rights to AG1343 will revert to the
Company. If the payment is made, then Agouron and JT will ultimately share
equally the costs of further development of AG1343.
Under the provisions of JT 1994, the Company will have exclusive rights to
develop, manufacture and market anti-hepatitis C and anti-herpes drugs in the
United States, Canada and Mexico. JT will have exclusive rights to develop,
manufacture and market these drugs in Japan, Taiwan and South Korea. Outside
the countries in which they respectively have exclusive rights, Agouron and JT
will have co-exclusive rights to manufacture and market jointly developed anti-
hepatitis C and anti-herpes drugs. Each company will pay royalties to the other
based upon their respective sales of anti-hepatitis C and anti-herpes drugs.
The Company will have exclusive, world-wide, royalty-free rights to develop,
manufacture and market drugs for the treatment or prevention of infections by
pathogenic rhinoviruses. JT will have the first right to negotiate for a
license to develop, manufacture and market such anti-rhinovirus drugs in Japan
and certain other countries in Asia. Under the provisions of JT HIV, Agouron
will retain exclusive commercial rights to AG1343 (with the right to sublicense,
subject to JT's right of first refusal) in the United States, Canada and Mexico.
JT will have exclusive commercial rights to AG1343 (with the right to
sublicense, subject to the Company's right of first refusal) in Japan and
certain other countries of Asia. Exclusive commercial rights (with the right to
sublicense) in Europe and all remaining countries of the world will be held by a
joint venture owned equally by Agouron and JT. The two companies will share
profits equally from the worldwide commercialization of AG1343.
Under a separate agreement dated December 1992, JT purchased 155,844 shares of
newly issued Common Stock for an aggregate purchase price of $3,000,000. Such
purchase represented approximately 2% of the total outstanding Common Stock.
Roche
In June 1993, the Company entered into an agreement with Syntex (U.S.A.) Inc.
(now a subsidiary of Roche Holdings, Inc.) (Roche) to collaborate on the
discovery of novel matrix metalloprotease inhibitor drugs. Matrix
metalloprotease inhibitor drugs are being developed for use against cancer and
degenerative diseases such as rheumatoid arthritis and osteoarthritis. Under
the provisions of the agreement, Roche has agreed to make certain research
payments of approximately $8,500,000 to the Company over a three-year period
ending June 1996. The Company is funding a portion of the activities associated
with this collaboration on its own account. The Company has retained a royalty
position in any MMP inhibitors used to treat arthritis and other degenerative
bone diseases. Subject to the payment of royalties to Roche, the Company
retains all commercial rights to MMP inhibitors in the field of cancer. Under
the terms of the agreement, the Company will have a royalty position in certain
other agreement products, if any, and other development and commercial rights in
other agreement products, if any.
Under a separate agreement dated June 1993, Syntex Corporation (Roche)
purchased 155,844 shares of newly issued Common Stock for an aggregate purchase
price of $3,000,000. Such purchase represented approximately 2% of the total
outstanding Common Stock.
Schering-Plough Corporation
In April 1994, the Company and Schering completed a three year collaborative
research agreement providing for the discovery and development of anti-cancer
drugs which target oncogenic ras proteins. Each company may pursue further
discovery or development efforts in this program area at its sole discretion and
expense with no subsequent obligations to the other company.
Eli Lilly and Company
In April 1993, the Company and Lilly completed a five year collaborative
research program in several therapeutic categories. Further development of any
discoveries made in the program will be undertaken at each company's sole
discretion and expense. Agouron has continuing commercial rights and/or
financial interests in certain of these discoveries.
National Institutes of Health
The Company is the grantee organization for two grants from the NIH to conduct
research related to HIV.
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COMPETITION
The pharmaceutical and biotechnology industries are subject to intense
competition and rapid and significant technological change. Many companies and
organizations, including major pharmaceutical, biotechnology and chemical
companies, universities and other research organizations, are engaged in
discovery and development of drugs for diseases targeted by the Company. For
example, the Company is aware of several pharmaceutical companies that have HIV
protease inhibitors, some of which are in more advanced stages of clinical
development than AG1343, including those of Abbott Laboratories, Inc., Merck &
Co., Inc. and Roche Holdings, Inc. Certain companies and organizations have
substantially greater financial and other resources, larger research and
development staffs and more extensive production and marketing organizations,
experience and capabilities than the Company. In addition, many companies have
significantly greater experience than the Company in preclinical testing and in
conducting human clinical trials of potential pharmaceutical products and in
obtaining FDA and other regulatory approvals. All of these companies and other
research organizations compete with the Company in recruiting and retaining
highly qualified scientific and management personnel.
Agouron was the first company to devote itself to the development and
application of protein structure-based drug design. As such, the Company
believes that it has achieved certain competitive advantages including
developmental lead time, level of commitment to the technology and the
development of certain practical or technical capabilities. However, in recent
years several pharmaceutical companies have undertaken to establish capabilities
in protein x-ray crystallography, either internally or through academic
collaborations, and can be presumed to be engaged in the use of such technology
for the same purposes as is the Company. Certain biotechnology companies and
other companies have also entered into the field of protein structure-based drug
design. For example, Abbott Laboratories, Ciba-Geigy Limited, Glaxo Wellcome
plc, Merck and Roche Holdings, Inc. have developed programs focused on
structure-based drug design. The Company expects that the technology for
protein structure-based drug design will become more widely implemented over
time and will ultimately become more common in the pharmaceutical industry.
The Company believes that its ability to compete successfully will be based on
its ability to create and maintain scientifically advanced technology, attract
and retain scientific personnel with a broad range of expertise, obtain patent
protection or otherwise develop proprietary products or processes, conduct
clinical trials and obtain required government approvals on a timely basis,
select and pursue drug design projects in areas in which significant market
opportunities exist or are likely to develop, manufacture its products on a
cost-effective basis and successfully market its products either alone or in
conjunction with others. Many of the Company's competitors have substantially
greater financial resources, clinical and regulatory experience, manufacturing
capabilities and sales and marketing organizations than Agouron. See "Risk
Factors -- Technological Change and Competition" and "Risk Factors -- Attraction
and Retention of Personnel."
PATENTS AND TRADE SECRETS
The Company seeks patent protection for its proprietary technology and
potential products in the United States and in foreign countries. Most of the
Company's products are expected to be synthetic chemical compounds which may be
afforded patent protection under principles and procedures well established by
the United States Patent and Trademark Office under United States patent law.
The Company's strategy is to pursue a strong patent portfolio. The Company is
currently prosecuting a number of patent applications in the United States and
in various other countries seeking protection for certain series of compounds,
including AG331, AG337 and AG1343 and certain proprietary technology. The
Company will continue to file patent applications on its evolving technology,
processes and products. The Company has recently received one United States
patent covering processes of making AG337 and related compounds and
intermediates thereof and one foreign patent covering AG331 and related
compounds and intermediates thereof, as well as certain processes for making
such compounds and intermediates. The Company's failure to obtain patent
protection for its products could have an adverse impact on the Company.
Many of the processes and much of the know-how of importance to the Company's
technology are dependent upon the skills, knowledge and experience of its
scientific and technical personnel, which skills, knowledge and experience are
not patentable. To protect its rights in these areas, the Company requires all
employees, significant consultants and advisors, and collaborators to enter into
confidentiality agreements with Agouron. There can be no assurance, however,
that these agreements will provide meaningful protection for the Company's trade
secrets, know-how or other proprietary information in the event of any
unauthorized use or disclosure of
26
<PAGE>
such trade secrets, know-how or proprietary information. Further, in the absence
of patent protection, the Company may be exposed to competitors who
independently develop substantially equivalent technology or otherwise gain
access to the Company's trade secrets, knowledge or other proprietary
information. See "Risk Factors -- Patents and Proprietary Technology."
GOVERNMENT REGULATION
The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation for safety,
efficacy and quality by numerous governmental authorities in the United States
and other countries. Pharmaceutical products intended for therapeutic use in
humans are principally governed by FDA regulations in the United States and by
comparable government regulations in foreign countries. Various federal, state
and local statutes and regulations also govern or influence the research and
development, manufacturing, safety, labeling, storage, recordkeeping,
distribution and marketing of such products. The process of completing
preclinical and clinical testing and obtaining the approval of FDA and similar
health authorities in foreign countries to market a new drug product requires a
significant number of years and the expenditure of substantial resources.
Failures or delays by the Company or its collaborators or licensees in obtaining
regulatory approvals would adversely affect the marketing of products being
developed by the Company and the Company's ability to receive product revenues
or royalties.
The steps required by FDA before a new human pharmaceutical product may be
marketed in the United States include: (a) preclinical laboratory tests, in vivo
preclinical studies and formulation studies; (b) the submission to FDA of a
request for authorization to conduct clinical trials on an Investigational New
Drug Application ("IND"), which must become effective before human clinical
trials may commence; (c) adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug for its intended use; (d)
submission to FDA of a NDA; and (e) review and approval of the NDA by FDA before
the drug product may be shipped or sold commercially. Prior to obtaining FDA
approval for each product, each manufacturing establishment for new drugs must
be registered with and receive appropriate approval by FDA.
Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the safety and efficacy of the
product. Preclinical test results are submitted to FDA as a part of the IND.
Clinical trials are typically conducted in three sequential phases, although the
phases may overlap. Phase I represents the initial administration of the drug
to a small group of humans, either healthy volunteers or patients, to test for
safety, dosage tolerance, absorption, distribution, metabolism, excretion and
clinical pharmacology and, if possible, early indications of effectiveness.
Phase II involves studies in a small sample of the actual intended patient
population to assess the efficacy of the investigational drug for a specific
clinical indication, to ascertain dose tolerance and the optimal dose range and
to collect additional clinical information relating to safety and potential
adverse effects. Once an investigational drug is found to have some efficacy
and an acceptable clinical safety profile in the targeted patient population,
phase III studies are often initiated to further establish safety and efficacy
of the investigational drug in a broader sample of the target patient
population. The results of the clinical trials together with the results of the
preclinical tests and complete manufacturing information are submitted in a NDA
to FDA for approval. See "Risk Factors -- Uncertainty Associated with Clinical
Trials."
If a NDA is submitted to FDA, there can be no assurance that such application
will be reviewed and approved by FDA in a timely manner, if at all. Even after
initial FDA approval has been obtained, further studies, including post-market
studies, may be required to provide additional information. Results of such
post-market programs may limit or expand the further marketing of the product.
The Company is also subject to foreign regulatory requirements governing
development, manufacturing and sales of pharmaceutical products that vary widely
from country to country. Approval of a drug by applicable regulatory agencies
of foreign countries must be secured prior to the marketing of such drug in
those countries. The regulatory approval process may be more or less rigorous
from country to country and the time required for approval may be longer or
shorter than that required in the United States.
In addition to the regulatory framework for pharmaceutical product approvals,
the Company is and may become subject to various federal, state, local and
foreign laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with Agouron's research and development work. The Company is
unable to predict
27
<PAGE>
the extent of restrictions that might arise from any governmental or
administrative action. See "Risk Factors -- Government Regulation."
MANUFACTURING
The Company currently has no manufacturing facilities for production of
commercial quantities of any compounds under development as pharmaceutical
products. The Company's facilities include scale-up laboratories in which the
Company intends to produce, under GMP, amounts of its drug product candidates
sufficient for use in certain early clinical trials. The Company is relying
upon third parties to manufacture its products in quantities sufficient to meet
both clinical and initial commercial needs. The Company will be dependent upon
these manufacturers to comply with GMP and to meet its production requirements.
There can be no assurance that these manufacturers will timely deliver the
Company's products or that the Company would be able to find substitute
manufacturers, if necessary. See "Risk Factors -- Manufacturing and Marketing."
HUMAN RESOURCES
As of June 30, 1995, the Company had 258 employees, 72 of whom hold Ph.D. or
M.D. degrees. Two hundred nineteen employees are engaged in, or directly
support, research and product development. The Company's employees are not
covered by a collective bargaining agreement and the Company considers its
relations with its employees to be excellent. The Company has entered into
confidentiality agreements with all of its employees.
FACILITIES
The Company leases space in three facilities which provide a total of
approximately 93,000 square feet of office and laboratory space. The Company's
corporate headquarters are located at 10350 North Torrey Pines Road, Suite 100,
La Jolla, California 92037, where the Company occupies approximately 25,000
square feet under two leases which expire in April 1997. Research and
development activities are conducted at 3565 General Atomics Court, San Diego,
California 92121 (where the Company is the sole tenant and occupies
approximately 43,500 square feet under a lease which expires September 2001) and
at 11099 North Torrey Pines Road, La Jolla, California 92037 (where the Company
occupies approximately 24,500 square feet under two leases which expire in
September 2000). These two research and development buildings provide state-of-
the-art facilities designed specifically to implement and support the Company's
innovative approach to drug design. Included in the facilities are approved
scale-up laboratories in which kilogram quantities of Company-designed drug
compounds are manufactured under current GMP for use in clinical trials. The
Company believes that its facilities are adequate for its current operations,
except that additional facilities will be necessary if the Company undertakes
commercial manufacturing.
LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings generally incidental to
its normal business activities. While the outcome of any such proceedings
cannot be accurately predicted, the Company does not believe the ultimate
resolution of any such existing matters should have a material adverse effect on
its financial position or results of operations.
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<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- -----------------------------------------------
<S> <C> <C>
Peter Johnson/(2)//(4)/ 50 President, Chief Executive Officer and Director
Neil J. Clendeninn, M.D., Ph.D. 46 Vice President, Clinical Affairs
Steven S. Cowell/(2)/ 46 Vice President, Finance and Chief Financial
Officer
Gary E. Friedman/(2)/ 48 Vice President, General Counsel, Secretary
and Director
Robert C. Jackson, Ph.D. 52 Vice President, Research and Development
Barry D. Quart, Pharm.D. 38 Vice President, Regulatory Affairs
R. Kent Snyder 41 Vice President, Commercial Affairs
Glenn R. Zinser 52 Vice President, Operations
John N. Abelson, Ph.D./(1)/ 56 Director
Patricia M. Cloherty/(3)//(4)/ 53 Director
A.E. Cohen/(1)//(4)/ 59 Director
Michael E. Herman/(1)//(4)/ 54 Director
Irving S. Johnson, Ph.D./(4)/ 70 Director
Antonie T. Knoppers, M.D., Ph.D./(3)/ 80 Director
Melvin I. Simon, Ph.D./(3)/ 58 Director
</TABLE>
/(1)/ Member of Directors Compensation Committee
/(2)/ Member of Management Compensation Committee
/(3)/ Member of Audit Committee
/(4)/ Member of Executive Committee
Peter Johnson, a founder of the Company, has served as a director and as
president and chief executive officer of the Company since its inception in
1984. Through 1989, Mr. Johnson held various positions with The Agouron
Institute, including executive director. Mr. Johnson received a M.A. from the
University of California, San Diego.
Neil J. Clendeninn joined the Company in February 1993 as vice president,
clinical affairs. From 1985 until joining the Company, Dr. Clendeninn held
various positions with Burroughs Wellcome Co., including head of the
chemotherapy section from 1988. From 1981 through 1985, Dr. Clendeninn worked
with the clinical oncology and clinical pharmacology groups at the National
Institutes of Health. Dr. Clendeninn received a M.D. and a Ph.D. in
pharmacology from New York University.
Steven S. Cowell joined the Company in August 1991 as vice president, finance
and chief financial officer. From 1982 until joining the Company, Mr. Cowell
held various positions, the most recent of which was vice president and
controller at Cetus Corporation, a public biotechnology company primarily
engaged in the development, manufacture and marketing of pharmaceutical
products. Mr. Cowell is a Certified Public Accountant in California and
received a B.S. in business administration from the University of California,
Berkeley.
Gary E. Friedman, a founder of the Company, has served as a director since its
inception, as the secretary of the Company since May 1986 and as vice president
and general counsel since December 1991. Previously, from 1982 until December
1991, Mr. Friedman was a principal of the law firm of Friedman, Jay & Cramer, a
Professional Corporation. Mr. Friedman is a California Certified Specialist in
Taxation. Mr. Friedman received a J.D. and a M.B.A. from the University of
California, Berkeley, and a L.L.M. in taxation from the University of San Diego.
29
<PAGE>
Robert C. Jackson joined the Company in March 1991 as vice president, research
and development. From June 1990 to February 1991, Dr. Jackson was group
director of the anti-cancer drug discovery program at The DuPont Merck
Pharmaceutical Company and, from 1982 to June 1990, held various positions with
the Parke-Davis Pharmaceutical Research Division of the Warner-Lambert Company,
including director of tumor biology and director of the chemotherapy department.
Dr. Jackson received a Ph.D. in biochemistry from the University of London.
Barry D. Quart joined the Company in June 1993 as vice president, regulatory
affairs. From 1983 until joining the Company, Dr. Quart held various management
positions with the Bristol-Myers Squibb Company, including executive director of
international regulatory affairs from 1992. Dr. Quart received a Pharm.D. in
clinical pharmacy from the University of California, San Francisco.
R. Kent Snyder joined the Company in July 1991 as vice president, business
development. In June 1995, Mr. Snyder's title was changed to vice president,
commercial affairs. From 1982 until joining the Company, Mr. Snyder held
various positions with Marion Laboratories, Inc. and its successor organization,
Marion Merrell Dow Inc. (now Hoechst Marion Roussel), including director
of U.S./European licensing. Prior to his employment at Marion, from 1978 to
1982, he held various sales and marketing positions with Roche Biomedical
Laboratories, Inc. Mr. Snyder received a M.B.A. from Rockhurst College.
Glenn R. Zinser joined the Company in 1987 and, since July 1995, has served as
vice president, operations. Previously, from 1987 through June 1995, Mr. Zinser
held various management positions with the Company, including senior director,
operations from July 1993 through June 1995. Mr. Zinser received a M.B.A. from
the University of California, Los Angeles.
John N. Abelson, a founder of the Company, has served as a director since its
inception. Dr. Abelson, a molecular biologist, is a member of the National
Academy of Sciences. Since 1982, Dr. Abelson has been a member of the faculty
of the Division of Biology at the California Institute of Technology where, from
October 1989 until June 1995, he served as chairman. Previously, Dr. Abelson
was a member of the faculty in the Department of Chemistry at the University of
California, San Diego. Dr. Abelson received a Ph.D. in biophysics from The
Johns Hopkins University and was a postdoctoral fellow at the Laboratory of
Molecular Biology in Cambridge, England. Dr. Abelson also serves as a director
of The Agouron Institute.
Patricia M. Cloherty joined the Board in December 1988. Since 1970, Ms.
Cloherty has been associated with Patricof & Co. Ventures, Inc. (formerly Alan
Patricof Associates, Inc.), a New York venture capital firm ("Patricof"), and
has been a general partner of its funds since 1973. In 1993, she was elected
president of Patricof. Ms. Cloherty also served as deputy administrator for the
U.S. Small Business Administration in 1977 and 1978. Ms. Cloherty also serves
on the board of directors of several private companies and is the chairman of
the National Venture Capital Association.
A.E. Cohen joined the Board in March 1992. Mr. Cohen is an independent
management consultant. From 1957 until his retirement in January 1992, Mr.
Cohen held various positions at Merck & Co., Inc., including senior vice
president and president of the Merck Sharp & Dohme International Division.
Currently, Mr. Cohen is the chairman of the board of Neurobiological
Technologies, Inc. and is a member of the board of directors of Akzo N.V.,
Immunomedics, Inc., Macrochem Corporation, Teva Pharmaceutical Industries Ltd.
and Vasomedical, Inc., all of which are public companies. Mr. Cohen also serves
on the board of directors of several private companies.
Michael E. Herman joined the Board in October 1992. Mr. Herman is a private
investor, as well as president and chief operating officer of the Kansas City
Royals Baseball Team. From October 1974 until his retirement in 1990, Mr.
Herman held various positions at Marion Laboratories, Inc. (now Hoechst Marion
Roussel), including executive vice president and chief financial officer.
Currently, Mr. Herman serves as chairman of the finance committee of the Ewing
Marion Kauffman Foundation, a private foundation located in Kansas City, where
from 1985 through 1990, he was the president and chief operating officer. Mr.
Herman is also a member of the board of directors of Cerner Corporation and
Seafield Capital, both of which are public companies, and serves on the board of
directors of several private companies.
Irving S. Johnson joined the Board in May 1989. Dr. Johnson is an independent
consultant in biomedical research working with numerous private companies. From
1953 until his retirement in November 1988, Dr. Johnson held various positions
at Lilly, including vice president of research from 1973 until 1988. Dr.
Johnson also served on several committees of the National Academy of Sciences,
the Office of Technology Assessment and the National Institutes of Health.
Currently, he is a member of the board of directors of Allelix
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<PAGE>
Biopharmaceuticals Inc., Athena Neurosciences, Inc. and Ligand Pharmaceuticals
Incorporated, all of which are public companies. Dr. Johnson received a Ph.D.
in developmental biology from the University of Kansas.
Antonie T. Knoppers joined the Board in July 1991. Dr. Knoppers is an
independent management consultant. From 1952 until his retirement in 1975, Dr.
Knoppers held various positions at Merck & Co., Inc., including vice chairman of
the board and president and chief operating officer. Dr. Knoppers is a member
of the board of directors of Centocor, Inc., a public biotechnology company. In
addition, he is a member of the board of trustees of the Salk Institute, was the
former chairman of the U.S. Council of the International Chamber of Commerce and
a member of the advisory board of PaineWebber Development Corporation, an
affiliate of PaineWebber Incorporated, a representative of the Underwriters in
this offering. Dr. Knoppers received a M.D. from the University of Amsterdam
and a Ph.D. from the University of Leiden, The Netherlands.
Melvin I. Simon, a founder of the Company, has served as a director since its
inception. Dr. Simon, a molecular geneticist, is a member of the National
Academy of Sciences. Currently, Dr. Simon is chairman of the Division of
Biology at the California Institute of Technology where he has been a member of
the faculty since 1982. Previously, Dr. Simon was a member of the faculty in
the Department of Biology at the University of California, San Diego. Dr. Simon
received a Ph.D. in biochemistry from Brandeis University. Dr. Simon also
serves as a director of The Agouron Institute.
The Board consists of nine directors elected by the holders of the Common
Stock. All directors of the Company hold office until the next annual meeting
of the shareholders and the election and qualification of their successors.
Non-officer members of the Board of Directors of the Company receive cash
compensation in the amount of $250 per meeting attended for their services as a
director.
31
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 75,000,000 shares of
Common Stock, without par value, and 2,000,000 shares of preferred stock,
without par value ("Preferred Stock"). There is no Preferred Stock outstanding.
The Board of Directors is authorized to determine the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption,
liquidation preferences and sinking fund terms on any series of the Preferred
Stock, the number of shares constituting such series and the designation
thereof. The Company has no present plans to issue any shares of Preferred
Stock. The issuance of Preferred Stock could have the effect of aiding the
Board of Directors in opposing takeover attempts and could adversely affect the
voting power of the holders of the Common Stock.
COMMON STOCK
At June 30, 1995, there were approximately 7,359,282 shares of Common Stock
outstanding held by approximately 5,000 beneficial owners. The holders of
shares of Common Stock are entitled to elect all directors. The bylaws of the
Company provide that there are nine directors. Upon giving notice of intent to
cumulate, holders of Common Stock may cumulate votes in the election of
directors. In general, the approval of proposals submitted to shareholders at a
meeting requires a favorable vote of the majority of the holders of the shares
of the Common Stock represented and voting at the meeting on which the matter is
to be adopted. Each share of Common Stock entitles its owner to one vote.
Additionally, under California law, certain fundamental matters affecting the
Company may require a favorable vote of a greater percentage. As an example,
sale or transfer of all Company assets or merger or dissolution of the Company
would each require the affirmative vote of a majority of the outstanding shares.
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors. Under the Company's articles of
incorporation, holders of Common Stock have no preemptive, subscription,
redemption or conversion rights and there are no sinking fund provisions with
respect to the Common Stock. All of the outstanding shares of Common Stock are,
and the shares to be issued in this offering will be, validly issued, fully paid
and non-assessable.
As of June 30, 1995, warrants to purchase a total of 45,000 shares of Common
Stock and options to purchase a total of 2,585,692 shares of Common Stock were
outstanding. Certain of the Company's current shareholders, including all
directors and executive officers, have agreed not to offer, sell, contract to
sell or grant any option to purchase or otherwise dispose of any of the Common
Stock owned by them for a period of 90 days after the date of this Prospectus
without the prior written consent of the Representatives of the Underwriters.
See "Underwriting."
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of Preferred Stock in one or more
series, and to fix the rights, preferences, privileges and restrictions thereof,
including, but not limited to, dividend rights, conversion rights, voting
rights, rights and terms of redemption, and liquidation preferences. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without any further action by the
stockholders. The Board of Directors, without stockholder approval, can issue
Preferred Stock, with voting and conversion rights which could adversely affect
the voting power of the holders of Common Stock. In addition, such Preferred
Stock may have other rights, including economic rights, senior to the Common
Stock and, as a result, the issuance thereof could have a material adverse
affect on the market value of the Common Stock. The Company has no present plan
to issue any shares of Preferred Stock. However, the Board of Directors is
evaluating the appropriateness of adopting a shareholder rights agreement which
would provide certain protections for the Company and its shareholders from
certain changes in control of the Company not approved by the Board of
Directors. If adopted, such an agreement could result in the issuance of
warrants to acquire shares of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Interstate Bank
of California, Los Angeles.
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<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions of the Underwriting Agreement
(the "U.S. Underwriting Agreement") among the Company and the Underwriters named
below (the "U.S. Underwriters"), for whom PaineWebber Incorporated and
Robertson, Stephens & Company, L.P. are acting as Representatives (the
"Representatives"), and concurrently with the sale of an aggregate of 400,000
shares of Common Stock to the International Underwriters (as defined below), the
U.S. Underwriters severally have agreed to purchase from the Company and the
Company has agreed to sell to the U.S. Underwriters, 1,600,000 shares of Common
Stock, which in the aggregate equal the number of shares set forth opposite the
names of such U.S. Underwriters below:
<TABLE>
<CAPTION>
NUMBER
OF
U.S. UNDERWRITERS SHARES
- ----------------- --------
<S> <C>
PaineWebber Incorporated......................
Robertson, Stephens & Company, L.P. ..........
---------
Total 1,600,000
=========
</TABLE>
The Company also has entered into an underwriting agreement (the
"International Underwriting Agreement") with certain underwriters outside the
United States and Canada (the "International Underwriters"; and, together with
the U.S. Underwriters, the "Underwriters") for whom PaineWebber International
(U.K.) Ltd. and Robertson, Stephens & Company, L.P. are acting as Managers (the
"Managers"). Subject to the terms and conditions of the International
Underwriting Agreement, and concurrently with the sale of 1,600,000 shares of
Common Stock to the U.S. Underwriters, the Company has agreed to sell to the
International Underwriters, and the International Underwriters severally have
agreed to purchase, an aggregate of 400,000 shares of Common Stock. The initial
public offering price per share and the total underwriting discounts and
commissions per share will be identical in the U.S. Underwriting Agreement and
the International Underwriting Agreement with respect to all shares of Common
Stock being purchased by the Underwriters from the Company.
In the U.S. Underwriting Agreement and the International Underwriting
Agreement, the several U.S. Underwriters and the several International
Underwriters, respectively, have agreed, subject to certain conditions, to
purchase all of the shares of Common Stock being sold pursuant to each such
Agreement (other than those covered by the over-allotment option described
below), if any are purchased. The U.S. Underwriting Agreement provides that, in
the event of a default by a U.S. Underwriter, in certain circumstances, the
purchase commitments of non-defaulting U.S. Underwriters may be increased or the
U.S. Underwriting Agreement may be terminated, and the International
Underwriting Agreement provides that, in the event of a default by an
International Underwriter, in certain circumstances, the purchase commitments of
non-defaulting International Underwriters may be increased or the International
Underwriting Agreement may be terminated. The sale of Common Stock to be
purchased by the U.S. Underwriters and the International Underwriters are
conditioned on one another.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock in part to the public at the price
to the public set forth on the cover page of this Prospectus, and in part to
certain securities dealers (who may include Underwriters) at such price less a
concession not in excess of $.____ per share; and that the Underwriters and such
dealers may reallow a discount not in excess of $.____ per share to other
dealers, including the Underwriters. After the commencement of the public
offering, the public offering price, the concession to selected dealers and the
discount to other dealers may be changed by the Representatives and the
Managers.
Each U.S. Underwriter has represented and agreed that, as part of the
distribution of the U.S. Shares, (a) it is not purchasing any U.S. Shares for
the account of anyone other than a United States Person (as defined below) and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the United
States offering to any person outside the United States or to anyone other than
a United States Person. Each International Underwriter has represented and
agreed that, as part of the distribution of the International Shares, (a) it is
not purchasing any International Shares for the account of any United States or
Canadian Person and (b) it has not offered or sold, and will not offer or sell,
directly or
33
<PAGE>
indirectly, any International Shares or distribute any prospectus to any person
within the United States or Canada or to any United States or Canadian Person.
The foregoing limitations do not apply to stabilization transactions or to sales
between the U.S. Underwriters and the International Underwriters pursuant to the
Agreement Between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any individual who is a resident of the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under or governed by the laws of the United States or
Canada or any political subdivision of either thereof (other than a branch
located outside the United States and Canada of any United States or Canadian
Person) and includes any United States or Canadian branch of a person who is
otherwise not a United States or Canadian Person.
Sales may be made between the U.S. Underwriters and the International
Underwriters of such number of shares of Common Stock as may be mutually agreed.
The per share price of any shares sold shall be the price to the public set
forth on the cover page of this Prospectus less an amount not greater than the
per share amount of the concession to dealers set forth above. To the extent
there are sales between the U.S. Underwriters and the International
Underwriters, the number of shares of Common Stock initially available for sale
by the U.S. Underwriters may be more or less than the amount specified on the
cover page of this Prospectus.
The Company has granted to the U.S. Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, under which the U.S.
Underwriters may purchase up to 300,000 additional shares of Common Stock from
the Company at the price to the public set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions. The U.S.
Underwriters may exercise the option only to cover over-allotments, if any, made
in connection with the offering of the shares of Common Stock offered hereby.
To the extent such option is exercised, each U.S. Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock as it was obligated to
purchase pursuant to the U.S. Underwriting Agreement.
The Company and certain of the Company's current shareholders, including all
directors and executive officers of the Company, have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, or rights
to acquire shares of Common Stock, for a period of 90 days after the date of
this Prospectus without the prior written consent of the Representatives.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The rules of the Securities and Exchange Commission (the "Commission")
generally prohibit the Underwriters from making a market in the Common Stock
during the two business day period prior to commencement of sales in this
offering (the "Cooling Off Period"). The Commission has, however, adopted Rule
10b-6A ("Rule 10b-6A") which provides an exemption from such prohibition for
certain passive market making transactions. Such passive market making
transactions must comply with applicable price and volume limits and must be
identified as passive market making transactions. In general, pursuant to Rule
10b-6A, a passive market maker may display its bid for a security at a price not
in excess of the highest independent bid for the 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. Further, net
purchases by a passive market maker on each day are generally limited to a
specified percentage of the passive market maker's average daily trading volume
in a security during a specified prior period and must be discontinued when such
limit is reached. Pursuant to the exemption provided by Rule 10b-6A, certain of
the Underwriters and selling group members may engage in passive market making
in the Common Stock during the Cooling Off Period. Passive market makers may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
34
<PAGE>
LEGAL MATTERS
The validity of the Common Stock being offered hereby has been passed upon for
the Company by Ferris & Britton, a professional corporation, San Diego,
California. Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, is
acting as counsel for the Underwriters in connection with certain legal matters
relating to the sale of the Common Stock offered hereby.
EXPERTS
The financial statements as of June 30, 1995 and 1994 and for each of the
three years in the period ended June 30, 1995 included in this Prospectus and
the financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended June 30, 1995 have been so
included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act,
as amended, 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 may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's regional offices:
Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661; and New York Regional Office, Room 1400, 75 Park Place, New York, New
York 10007. Copies of such materials can also be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Common Stock of the Company is
quoted on the Nasdaq Stock Market, and such material may also be inspected at
the offices of Nasdaq Operations, 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 of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits thereto, which may be inspected without charge at, and copies thereof
may be obtained at prescribed rates from, the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------------
<S> <C>
Report of Price Waterhouse LLP, Independent Accountants F-2
Financial Statements:
Balance Sheet as of June 30, 1994 and 1995 F-3
Statement of Operations for the years ended June 30, 1993, 1994 and 1995 F-4
Statement of Stockholders' Equity for the years ended June 30, 1993,
1994 and 1995 F-5
Statement of Cash Flows for the years ended June 30, 1993, 1994 and 1995 F-6
Notes to Financial Statements F-7 - F-13
</TABLE>
NOTE: All schedules are omitted because they are either not applicable
or not required or the information is shown elsewhere in the
financial statements or in the notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Agouron Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Agouron Pharmaceuticals, Inc. at
June 30, 1994 and 1995, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Diego, California
July 25, 1995
F-2
<PAGE>
AGOURON PHARMACEUTICALS, INC.
BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30,
-------------------
Current assets: 1994 1995
------- -------
<S> <C> <C>
Cash and cash equivalents $ 2,104 $ 4,358
Short-term investments 27,757 15,886
Accounts receivable 328 344
Other current assets 891 871
------- -------
Total current assets 31,080 21,459
Property and equipment, net 6,098 5,638
------- -------
$37,178 $27,097
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,514 $ 5,426
Accrued liabilities 519 683
Deferred revenue 6,818 5,745
Current portion of long-term debt 1,190 768
-------- --------
Total current liabilities 10,041 12,622
-------- --------
Long-term liabilities:
Long-term debt, less current portion 992 580
Accrued rent 1,293 1,304
-------- --------
Total long-term liabilities 2,285 1,884
-------- --------
Stockholders' equity:
Common stock, no par value, 75,000,000 shares authorized,
7,278,488 and 7,359,282 shares issued and outstanding 75,435 76,113
Accumulated deficit (50,583) (63,522)
-------- --------
Total stockholders' equity 24,852 12,591
-------- --------
Commitments and contingencies (Note 8) -- --
-------- --------
$ 37,178 $ 27,097
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Contract $ 8,266 $ 16,301 $ 26,722
Interest 1,704 1,350 1,239
---------- ---------- ----------
9,970 17,651 27,961
---------- ---------- ----------
Costs and expenses:
Research and development 17,404 23,957 36,317
General and administrative 2,127 2,961 4,358
Interest 268 195 225
---------- ---------- ----------
19,799 27,113 40,900
---------- ---------- ----------
Net loss $ (9,829) $ (9,462) $ (12,939)
========== ========== ==========
Net loss per common share $ (1.40) $ (1.31) $ (1.77)
========== ========== ==========
Shares used in computing net loss per common share 6,997,000 7,241,000 7,296,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock
------------------- Accumulated
Shares Amount Deficit Total
--------- ------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at June 30, 1992 6,903,933 $68,809 $(31,292) $ 37,517
Stock issuances:
Private sales 311,688 5,940 - 5,940
Exercise of stock options 2,500 21 - 21
Employee stock purchase plan 8,425 70 - 70
Options granted for services provided - 38 - 38
Net loss - - (9,829) (9,829)
--------- ------- -------- --------
Balance at June 30, 1993 7,226,546 74,878 (41,121) 33,757
Stock issuances:
Exercise of stock options 32,649 352 - 352
Employee stock purchase plan 19,293 170 - 170
Options granted for services provided - 35 - 35
Net loss - - (9,462) (9,462)
--------- ------- -------- --------
Balance at June 30, 1994 7,278,488 75,435 (50,583) 24,852
Stock issuances:
Exercise of stock options 49,125 382 - 382
Employee stock purchase plan 31,669 296 - 296
Net loss - - (12,939) (12,939)
--------- ------- -------- --------
Balance at June 30, 1995 7,359,282 $76,113 $(63,522) $ 12,591
========= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
AGOURON PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year ended June 30,
---------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from contracts $ 7,973 $ 20,307 $ 25,633
Cash paid to suppliers, employees and service providers (16,962) (24,955) (34,113)
Interest received 1,704 1,350 1,239
Interest paid (268) (195) (225)
-------- -------- --------
Net cash provided (used) by operating activities (7,553) (3,493) (7,466)
-------- -------- --------
Cash flows from investing activities:
Net (increase) decrease in short-term investments 6,878 (840) 11,871
Expenditures for property and equipment (2,655) (1,783) (1,978)
-------- -------- --------
Net cash provided (used) by investing activities 4,223 (2,623) 9,893
-------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock 6,031 522 678
Principal payments under equipment leases (572) (550) (613)
Increase (decrease) in long-term debt, net (312) 465 (238)
-------- -------- --------
Net cash provided (used) by financing activities 5,147 437 (173)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1,817 (5,679) 2,254
Cash and cash equivalents at beginning of year 5,966 7,783 2,104
-------- -------- --------
Cash and cash equivalents at end of year $ 7,783 $ 2,104 $ 4,358
======== ======== ========
Reconciliation of net loss to net cash provided (used) by operating activities:
Net loss $ (9,829) $ (9,462) $(12,939)
Depreciation and amortization 1,755 2,180 2,455
Net (increase) decrease in accounts receivable and other current assets (172) (635) 4
Net increase (decrease) in accounts payable, accrued liabilities,
deferred revenue and other liabilities 655 4,389 3,014
Options granted for services provided 38 35 --
-------- -------- --------
Net cash provided (used) by operating activities $ (7,553) $ (3,493) $ (7,466)
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
The Company
Agouron Pharmaceuticals, Inc. ("Agouron" or the "Company") was incorporated in
the state of California on June 22, 1984. The Company is engaged in the
development of human pharmaceuticals utilizing protein structure-based drug
design.
Short-term Investments
Short-term investments consist principally of government or government agency
securities, corporate notes and bonds, commercial paper and certificates of
deposit with original maturities of three to thirty-six months. Included in
short-term investments at June 30, 1994 and 1995 is $246,000 and $172,000 of
accrued interest receivable.
The Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115")
for investments held as of or acquired after July 1, 1994. The Company has
classified its short-term investments as available-for-sale. The adoption of
FAS 115 did not have a material impact on the Company's financial position or
results of operations.
Concentration of Credit and Market Risk and Off Balance Sheet Risk
The Company invests its excess cash principally in marketable securities from
a diversified portfolio of institutions with strong credit ratings and, by
policy, limits the amount of credit exposure at any one institution. These
investments are generally not collateralized and primarily mature within one
year. The Company has not realized any material losses from such investments in
1993, 1994 or 1995.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over estimated useful lives of three to five years.
Leasehold improvements are amortized over the life of the lease. Charges to
costs and expenses for repairs and maintenance were $508,000, $534,000 and
$422,000 for the years ended June 30, 1993, 1994 and 1995.
Revenue Recognition
Contract revenues (including profit, if any) are earned and recognized as work
is performed. Contract payments received in advance of performance are recorded
as deferred revenue. Subsequent contract revenues are recognized according to
the provisions of each collaborative agreement, generally on a percentage-of-
completion basis over the life of the contract.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, cash equivalents are highly
liquid investments purchased with an original maturity of three months or less.
Non-cash financing activities are comprised primarily of capital lease
obligations and were $85,000, $58,000 and $17,000, for 1993, 1994 and 1995.
Income Taxes
Effective July 1, 1993, the Company adopted, on a prospective basis, Statement
of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS
109"). Under FAS 109, deferred tax is recognized using the liability method,
whereby tax rates are applied to cumulative temporary differences based on when
and how they are expected to affect the tax return. The adoption of FAS 109 did
not have a material impact on the Company's financial statements.
F-7
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Liquidity and Capital Resources
As of June 30, 1995, the Company believes that its current capital resources,
existing contractual commitments and the JT milestone payment of $24,000,000
(see Note 4), will be sufficient to meet its operating needs through fiscal
1996. This belief is based on current research and clinical development plans,
the current regulatory environment, historical industry experience in the
development of therapeutic drugs and general economic conditions. However, if
the JT milestone payment is not received, the Company will need additional
financing to meet the planned operating needs of fiscal 1996 as well as fiscal
1997 and beyond. Such needs would include the expenditure of substantial funds
to continue research and development activities, conduct existing and planned
preclinical studies and tests, conduct human clinical trials and establish
certain manufacturing, sales and marketing capabilities. As a result, the
Company anticipates pursuing various financing alternatives, such as
collaborative arrangements and additional public offerings or private placements
of Company common or preferred stock. If such alternatives are not available,
the Company may be required to delay or eliminate expenditures for certain of
its potential products under development or to license third parties to
commercialize products or technologies that the Company would otherwise seek to
develop itself.
NOTE 2 - SHORT-TERM INVESTMENTS
At June 30, 1995, the amortized cost and estimated fair value of short-term
investments held as available-for-sale were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
-----------------------------------------------
<S> <C> <C> <C> <C>
United States government securities $10,236 $5 $(60) $10,181
Corporate obligations 3,037 2 (16) 3,023
Other interest bearing securities 2,613 -- -- 2,613
------- -- ---- -------
$15,886 $7 $(76) 15,817
======= == ==== =======
</TABLE>
Realized gains and losses on the disposal of available-for-sale securities
during 1995 totaled $3,000 and $7,000, respectively. The cost of securities
sold is based upon the specific identification method. At June 30, 1995,
scheduled maturities for available-for-sale securities were less than one year
for $14,720,000 and between one and two years for $1,166,000. At June 30, 1995,
short-term investments are carried on the balance sheet at amortized cost. The
difference between amortized cost and fair value has not been reflected in
stockholders' equity as such difference is not material.
F-8
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
June 30,
------------------------
1994 1995
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Accounts receivable:
Employee receivables $ 270 $ 262
Other receivables 58 82
------- --------
$ 328 $ 344
======= ========
Property and equipment, net:
Scientific instrumentation $ 6,748 $ 7,787
Computer equipment 4,838 5,453
Leasehold improvements 2,535 2,798
Furniture and fixtures 794 944
------- --------
14,915 16,982
Less accumulated depreciation and amortization (8,817) (11,344)
------- --------
$ 6,098 $ 5,638
======= ========
Accrued liabilities:
Accrued vacation $ 489 $ 623
Other 30 60
------- --------
$ 519 $ 683
======= ========
</TABLE>
NOTE 4 - SIGNIFICANT CONTRACT AND GRANT ARRANGEMENTS
Japan Tobacco Inc.
In December 1992, the Company entered into an agreement with Japan Tobacco
Inc. ("JT") to collaborate on the discovery, development and commercialization
of novel therapeutic drugs which act on key proteins related to the human immune
system ("JT 1992"). In February 1994, the Company expanded its strategic
alliance with JT into the field of anti-viral drugs for the treatment of
infections caused by hepatitis C, the herpes family of viruses and the
rhinoviruses ("JT 1994"). In December 1994, the Company added its anti-HIV
drug, AG1343, to the JT collaboration with the execution of a worldwide
development and licensing agreement ("JT HIV"). In January 1995, JT 1992 was
canceled by mutual agreement and JT 1992 resources were reallocated to JT 1994
programs.
Under the provisions of JT 1994, JT has agreed to make certain research
payments to the Company of not less than $8,000,000 over a two year period
ending December 1996. Such payments could approximate more than $21,000,000
over a four year period if certain technical milestones are achieved. In
addition, JT made an up-front payment of $7,778,000, which is being amortized to
revenue over a twenty-four month period. Under the provisions of JT HIV, JT has
made payments of $6,000,000 to Agouron representing an initial payment of
$2,500,000 and a milestone payment of $3,500,000 in recognition of the
satisfactory completion of a phase I clinical study. A second milestone payment
of $24,000,000 is to be made by JT, at its election, subsequent to the receipt
of results from a pilot phase II clinical study of AG1343. The Company
anticipates such payment to be received in calendar 1995. If the milestone
payment is not made, all rights to AG1343 revert to the Company. If the
milestone payment is made, then Agouron and JT will ultimately share equally the
costs of further development of AG1343.
F-9
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Under the provisions of JT 1994, the Company will have exclusive rights to
develop, manufacture and market anti-hepatitis C and anti-herpes drugs in the
United States, Canada and Mexico. JT will have exclusive rights to develop,
manufacture and market these drugs in Japan, Taiwan and South Korea. Outside
the countries in which they respectively have exclusive rights, Agouron and JT
will have co-exclusive rights to manufacture and market jointly developed anti-
hepatitis C and anti-herpes drugs. Each company will pay royalties to the other
based upon their respective sales of anti-hepatitis C and anti-herpes drugs.
The Company will have exclusive, world-wide, royalty-free rights to develop,
manufacture and market drugs for the treatment or prevention of infections by
pathogenic rhinoviruses. JT will have the first right to negotiate for a
license to develop, manufacture and market such anti-rhinovirus drugs in Japan
and certain other countries in Asia. Under the provisions of JT HIV, Agouron
will retain exclusive commercial rights to AG1343 (with the right to sublicense,
subject to JT's right of first refusal) in the United States, Canada and Mexico.
JT will have exclusive commercial rights to AG1343 (with the right to
sublicense, subject to Agouron's right of first refusal) in Japan and certain
other countries in Asia. Exclusive commercial rights (with the right to
sublicense) in Europe and all remaining countries of the world will be held by a
joint venture owned equally by Agouron and JT. The two companies will share
profits equally from the worldwide commercialization of AG1343.
Under the combined terms of the agreements, the Company has incurred costs of
$1,144,000, $5,043,000 and $19,211,000 and recognized corresponding revenues of
$2,156,000, $11,144,000 and $22,880,000 for the years ended June 30, 1993, 1994
and 1995.
Under a separate agreement dated December 1992, JT purchased 155,844 shares of
newly issued common stock for an aggregate purchase price of $3,000,000. Such
purchase represented approximately 2% of the total outstanding common stock.
Syntex (U.S.A.) Inc.
In June 1993, the Company entered into an agreement with Syntex (U.S.A.) Inc.
(now a subsidiary of Roche Holdings, Inc.) ("Roche"), to collaborate on the
discovery of novel matrix metalloprotease inhibitor drugs for use against cancer
and degenerative diseases such as rheumatoid arthritis and osteoarthritis.
Under the provisions of the agreement, Roche has agreed to make certain research
payments to the Company over a three-year period ending June 1996 of
approximately $8,500,000. Under the agreement, the Company has incurred costs
and recognized corresponding revenues of $120,000, $2,307,000 and $3,043,000
during the years ended June 30, 1993, 1994 and 1995. The Company is funding a
portion of the activities associated with this collaboration on its own account.
Under the terms of the agreement, the Company will have a royalty position in
certain agreement products, if any, and other development and commercial rights
in other agreement products, if any.
Under a separate agreement dated June 1993, Syntex Corporation (Roche)
purchased 155,844 shares of newly issued common stock for an aggregate purchase
price of $3,000,000. Such purchase represented approximately 2% of the total
outstanding common stock.
Schering-Plough Corporation
In April 1994, the Company and Schering-Plough Corporation completed a three-
year collaborative research agreement providing for the discovery and
development of anti-cancer drugs which target oncogenic ras proteins. Each
company may pursue further discovery or development efforts in this program area
at its sole discretion and expense with no subsequent obligations to the other
company. Under the agreement, the Company has incurred costs and recognized
corresponding revenues of $2,570,000 and $1,894,000 during the years ended June
30, 1993 and 1994.
Eli Lilly and Company
In April 1993, the Company and Eli Lilly and Company completed a five year
collaborative research program in several therapeutic categories. Further
development of any discoveries made in the program will be undertaken at each
company's sole discretion and expense. Agouron has continuing commercial rights
and/or financial interests in certain of these discoveries. During the
collaborative research program, the Company has been reimbursed for certain
costs incurred and has recognized revenues of $2,941,000 during 1993.
F-10
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
National Institutes of Health
The Company is currently the grantee organization for two grants from the
National Institutes of Health to conduct research related to the Human
Immunodeficiency Virus. Costs incurred and the corresponding reimbursement
revenues recognized under various grant programs were $479,000, $956,000 and
$799,000 for 1993, 1994 and 1995.
NOTE 5 - LONG-TERM DEBT
At June 30, 1994 and 1995, long-term debt and capital lease obligations were
as follows:
<TABLE>
<CAPTION>
1994 1995
------------ -----------
<S> <C> <C>
Notes payable, secured with personal property and a $ 1,169,000 $ 931,000
certificate of deposit for $400,000; interest at prime
plus 1.5%; maturing September 1995, June 1997 and
November 1998
Capital leases, with interest rates between 6.7% and 16.5%, 1,013,000 417,000
maturing at various dates through December 1998 ----------- ----------
Total long-term debt and capital lease obligations 2,182,000 1,348,000
Current portion of long-term debt (1,190,000) (768,000)
----------- ----------
Long-term debt $ 992,000 $ 580,000
=========== ==========
</TABLE>
Maturities of long-term debt, excluding capital leases, are as follows: 1996
- - $445,000, 1997 - $344,000, 1998 - $100,000, 1999 - $42,000 and 2000 and
thereafter $0.
NOTE 6 - INCOME TAXES
At June 30, 1994 and 1995, the Company has total deferred income taxes of
$23,609,000 and $30,299,000, which have been fully reserved as follows:
<TABLE>
<CAPTION>
June 30, 1994 June 30, 1995
-------------- --------------
<S> <C> <C>
Deferred revenue $ 2,737,000 $ 2,358,000
Book and tax depreciation differences 1,588,000 1,664,000
Accrued liabilities 715,000 790,000
Net operating loss carryforwards 14,437,000 19,638,000
Foreign tax credits 1,237,000 1,913,000
Research and development tax credits 2,895,000 3,936,000
------------ ------------
23,609,000 30,299,000
Valuation allowance (23,609,000) (30,299,000)
------------ ------------
Deferred taxes, net $ -- $ --
============= =============
</TABLE>
F-11
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company has not recorded provisions for any United States income taxes due
to net operating losses for tax reporting purposes. At June 30, 1995, the
Company had net operating loss carryforwards for federal tax reporting purposes
of approximately $53,509,000, expiring from 2000 through 2010. The Company also
has federal research and development credit carryforwards of approximately
$2,721,000 at June 30, 1995, expiring from 2000 through 2010. The future
utilization of, or limitation as to the use of, net operating loss
carryforwards for federal and state income tax purposes may be impacted by the
issuance of additional equity securities.
As a result of California's partial conformity with federal provisions
regarding net operating loss and research and development credit carryforwards,
the Company has net operating loss and research and development credit
carryforwards of approximately $15,055,000 and $1,215,000 for state tax
reporting purposes at June 30, 1995, expiring from 1996 through 2010.
Included in general and administrative costs and expenses at June 30, 1993,
1994 and 1995 is approximately $116,000, $611,000 and $863,000 of foreign tax
expense associated with the contract research payments from JT.
NOTE 7 - STOCKHOLDERS' EQUITY
Stock Options
The Company has two stock option plans whereby 3,220,000 shares of common
stock have been reserved for issuance to its officers, directors, employees and
consultants. The plans, as amended, are administered by the Board of Directors
or its designees and provide generally that, for incentive stock options, the
exercise price shall not be less than the fair market value of the shares at the
date of grant and, for certain non-qualified stock options, the price shall not
be less than 85% of the fair market value of the shares at the date of grant and
may be at any price determined by the Board of Directors for others. The
options expire not later than ten years from the date of the grant and generally
become exercisable ratably over a four year period beginning one year from the
grant date. As of June 30, 1995, 293,636 of these options had been exercised,
1,107,922 were exercisable and 340,672 shares of common stock remain available
for option grant. The following table summarizes stock option activity for 1993
through 1995:
<TABLE>
<CAPTION>
Shares Price
---------- ---------------
<S> <C> <C>
Outstanding June 30, 1992 803,278
Options granted 494,239 $ 7.88 - $13.88
Options exercised (2,500) $ 7.38 - $ 9.15
Options canceled (20,550) $ 7.38 - $15.50
---------
Outstanding June 30, 1993 1,274,467
Options granted 703,450 $ 8.63 - $16.00
Options exercised (32,649) $ 5.40 - $12.00
Options canceled (39,829) $ 7.88 - $15.50
---------
Outstanding June 30, 1994 1,905,439
Options granted 773,275 $10.13 - $24.50
Options exercised (49,125) $ 5.40 - $15.50
Options canceled (43,897) $ 7.88 - $16.13
---------
Outstanding June 30, 1995 2,585,692 $ 5.40 - $24.50
=========
</TABLE>
F-12
<PAGE>
AGOURON PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Employee Stock Purchase Plan
In December 1992, the shareholders approved an Employee Stock Purchase Plan
("ESPP") which commenced on January 1, 1993. Under the ESPP, 250,000 shares of
common stock have been reserved for issuance and 190,613 shares remain available
for purchase at June 30, 1995. Eligible employees may purchase shares of the
Company's common stock through payroll deductions at prices equal to 85% of the
fair market value of the common stock on either the first or last day of a
purchase period. During 1995, 25,524 shares were issued at a price of $9.24 per
share and 6,145 shares were issued at a price of $9.88 per share. During 1994,
10,073 shares were issued at a price of $8.2875 per share and 9,220 shares were
issued at a price of $9.35 per share. During 1993, 8,425 shares were issued at
a price of $8.2875 per share.
Stock Warrants
As part of certain financing arrangements in 1986, the Company issued a
warrant to purchase 45,000 shares of the Company's common stock at a per share
price of $6.30. This warrant is currently exercisable and expires in July 1996.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Certain scientific instrumentation and computer and other equipment are
subject to leases which are classified as capital leases. At June 30, 1994 and
1995, $2,601,000 ($624,000, net) and $2,364,000 ($227,000, net) of such leased
equipment were included in property and equipment.
Rental expenses (principally for leased facilities under long-term operating
lease commitments) were $1,502,000, $1,973,000 and $2,198,000 for 1993, 1994 and
1995. Future minimum payments for capital and operating leases at June 30, 1995
are as follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
1996 $350,000 $ 2,579,000
1997 56,000 2,565,000
1998 37,000 2,244,000
1999 8,000 2,295,000
2000 -- 2,411,000
Thereafter -- 2,291,000
-------- -----------
Total minimum lease payments 451,000 $14,385,000
===========
Less amount representing interest (34,000)
--------
Obligation under capital leases $417,000
========
</TABLE>
The Company is involved in certain legal proceedings generally incidental to
its normal business activities. While the outcome of any such proceedings
cannot be accurately predicted, the Company does not believe the ultimate
resolution of any such existing matters should have a material adverse effect on
its financial position or results of operations.
F-13
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTA-
TIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. 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
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information
By Reference........................ 2
Prospectus Summary..................... 3
Risk Factors........................... 5
Use of Proceeds........................ 11
Capitalization......................... 12
Price Range of Common Stock and
Dividend Policy..................... 12
Dilution............................... 13
Selected Financial Data................ 14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........... 15
Business............................... 17
Management............................. 29
Description of Securities.............. 32
Underwriting........................... 33
Legal Matters.......................... 35
Experts................................ 35
Available Information.................. 35
Financial Statements................... F-1
</TABLE>
================================================================================
================================================================================
2,000,000 SHARES
[LOGO OF AGOURON PHARMACEUTICALS, INC.]
AGOURON
PHARMACEUTICALS,
INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
PAINEWEBBER INCORPORATED
ROBERTSON, STEPHENS & COMPANY
--------------
1995
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 4, 1995
2,000,000 SHARES
[LOGO OF AGOURON PHARMACEUTICALS, INC.]
COMMON STOCK
____________________
All of the shares of Common Stock offered hereby are being sold by Agouron
Pharmaceuticals, Inc. Of the 2,000,000 shares of Common Stock offered, 400,000
shares are being offered in an international offering outside of the United
States and Canada (the "International Shares") and 1,600,000 shares are being
offered in a concurrent offering in the United States. The price to the public
and the aggregate underwriting discounts and commissions per share will be
identical for both offerings. See "Underwriting."
The Common Stock is traded on The Nasdaq Stock Market under the symbol
AGPH. On August 2, 1995, the closing sale price of the Common Stock as reported
by Nasdaq was $28.50 per share. See "Price Range of Common Stock and Dividend
Policy."
____________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 5.
____________________
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.
<TABLE>
<CAPTION>
=============================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions/(1)/ Company/(2)/
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ---------------------------------------------------------------------------------------------
Total $ $ $
- ---------------------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option/(3)/ $ $ $
=============================================================================================
</TABLE>
/(1)/ See "Underwriting."
/(2)/ Before deducting expenses estimated at $350,000, which are payable by the
Company.
/(3)/ Assuming exercise in full of the 45-day option granted by the Company to
the Underwriters to purchase up to 300,000 additional shares, on the same
terms, solely to cover over-allotments. See "Underwriting."
____________________
The International Shares are offered by the International Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
International Underwriters, and subject to their right to reject orders in whole
or in part. It is expected that delivery of the Common Stock offered hereby
will be made in New York City on or about ____________, 1995.
____________________
PAINEWEBBER INTERNATIONAL ROBERTSON, STEPHENS & COMPANY
____________________
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL
PROSPECTUS]
THE INTERNATIONAL SHARES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY,
IN THE UNITED STATES OR CANADA OR TO ANY PERSON WHO IS A UNITED STATES OR
CANADIAN PERSON, AS PART OF THE DISTRIBUTION OF THE INTERNATIONAL SHARES. ALL
APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES ACT OF 1986 AND THE COMPANIES
ACT OF 1985 WITH RESPECT TO ANYTHING DONE BY ANY PERSON IN RELATION TO THE
COMMON STOCK, IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM, MUST BE
COMPLIED WITH. FOR A DESCRIPTION OF THESE AND OTHER RESTRICTIONS ON THE
OFFERING AND SALE OF THE SHARES. SEE "UNDERWRITING."
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-----------------------
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Agouron's Annual Report on Form 10-K for the fiscal year ended June 30, 1995
and the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A having an effective date of June 16, 1987
(file number 0-15609), are hereby incorporated by reference in this Prospectus,
except as superseded or modified herein. All documents filed with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of this Prospectus and
prior to the termination of the offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
Agouron will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Such
requests should be directed to the Chief Financial Officer at Agouron's
executive offices at 10350 North Torrey Pines Road, La Jolla, California 92037;
(619) 622-8000.
2
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of the material United States federal
tax consequences of the ownership and disposition of Common Stock by a person (a
"non-U.S. Holder") that, for United States federal income tax purposes, is a
nonresident alien individual, a foreign corporation, a foreign partnership, or a
foreign estate or trust, as such terms are defined in the Internal Revenue Code
of 1986, as amended (the "Code"). The discussion does not consider specific
facts and circumstances that may be relevant to a particular holder's tax
position. Each holder is urged to consult a tax advisor with respect to the
United States federal tax consequences of holding and disposing of Common Stock,
as well as any tax consequences that may arise under the laws of any state,
municipality, foreign or other taxing jurisdiction. This discussion assumes
that the Company's distribution to a non-U.S. Holder will consist solely of
cash.
Dividends paid to a non-U.S. Holder of Common Stock will be subject to
withholding of United States federal income tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business of the non-U.S.
Holder within the United States. Dividends received by such non-U.S. Holder
that are effectively connected with the conduct of a trade or business of the
non-U.S. Holder within the United States are exempt from the withholding tax
described above. A non-U.S. Holder may claim this exemption by filing Form 4224
(Exemption From Withholding of Tax on Income Effectively Connected with the
Conduct of Trade or Business in the United States) with the Company or its
dividend paying agent. In order to claim the benefit of an applicable tax
treaty rate, a non-U.S. Holder may have to file with the Company or its
dividend-paying agent an exemption or reduced treaty rate certificate or letter
in accordance with the terms of such treaty.
A non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of the
non-U.S. Holder in the United States, (ii) in the case of a non-U.S. Holder who
is a nonresident alien individual and holds the Common Stock as a capital asset,
such holder is present in the United States for 183 or more days in the taxable
year of the sale, (iii) the non-U.S. Holder has owned more than 5% of the Common
Stock at any time during the five-year period ending on the date of the
disposition of such interest and the Common Stock is, at the time of the
disposition, a United States real property interest within the meaning of
section 897(c)(1) of the Code, or (iv) the non-U.S. Holder is subject to tax
pursuant to certain provisions of the Code applicable to expatriates.
Common Stock held by a non-U.S. Holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
Under temporary United States Treasury regulations, United States information
reporting requirements and backup withholding tax will not apply to dividends
paid on Common Stock to a non-U.S. Holder at an address outside the United
States. Payment by a United States office of a broker of the proceeds of a sale
of Common Stock is subject to both backup withholding at a rate of 31% and
information reporting unless the holder certifies its non-United States status
under penalties of perjury or otherwise establishes an exemption. Information
reporting requirements (but not backup withholding) will also apply to a payment
of the proceeds of a sale of Common Stock by a foreign office of a United States
broker, or certain foreign brokers, unless the broker has documentary evidence
in its records that the holder is a non-U.S. Holder and certain other conditions
are met, or the holder otherwise establishes an exemption.
A non-U.S. Holder may obtain a refund of any amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the United
States Internal Revenue Service.
The tax consequences to non-U.S. Holders who acquire Common Stock through
partnerships engaged in a trade or business in the United States may be
different from those discussed above.
These backup withholding and information reporting rules are under review by
the United States Treasury and their application to the Common Stock could be
changed by future regulations.
33
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Upon the terms and subject to the conditions of the Underwriting Agreement
(the "International Underwriting Agreement") among the Company and the
Underwriters named below (the "International Underwriters"), for whom
PaineWebber International (U.K.) Ltd. and Robertson, Stephens & Company, L.P.
are acting as Managers (the "Managers"), and concurrently with the sale of an
aggregate of 1,600,000 shares of Common Stock to the U.S. Underwriters (as
defined below), the International Underwriters severally have agreed to purchase
from the Company and the Company has agreed to sell to the International
Underwriters severally, 400,000 shares of Common Stock, which in the aggregate
equal the number of shares set forth opposite the names of such International
Underwriters below:
NUMBER
OF
INTERNATIONAL UNDERWRITERS SHARES
- -------------------------- --------
PaineWebber International (U.K.) Ltd.
Robertson, Stephens & Company, L.P.
--------
Total 400,000
========
The Company also has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with certain underwriters in the United States (the
"U.S. Underwriters"; and, together with the International Underwriters, the
"Underwriters") for whom PaineWebber Incorporated and Robertson, Stephens &
Company, L.P. are acting as Representatives (the "Representatives"). Subject to
the terms and conditions of the U.S. Underwriting Agreement, and concurrently
with the sale of 400,000 shares of Common Stock to the International
Underwriters, the Company has agreed to sell to the U.S. Underwriters severally,
and the U.S. Underwriters severally have agreed to purchase, an aggregate of
1,600,000 shares of Common Stock. The initial public offering price per share
and the total underwriting discount per share will be identical in the
International Underwriting Agreement and the U.S. Underwriting Agreement with
respect to all shares of Common Stock being purchased by the Underwriters from
the Company.
In the International Underwriting Agreement and the U.S. Underwriting
Agreement, the several International Underwriters and the several U.S.
Underwriters, respectively, have agreed, subject to certain conditions, to
purchase all of the shares of Common Stock being sold pursuant to each such
Agreement (other than those covered by the over-allotment options described
below), if any are purchased. The International Underwriting Agreement provides
that, in the event of a default by an International Underwriter, in certain
circumstances, the purchase commitments of non-defaulting International
Underwriters may be increased or the International Underwriting Agreement may be
terminated, and the U.S. Underwriting Agreement provides that in the event of a
default by a U.S. Underwriter, in certain circumstances, the purchase
commitments of nondefaulting U.S. Underwriters may be increased or the U.S.
Underwriting Agreement may be terminated. The sale of Common Stock to be
purchased by the International Underwriters and the U.S. Underwriters are
conditioned upon one another.
The Company has been advised by the Managers that the Underwriters propose to
offer the shares of Common Stock in part to the public at the price to the
public set forth on the cover page of this Prospectus, and in part to certain
securities dealers (who may include Underwriters) at such price less a
concession not in excess of $.____ per share; and that the Underwriters and such
dealers may reallow a discount not in excess of $.____ per share to other
dealers, including the Underwriters. After the commencement of the public
offering, the public offering price, the concession to selected dealers and the
discount to other dealers may be changed by the Managers and the
Representatives.
34
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING (CONTINUED)
Each International Underwriter has represented and agreed that, as part of the
distribution of the International Shares, (a) it is not purchasing any
International Shares for the account of any United States or Canadian Person (as
defined below) and (b) it has not offered or sold, and will not offer or sell,
directly or indirectly, any International Shares or distribute any prospectus
relating to the International offering to any person within the United States or
Canada or to any United States or Canadian Person. Each U.S. Underwriter has
represented and agreed that, as part of the distribution of the U.S. Shares, (a)
it is not purchasing any U.S. Shares for the account of anyone other than a
United States Person and (b) it has not offered or sold, and will not offer or
sell, directly or indirectly, any U.S. Shares or distribute any prospectus to
any person outside the United States or to anyone other than a United States
Person. The foregoing limitations do not apply to stabilization transactions or
to sales between the International Underwriters and the U.S. Underwriters
pursuant to the Agreement Between U.S. and International Underwriters. As used
herein, "United States or Canadian Person" means any individual who is a
resident of the United States or Canada, or any corporation, pension, profit-
sharing or other trust or other entity organized under or governed by the laws
of the United States or Canada or any political subdivision of either thereof
(other than a branch located outside the United States and Canada of any United
States or Canadian Person) and includes any United States or Canadian branch of
a person who is otherwise not a United States or Canadian Person.
Sales may be made between the International Underwriters and the U.S.
Underwriters of such number of shares of Common Stock as may be mutually agreed.
The per share price of any shares sold shall be the price to the public set
forth on the cover page of this Prospectus less an amount not greater than the
per share amount of the concession to dealers set forth above. To the extent
there are sales between the International Underwriters and the U.S.
Underwriters, the number of shares of Common Stock initially available for sale
by the International Underwriters may be more or less than the amount specified
on the cover page of this Prospectus.
Each International Underwriter has represented and agreed that (i) it has not
offered or sold and will not offer or sell in the United Kingdom, by means of
any document, any Common Stock other than to persons whose ordinary business is
to buy or sell shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act of 1985 of the United Kingdom, (ii) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom and (iii) it has only issued or passed
on, and will only issue or pass on, in the United Kingdom any document received
by it in connection with the issue of the Common Stock to a person who is of a
kind described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988 or is a person to whom any document may
otherwise lawfully be issued or passed on.
The Company has granted to the U.S. Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, under which the U.S.
Underwriters may purchase up to 300,000 additional shares of Common Stock from
the Company at the price to the public set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions. The U.S.
Underwriters may exercise the option only to cover over-allotments, if any, made
in connection with the offering of the shares of Common Stock offered hereby.
To the extent such option is exercised, each U.S. Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock as it was obligated to
purchase pursuant to the U.S. Underwriting Agreement.
The Company and certain of the Company's current shareholders, including all
directors and executive officers of the Company, have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, or rights
to acquire shares of Common Stock, for a period of 90 days after the date of
this Prospectus without the prior written consent of the Representatives.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
35
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING (CONTINUED)
The rules of the Securities and Exchange Commission (the "Commission")
generally prohibit the Underwriters from making a market in the Common Stock
during the two business day period prior to commencement of sales in this
offering (the "Cooling Off Period"). The Commission has, however, adopted Rule
10b-6A ("Rule 10b-6A") which provides an exemption from such prohibition for
certain passive market making transactions. Such passive market making
transactions must comply with applicable price and volume limits and must be
identified as passive market making transactions. In general, pursuant to Rule
10b-6A, a passive market maker may display its bid for a security at a price not
in excess of the highest independent bid for the 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. Further, net
purchases by a passive market maker on each day are generally limited to a
specified percentage of the passive market maker's average daily trading volume
in a security during a specified prior period and must be discontinued when such
limit is reached. Pursuant to the exemption provided by Rule 10b-6A, certain of
the Underwriters and selling group members may engage in passive market making
in the Common Stock during the Cooling Off Period. Passive market makers may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
36
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTA-
TIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. 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
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
_________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information
By Reference.......................... 2
Prospectus Summary....................... 3
Risk Factors............................. 5
Use of Proceeds.......................... 11
Capitalization........................... 12
Price Range of Common Stock and
Dividend Policy....................... 12
Dilution................................. 13
Selected Financial Data.................. 14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations............. 15
Business................................. 17
Management............................... 29
Description of Securities................ 32
Certain United States Tax Consequences
to Non-United States Holders.......... 33
Underwriting............................. 34
Legal Matters............................ 37
Experts.................................. 37
Available Information.................... 37
Financial Statements..................... F-1
</TABLE>
================================================================================
================================================================================
2,000,000 SHARES
[LOGO OF AGOURON PHARMACEUTICALS, INC.]
COMMON STOCK
----------
PROSPECTUS
----------
PAINEWEBBER INTERNATIONAL
ROBERTSON, STEPHENS & COMPANY
-------------------
1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses, other than underwriting discounts
and commissions, payable by the Company in connection with the sale of the
Common Stock being registered. All amounts shown are estimates, except the
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........... $ 22,653
NASD Filing Fee and Expenses.................................. 17,500
Transfer Agent's Fee and Expenses............................. *
Accounting Fees and Expenses.................................. *
Legal Fees and Expenses....................................... *
Blue Sky Fees and Expenses (including legal fees and expenses) *
Printing and Engraving........................................ *
Miscellaneous................................................. *
--------
$350,000
========
</TABLE>
- --------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law generally provides
indemnification to officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
Article VII of the articles of incorporation of the Company provides that
liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Further,
Article VIII of the articles of incorporation authorizes the Company to provide
indemnification of agents (as defined in Section 317) for breach of duty to the
Company and its shareholders through bylaw provisions or through agreements with
such agents, or both, in excess of the indemnification otherwise permitted by
Section 317, subject to the limits on such excess indemnification set forth in
Section 317.
Section 3.15 of the bylaws of the Company authorizes the Company to indemnify
any person who was or is a party, or is threatened to be made a party, to any
proceeding (other than actions by or in the right of the Company to procure a
judgment in its favor) by reason of the fact that such person is or was an agent
of the Company, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests of the Company. Section 3.15 also authorizes the
Company to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action by or in the right
of the Company to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the Company against expenses actually and
reasonably incurred by such person in connection with the defense or settlement
of such action if such person acted in good faith.
Any indemnification under Section 3.15 is to be made by the Company only if
authorized in the specific case upon determination that indemnification of the
agent is proper in the circumstances because the agent has met the applicable
standard of conduct required by Paragraphs 3.15.2 or 3.15.3 of the bylaws.
Pursuant to authorization provided under the articles of incorporation and the
bylaws, the Company has entered into indemnification agreements with each of its
present directors. The Company has also entered into similar agreements with
certain of the Company's officers who are not directors. Generally, the
indemnification agreements attempt to provide the maximum protection permitted
by California law as it may be amended from time to time. Moreover, the
indemnification agreements provide for certain additional indemnification.
Under such additional indemnification provisions, however, an individual will
not receive indemnification for judgments, settlements or expenses if he or she
is found liable to the Company (except to the extent the court determines he or
she is fairly and reasonably entitled to indemnity for expenses) for settlements
not approved by the Company or for settlements and expenses if the settlement is
not approved by the court. The indemnification agreements provide for the
Company to advance to the individual any and all reasonable expenses (including
legal fees and expenses) incurred in investigating or defending any such action,
suit or proceeding. In order to receive
II-1
<PAGE>
an advance of expenses, the individual must submit to the Company copies of
invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification.
Section 3.15 of the bylaws also provides that, in the event of a determination
by the Board of Directors of the Company to purchase insurance for certain of
its agents, the Company shall purchase and maintain insurance on behalf of any
such agent against liability asserted against or incurred by the agent in such
capacity or arising out of the agent's status, whether or not the Company would
have the power to indemnify the agent against such liability under the
provisions of Section 3.15.
The Company has in effect directors and officers liability insurance policies
which insure directors and officers of the Company. The policies expire on
October 13, 1995 and provide a combined total limit of $5,000,000 per policy
year. Although the Company intends to renew the policies on or before their
expiration date, there can be no assurance that the policies will be renewed on
terms acceptable to the Company. Under the policies, the directors and officers
of the Company are insured against loss arising from claims made against them
due to wrongful acts while acting in their individual and collective capacities
as directors and officers, subject to certain exclusions. In addition, the
policies insure the Company against losses for which its directors and officers
are entitled to indemnification, subject to a retention of $250,000 payable by
the Company. The policies are "claims made" policies and provide coverage only
for losses arising out of claims first made against the Company and reported to
the insurer during the policy period.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as part of the Registration
Statement:
Exhibit
Number Description
------ -----------
1.1 Form of U.S. Underwriting Agreement (Proof of July 29, 1995).
1.2 Form of International Underwriting Agreement (Proof of July 28, 1995).
4* Restated Articles of Incorporation.
5** Opinion of Ferris & Britton, A P.C., Regarding Legality.
23.1 Consent of Independent Accountants.
23.2** Consent of Counsel for Company (contained in Exhibit 5).
24 Power of Attorney of Board of Directors (contained on signature page
of this Registration Statement.
- --------
* Incorporated by Reference to Form 10-Q for the Quarter ended December 31,
1992.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant,
pursuant to the foregoing provisions, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's Annual Report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF SAN DIEGO, STATE OF CALIFORNIA, ON THE 2/ND/ DAY OF
AUGUST, 1995.
AGOURON PHARMACEUTICALS, INC.
BY: /s/ PETER JOHNSON
-------------------------
PETER JOHNSON,
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW
CONSTITUTES AND APPOINTS PETER JOHNSON, STEVEN S. COWELL AND GARY E. FRIEDMAN,
OR ANY OF THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH
FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER
NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS
TO THIS REGISTRATION STATEMENT, INCLUDING POST-EFFECTIVE AMENDMENTS, AND TO FILE
THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH
WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-
FACT AND AGENTS FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT
AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY
AND TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR THEIR
SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- -------------------------------- --------------
<S> <C> <C>
/s/ Peter Johnson President, Chief Executive August 2, 1995
- ----------------------------- Officer and Director
Peter Johnson
/s/ Steven S. Cowell Vice President, Finance and August 2, 1995
- ----------------------------- Chief Financial Officer
Steven S. Cowell
/s/ Gary E. Friedman Vice President, General Counsel, August 2, 1995
- ----------------------------- Secretary and Director
Gary E. Friedman
/s/ John N. Abelson Director August 2, 1995
- -----------------------------
John N. Abelson
/s/ Patricia M. Cloherty Director August 2, 1995
- -----------------------------
Patricia M. Cloherty
/s/ A.E. Cohen Director August 2, 1995
- -----------------------------
A.E. Cohen
/s/ Michael E. Herman Director August 2, 1995
- -----------------------------
Michael E. Herman
/s/ Irving S. Johnson Director August 2, 1995
- -----------------------------
Irving S. Johnson
Director _____________
- -----------------------------
Antonie T. Knoppers
/s/ Melvin I. Simon Director August 2, 1995
- -----------------------------
Melvin I. Simon
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ------
<C> <S> <C>
1.1 Form of U.S. Underwriting Agreement (Proof of July 29, 1995)
1.2 Form of International Underwriting Agreement (Proof of July 28, 1995).
4* Restated Articles of Incorporation
5** Opinion of Ferris & Britton, A P.C., Regarding Legality
23.1 Consent of Independent Accountants
23.2** Consent of Counsel for Company (contained in Exhibit 5)
24 Power of Attorney of Board of Directors (contained on signature
page of this Registration Statement)
</TABLE>
- ----------------
* Incorporated by Reference to Form 10-Q for the Quarter ended December 31,
1992.
** To be filed by amendment.
<PAGE>
EXHIBIT 1.1
1,600,000 Shares
AGOURON PHARMACEUTICALS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
(U.S. Version)
September ___, 1995
PAINEWEBBER INCORPORATED
ROBERTSON, STEPHENS & COMPANY, L.P.
As Representatives of the
several U.S. Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Agouron Pharmaceuticals, Inc., a California corporation (the "Company"),
proposes to sell an aggregate of 1,600,000 shares (the "U.S. Firm Shares") of
the Company's Common Stock, no par value (the "Common Stock"), to you and to the
several other U.S. Underwriters named in Schedule I hereto (collectively, the
"U.S. Underwriters"), for whom you are acting as representatives (the
"Representatives"), in connection with the offering and sale of such shares of
Common Stock in the United States to United States Persons (as hereinafter
defined). The Company has also agreed to grant to you and the other U.S.
Underwriters an option (the "Option") to purchase up to an additional 300,000
shares of Common Stock (the "Option Shares") on the terms and for the purposes
set forth in
1
<PAGE>
Section 1(b). The U.S. Firm Shares and the Option Shares are referred to
collectively herein as the "U.S. Shares" and the International Shares (as
hereinafter defined) and the U.S. Shares are referred to collectively herein as
the "Shares."
It is understood that the Company is concurrently entering into an
agreement (the "International Underwriting Agreement") providing for the sale by
the Company of an aggregate of 400,000 shares of Common Stock (the
"International Shares"), through arrangements with certain underwriters outside
the United States (the "International Underwriters"), for whom PaineWebber
International (U.K.) Limited and Robertson, Stephens & Company, L.P. are acting
as lead managers (the "Managers"), in connection with the offering and the sale
of such shares of Common Stock outside the United States and Canada to persons
other than United States and Canadian Persons. As used herein, "United States
or Canadian Person" shall mean any individual who is resident in the United
States or Canada or any corporation, pension, profit-sharing or other trust or
other entity organized under or governed by the laws of the United States or
Canada or of any political subdivision thereof (other than the foreign branch of
any United States or Canadian Person), and shall include any United States or
Canadian branch of a person other than a United States or Canadian Person; and
"United States" shall mean the United States of
2
<PAGE>
America, its territories, possessions and all areas subject to its jurisdiction.
The U.S. Underwriters have entered into an agree ment with the
International Underwriters (the "Agreement Between U.S. Underwriters and
International Underwriters") contemplating the coordination of certain
transactions between the U.S. Underwriters and the International Underwriters
and any such transactions between the U.S. Underwriters and the International
Underwriters shall be governed by the Agreement Between U.S. Underwriters and
International Underwriters and shall not be governed by the terms of this
Agreement.
The initial public offering price per share for the U.S. Shares and the
purchase price per share for the U.S. Shares to be paid by the several U.S.
Underwriters shall be agreed upon by the Company and the Representatives, acting
on behalf of the several U.S. Underwriters, and such agreement shall be set
forth in a separate written instrument substantially in the form of Exhibit A
hereto (the "U.S. Price Determination Agreement"). The U.S. Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication among the Company and the Representatives and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering of
the U.S. Shares will be governed by this Agreement, as supplemented by the U.S.
Price Determination
3
<PAGE>
Agreement. From and after the date of the execution and delivery of the U.S.
Price Determination Agreement, this Agreement shall be deemed to incorporate,
and, unless the context otherwise indicates, all references contained herein to
"this Agreement" and to the phrase "herein" shall be deemed to include the U.S.
Price Determination Agreement. The initial public offering price per share and
the purchase price per share for the International Shares to be paid by the
several International Underwriters pursuant to the International Underwriting
Agreement shall be set forth in a separate agreement (the "International Price
Determination Agreement"), the form of which is attached to the International
Underwriting Agreement. From and after the date of the execution and delivery
of the International Price Determination Agreement, unless the context otherwise
indicates, all references contained herein to the "International Underwriting
Agreement" shall be deemed to include the International Price Determination
Agreement. The purchase price per share for the International Shares to be paid
by the several International Underwriters shall be identical to the purchase
price per share for the U.S. Shares to be paid by the several U.S. Underwriters
hereunder.
The Company confirms as follows its agreements with the Representatives
and the several other U.S. Underwriters.
4
<PAGE>
1. Agreement to Sell and Purchase.
------------------------------
(a) On the basis of the respective representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to sell to the several U.S.
Underwriters and (ii) each of the U.S. Underwriters, severally and not jointly,
agrees to purchase from the Company at the purchase price per share for the U.S.
Firm Shares to be agreed upon by the Representatives, and the Company in
accordance with Section 1(c) or 1(d) and set forth in the U.S. Price
Determination Agreement, the number of U.S. Firm Shares set forth opposite the
name of such U.S. Underwriter in Schedule II, plus such additional number of
U.S. Firm Shares which such U.S. Underwriter may become obligated to purchase
pursuant to Section 8 hereof. If the Company elects to rely on Rule 430A (as
hereinafter defined), Schedule II may be attached to the U.S. Price
Determination Agreement.
(b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to the several U.S. Underwriters to purchase,
severally and not jointly, up to 300,000 Option Shares from the Company at the
same price per share as the U.S. Underwriters shall pay for the U.S. Firm
Shares. The Option may be exercised only to cover over-allotments in the sale
of the U.S. Firm Shares by the U.S. Underwriters and may be exercised in whole
or in
5
<PAGE>
part at any time (but not more than once) on or before the 45th day after the
date of this Agreement (or, if the Company has elected to rely on Rule 430A, on
or before the 45th day after the date of the U.S. Price Determination
Agreement), upon written or telegraphic notice (the "Option Shares Notice") by
the Representatives to the Company no later than 12:00 noon, New York City time,
at least two and no more than five business days before the date specified for
closing in the Option Shares Notice (the "Option Closing Date") setting forth
the aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, the Company will issue and sell to
the U.S. Underwriters the number of Option Shares set forth in the Option Shares
Notice, and each U.S. Underwriter will purchase such percentage of the Option
Shares as is equal to the percentage of U.S. Firm Shares that such U.S.
Underwriter is purchasing, as adjusted by the Representatives in such manner as
they deem advisable to avoid fractional shares.
(c) If the Company has elected not to rely on Rule 430A, the initial
public offering price per share for the U.S. Firm Shares and the purchase price
per share for the U.S. Firm Shares to be paid by the several U.S. Underwriters
shall be agreed upon and set forth in the U.S. Price Determination Agreement,
which shall be dated the date hereof, and an amendment to the Registration
Statement (as
6
<PAGE>
hereinafter defined) containing such per share price information shall be filed
before the Registration Statement becomes effective.
(d) If the Company has elected to rely on Rule 430A, the initial
public offering price per share for the U.S. Firm Shares and the purchase price
per share for the U.S. Firm Shares to be paid by the several U.S. Underwriters
shall be agreed upon and set forth in the U.S. Price Determination Agreement.
In the event such price has not been agreed upon and the U.S. Price
Determination Agreement has not been executed by the close of business on the
fourteenth business day following the date on which the Registration Statement
becomes effective, this Agreement shall terminate forthwith, without liability
of any party to any other party except that Section 7 shall remain in effect.
2. Delivery and Payment. Delivery of the U.S. Firm Shares shall be
--------------------
made to the Representatives for the accounts of the U.S. Underwriters against
payment of the purchase price by credit to the account of the Company with the
Depository Trust Company]. Such payment shall be made at 10:00 a.m., New York
City time, on the fourth business day following the date of this Agreement or,
if the Company has elected to rely on Rule 430A, the fourth business day after
the date on which the first bona fide offering of the U.S. Shares to the public
is made by the U.S. Underwriters
7
<PAGE>
or at such time on such other date as may be agreed upon by the Company and the
Representatives (such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the U.S. Underwriters (in the manner specified above) will
take place at the time and date (which may be the Closing Date) specified in the
Option Shares Notice.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the U.S. Firm Shares and Option Shares by the Company
to the respective U.S. Underwriters shall be borne by the Company. The Company
will pay and save each U.S. Underwriter and any subsequent holder of the U.S.
Shares harmless from any and all liabilities with respect to or resulting from
any failure or delay in paying Federal and state stamp and other transfer taxes,
if any, which may be payable or determined to be payable in connection with the
original issuance or sale to such U.S. Underwriter of the U.S. Firm Shares and
Option Shares.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents, warrants and covenants to each U.S. Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 33-_____) on Form S-3 relating to the
Shares, including
8
<PAGE>
a preliminary prospectus and such amendments to such registration statement as
may have been required to the date of this Agreement, has been prepared by the
Company under the provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. The registration statement
contains forms of two preliminary prospectuses to be used in connection with the
offering and sale of the Shares: a United States preliminary prospectus (the
"United States Preliminary Prospectus") relating to the U.S. Shares and an
international preliminary prospectus (the "International Preliminary
Prospectus"; the United States Preliminary Prospectus and the International
Preliminary Prospectus are referred to collectively herein as the "preliminary
prospectus") relating to the International Shares. The International
Preliminary Prospectus is identical to the United States Preliminary Prospectus,
except for differences in the outside front cover page, the back cover page and
the text of the section headed "Underwriting" and except for the inclusion in
the International Preliminary Prospectus of a section headed "Certain United
States Tax Consequences to Non-United States Holders." The term "preliminary
prospectus" as used herein means a preliminary prospectus as contemplated by
Rule 430
9
<PAGE>
or Rule 430A ("Rule 430A") of the Rules and Regulations included at any time as
part of the registration statement. Copies of such registration statement and
amendments have been delivered to the Representatives and the Managers, copies
of each related United States Preliminary Prospectus have been delivered to the
Representatives of the U.S. Underwriters and copies of each related
International Preliminary Prospectus have been delivered to the Managers. If
such registration statement has not become effective, a further amendment to
such registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective will be filed promptly by
the Company with the Commission. If such registration statement has become
effective, a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A will be filed by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations promptly
after execution and delivery of the U.S. Price Determination Agreement. The
term "Registration Statement" means the registration statement as amended at
the time it becomes or became effective (the "Effective Date"), including
financial statements and all exhibits and any information deemed to be included
by Rule 430A. The term "Prospectus" means, collectively, (i) a prospectus
relating to the U.S. Shares (the "United States Prospectus") and (ii) a
prospectus relating to the
10
<PAGE>
International Shares (the "International Prospectus"), in the respective forms
they are first filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or, if no such filing is required, the forms of final
prospectuses included in the Registration Statement at the Effective Date. Any
reference herein to the Registration Statement, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), on or before the Effective Date or the date of such preliminary
prospectus or the Prospectus, as the case may be. Any reference herein to the
terms "amend," "amendment" or "supplement" with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to refer
to and include the filing of any document under the Exchange Act after the
Effective Date, or the date of any preliminary prospectus or the Prospectus, as
the case may be, and deemed to be incorporated therein by reference.
(b) On the Effective Date, the date the Prospectus is first filed with
the Commission pursuant to Rule 424(b) (if required), at all times subsequent to
and including the Closing Date and, if later, the Option Closing Date and when
any post-effective amendment to the Registration Statement becomes effective or
any amendment or supplement
11
<PAGE>
to the Prospectus is filed with the Commission, the Registration Statement and
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment or supplement thereto), including the
financial statements included or incorporated by reference in the Prospectus,
did or will comply with all applicable provisions of the Act, the Exchange Act,
the rules and regulations thereunder (the "Exchange Act Rules and Regulations")
and the Rules and Regulations and will contain all statements required to be
stated therein in accordance with the Act, the Exchange Act, the Exchange Act
Rules and Regulations and the Rules and Regulations. On the Effective Date and
when any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement or any such amendment did or
will contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. At the Effective Date, the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission and at
the Closing Date and, if later, the Option Closing Date, the Prospectus did not
or will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
representations
12
<PAGE>
and warranties in this Section 3(b) do not apply to any statements or omissions
made in reliance on and in conformity with information relating to any U.S.
Underwriter or International Underwriter furnished in writing to the Company by
the Representatives or the Managers specifically for inclusion in the
Registration Statement or Prospectus or any amendment or supplement thereto.
For all purposes of this Agreement, the amounts of the selling concession and
reallowance set forth in the Prospectus constitute the only information relating
to any U.S. Underwriter or International Underwriter furnished in writing to the
Company by the Representatives or the Managers specifically for inclusion in the
United States Preliminary Prospectus, the Registration Statement or the United
States Prospectus. The Company has not distributed any offering material in
connection with the offering or sale of the Shares other than the Registration
Statement, the preliminary prospectus, the Prospectus or any other materials, if
any, permitted by the Act.
(c) The documents which are incorporated by reference in the
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they become effective or were filed with the
Commission, as the case may be, complied in all material respects with the
requirements of the Act or the Exchange Act, as applicable, the Exchange Act
Rules and Regulations
13
<PAGE>
and the Rules and Regulations; and any documents so filed and incorporated by
reference subsequent to the Effective Date shall, when they are filed with the
Commission, conform in all material respects with the requirements of the Act
and the Exchange Act, as applicable, the Exchange Act Rules and Regulations and
the Rules and Regulations.
(d) The Company has no subsidiaries (as defined in the Rules and
Regulations). The Company is, and at the Closing Date will be, a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. The Company has, and at the Closing Date will have, full
power and authority to conduct all the activities conducted by it, to own or
lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company is, and
at the Closing Date will be, duly licensed or qualified to do business and in
good standing as a foreign corporation in all jurisdictions in which the nature
of the activities conducted by it or the character of the assets owned or leased
by it makes such licensing or qualification necessary. The Company does not
own, and at the Closing Date will not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association or
other entity. Complete and correct copies of the certificate of
14
<PAGE>
incorporation and of the by-laws of the Company and all amendments thereto have
been delivered to the Representatives and the Managers, and no changes therein
will be made subsequent to the date hereof and prior to the Closing Date or, if
later, the Option Closing Date.
(e) The outstanding shares of Common Stock have been, and the Shares
to be issued and sold by the Company upon such issuance will be, duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive or similar right. The description of the Common Stock in the
Registration Statement and the Prospectus is, and at the Closing Date will be,
complete and accurate in all respects. Except as set forth in the Prospectus,
the Company does not have outstanding, and at the Closing Date will not have
outstanding, any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or any contracts or
commitments to issue or sell, any shares of Common Stock, or any such warrants,
convertible securities or obligations.
(f) The financial statements and schedules included or incorporated by
reference in the Registration Statement or the Prospectus present fairly the
financial condition of the Company as of the respective dates thereof and the
results of operations and cash flows of the Company for the respective periods
covered thereby, all in conformity with generally accepted accounting principles
15
<PAGE>
applied on a consistent basis throughout the entire period involved, except as
otherwise disclosed in the Prospectus. No other financial statements or
schedules of the Company are required by the Act, the Exchange Act or the Rules
and Regulations to be included in the Registration Statement or the Prospectus.
Price Waterhouse LLP (the "Accountants") who have reported on such financial
statements and schedules, are independent accountants with respect to the
Company as required by the Act and the Rules and Regulations. The statements
included in the Registration Statement with respect to the Accountants pursuant
to Rule 509 of Regulation S-K of the Rules and Regulations are true and correct
in all material respects.
(g) The Company maintains a system of internal accountings control
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
16
<PAGE>
(h) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus and prior to the Closing Date,
except as set forth in or contemplated by the Registration Statement and the
Prospectus, (i) there has not been and will not have been any change in the
capitalization of the Company, or in the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company, arising for any reason whatsoever, (ii) the Company has not incurred
nor will it incur any material liabilities or obligations, direct or contingent,
nor has it entered into nor will it enter into any material transactions other
than pursuant to this Agreement and the transactions referred to herein and
(iii) the Company has not and will not have paid or declared any dividends or
other distributions of any kind on any class of its capital stock.
(i) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(j) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or threatened
against or affecting the Company or any of its officers in their capacity as
such, before or by any Federal or state court, commission,
17
<PAGE>
regulatory body, administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding might materially and
adversely affect the Company or its business, properties, business prospects,
condition (financial or otherwise) or results of operations.
(k) The Company has, and at the Closing Date will have, (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as contemplated in the
Prospectus, (ii) complied in all respects with all laws, regulations and orders
applicable to it or its business and (iii) performed all its obligations
required to be performed by it, and is not, and at the Closing Date will not be,
in default, under any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement, lease, contract or
other agreement or instrument (collectively, a "contract or other agreement") to
which it is a party or by which its property is bound or affected. To the best
knowledge of the Company, no other party under any contract or other agreement
to which it is a party is in default in any respect thereunder. The Company is
not, nor at the Closing Date will it be, in violation of any provision of its
certificate of incorporation or by-laws.
(l) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with
18
<PAGE>
the authorization, issuance, transfer, sale or delivery of the Shares by the
Company, in connection with the execution, delivery and performance of this
Agreement by the Company or in connection with the taking by the Company of any
action contemplated hereby and in the International Underwriting Agreement,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-laws
and rules of the National Association of Securities Dealers, Inc. (the "NASD")
in connection with the purchase and distribution by the U.S. Underwriters of the
U.S. Shares to be sold by the Company.
(m) The Company has full corporate power and authority to enter into
this Agreement and the International Underwriting Agreement. Each of this
Agreement and the International Underwriting Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company and is enforceable against the Company in accordance
with the terms hereof and thereof. The performance of this Agreement and the
International Underwriting Agreement, the consummation of the transactions
contemplated hereby and thereby and the application of the net proceeds from the
offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds" will not result in the creation
or imposition of any lien, charge or
19
<PAGE>
encumbrance upon any of the assets of the Company pursuant to the terms or
provisions of, or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or give any other party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the certificate of incorporation or by-laws of the Company,
any contract or other agreement to which the Company is a party or by which the
Company or any of its properties is bound or affected, or violate or conflict
with any judgment, ruling, decree, order, statute, rule or regulation of any
court or other governmental agency or body applicable to the business or
properties of the Company.
(n) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The Company has
valid, subsisting and enforceable leases for the properties described in the
Prospectus as leased by it, with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
properties by the Company.
(o) There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to
20
<PAGE>
the Registration Statement which is not described or filed as required. All
such contracts to which the Company is a party have been duly authorized,
executed and delivered by the Company, constitute valid and binding agreements
of the Company and are enforceable against the Company in accordance with the
terms thereof.
(p) No statement, representation, warranty or covenant made by the
Company in this Agreement or in the International Underwriting Agreement or made
in any certificate or document required by this Agreement or the International
Underwriting Agreement to be delivered to the Representatives or the Managers
was or will be, when made, inaccurate, untrue or incorrect.
(q) Neither the Company nor any of its directors, officers or
controlling persons has taken, directly or indirectly, any action intended, or
which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or which has constituted, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
(r) No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the
Registration Statement.
(s) The Shares are eligible for quotation on the National Association
of Securities Dealers Automated Quotation System National Market.
21
<PAGE>
(t) The Company is not involved in any material labor dispute nor, to
the knowledge of the Company, is any such dispute threatened.
(u) the Company owns, or possesses adequate rights to use, (i) all
patents, patent rights, trademarks, service marks, trade names and copyrights
described in the Prospectus as owned or used by it or that are necessary for the
material conduct of its business and activities as described in the Prospectus
and (ii) all inventions, trade secrets, know-how and proprietary techniques,
including processes and substances, described in the Prospectus as owned or used
by it or which are necessary for the material conduct of its business and
activities. The Company has not received any written notice (or oral notice
delivered to any executive officer of the Company who is named in the
Prospectus) of infringement of or conflict with asserted rights of others with
respect to any patents, patent rights, inventions, trade secrets, know-how or
proprietary techniques, including processes and substances, trademarks, service
marks, trade names or copyrights of others, which infringement or conflict could
reasonably be expected to have a material adverse effect on the business,
properties, business prospects, condition (financial or otherwise) or results of
operations of the Company.
(v) Except as disclosed in the Registration Statement or the
Prospectus, the Company maintains insurance
22
<PAGE>
of the types and in amounts generally deemed adequate for its business and
activities and consistent with insurance coverage maintained by similar
companies and businesses, all of which insurance is in full force and effect.
(w) The Company has not received any communication (whether written or
oral), or otherwise obtained knowledge, relating to termination or threatened
termination, modification or threatened modification or breach or threatened
breach, which have or which may have a material adverse effect on the Company,
of any employment, confidentiality or trade-secret, consulting, licensing,
collaboration, marketing, research and development or any similar agreement.
The Company owns, or is licensed or otherwise has the full exclusive right to
use, all material trademarks and trade names which are used in or necessary for
the conduct of its business and activities as described in the Prospectus. No
claims have been asserted by any person to the use of any such trademarks or
trade names or challenging or questioning the validity or effectiveness of any
such trademark or trade name. The use, in connection with the business and
operations of the Company of such trademarks and trade names does not, to the
Company's knowledge, infringe on the rights of any person.
(x) Neither the Company nor, to the Company's knowledge, any employee
or agent of the Company has made any payment of funds of the Company or received
or
23
<PAGE>
retained any funds in violation of any law, rule or regulation or of a character
required to be disclosed in the Prospectus.
(y) The Company has complied, and until the completion of the
distribution of the Shares will comply, with all of the provisions of
(including, without limitation, filing all forms required by) Section 517.075
of the Florida Securities and Investor Protection Act and regulation 3E-900.001
issued thereunder with respect to the offering and sale of the Shares.
(z) The Company is not and has never been a "United States real
property holding corporation" as defined in section 897(c)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury Department
regulations promulgated thereunder.
4. Agreements of the Company. The Company agrees with the several U.S.
-------------------------
Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by a U.S. Underwriter,
International Underwriter or dealer, file any amendment or supplement to the
Registration Statement or the Prospectus, unless a copy thereof shall first have
been submitted to the Representatives and the Managers within a reasonable
period of time prior to the filing thereof and the Representatives
24
<PAGE>
and the Managers shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives and the
Managers promptly, and will confirm such advice in writing, (1) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (2) of any request by the Commission for
amendments supplements to the Registration Statement or the Prospectus or for
additional information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose or the threat thereof, (4) of the happening of
any event during the period mentioned in the second sentence of Section 4(e)
that in the judgment of the Company makes any statement made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (5) of receipt by the Company or any representative or attorney of the
Company of any other communication from the Commission relating to the Company,
the Registration Statement, any preliminary prospectus or the Prospectus. If at
any time the Commission shall issue any order suspending the effectiveness of
the
25
<PAGE>
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company
has omitted any information from the Registration Statement pursuant to Rule
430A, the Company will use its best efforts to comply with the provisions of and
make all requisite filings with the Commission pursuant to said Rule 430A and to
notify the Representatives and the Managers promptly of all such filings.
(c) The Company will furnish to the Representatives and the Managers,
without charge, two signed copies of the Registration Statement and of any post-
effective amendment thereto, including financial statements and schedules, and
all exhibits thereto (including any document filed under the Exchange Act and
deemed to be incorporated by reference into the Prospectus), and will furnish to
the Representatives and the Managers, without charge, for transmittal to each of
the other U.S. Underwriters and International Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
26
<PAGE>
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver (i) to each of the U.S. Underwriters, without charge, as
many copies of the United States Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request and (ii) to each of the
International Underwriters, without charge, as many copies of the International
Prospectus or any amendment or supplement thereto as the Managers may reasonably
request. The Company consents to the use of the Prospectus or any amendment or
supplement thereto by the several U.S. Underwriters and International
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for any period of time
thereafter during which the Prospectus is required by law to be delivered in
connection therewith. If during such period of time any event shall occur which
in the judgment of the Company or counsel to the U.S. Underwriters or counsel to
the International Underwriters should be set forth in the Prospectus in order to
make any statement therein, in the light of the circumstances under which it was
made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with law, the Company will forthwith prepare and duly file
with the Commission an appropriate supplement or amendment thereto, and will
deliver to each of the U.S. Underwriters, without charge, such number of copies
of such supplement or
27
<PAGE>
amendment to the U.S. Prospectus as the Representatives may reasonably request
and will deliver to each of the Managers, without charge, such number of copies
of such supplement or amendment to the International Prospectus as the Managers
may reasonably request. The Company shall not file any document under the
Exchange Act before the termination of the offering of the Shares by the U.S.
Underwriters and the Managers if such document would be deemed to be
incorporated by reference into the Prospectus which is not approved by the
Representatives and the Managers after reasonable notice thereof.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and the Managers and counsel to the
Underwriters and the Managers in connection with the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions as the Representa tives and the Managers may request,
including, without limitation, the provinces and territories of Canada and other
jurisdictions outside of the United States; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
28
<PAGE>
(g) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives, the Managers and each other
U.S. Underwriter or International Underwriter who may so request copies of such
financial statements and other periodic and special reports as the Company may
from time to time distribute generally to the holders of any class of its
capital stock, and will furnish to the Representatives, the Managers and each
other U.S. Underwriter or International Underwriter who may so request a copy of
each annual or other report it shall be required to file with the Commission.
(h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the fifteenth full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after the
Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by this Agreement or
the International Underwriting Agreement are consummated or this Agreement or
the International Underwriting Agreement is terminated, the Company
29
<PAGE>
will pay, or reimburse if paid by the Representatives or the Managers, all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement and the International Underwriting Agreement, including but not
limited to costs and expenses of or relating to (1) the preparation, printing
and filing of the Registration Statement and exhibits to it, each preliminary
prospectus, Prospectus and any amendment or supplement to the Registration
Statement or Prospectus, (2) the preparation and delivery of certificates
representing the Shares, (3) the printing of this Agreement, the Agreement
Between U.S. Underwriters and International Underwriters, the International
Underwriting Agreement, the Agreement Among Underwriters, the Agreement among
International Underwriters, any Dealer Agreements and any Underwriters'
Questionnaire, (4) furnishing (including costs of shipping, mailing and courier)
such copies of the Registration Statement, the Prospectus and any preliminary
prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Shares by the U.S.
Underwriters, the International Underwriters or by dealers to whom Shares may be
sold, (5) the quotation of the Shares on the National Association of Securities
Dealers Automated Quotation System National Market, (6) any filings required to
be made by the U.S. Underwriters and the International Underwriters with the
NASD, and the fees,
30
<PAGE>
disbursements and other charges of counsel for the U.S. Underwriters and
International Underwriters in connection therewith, (7) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 5(f), including the
fees, disbursements and other charges of counsel (including counsel in Canadian
provinces and territories, if applicable) to the U.S. Underwriters and
International Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel
to the Company, (9) the transfer agent for the Shares and (10) the Accountants.
(j) If this Agreement or the International Underwriting Agreement
shall be terminated by the Company pursuant to any of the provisions hereof or
thereof (otherwise than pursuant to Section 7 hereof and Section 8 thereof) or
if for any reason the Company shall be unable to perform its obligations
hereunder or thereunder, the Company will reimburse the several U.S.
Underwriters and International Underwriters for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the U.S.
Underwriters and International Underwriters) reasonably incurred by them in
connection herewith.
31
<PAGE>
(k) The Company will not at any time, directly or indirectly, take any
action intended, or which might reasonably be expected, to cause or result in,
or which will constitute, stabilization of the price of the shares of Common
Stock to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(m) During the period of 180 days commencing at the Closing Date, the
Company will not, without the prior written consent of PaineWebber Incorporated,
grant options to purchase shares of Common Stock at a price less than the
initial public offering price.
(n) The Company will not, and will cause each of its executive
officers, directors and each beneficial owner of Common Stock named on Schedule
___ hereto to enter into agreements with the Representatives and the Managers in
the form set forth in Exhibit C to the effect that they will not, for a period
of 90 days after the commencement of the public offering of the Shares, without
the prior written consent of PaineWebber Incorporated, sell, contract to sell or
otherwise dispose of any shares of Common Stock or rights to acquire such shares
(other than
32
<PAGE>
pursuant to employee stock option plans or in connection with other employee
incentive compensation arrangements).
(o) The Company will (i) furnish to each U.S. Underwriter and
International Underwriter on the Closing Date a certification, as contemplated
by and in compliance with Treasury Department regulations section 1.897-2(h),
that, as of the Closing Date, the Shares are not United States real property
interests as defined in section 897(c)(1) of the Code, (ii) file such
certification with the Internal Revenue Service in the manner and within the
time period specified in Treasury Department regulations section 1.897-2(h) and
(iii) promptly after such filing, furnish to each U.S. Underwriter and
International Underwriter proof of such filing.
5. Conditions of the Obligations of the U.S. Underwriters. In addition
------------------------------------------------------
to the execution and delivery of the U.S. Price Determination Agreement, the
obligations of each U.S. Underwriter hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives and the Managers not later than 5:00
p.m., New York City time, on the date of this Agreement and the International
Underwriting Agreement or at such later date and time as shall be consented to
in writing by the Representatives and the Managers and all filings required by
33
<PAGE>
Rule 424 of the Rules and Regulations and Rule 430A shall have been made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of the
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities and (iv)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Representatives and the Managers and the Representatives and
the Managers do not object thereto in good faith, and the Representatives and
the Managers shall have received certificates, dated the Closing Date and the
Option Closing Date and signed by the Chief Executive Officer or the Chairman of
the Board of Directors of the Company and the Chief Financial Officer of the
Company (who may, as to proceedings threatened, rely upon the best of
34
<PAGE>
their information and belief), to the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, in each case other than as set forth in or
contemplated by the Registration Statement and the Prospectus and (ii) the
Company shall not have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in the
Registration Statement and the Prospectus, if in the judgment of the
Representatives any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the U.S. Underwriters and the
International Underwriters at the initial public offering price.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its
35
<PAGE>
officers or directors in their capacities as such, before or by any Federal,
state or local court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would materially and adversely affect
the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Shares, at the Option Closing Date
as if made at the Closing Date and, with respect to the Option Shares, at the
Option Closing Date, and all covenants and agreements contained herein and in
the International Underwriting Agreement to be performed on the part of the
Company and all conditions contained herein and in the International
Underwriting Agreement to be fulfilled or complied with by the Company at or
prior to the Closing Date and, with respect to the Option Shares, at or prior to
the Option Closing Date, shall have been duly performed, fulfilled or complied
with.
(f) The Representatives and the Managers shall have received opinions,
each dated the Closing Date and, with respect to the Option Shares, the Option
Closing Date, and satisfactory in form and substance to counsel for
36
<PAGE>
the U.S. Underwriters and International Underwriters, from Ferris & Britton,
counsel to the Company, and Gary E. Friedman, General Counsel of the Company, to
the effect set forth in Exhibit D and from _________, patent counsel to the
Company, to the effect set forth in Exhibit E.
(g) The Representatives and the Managers shall have received an
opinion, dated the Closing Date and the Option Closing Date, from Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to the U.S. Underwriters, with respect to
the Registration Statement, the Prospectus and this Agreement, which opinion
shall be satisfactory in all respects to the Representatives and the Managers.
(h) Concurrently with the execution and delivery of this Agreement and
the International Underwriting Agreement or, if the Company elects to rely on
Rule 430A, on the date of the United States Prospectus, the Accountants shall
have furnished to the Representatives and the Managers a letter, dated the date
of its delivery, addressed to the Representatives and the Managers and in form
and substance satisfactory to the Representatives and the Managers, confirming
that they are independent accountants with respect to the Company as required
by the Act and the Rules and Regulations and with respect to the financial and
other statistical and numerical information contained in the Registration
Statement or incorporated by reference therein. At the Closing Date and, as to
the Option Shares,
37
<PAGE>
the Option Closing Date, the Accountants shall have furnished to the
Representatives and the Managers a letter, dated the date of its delivery, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the letter from the Accountants, that nothing has come to their
attention during the period from the date of the letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior to
the Closing Date and the Option Closing Date, as the case may be, which would
require any change in their letter dated the date hereof or, if the Company
elects to rely on Rule 430A, on the date of the Prospectus, if it were required
to be dated and delivered at the Closing Date and the Option Closing Date.
(i) At the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to the Representatives and the Managers
an accurate certificate, dated the date of its delivery, signed by each of the
Chief Executive Officer and the Chief Financial Officer of the Company, in form
and substance satisfactory to the Representatives and the Managers, to the
effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed under
the Exchange Act and deemed to be incorporated by reference
38
<PAGE>
into the Prospectus) and (A) as of the date of such certificate, such documents
are true and correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not untrue or misleading and (B) since the Effective Date, no
event has occurred as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein not untrue or misleading
in any material respect and there has been no document required to be filed
under the Exchange Act and the Exchange Act Rules and Regulations that upon such
filing would be deemed to be incorporated by reference into the Prospectus that
has not been so filed.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the time
such certificate is dated, true and correct in all material respects.
(iii) Each of the covenants required to be performed by the Company
herein and in the International Underwriting Agreement on or prior to the date
of such certificate has been duly, timely and fully performed and each condition
herein required to be satisfied or fulfilled on or prior to the date of
39
<PAGE>
such certificate has been duly, timely and fully satisfied or fulfilled.
(j) On or prior to the Closing Date, the Representatives and the
Managers shall have received the executed agreements referred to in Section
4(n).
(k) The Shares shall be qualified for sale in such jurisdictions as
the Representatives and the Managers may reasonably request, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date or the Option Closing Date.
(l) Prior to the Closing Date, the Shares shall have been qualified
for quotation on the National Association of Securities Dealers' Automated
Quotation System National Market.
(m) The Company shall have furnished to the Representatives and the
Managers such certificates, in addition to those specifically mentioned herein,
as the Representatives or the Managers may have reasonably requested as to the
accuracy and completeness at the Closing Date and the Option Closing Date of any
statement in the Registration Statement or the Prospectus or any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus, as to the accuracy at the Closing Date and the Option Closing Date
of the representations and warranties of the Company herein and in the
40
<PAGE>
International Underwriting Agreement, as to the performance by the Company of
its obligations hereunder and under the International Underwriting Agreement, or
as to the fulfillment of the conditions concurrent and precedent to the
obligations hereunder and under the International Underwriting Agreement of the
Representatives and the Managers.
(n) The closing of the purchase and sale of the International Shares
pursuant to the International Underwriting Agreement shall occur concurrently
with the closing of the purchase and sale of the U.S. Shares hereunder.
6. Indemnification.
---------------
(a) The Company will indemnify and hold harmless each U.S.
Underwriter, the directors, officers, employees and agents of each U.S.
Underwriter and each person, if any, who controls each U.S. Underwriter, within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, liabilities, expenses and damages (including
any and all investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as
41
<PAGE>
such losses, claims, liabilities, expenses or damages arise out of or are based
on any untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus, the Registration Statement or the Prospectus or
any amendment or supplement to the Registration Statement or the Prospectus, or
in any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading, provided that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the U.S. Shares in the public offering to any person by a U.S.
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any U.S. Underwriter furnished in writing to the Company by the
Representatives on behalf of any U.S. Underwriter expressly for inclusion in the
Registration Statement, the United States Preliminary Prospectus or the United
States Prospectus. This indemnity agreement will be in addition to any
liability that the Company might otherwise have.
(b) Each U.S. Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or
42
<PAGE>
Section 20 of the Exchange Act, each director of the Company and each officer of
the Company who signs the Registration Statement to the same extent as the
foregoing indemnity from the Company to each U.S. Underwriter, but only insofar
as losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any U.S. Underwriter
furnished in writing to the Company by the Representatives on behalf of such
U.S. Underwriter expressly for use in the Registration Statement, the United
States Preliminary Prospectus or the United States Prospectus. This indemnity
will be in addition to any liability that each U.S. Underwriter might otherwise
have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 6 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or
43
<PAGE>
defenses by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement,
the indemnifying party will be entitled to participate in and, to the extent
that it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly notified, to assume
the defense of the action, with counsel satisfactory to the indemnified party,
and after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on
44
<PAGE>
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All
such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld). No
indemnifying party shall, without the prior written consent of each indemnified
party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 6 (whether or not any
45
<PAGE>
indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the U.S. Underwriters,
the Company and the U.S. Underwriters will contribute to the total losses,
claims, liabilities, expenses and damages (including any investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted, but
after deducting any contribution received by the Company from persons other than
the U.S. Underwriters, such as persons who control the Company within the
meaning of the Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for contribution)
to which the Company and any one or more of the U.S. Underwriters may be subject
in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the U.S. Underwriters on the other.
The relative benefits received by the Company on the one hand and the U.S.
46
<PAGE>
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
U.S. Underwriters, in each case as set forth in the table on the cover page of
the United States Prospectus. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the U.S. Underwriters, on
the other, with respect to the statements or omissions which resulted in such
loss, claim, liability, expense or damage, or action in respect thereof, as well
as any other relevant equitable considerations with respect to such offering.
Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Representatives on behalf of the U.S. Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the U.S. Underwriters
agree that it would not be just and equitable if contributions pursuant to this
Section 6(d)
47
<PAGE>
were to be determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, liability, expense or damage, or action in respect thereof,
referred to above in this Section 6(d) shall be deemed to include, for purpose
of this Section 6(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Not withstanding the provisions of this Section 6(d), no U.S.
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to contribute as provided
in this Section 6(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 6(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in
48
<PAGE>
each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section 6(d), will notify any such party or parties from whom contribution may
be sought, but the omission so to notify will not relieve the party or parties
from whom contribution may be sought from any other obligation it or they may
have under this Section 6(d). No party will be liable for contribution with
respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the U.S. Underwriters, (ii)
acceptance of any of the U.S. Shares and payment therefor or (iii) any
termination of this Agreement.
7. Termination. The obligations of the several U.S. Underwriters under
-----------
this Agreement may be terminated at any time on or prior to the Closing Date
(or, with respect to the Option Shares, on or prior to the Option Closing Date),
by notice to the Company from the Representatives, without liability on the part
of any U.S. Underwriter to the
49
<PAGE>
Company, if, prior to delivery and payment for the U.S. Shares (or the Option
Shares, as the case may be), in the sole judgment of the Representatives, (i)
trading in any of the equity securities of the Company shall have been suspended
by the Commission, by an exchange that lists such securities or by the National
Association of Securities Dealers Automated Quotation System National Market,
(ii) trading in securities generally on the New York Stock Exchange shall have
been suspended or limited or minimum or maximum prices shall have been generally
established on such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon trading
in securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (iii) a general banking moratorium shall
have been declared by either Federal or New York State authorities or (iv) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred, the effect of any of which is such as to make it, in the sole judgment
of the Representatives, impracticable or inadvisable to market the Shares on the
terms and in the manner contemplated by the Prospectus.
50
<PAGE>
8. Substitution of Underwriters. If any one or more of the U.S.
----------------------------
Underwriters shall fail or refuse to purchase any of the U.S. Firm Shares which
it or they have agreed to purchase hereunder, and the aggregate number of U.S.
Firm Shares which such defaulting U.S. Underwriter or U.S. Underwriters agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
number of U.S. Firm Shares, the other U.S. Underwriters shall be obligated,
severally, to purchase the U.S. Firm Shares which such defaulting U.S.
Underwriter or U.S. Underwriters agreed but failed or refused to purchase, in
the proportions which the number of U.S. Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of U.S. Firm Shares which all such non-defaulting U.S. Underwriters have
so agreed to purchase, or in such other proportions as the Representatives may
specify; provided that in no event shall the maximum number of U.S. Firm Shares
which any U.S. Underwriter has become obligated to purchase pursuant to Section
1 be increased pursuant to this Section 8 by more than one-ninth of the number
of U.S. Firm Shares agreed to be purchased by such U.S. Underwriter without the
prior written consent of such U.S. Underwriter. If any U.S. Underwriter or U.S.
Underwriters shall fail or refuse to purchase any U.S. Firm Shares and the
aggregate number of U.S. Firm Shares which such defaulting U.S. Underwriter or
U.S. Underwriters agreed
51
<PAGE>
but failed or refused to purchase exceeds one-tenth of the aggregate number of
the U.S. Firm Shares and arrangements satisfactory to the Representatives and
the Company for the purchase of such U.S. Firm Shares are not made within 48
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting U.S. Underwriter or the Company for the purchase or
sale of any U.S. Shares under this Agreement. In any such case either the
Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the United States
Prospectus or in any other documents or arrangements may be effected. Any
action taken pursuant to this Section 8 shall not relieve any defaulting U.S.
Underwriter from liability in respect of any default of such U.S. Underwriter
under this Agreement.
9. U.S. Distribution. Each U.S. Underwriter represents and agrees
-----------------
that, except for (x) sales between the U.S. Underwriters and the International
Underwriters pursuant to Section 1 of the Agreement Between U.S. and
International Underwriters and (y) stabilization transactions contemplated in
Section 3 thereof conducted as part of the distribution of the Shares, (a) it is
not purchasing any of the U.S. Shares for the account of anyone other than a
United States or Canadian Person and (b) it has not offered
52
<PAGE>
or sold, and will not offer or sell, directly or indirectly, any of the U.S.
Shares or distribute any prospectus relating to the U.S. Shares outside the
United States or Canada to anyone other than a United States or Canadian Person,
and any dealer to whom it may sell any of the U.S. Shares will represent that it
is not purchasing any of the U.S. Shares for the account of anyone other than a
United States or Canadian Person and will agree that it will not offer or resell
such U.S. Shares directly or indirectly outside the United States or Canada or
to anyone other than a United States or Canadian Person or to any other dealer
who does not so represent and agree.
The U.S. Underwriters further confirm that in determining their net
commitment for short account pursuant to Section 7 of the Amended and Restated
Master Agreement Among Underwriters dated as of June 11, 1984, there shall be
subtracted any Shares purchased for such U.S. Underwriter's account pursuant to
Section 1 of the Agreement Between U.S. and International Underwriters.
10. Miscellaneous. Notice given pursuant to any of the provisions of
-------------
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 10350
North Torrey Pines Road, La Jolla, California 92037, Attention: President, or
(b) if to the U.S. Underwriters, to the Representatives at the offices of
PaineWebber
53
<PAGE>
Incorporated, 1285 Avenue of the Americas, New York, New York 10019-6064,
Attention: Corporate Finance Department. Any such notice shall be effective
only upon receipt. Any notice under Section 7 or 8 may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
U.S. Underwriters and the Company and of the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and, except as set forth in the International Underwriting Agreement, no other
person shall acquire or have any right under or by virtue of this Agreement.
The term "successors and assigns" as used in this Agreement shall not include a
purchaser, as such purchaser, of U.S. Shares from any of the several U.S.
Underwriters.
Any action required or permitted to be taken by the Representatives under
this Agreement may be taken by them jointly or by PaineWebber Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
OF SUCH STATE. This Agreement may be signed in two or more counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
54
<PAGE>
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the U.S. Underwriters each hereby irrevocably waive any
right they may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or the transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any provision
hereof waived except by an instrument in writing signed by the Representatives
and the Company.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several U.S. Underwriters.
Very truly yours,
AGOURON PHARMACEUTICALS, INC.
By: ________________________
Title:
55
<PAGE>
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
ROBERTSON, STEPHENS & COMPANY, L.P.
Acting on behalf of themselves
and as the Representatives
of the other several U.S. Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: ________________________
Title:
ROBERTSON, STEPHENS & COMPANY, L.P.
By: ________________________
Title:
56
<PAGE>
EXHIBIT 1.2
400,000 Shares
AGOURON PHARMACEUTICALS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
(International Version)
September , 1995
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
ROBERTSON, STEPHENS & COMPANY, L.P.
As Managers of the several
International Underwriters
c/o PaineWebber International (U.K.) LTD.
1 Finsbury Avenue
London EC2M 2PA England
Dear Sirs:
Agouron Pharmaceuticals, Inc., a California corporation (the
"Company") proposes to sell an aggregate of 400,000 shares (the "International
Shares") of the Company's Common Stock, no par value (the "Common Stock"), to
you and to the several other International Underwriters named in Schedule I
hereto (collectively, the "International Underwriters"), for whom you are acting
as managers (the "Managers"), in connection with the offering and sale of such
shares of Common Stock outside the United States and Canada to persons other
than United States and Canadian Persons (as hereinafter defined).
It is understood that the Company is concurrently entering into an
agreement (the "U.S. Underwriting
1
<PAGE>
Agreement") providing for the sale by the Company of an aggregate of 1,900,000
shares of Common Stock, including the over-allotment option described therein
(the "U.S. Shares"), through arrangements with certain underwriters in the
United States (the "U.S. Underwriters"), for whom PaineWebber Incorporated and
Robertson, Stephens & Company, L.P. are acting as representatives, in connection
with the offering and sale of such shares of Common Stock in the United States
to United States Persons. As used herein, "United States Person" shall mean any
individual who is resident in the United States or any corporation, pension,
profit-sharing or other trust or other entity organized under or governed by the
laws of the United States or of any political subdivision thereof (other than
the foreign branch of the United States Person), and shall include any United
States branch of a person other than a United States Person; and "United States"
shall mean the United States of America, its territories, possessions and all
areas subject to its jurisdiction. This Agreement incorporates by reference
certain provisions from the U.S. Underwriting Agreement (including the
definitions of terms used therein which are also used herein) and, in general,
all such provisions (and defined terms) shall be applied mutatis mutandis as if
----------------
the incorporated provisions were set forth in full herein having regard to their
context in this Agreement as opposed to the U.S. Underwriting Agreement.
The U.S. Underwriters have entered into an agreement
2
<PAGE>
with the International Underwriters (the "Agreement Between U.S. Underwriters
and International Underwriters") contemplating the coordination of certain
transactions between the U.S. Underwriters and the International Underwriters
and any such transactions between the U.S. Underwriters and the International
Underwriters shall be governed by the Agreement Between U.S. Underwriters and
International Underwriters and shall not be governed by the terms of this
Agreement.
The initial public offering price per share for the International
Shares and the purchase price per share for the International Shares to be paid
by the several International Underwriters shall be agreed upon by the Company
and the Managers, acting on behalf of the several International Underwriters,
and such agreement shall be set forth in a separate written instrument
substantially in the form of Exhibit A hereto (the "International Price
Determination Agreement.") The International Price Determination Agreement may
take the form of an exchange of any standard form of written telecommunication
among the Company and the Managers and shall specify such applicable information
as is indicated in Exhibit A hereto. The offering of the International Shares
will be governed by this Agreement, as supplemented by the International Price
Determination Agreement. From and after the date of the execution and delivery
of the International Price Determination Agreement, this Agreement shall be
deemed to
3
<PAGE>
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include the International Price Determination Agreement. The initial public
offering price per share and the purchase price per share for the U.S. Shares to
be paid by the several U.S. Underwriters pursuant to the U.S. Underwriting
Agreement shall be set forth in a separate agreement (the "U.S. Price Deter-
mination Agreement"), the form of which is attached to the U.S. Underwriting
Agreement. From and after the date of the execution and delivery of the U.S.
Price Determination Agreement, unless the context otherwise indicates, all
references contained herein to the "U.S. Underwriting Agreement" shall be
deemed to include the U.S. Price Determination Agreement. The purchase price
per share for the U.S. Shares to be paid by the several U.S. Underwriters shall
be identical to the purchase price per share for the International Shares to be
paid by the several International Underwriters hereunder.
The Company confirms as follows its agreement with the Managers and
the several other International Under writers.
1. Agreement to Sell and Purchase.
------------------------------
(a) On the basis of the respective representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, (i) the Company agrees to sell to the
4
<PAGE>
several International Underwriters and (ii) each of the International
Underwriters, severally and not jointly, agrees to purchase from the Company at
the purchase price per share for the International Shares to be agreed upon by
the Managers and the Company in accordance with Section 1(c) or 1(d) and set
forth in the International Price Determination Agreement, the number of
International Shares set forth opposite the name of such International
Underwriter in Schedule I, plus such additional number of International Shares
which such International Underwriter may become obligated to purchase pursuant
to Section 8 hereof. If the Company elects to rely on Rule 430A (as hereinafter
defined), Schedule I may be attached to the International Price Determination
Agreement.
(b) If the Company has elected not to rely on Rule 430A, the initial
public offering price per share for the International Shares and the purchase
price per share for the International Shares to be paid by the several
International Underwriters shall be agreed upon and set forth in the
International Price Determination Agreement, which shall be dated the date
hereof, and an amendment to the Registration Statement (as hereinafter defined)
containing such per share price information shall be filed before the
Registration Statement becomes effective.
(c) If the Company has elected to rely on Rule 430A, the initial
public offering price per share for the International Shares and the purchase
price per share
5
<PAGE>
for the International Shares to be paid by the several International
Underwriters shall be agreed upon and set forth in the International Price
Determination Agreement. In the event that the International Price Determination
Agreement has not been executed by the close of business on the fourteenth
business day following the date on which the Registration Statement becomes
effective, this Agreement shall terminate forthwith, without liability of any
party to any other party except that Section 7 shall remain in effect.
2. Delivery and Payment. Delivery of the International Shares shall
--------------------
be made to the Managers for the accounts of the International Underwriters
against payment of the purchase price by credit to the account of the Company
with the Depository Trust Company. Such payment will be made at 10:00 a.m., New
York City time, on the fourth business day following the date of this Agreement
or, if the Company has elected to rely on Rule 430A, the fourth business day
after the date on which the first bona fide offering of the International Shares
is made by the International Underwriters, or at such time on such other date,
not later than seven business days after the date of this Agreement, as may be
agreed upon by the Company and the Managers (such date is hereinafter referred
to as the "Closing Date").
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the
6
<PAGE>
International Shares by the Company to the respective International Underwriters
shall be borne by the Company. The Company will pay and save each International
Underwriter and any subsequent holder of the International Shares harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such International Underwriter of the International Shares.
3. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
makes to each International Underwriter the same representations and warranties
as are set forth in Section 3 of the U.S. Underwriting Agreement, which Section
is hereby incorporated herein by reference.
4. Agreements of the Company. The Company hereby makes the same
-------------------------
agreements with the several International Underwriters as the Company makes in
Section 4 of the U.S. Underwriting Agreement, which Section is hereby
incorporated herein by reference.
5. Conditions of the Obligations of the International Underwriters.
---------------------------------------------------------------
The obligations of each International Underwriter hereunder are subject to each
of the conditions set forth in Section 5 of the U.S. Underwriting Agreement,
which Section is hereby incorporated herein by reference, and the additional
condition that the closing of the purchase and sale of the U.S. Shares pursuant
7
<PAGE>
to the U.S. Underwriting Agreement shall occur concurrently with the closing of
the purchase and sale of the International Shares hereunder.
6. Indemnification.
---------------
(a) The Company will indemnify and hold harmless each International
Underwriter, the directors, officers, employees and agents of each International
Underwriter and each person, if any, who controls each International Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
from and against any and all losses, claims, liabilities, expenses and damages
(including any and all investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or in
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to
8
<PAGE>
make the statements in it not misleading, provided that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the International Shares in the public offering to any person
by an International Underwriter and is based on an untrue statement or omission
or alleged untrue statement or omission made in reliance on and in conformity
with information relating to any International Underwriter furnished in writing
to the Company by the Managers on behalf of any International Underwriter
expressly for inclusion in the Registration Statement, the International
Preliminary Prospectus or the International Prospectus. For all purposes of
this Agreement, the amounts of the selling concession and the reallowance set
forth in the Prospectus constitute the only information relating to any
International Underwriter furnished in writing to the Company by the Managers on
behalf of the International Underwriters expressly for inclusion in the
Registration Statement, the International Preliminary Prospectus or the
International Prospectus. This indemnity agreement will be in addition to any
liability that the Company might otherwise have.
(b) Each International Underwriter will indemnify and hold harmless
the Company and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company
9
<PAGE>
who signs the Registration Statement to the same extent as the foregoing
indemnity from the Company to each International Underwriter, but only insofar
as losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any International
Underwriter furnished in writing to the Company by the Managers on behalf of
such International Underwriter expressly for use in the Registration Statement,
the International Preliminary Prospectus or the International Prospectus. This
indemnity will be in addition to any liability that each International
Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 6 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the
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indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other indemnifying
party similarly notified, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based on advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to
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direct the defense of such action on behalf of the indemnified party) or (4)
the indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm admitted to practice in such jurisdiction at any one time for
all such indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 6 (whether or not any
indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
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(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the International
Underwriters, the Company and the International Underwriters will contribute to
the total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting any contribution received by the Company
from persons other than the International Underwriters, such as persons who
control the Company within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and any one or more of the
International Underwriters may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Underwriters on the other. The relative benefits
received by the Company on the one hand and the International Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the International
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Underwriters, in each case as set forth in the table on the cover page of the
International Prospectus. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the International Under-
writers, on the other, with respect to the statements or omissions which
resulted in such loss, claim, liability, expense or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Managers on behalf of the International Underwriters, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
International Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the International Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified
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party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 6(d) shall be deemed to
include, for purposes of this Section 6(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), no International Underwriter shall be required to contribute any
amount in excess of the underwriting discounts received by it and no person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The International Underwriters'
obligations to contribute as provided in this Section 6(d) are several in
proportion to their respective underwriting obligations and not joint. For
purposes of this Section 6(d), any person who controls a party to this Agreement
within the meaning of the Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration Statement
will have the same rights to contribution as the Company, subject in each case
to the provisions hereof. Any party entitled to contribution, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim for contribution may be made under this Section 6(d), will notify
any such party or parties from whom contribution may be sought, but the omission
so to
15
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notify will not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have under this Section 6(d). No
party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in, or
incorporated by reference into, this Agreement shall remain operative and in
full force and effect regardless of (i) any investigation made by or on behalf
of the International Underwriters, (ii) acceptance of any of the International
Shares and payment therefor or (iii) any termination of this Agreement.
7. Termination. The obligations of the several International
-----------
Underwriters under this Agreement may be terminated at any time on or prior to
the Closing Date by notice to the Company from the Managers, without liability
on the part of any International Underwriter to the Company, if, prior to
delivery and payment for the International Shares, in the sole judgment of the
Managers, (i) trading in any of the equity securities of the Company shall have
been suspended by the Commission, by an exchange that lists the Shares or by the
National Association of Securities Dealers Automated Quotation System National
Market, (ii) trading in securities generally on the New York Stock Exchange
shall
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have been suspended or limited or minimum or maximum prices shall have been
generally established on such exchange, or additional material governmental
restrictions, not in force on the date of this Agreement, shall have been
imposed upon trading in securities generally by such exchange or by order of the
Commission or any court or other governmental authority, (iii) a general banking
moratorium shall have been declared by either Federal or New York State
authorities, (iv) a moratorium in foreign exchange trading by major
international banks shall have been declared or (v) any material adverse change
in the financial or securities markets or in political, financial or economic
conditions or any outbreak or material escalation of hostilities or declaration
by the United States of a national emergency or war or other calamity or crisis
shall have occurred, the effect of any of which is such as to make it, in the
sole judgment of the Representatives, impracticable or inadvisable to market the
Shares on the terms and in the manner contemplated by the Prospectus.
8. Substitution of Underwriters. If any one or more of the
----------------------------
International Underwriters shall fail or refuse to purchase any of the
International Shares which it or they have agreed to purchase hereunder, and the
aggregate number of International Shares which such defaulting International
Underwriter or International Underwriters agreed but failed or refused to
purchase is not more than one-tenth of the aggregate number of International
Shares, the other
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International Underwriters shall be obligated, severally, to purchase the
International Shares which such defaulting International Underwriter or
International Underwriters agreed but failed or refused to purchase, in the
proportions which the number of International Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of International Shares which all such non-defaulting International
Underwriters have so agreed to purchase, or in such other proportions as the
Managers may specify; provided that in no event shall the maximum number of
International Shares which any International Underwriter has become obligated to
purchase pursuant to Section 1 be increased pursuant to this Section 8 by more
than one-ninth of the number of International Shares agreed to be purchased by
such U.S. Underwriter without the prior written consent of such International
Underwriter. If any International Underwriter or International Underwriters
shall fail or refuse to purchase any International Shares and the aggregate
number of International Shares which such defaulting International Underwriter
or International Underwriters agreed but failed or refused to purchase exceeds
one-tenth of the aggregate number of the International Shares and arrangements
satisfactory to the Managers and the Company for the purchase of such
International Shares are not made within 48 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
International
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Underwriter or the Company for the purchase or sale of any International Shares
under this Agreement. In any such case either the Managers or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and in the International Prospectus or in any other documents or
arrangements may be effected. Any action taken pursuant to this Section 8 shall
not relieve any defaulting International Underwriter from liability in respect
of any default of such International Underwriter under this Agreement.
9. International Distribution. Each International Underwriter
--------------------------
represents and agrees that, except for (x) sales between the U.S. Underwriters
and the International Underwriters pursuant to Section 1 of the Agreement
between U.S. and International Underwriters and (y) stabilization transactions
contemplated in Section 3 thereof conducted as part of the distribution of the
Shares, (a) it is not purchasing any of the International Shares for the account
of any United States or Canadian Person and (b) it has not offered or sold, and
will not offer or sell, directly or indirectly, any of the International Shares
or distribute any prospectus relating to the International Shares in the United
States or Canada or to any United States or Canadian Person, and any dealer to
whom it may sell any of the International Shares will represent that it
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is not purchasing any of the International Shares for the account of any United
States or Canadian Person and will agree that it will not offer or resell such
International Shares directly or indirectly in the United States or Canada or to
any United States or Canadian Person or to any other dealer who does not so
represent and agree.
10. Miscellaneous. Notice given pursuant to any of the provisions of
-------------
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at the office of the Company, 10350
North Torrey Pines Road, La Jolla, California, Attention: President, or (b) if
to the International Underwriters, to the Managers at the offices of PaineWebber
International (U.K.) Ltd., 1 Finsbury Avenue, London EC2M 2PA England,
Attention: Corporate Finance Department. Any such notice shall be effective
only upon receipt. Any notice under Section 7 or 8 may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several International Underwriters and the Company and of the controlling
persons, directors and officers referred to in Section 6, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" as used
in this Agreement shall not include a purchaser, as such purchaser, of
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International Shares from any of the several International Underwriters.
Any action required or permitted to be taken by the Managers under
this Agreement may be taken by them jointly or by PaineWebber International
(U.K.) Ltd.]
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE.
This Agreement may be signed in two or more coun terparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the International Underwriters each hereby irrevocably
waive any right they may have to a trial by jury in respect of any claim based
upon or arising out of this Agreement or the transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by the
Managers and the Company.
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Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several International Underwriters.
Very truly yours,
AGOURON PHARMACEUTICALS, INC.
By:
---------------------------------
Title:
Confirmed as of the date first
above mentioned:
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
ROBERTSON, STEPHENS & COMPANY, L.P.
Acting on behalf of themselves
and as the Managers of the other
several International Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INTERNATIONAL (U.K.) LTD.
By:__________________________________
Title:
ROBERTSON, STEPHENS & COMPANY, L.P.
By:_________________________________
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated July 25, 1995 relating to
the financial statements of Agouron Pharmaceuticals, Inc., which appears in such
Prospectus. We also consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
July 25, 1995 appearing on page F-1 of Agouron Pharmaceuticals, Inc.'s Annual
Report on Form 10-K for the year ended June 30, 1995. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
Price Waterhouse LLP
San Diego, California
August 4, 1995
