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As filed with the Securities and Exchange Commission on July 31, 1996
Registration No. 333-08659
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under the
Securities Act of 1933
ADVANCED TISSUE SCIENCES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 14-1701513
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10933 North Torrey Pines Road
La Jolla, California 92037
(619) 450-5730
(Address, Including Zip Code, and Telephone Number including
Area Code, of Registrant's Principal Executive Offices)
ARTHUR J. BENVENUTO
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
ADVANCED TISSUE SCIENCES, INC.
10933 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
(619) 450-5730
(Name, Address, Including Zip Code, and Telephone Number
Including Area Code, of Agent for Service)
----------------------
Copies to:
LAURA B. HUNTER, ESQ.
BROBECK, PHLEGER & HARRISON LLP
4675 MACARTHUR COURT, SUITE 1000
NEWPORT BEACH, CALIFORNIA 92660
(714) 752-7535
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to Offering Aggregate Registration
Securities to be Registered be Registered Price Per Share Offering Price Fee(1)
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Common Stock issuable upon 275,000 shares $10.57(2) $2,906,750 $1,003.00
resale of shares issuable
upon exercise of warrant,
par value $.01 per share
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(1) $1,003.00 previously paid.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
on the average of the high and low selling price per share of the
Company's Common Stock on July 22, 1996 as reported on the Nasdaq
National Market.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION DATED JULY 31, 1996
ADVANCED TISSUE SCIENCES, INC.
275,000
COMMON STOCK
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 7 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Prospectus relates to the offer and sale of up to an aggregate of
275,000 shares of Common Stock, par value $.01 per share, of Advanced Tissue
Sciences, Inc. ("Advanced Tissue Sciences" or the "Company") which may be resold
or distributed (the "Resale Shares") upon the exercise of warrants held by
certain warrantholders of the Company (the "Selling Stockholders"). The Resale
Shares are being registered by the Company pursuant to registration rights
granted by the Company to the warrantholders. The Company has agreed to bear
certain expenses (other than selling commissions and fees and expenses of
counsel and other advisers to the warrantholders and the Selling Stockholders)
in connection with the registration of the Resale Shares.
Sales by the Selling Stockholders may be made in the over-the-counter
market, or otherwise at prices and at terms then prevailing or at prices related
to the then current market price, or in negotiated transactions. The Resale
Shares may be sold by one or more of the following: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the Resale Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) an
exchange distribution in accordance with the rules of such exchange; and (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from the Selling Stockholders in
amounts to be negotiated immediately prior to the sale. Such brokers or dealers
and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act") in connection with such sales. See "Distribution or Sale
of the Shares." In addition, any securities covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant this Prospectus. To the extent required, the specific Resale Shares to
be sold, the name of any successor Selling Stockholders, the public offering
price, the names of any such agent, dealer or underwriter, and any applicable
commission or discount with respect to any particular offer will be set forth in
an accompanying Prospectus Supplement. See "Selling Stockholders" and
"Distribution or Sale of the Shares."
The Company will receive up to an aggregate of $2,887,500 upon
exercise of the warrants and issuance of such shares to the warrantholders.
The Company will not receive any part of the proceeds from sales of the Resale
Shares by the Selling Stockholders. See "Use of Proceeds."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "ATIS." On July 22, 1996, the last reported sale price of the
Company's Common Stock on the Nasdaq National Market was $13.50 per share.
THE DATE OF THIS PROSPECTUS IS _______________, 1996
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. Neither the delivery
of this Prospectus nor any sale made thereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Resale Shares to any person or by
anyone in any jurisdiction in which such offer or solicitation may not lawfully
be made.
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TABLE OF CONTENTS
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Page
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Available Information . . . . . . . . . . . . . . . . . . . . . 2
Information Incorporated By Reference . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 13
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . 13
Distribution or Sale of the Shares . . . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected, and
copies of such material may be obtained at prescribed rates, at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington D.C. 20549, as well as at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Common Stock of the Company is traded on the Nasdaq National Market.
Reports, proxy statements and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the Resale Shares
offered hereby is contained in the Registration Statement on Form S-3 and the
exhibits thereto filed with the Commission under the Securities Act. For
further information pertaining to the Company and the Resale Shares, 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 office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission also maintains a site on the World Wide Web that
contains reports, proxy and information statements and other information
regarding the Company. The address for such site is http://www.sec.gov.
Advanced Tissue Sciences(TM), Skin2(R), Dermagraft(TM),
Dermagraft-TC(TM) and the Company's logo are trademarks of Advanced Tissue
Sciences.
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INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Prospectus: (i) the Annual Report of the
Company on Form 10-K for the fiscal year ended December 31, 1995; (ii) the
Quarterly Report of the Company on Form 10-Q for the quarter ended March 31,
1996; (iii) the Proxy Statement of the Company dated April 22, 1996 in
connection with the Annual Meeting of Stockholders held on May 22, 1996; (iv)
the Current Report of the Company on Form 8-K dated February 16, 1996; (v) the
Company's Registration Statement on Form 8-A dated July 28, 1992; and (vi) the
Company's Registration Statement on Form 8-A dated January 6, 1995.
All reports and other documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such reports and documents. Any statement incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to Michael V. Swanson, Vice President, Finance
and Administration, at Advanced Tissue Sciences, Inc., 10933 North Torrey Pines
Road, La Jolla, California 92037 or by telephone at (619) 450-5730.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere, or incorporated by reference, in this Prospectus, including
the information under "Risk Factors." The discussion in this Prospectus,
particularly those relating to strategic alliances and commercialization of the
Company's products, contain certain forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
and involve risks and uncertainties. No assurance can be given that the Company
will successfully market such products, achieve the milestones required by the
Smith & Nephew Dermagraft Joint Venture or Cartilage Joint Venture necessary to
receive additional funding, or enter into new strategic alliances. These and
other risks are detailed in publicly available filings with the Securities and
Exchange Commission such as the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. The forward-looking statements herein are
qualified in their entirety by reference to the risks and risk factors described
herein and in such reports. The Company's actual results could differ
materially from those projected in the forward-looking statements as a result of
the factors described under "Risk Factors" and elsewhere in this Prospectus and
in such reports.
THE COMPANY
OVERVIEW
Advanced Tissue Sciences is a leading tissue engineering company
engaged in the development of living human tissue products for therapeutic
applications. The Company is primarily focusing its efforts on skin, cartilage
and cardiovascular products. Utilizing principles of cell biology,
biochemistry and polymer science, the Company has developed and is applying its
patented core technology which permits living human cells to be cultured ex
vivo in a manner that allows the cells to develop and assemble into a
functioning three-dimensional tissue. The Company has successfully replicated
a variety of human tissues and has a number of products under various stages of
development.
Advanced Tissue Sciences' objective is to redefine tissue repair and
transplantation by developing, manufacturing and marketing human tissue
replacement products produced through tissue engineering. The Company's
product strategy is to utilize its patented core technology to develop multiple
products which address unmet therapeutic needs or offer improved,
cost-effective alternatives to current treatment modalities. By building upon
its base of scientific knowledge through the continued application of its core
technology, the Company believes it will achieve significant synergies in the
development, clinical testing and manufacture of successive tissue products.
In addition, the Company is focusing its development programs on products which
are currently being or are expected to be regulated as medical devices.
Medical devices are generally subject to shorter regulatory approval processes
than biologics or pharmaceuticals. The Company is developing marketing and
reimbursement strategies, establishing a direct sales organization and pursuing
strategic alliances, to market future commercial products.
Leading the Company's product development efforts are therapeutic skin
products that address the burn and diabetic foot ulcer markets. These
products, based on Dermagraft, a three-dimensional living human tissue designed
by the Company as a temporary or permanent replacement for human dermis, were
developed to treat conditions where the dermis (the inner skin layer) has been
injured or destroyed, such as in severe burns and chronic skin ulcers. The
dermis is essential to normal skin function and healing and, unlike the
epidermis (the outer layer of skin), does not regenerate into normal tissue
after injury. The Company has two lead products currently in pivotal clinical
trials, a temporary covering for severe burns ("Dermagraft-TC") and a dermal
replacement product ("Dermagraft-Ulcers") for treating diabetic foot ulcers.
The Company submitted a premarket approval ("PMA") application to the United
States Food and Drug Administration (the "FDA") for Dermagraft-TC on March 28,
1996 and expects to submit a PMA application for Dermagraft-Ulcers to treat
diabetic foot ulcers in late 1996. The FDA has notified the Company that the
PMA applications for both products will receive expedited review.
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RECENT DEVELOPMENTS
DERMAGRAFT-TC. In December 1995, the Company reported that data from
the pivotal clinical trial of Dermagraft-TC achieved statistical significance
(p<0.01) with respect to its primary endpoint, the ability of the Company's
product to adequately prepare the wound beds for successful autografting.
Based on these results, the Company submitted a PMA application to the FDA on
March 28, 1996. The FDA has notified the Company that it intends to review the
PMA application for Dermagraft-TC on an expedited basis, potentially
accelerating the regulatory review period.
Dermagraft-TC has been developed as an alternative to human cadaver
skin to treat severely burned patients. Dermagraft-TC, consisting of a dermal
tissue with an ultrathin synthetic covering, acts as a protective cover to help
retain fluids and reduce the risk of infection until a sufficient amount of the
patient's own skin becomes available for grafting. Of the 70,000 burn patients
hospitalized annually in the United States, approximately 13,000 are severely
burned and require skin grafts. The Company's Dermagraft-TC product is
initially intended to address the approximately 1,500 severely burned patients
with burns exceeding 20% body surface area.
DIABETIC FOOT ULCERS. Enrollment in the pivotal clinical trial of
Dermagraft-Ulcers for diabetic foot ulcers in the United States has been
completed. The primary endpoint in the pivotal trial is complete wound
closure. A planned interim analysis of this data showed that the clinical
trial was on track to achieve the primary endpoint. After follow-up and
completion of the trial, all trial data will be evaluated for statistical
significance. If the results of the completed trial are consistent with the
results shown at the interim analysis, the Company expects to submit a PMA
application to the FDA in late 1996. After the interim analysis, the FDA
notified the Company that the PMA application for Dermagraft-Ulcers in the
treatment of diabetic foot ulcers will also receive expedited review. In an
earlier pilot trial, the Dermagraft-Ulcers patients receiving one piece of
Dermagraft-Ulcers per week for eight weeks showed a statistically significant
improvement in complete wound closure. In addition, patients healed in the
pilot trial treated with Dermagraft-Ulcers had no recurrence of their ulcers
after being followed for an average of 14 months. By contrast, published
reports have indicated rates of recurrence ranging from 20% to 50% within the
first year following healing. The Company has entered into an agreement with
Smith & Nephew plc ("Smith & Nephew") to form a fifty-fifty joint venture for
the worldwide commercialization of Dermagraft-Ulcers for diabetic foot ulcers,
assuming receipt of appropriate regulatory approvals.
Dermagraft-Ulcers is a dermal replacement product grown on a
bioabsorbable scaffold and is designed to provide a healthy, metabolically
active dermal matrix in the ulcer to support wound closure. Approximately
800,000 diabetic foot ulcer patients are treated in the United States each
year, 400,000 of which represent the Company's initial target market. Based on
data from outside sources, it is estimated that the total United States market
opportunity for this targeted indication potentially exceeds $1 billion.
OTHER THERAPEUTIC PRODUCTS UNDER DEVELOPMENT
ORTHOPEDICS. The Company has successfully replicated cartilage tissue
ex vivo using the Company's proprietary three-dimensional culture system.
Through a joint venture with Smith & Nephew, the Company is developing several
orthopedic applications of tissue engineered cartilage. The joint venture is
currently in a pivotal preclinical trial for articular resurfacing which, if
successfully completed, is expected to lead to human clinical trials in 1997.
Pilot preclinical trials of tissue engineered meniscus have shown successful
repair of meniscus defects in subjects followed for up to one year. There are
over 1.2 million arthroscopic procedures for repair of the knee performed
annually in the United States, including procedures involving articular
cartilage, meniscus and ligament.
CARDIOVASCULAR. Through the use of its tissue engineering technology,
Advanced Tissue Sciences is working on developing cardiovascular products that
will grow and repair normally. Over the past year, the Company has made
substantial progress in developing dynamic bioreactors for growing tissue
engineered heart valves and blood vessels. In the United States, over 900,000
Americans die each year from cardiovascular disease, and over 60,000 prosthetic
heart valves are implanted and over 430,000 vascular graft procedures are
performed in the United States.
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PATENTED CORE TECHNOLOGY
The Company has developed a patented core technology that combines the
principles of cell biology, biochemistry and polymer science to create a
three-dimensional living support stroma ex vivo. Products engineered by the
Company based on its core technology produce a completely human stromal tissue
that, in turn, supports the growth of organ cells into functional tissue.
Advanced Tissue Sciences has been issued United States and European patents
covering its core technology and numerous patents related to applications of
such technology.
Advanced Tissue Sciences was incorporated in Delaware in 1987. The
Company maintains its executive offices at 10933 North Torrey Pines Road, La
Jolla, California 92037, and its telephone number at that address is (619)
450-5730.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully before purchasing the
Common Stock offered hereby.
UNCERTAINTIES OF CLINICAL TRIALS
The Company is required to obtain approval from the FDA prior to
marketing its therapeutic products in the United States and the approval of
foreign regulatory authorities to commercialize its products in other
countries. To obtain such approvals, the Company is required to prove the
safety and efficacy of its products through extensive preclinical studies and
clinical trials. The Company is in various stages of such testing. The
Company's lead products, Dermagraft-TC, a temporary covering for severe burns
and Dermagraft-Ulcers for diabetic foot ulcers, are in pivotal human clinical
trials in the United States and in the United States and France, respectively.
Enrollment in the pivotal clinical trials of Dermagraft-TC and for diabetic
foot ulcers in both the United States and France is complete. The completion
of these trials, or any other of the Company's clinical trials, is dependent
upon many factors. Delays may result in increased trial costs and delays in
FDA submissions which could have a material adverse effect on the Company.
A number of companies in the biotechnology and pharmaceutical
industries have suffered significant setbacks in clinical trials, even after
showing promising results in earlier studies or trials. Although the Company
has obtained favorable results to date in preclinical studies and clinical
trials of certain of its products, such results may not be predictive of
results that will ultimately be obtained in or throughout such clinical trials.
In a previously conducted pivotal clinical trial, the Company encountered an
efficacy issue for a Dermagraft product to treat venous ulcers. An interim
analysis of that trial indicated there was no statistically significant
difference in complete healing between the control group patients and those
treated with a single dose of the Dermagraft product. Analysis of follow-up
data from patients in the trial did, however, show a statistically significant
difference in the recurrence rate of Dermagraft-treated patients versus control
patients. To date, the Company has elected not to pursue the use of
Dermagraft-Ulcers as a treatment to reduce the recurrence of venous ulcers,
although it may do so in the future. There can be no assurance that the
Company will not encounter problems in its clinical trials that will cause the
Company to delay or suspend its clinical trials, that the clinical trials of
its products will be completed at all, that such testing will ultimately
demonstrate the safety or efficacy of such products or that any products will
receive regulatory approval on a timely basis, if at all. If any such problems
occur, the Company could be materially and adversely affected.
ABSENCE OF PROFITABLE OPERATIONS; NEED FOR ADDITIONAL FUNDS
To date, the Company has experienced significant operating losses in
funding the research, development and testing of its products and expects to
continue to incur substantial operating losses. The Company has incurred
cumulative net operating losses of $123.7 million through March 31, 1996
(including an approximately $21.4 million non-recurring charge related to an
acquisition in September 1992). Losses are expected to increase as a result of
the expenses associated with scaling up and validating manufacturing processes
and equipment, establishing sales and marketing capabilities and funding
additional research, development and testing. The Company's ability to achieve
profitability depends in part upon its ability, either independently or in
collaboration with others, to complete the development and obtain required
regulatory approvals of, and to successfully manufacture and market, products.
There can be no assurance that the Company will ever achieve a profitable level
of operations or that profitability, if achieved, can be sustained on an
ongoing basis.
The further development of the Company's technology and products as
well as the scale up of the Company's manufacturing capabilities and the
establishment of necessary sales, marketing and distribution capabilities will
require the commitment of substantial funds, the amount of which will depend on
many factors, such as the schedule and progress of preclinical and clinical
trials and the timing and cost of obtaining regulatory approvals. The Company
may ultimately need to raise additional funds to support its long-term product
development and commercialization programs. The Company could acquire such
additional funding through collaborative arrangements, the extension of
existing arrangements, additional public or private offerings of debt or equity
7
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securities or other means. There can be no assurance that adequate funds will
be available under existing or future arrangements when such funds are needed
or, if available, on terms acceptable to the Company. Insufficient funds may
require the Company to delay, scale back or eliminate certain of its research
and product development programs or to license third parties the right to
commercialize products or technologies that the Company would otherwise
commercialize itself.
STAGE OF PRODUCT DEVELOPMENT
Although two of the Company's products are in advanced stages of
pivotal clinical trials, the remainder of the Company's other products are at
earlier stages of research, development and testing. These products will
require significant additional research and development, including extensive
preclinical and clinical testing, and regulatory approvals prior to
commercialization. All of the Company's products are subject to the risks of
failure inherent in the development of products based on innovative
technologies. Such risks include the possibilities that any or all of these
products are found to be unsafe or ineffective or otherwise fail to receive
necessary regulatory approvals, that products are uneconomical to market, that
third parties may hold proprietary rights that preclude the Company from
marketing its products, or that the Company's products fail to achieve market
acceptance in light of competing technologies and products. The Company
continually reviews its product development activities in an effort to allocate
its resources to those products the Company believes have the greatest
commercial potential. Factors considered by the Company in determining the
products to pursue include projected markets and need, potential for regulatory
approval and reimbursement under the existing health care system as well as
anticipated health care reforms, technical feasibility, expected and known
product attributes and estimated costs to bring the product to market. Based
on these and other factors which the Company considers relevant, the Company
may from time to time reallocate its resources among its product development
activities. Additions of products under development or changes to products
being pursued can substantially and rapidly change the Company's funding
requirements.
LIMITED MANUFACTURING AND MARKETING EXPERIENCE
Although the Company has had the manufacturing capacity to produce
sufficient quantities of Dermagraft to support its ongoing clinical trials, the
Company must develop the capability of manufacturing its products in commercial
quantities, in compliance with regulatory requirements and at acceptable costs.
While the Company has clinical scale manufacturing experience producing its
Dermagraft products, it has no commercial scale manufacturing experience with
these specific products. The Company has constructed and is in the process of
developing and validating commercial scale manufacturing for its Dermagraft-TC
and Dermagraft-Ulcers products. The facility and processes have and will
continue to undergo rigorous validation tests and there can be no assurance
that the Company will be able to obtain the necessary regulatory approvals for
its manufacturing operations on a timely basis or at all. Although the Company
believes it unlikely, it cannot be certain that process changes during scale up
will not require the Company to undertake additional clinical trials which
would require additional expenditures and cause delays in commercial
production. In addition, the Company's manufacturing facility must be
registered with and licensed by various regulatory authorities, including the
California Department of Health and Human Services, and comply with the good
manufacturing practices ("GMPs") requirements prescribed by the FDA. Any
significant delays in the completion of validation or regulatory inspection of
the facility or manufacturing processes could have a material adverse effect on
the ability of the Company to ultimately market its products on a timely and
profitable basis, and on the Company's ability to conduct its business.
The Company has no direct experience marketing or obtaining
third-party reimbursement for its products. The Company will have to establish
an effective internal sales and marketing organization and/or rely on corporate
partners or licensees, or on arrangements with others to market its products
domestically and internationally. There can be no assurance that the Company
will be successful in these efforts or that any of its products, if approved,
will gain market acceptance.
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GOVERNMENT REGULATION
The Company's preclinical studies and clinical trials and the
manufacturing and marketing of its products are subject to extensive, costly
and rigorous regulation by various governmental authorities in the United
States and other countries. The process of obtaining required regulatory
approvals from the FDA and other regulatory authorities often takes many years,
is expensive and can vary significantly based on the type, complexity and
novelty of the product. There can be no assurance that any products developed
by the Company, independently or in collaboration with others, will meet
applicable regulatory criteria to receive the required approvals for
manufacturing and marketing. Delays in obtaining United States or foreign
approvals could result in substantial additional costs to the Company and
adversely affect the Company's competitive position.
The Dermagraft-TC and Dermagraft-Ulcers products are currently in
pivotal clinical trials. The Company submitted a PMA application to the FDA
for the Dermagraft-TC product on March 28, 1996, and expects to submit a PMA
application for the Dermagraft-Ulcers product in late 1996, based upon the
results of the respective trials. There can be no assurance that the Company
will submit the PMA application for Dermagraft-Ulcers in this time frame, if at
all, or that FDA will conclude that the trial results support a finding of
safety and efficacy for any of its products. In addition, even though the
Company has been informed by the FDA that the Company's Dermagraft-TC and
Dermagraft-Ulcers products will receive expedited PMA review from the agency,
there can be no assurance that such status will accelerate the review process,
or that such status will not be rescinded by the FDA if products of other
companies that have already received FDA approval, or which receive FDA
approval prior to the Company receiving its approval, are deemed by the FDA to
perform substantially the same functions or to provide comparable benefits.
There can be no assurance that the FDA will approve either the Dermagraft-TC or
Dermagraft-Ulcers PMA applications in a timely fashion, if at all. Moreover,
even if such approvals are obtained, post-approval regulation of the Company's
products could result in the withdrawal, suspension or limitation of approvals
or limit the further marketing of the Company's products.
The Company's Dermagraft and cartilage products are subject to
regulation as medical devices. The Company's other tissue replacement
products, currently in various stages of development, could be regulated either
as medical devices or as biologic products. Even though the FDA has classified
human tissue engineered products such as those manufactured by the Company as
medical devices, application of the Federal Food, Drug, and Cosmetic Act (the
"FDC Act") to human tissue in its original form has been accomplished one
tissue type at a time. Certain of the Company's potential products are not
currently regulated by the FDA, but may ultimately be regulated either as a
medical device or a biologic. Accordingly, while regulation of the Company's
additional potential tissue replacement products as medical devices is
possible, it is impossible to determine with certainty under which regulatory
scheme they will be placed by the FDA. Legislative and regulatory initiatives
concerning the regulation of tissue and organ transplants are ongoing and could
possibly affect the future regulation of the Company's tissue engineered
products. It is not possible at the present time to predict accurately either
the time frame for such action, or the ultimate effect that such initiatives
could have, if any, on the products under development by the Company.
The Company has constructed and is in the process of developing and
validating commercial scale manufacturing for its Dermagraft-TC and
Dermagraft-Ulcers products. The facility must be registered, inspected, and
licensed by various regulatory authorities, including the California Department
of Health and Human Services, and must comply with FDA's GMP requirements.
There can be no assurance that the facility will be found to comply with GMPs
and other requirements and that necessary regulatory approvals will be obtained
on a timely basis, if at all.
DEPENDENCE ON CERTAIN SUPPLIERS
The mesh framework used by the Company in its Dermagraft-Ulcers and
Dermagraft-Burns (designed as a dermal replacement to be placed below an
autograft) products is supplied by only one FDA-approved manufacturer. The
synthetic mesh framework used by the Company in its Dermagraft-TC product is
likewise available from a single FDA-approved manufacturing source. Although
the Company has not experienced difficulty acquiring these materials for the
manufacture of its Dermagraft products for clinical trials, no assurance can be
9
<PAGE> 11
given that interruptions in supplies will not occur in the future or that the
Company would not have to obtain substitute vendors for these materials, which
would require additional regulatory submissions. Any significant supply
interruption could adversely affect the Company's clinical trials as well as
its product development and marketing programs. In addition, an uncorrected
impurity or supplier's variation in a raw material, either unknown to the
Company or incompatible with the Company's manufacturing process, could have a
material adverse effect on the Company's ability to manufacture its products.
TECHNOLOGICAL CHANGE AND COMPETITION
The markets for the Company's products are characterized by rapid,
unpredictable and significant technological change. Competition in the
Company's industry is intense. The Company's competitors include universities,
research institutions and pharmaceutical, chemical, medical device and
biotechnology companies. Many of these companies have greater financial
resources, research and development capabilities and more experience in
conducting clinical trials, obtaining regulatory approvals, manufacturing and
marketing than the Company. Accordingly, these competitors may succeed in
developing, obtaining regulatory approval for and some have commercialized
their products more rapidly than the Company. A number of companies are
developing and have commercialized dermal replacement and other products,
including various types of wound healing treatments employing a variety of
approaches that are in competition with the Company's Dermagraft products. The
Company also knows of other companies that are undertaking research and
development of tissue engineered products, some of which are patented. There
can be no assurance that developments by the Company's competitors or potential
competitors will not render the Company's technology or proposed applications
of its technology non-competitive, uneconomical or obsolete.
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to maintain the proprietary nature of its
technology, products and manufacturing processes. The Company relies on
patents, trade secrets and know-how to maintain its competitive position. The
Company has been issued one United States patent and a European patent covering
its core technology and has been issued other United States and foreign patents
related to this technology. In addition, many other United States and foreign
patent applications have been filed. The issued United States patents include
patents covering the Dermagraft-Ulcers and Dermagraft-TC products. The Company
also has licenses or licensing rights to certain other United States and
foreign patents and patent applications.
There can be no assurance that any existing or future patent
applications by the Company will result in issued patents or that any current
or future issued or licensed patents, trade secrets or know-how will afford
protection against competitors with similar technologies or processes, or that
any patents issued will not be infringed upon or designed around by others. In
addition, there can be no assurance that others will not independently develop
proprietary technologies and processes which are the same as or substantially
equivalent to those of the Company. The Company could also incur substantial
costs in defending itself in suits brought against it on such patents or in
bringing suits to protect the Company's patents or patents licensed by the
Company against infringement. Additionally, the Company protects its
proprietary technology and processes in part by confidentiality agreements with
its collaborative partners, employees and consultants. There can be no
assurance that these agreements will not be breached, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or independently discovered by competitors.
UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM
The Company's ability to commercialize products successfully may
depend in part on the extent to which reimbursement for the costs of such
products and related treatments will be available from government health
administration authorities, private health insurers and other organizations.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and there can be no assurance that adequate third party
coverage will be available for the Company to maintain price levels sufficient
for realization of an appropriate return on its investment in developing new
products. Government and other third party payors are increasingly
10
<PAGE> 12
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new products approved for marketing by the FDA, and by
refusing, in some cases, to provide any coverage for uses of approved products
for indications for which the FDA has not granted marketing approval. Recent
initiatives to reduce the federal deficit and to reform health care delivery
are increasing these cost containment efforts. As managed care organizations
continue to expand as a means of containing health care costs, the Company
believes there may be attempts by such organizations to restrict the use or
delay authorization to use new products, such as those being developed by the
Company, pending completion of cost/benefit analyses of such products by those
managed care organizations. If adequate coverage and reimbursement levels are
not provided by government and other third party payors for uses of the
Company's products, the market acceptance of these products could be adversely
affected.
UNCERTAINTY OF COLLABORATIVE ARRANGEMENTS AND STRATEGIC ALLIANCES
The Company's strategy for the development, clinical testing,
manufacture and commercialization of certain of its tissue replacement products
includes entering into various collaborations with corporate partners,
licensors, licensees and others. These collaborations provide access to
technologies, technical expertise and financial and other resources that might
otherwise be unavailable to the Company. The Company has entered into
collaborations with various institutions related to the development and
commercialization of its tissue engineered products. Although the Company
believes that its partners in these collaborations have an economic motivation
to succeed in performing their contractual responsibilities, the amount and
timing of resources to be devoted to these activities are not within the
control of the Company. Moreover, the collaboration agreements generally
provide that they may be terminated by the collaborator prior to their
expiration under circumstances that may also be outside the control of the
Company. In addition, there can be no assurance that these collaborators will
pay any additional option or license fees to the Company or that they will
develop or market any products under the agreements. For example, in early
1996 St. Jude Medical, Inc., which had previously worked with the Company on a
collaboration effort related to heart valves, elected not to enter into a
licensing agreement even though the feasibility studies conducted by the
parties were successful. Finally, if the Company's collaboration agreements
are terminated prior to their expiration or if the other parties to such
agreements fail to adequately perform, there can be no assurance that
submission of products for regulatory approval will not be delayed or that the
Company's ability to deliver products on a timely basis will not be impaired.
Furthermore, there can be no assurance that the Company will be able
to negotiate additional collaborative arrangements in the future on acceptable
terms, if at all, or that such collaborative arrangements will be successful.
To the extent that the Company chooses not to or is unable to establish such
arrangements, it would experience increased capital requirements to undertake
research, development and marketing of its proposed products at its own
expense. In addition, the Company may encounter significant delays in
introducing its proposed products into certain markets or find that the
development, manufacture or sale of its proposed products in such markets is
adversely affected by the absence of such collaborative agreements.
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in large part upon its ability to
attract and retain qualified scientific, management, marketing and sales
personnel as well as the continued contributions of its existing senior
management, and scientific and technical personnel. The Company faces strong
competition for such personnel and there can be no assurance that the Company
will be able to attract or retain such individuals. In particular, the loss of
the services of either Arthur J. Benvenuto, the Company's Chairman and Chief
Executive Officer, or Dr. Gail K. Naughton, its President and Chief Operating
Officer, would have a material adverse effect on the Company. The Company has
obtained key man life insurance on the lives of each of Mr. Benvenuto and Dr.
Naughton in the amount of $3 million, $2.5 million of which is payable to the
Company.
PRODUCT LIABILITY CLAIMS AND INSURANCE
The use of any of the Company's products, whether for commercial
applications or during clinical trials, exposes the Company to an inherent risk
of product liability claims in the event such products cause injury, disease or
result in adverse effects. Such liability might result from claims made
directly by health care institutions,
11
<PAGE> 13
contract laboratories or others selling or using such products. The Company
currently maintains product liability insurance coverage; however, there can be
no assurance that the level or breadth of any insurance coverage will be
sufficient to fully cover potential claims. Such insurance is becoming
increasingly expensive and difficult to obtain. There can be no assurance that
adequate insurance coverage will be available in the future at an acceptable
cost, if at all, or in sufficient amounts to protect the Company against such
liability. The obligation to pay any product liability claim in excess of
whatever insurance the Company is able to acquire could have a material adverse
effect on the business, financial condition and future prospects of the
Company.
HAZARDOUS MATERIALS
The Company's research and development activities and operations
involve the controlled use of small quantities of radioactive compounds,
chemical solvents and other hazardous materials. In addition, the Company's
business involves the growth of human tissue samples. Although the Company
believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by federal, state and local
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 Company.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation (the
"Certificate") includes provisions that may discourage or prevent certain types
of transactions involving an actual or potential change in control of the
Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over then-current market prices. The
Certificate, for example, authorizes the Board of Directors (the "Board") to
issue shares of Preferred Stock without stockholder approval on such terms as
the Board may determine. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. Moreover, such issuance may
make it more difficult for a third party to acquire, or may discourage a third
party from acquiring, a majority of the voting stock of the Company. Further,
pursuant to the terms of a stockholder rights plan adopted in January 1995, the
Company has distributed a dividend of one right for each outstanding share of
Common Stock. The rights will cause substantial dilution of the ownership of a
person or group that attempts to acquire the Company on terms not approved by
the Board and may have the effect of deterring hostile takeover attempts.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, like that of the
securities of other biotechnology companies, has fluctuated significantly in
recent years and is likely to fluctuate in the future. From time to time the
market for securities of biotechnology companies has in fact experienced
significant price and volume fluctuations that are unrelated to the operating
performance of such companies. In addition, announcements by the Company or
others regarding scientific discoveries, technological innovations, commercial
products, patents or proprietary rights, the progress of clinical trials or
government regulation, public concern as to the safety of devices or drugs, the
issuance of securities analysts' reports and general market conditions may all
have a significant 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.
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE
The issuance of freely tradable Common Stock upon the exercise of
stock options and warrants, including the Warrant Shares, as well as future
sales of Common Stock by existing stockholders, or the perception that sales
could occur, could adversely affect the market price of the Common Stock.
12
<PAGE> 14
USE OF PROCEEDS
Assuming the exercise of all of the warrants and issuance of such
shares, the Company will receive aggregate proceeds of approximately $2,887,500
from the sale of such shares to the warrantholders. The Company anticipates
that such proceeds will be used for working capital and general corporate
purposes. The Company will not receive any of the proceeds from the sale or
distribution of the Resale Shares by the Selling Stockholders. See
"Selling Stockholders."
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by the Selling Stockholders. Except as indicated, none of
such security holders has had a material relationship with the Company within
the past three years other than as a result of the ownership of the warrants or
other securities of the Company. Because the Selling Stockholders may offer all
or some of the Resale Shares which it holds, or has the right to acquire,
pursuant to this Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Resale
Shares, no estimate can be given as to the amount of Resale Shares that will be
held by the Selling Stockholders after completion of such distribution. See
"Distribution or Sale of the Shares." The shares issuable upon exercise of the
warrants and available for resale pursuant to this Prospectus may be purchased
from time to time by the Selling Stockholders named below:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES PERCENT OF
SHARES BENEFICIALLY REGISTERED OUTSTANDING
NAME OF HOLDERS: OWNED(1) FOR SALE HEREBY SHARES
- --------------- ------------------- --------------- ------------
<S> <C> <C> <C>
Ramius Hatteras Partners, L.P.(2) 175,000 175,000 *
J. P. Morgan Ventures Corporation 100,000 100,000 *
-------
TOTAL 275,000
=======
</TABLE>
- ---------------------
* Less than 1% as of June 30, 1996.
(1) All shares of Common Stock of the Company shown as beneficially owned
are issuable upon the exercise of outstanding warrants.
(2) Ramius Hatteras Partners, L.P. has agreed to purchase up to
$50,000,000 of shares of Common Stock of the Company at the Company's
discretion pursuant to the Investment Agreement dated February 9, 1996
described below.
175,000 of the shares issuable to Ramius Hatteras Partners, L.P. and
available for sale pursuant to this Prospectus were acquired under that certain
Investment Agreement dated February 9, 1996 (the "Investment Agreement"), at
an exercise price per share of $10.50. The Common Stock Warrant dated April 1,
1996 (the "Warrant Agreement") that is exercisable for 100,000 of the shares
available for sale pursuant to this Prospectus was acquired by J.P. Morgan
Ventures Corporation in connection with certain advisory services provided
under a Letter Agreement dated March 26, 1996 (the "Letter Agreement"). The
Warrant Agreement provides for the purchase of the shares at an exercise price
of $10.50 per share.
13
<PAGE> 15
At the time of issuance, each warrantholder represented to the Company that
it was acquiring the warrants and underlying shares from the Company without any
present intention of effecting a distribution of those shares. However, in
accordance with the Investment Agreement and the Warrant Agreement entered into
with the warrantholders, the Company agreed to register the Resale Shares to
permit sales of such shares from time to time in the market or in
privately-negotiated transactions. The Company will prepare and file such
amendments and supplements to the registration statement as may be necessary in
accordance with the rules and regulations of the Securities Act to keep it
effective until all of such Resale Shares have been sold pursuant to the
registration statement or until registration of the Resale Shares is no long
required by reason of Rule 144 under the Securities Act or other rules of
similar effect.
The Company has agreed to bear certain expenses (other than broker
discounts and commissions, if any, and expenses of counsel and other advisors
to certain of the warrantholders) in connection with the registration of the
Resale Shares.
DISTRIBUTION OR SALE OF THE SHARES
Assuming all warrants are exercised, the Company will receive aggregate
proceeds from the issuance of such shares to the warrantholders in the amount
of approximately $2,887,500. After such exercise, the sale of the Resale
Shares may be effected by the Selling Stockholders from time to time in
transactions in the over-the-counter market, on the Nasdaq National Market, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Resale Shares to or
through broker-dealers, and such broker- dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Resale Shares for whom such broker-dealers may act
as agents or to whom they sell as principals, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Resale Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Resale Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with by the Company and
the Selling Stockholders.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Resale
Shares may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions received by them and any profit on
the resale of the Resale Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Resale Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution.
In addition and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
The Company has agreed to register the Resale Shares under the Securities
Act and to indemnify and hold certain of the Selling Stockholders harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale by such holders of the Resale Shares.
14
<PAGE> 16
EXPERTS
The consolidated financial statements of Advanced Tissue Sciences, Inc.
appearing in the Company's Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in such report given upon the authority of
such firm as experts in accounting and auditing.
15
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale or the distribution of the securities being registered, other than
underwriting discounts and commissions and finder's fees. All of the amounts
shown are estimates except for the Securities and Exchange Commission
registration fee and Nasdaq filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . $ 1,604.00
Nasdaq additional listing fee . . . . . . . . . . . . . . . . . 5,500.00
Accounting fees and expenses . . . . . . . . . . . . . . . . . 5,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . 10,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 7,896.00
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $30,000.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware Corporation Law, the Company has
broad powers to indemnify its directors and officers against liability they may
incur in such capacities, including liabilities under the Securities Act. The
Company's Bylaws (the "Bylaws") provide that the Company will indemnify its
directors and may indemnify its officers, employees and other agents to the
full extent permitted by law. The Company believes that indemnification under
its Bylaws covers at least negligence and gross negligence by indemnified
parties, and requires the Company to advance litigation expenses in the case of
stockholder derivative actions or other actions if the director agrees to repay
advances if it is ultimately determined that the director is not entitled to
indemnification.
The Company has entered into indemnification agreements with each of
its directors and officers which provide the directors and officers with
indemnification rights. One significant difference between the indemnification
rights provided under the Company's Bylaws and those provided under the
indemnification agreements is that, under the Bylaws as construed in accordance
with Delaware law, amounts may be paid as indemnity only if independent
determinations are made in each specific case that under the circumstances the
individual claiming indemnity meets certain specified standards of conduct.
Under the indemnification agreements, a determination that a director or
officer has met these standards is not required for such indemnity, although
the agreements exclude indemnity for conduct which is adjudged to be knowingly
fraudulent, deliberately dishonest or to constitute willful misconduct. The
Company also currently maintains policies of insurance under which its
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities which might
be imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
The Company's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for breach
of the director's fiduciary duty of care to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances, equitable remedies such as
injunction or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, or knowing
violations of law, or actions lending to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
II-1
<PAGE> 18
ITEM 16. EXHIBITS.
Exhibit No.
- -----------
4.1* Investment Agreement dated as of February 9, 1996 between Ramius
Hatteras Partners, L.P. and the Company. Incorporated by reference as
Exhibit 4.1 to the Current Report on Form 8-K dated February 9, 1996.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1+ Power of Attorney. Reference is made to page II-4.
- ------------------
* Previously filed and incorporated by reference.
+ Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement; and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement; provided, however, that (i) and
(ii) do not apply if the Registration Statement is on Form S-3, Form S-8 or
Form F-3, and the information required to be included in a post-effective
amendment by (i) and (ii) is contained in periodic reports filed with or
furnished to the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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 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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
II-2
<PAGE> 19
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the 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 its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of La Jolla, State of California, on July 29, 1996.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ MICHAEL V. SWANSON
---------------------------
Michael V. Swanson
Vice President, Finance
and Administration
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the 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>
* Chairman of the Board of Directors and July 29, 1996
------------------------------------ Chief Executive Officer (principal
Arthur J. Benvenuto executive officer)
* Director, President and Chief Operating July 29, 1996
------------------------------------ Officer
Dr. Gail K. Naughton
/s/ MICHAEL V. SWANSON Vice President, Finance and July 29, 1996
------------------------------------ Administration, (principal financial
Michael V. Swanson and accounting officer)
* Director July 29, 1996
------------------------------------
Jerome S. Groopman, M.D.
* Director July 29, 1996
------------------------------------
Jack L. Heckel
* Director July 29, 1996
------------------------------------
David S. Tappan, Jr.
* Director July 29, 1996
------------------------------------
William B. Walsh, M.D.
* Director July 29, 1996
------------------------------------
Dr. Gail R. Wilensky
*By: /s/ MICHAEL V. SWANSON Vice President, Finance and
-------------------------------- Administration
Michael V. Swanson
</TABLE>
II-4
<PAGE> 21
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
Exhibit No. Description of Document
- ---------- -----------------------
<S> <C>
4.1* Investment Agreement dated as of February 9, 1996 between
Ramius Hatteras Partners, L.P. and the Company. Incorporated
by reference as Exhibit 4.1 to the Current Report on Form 8-K
dated February 9, 1996.
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1+ Power of Attorney. Reference is made to page II-4.
</TABLE>
- --------------
* Previously filed and incorporated by reference.
+ Previously filed.
<PAGE> 1
EXHIBIT 5.1
(714) 955-4426
July 31, 1996
Advanced Tissue Sciences, Inc.
10933 Torrey Pines Road
La Jolla, CA 92037
Re: Amendment No. 1 to Registration Statement on Form S-3
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Ladies and Gentlemen:
We have examined Amendment No. 1 to Registration Statement on Form S-3
filed by you with the Securities and Exchange Commission (the "Commission") on
July 30, 1996, (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of 275,000 shares of
your Common Stock, issuable upon exercise of certain warrants (the "Shares").
The Shares are being registered for resale and distribution pursuant to (1) the
Investment Agreement and (2) the Warrant Agreement, both of which are described
in the Registration Statement. As your counsel in connection with this
transaction, we have examined the proceedings taken and are familiar with the
proceedings proposed to be taken by you in connection with the sale and issuance
of the Shares.
It is our opinion that the Shares, when sold in the manner described in
the Registration Statement, will be legally issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in
such Registration Statement, including the prospectus constituting a part
thereof, and any amendment thereto.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
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EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Advanced Tissue
Sciences, Inc. for the registration of 275,000 shares of its common stock and
to the incorporation by reference therein of our report dated February 22,
1996, with respect to the consolidated financial statements of Advanced Tissue
Sciences, Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
July 26, 1996
