FILED PURSUANT TO RULE 424(B)(4)
REGISTRATION STATEMENT NOS. 333-82683
PROSPECTUS
3,750,000 UNITS
ADVANCED TISSUE SCIENCES, INC.
UNITS
EACH UNIT CONSISTING OF ONE SHARE OF OUR COMMON STOCK
AND ONE WARRANT TO PURCHASE UP TO 0.46666666 OF ONE SHARE
OF OUR COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 3,750,000 units. Each unit consists of one share of our common
stock, par value $0.01 per share and one warrant to purchase 0.46666666 of one
share of our common stock at a purchase price of $4.00 per whole share. The
warrants may be exercised at any time beginning on the date of issuance and
ending three years following such date.
All of the units are being offered and may be sold by us. However, there
is no minimum offering amount and it is possible that we may not sell all of
the units being offered.
The common stock and warrants which comprise the units will separate
immediately upon issuance. The warrants will not be traded on the Nasdaq
National Market. Our common stock is traded on the Nasdaq National Market under
the symbol "ATIS." The public offering price is $4.00 per unit.
_______________
THE UNITS OFFERED INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 6 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU SHOULD
CONSIDER BEFORE BUYING ANY OF OUR UNITS.
_______________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
==============================================================================
Proceeds to
Price to Public Advanced Tissue Sciences
==============================================================================
Per Unit $4.00 $4.00
- ------------------------------------------------------------------------------
Total $15,000,000.00 $15,000,000.00
==============================================================================
The proceeds to Advanced Tissue Sciences are based on proceeds before deducting
expenses payable by us estimated at $125,000.
The units offered hereby are offered directly by us. It is expected that
delivery of certificates representing shares will be made against payment on or
about November 9, 1999.
_______________
The date of this prospectus is November 5, 1999
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TABLE OF CONTENTS
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Page
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Advanced Tissue Sciences, Inc........... 3
Recent Developments..................... 5
Risk Factors............................ 6
Forward-Looking Statements.............. 14
Where You Can Find More Information..... 14
Information Incorporated by Reference... 14
Use of Proceeds......................... 16
Dilution................................ 17
Plan of Distribution.................... 18
Description of Warrants................. 18
Legal Matters........................... 19
Experts................................. 19
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ADVANCED TISSUE SCIENCES, INC.
We are a leading company in developing tissue products grown from human
cells. We develop these tissue products for medical applications. We are
currently focusing our efforts on skin, cartilage and cardiovascular products.
We apply a broad range of scientific disciplines, such as cell biology,
bioengineering, biochemistry, and polymer and transplant science to culture
living human cells "in vivo" or in the body, or "ex vivo" or outside the body.
We culture the cells in a manner that allows them to develop and assemble into a
functioning tissue. We have successfully replicated a variety of human tissues
using our technology.
Our objective is to redefine tissue repair and transplantation by
developing, manufacturing and marketing products produced through our
technology. Our product strategy is to use our patented methods to develop
multiple products which address unmet therapeutic needs or offer improved,
cost-effective alternatives to current methods of treating patients. By
building on our base of scientific knowledge through the continued application
of our technology, we believe we can achieve significant advances in the
development, clinical testing and manufacture of each of our tissue products.
Our first commercial product, TransCyte[TM], a temporary covering for
burns, was first approved for commercial sale by the FDA in March 1997 for
full-thickness, or third degree burns, and for partial-thickness, or second
degree burns, in October 1997. Dermagraft[R] for the treatment of diabetic
foot ulcers, a living replacement for the lower or dermal layer of human skin,
is in clinical trials in the United States. Dermagraft for diabetic foot
ulcers and TransCyte for burns have been introduced in other countries as
permitted by regulatory requirements. Both TransCyte and Dermagraft are being
commercialized through a joint venture with Smith & Nephew plc. Our other
products are at earlier stages of development.
TRANSCYTE. TransCyte consists of a dermal tissue with an ultra-thin
synthetic covering that acts as a protective cover. In the treatment of third
degree burns, TransCyte is designed to help retain fluids and reduce the risk of
infection until a sufficient amount of the patient's own skin becomes available
for grafting. TransCyte, as compared to silver sulfadiazine in treating second
degree burns, has been shown to heal burns faster.
Of the approximately 1.2 million people who suffer burn injuries annually
in the United States, up to 13,000 are severely burned and require skin grafts.
TransCyte was initially approved to address the approximately 1,500 severely
burned patients with burns exceeding 20% body surface area. Another 30,000 to
40,000 burn victims, often children, suffer the partial to mid-dermal burns also
being addressed by TransCyte. These burns frequently result from household
hazards such as scalds from hot liquids, faulty heating pads or misuse of
ignition fluids.
DERMAGRAFT. Dermagraft consists of living skin cells called fibroblasts
grown on a scaffold that will dissolve over time. It is designed to provide a
healthy, metabolically active tissue to be placed in chronic skin ulcers to
support wound closure. Healing skin ulcers faster can potentially reduce the
risk of infection (and, in the case of diabetic foot ulcers, the subsequent risk
of amputation), as well as the need for skin grafting and reconstructive
procedures. Chronic skin ulcers that may be addressed by Dermagraft include
diabetic foot ulcers, skin ulcers on the lower part of the leg, generally known
as venous ulcers, and pressure ulcers.
Approximately 800,000 diabetic foot ulcers are estimated to be treated in
the United States each year, approximately half of which are believed to
represent the target market for Dermagraft. It is estimated that more than
1.2 million patients are affected by acute pressure ulcers, and over 200,000
nursing home patients suffer from chronic pressure ulcers. Approximately
500,000 patients are diagnosed with venous ulcers in the United States each
year.
ORTHOPEDICS. Through a separate joint venture with Smith & Nephew, we are
developing cartilage tissues for orthopedic applications. Over the past several
years, the joint venture's activities have focused on the development of
articular cartilage, a smooth cartilage that covers the surfaces of joints. We
believe a manufactured articular cartilage could be used to repair cartilage
defects in joints. This would provide an opportunity to treat patients at an
earlier stage of joint degeneration, thereby delaying, or in some cases
eliminating, the need for total joint replacements. We are working to optimize
the product before advancing into clinical trials. The joint venture has also
developed
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prototypes for a meniscus, the fibrous "shock absorbing" cartilage in the
knee, and is performing preclinical studies during 1999.
There are over 1.2 million arthroscopic procedures for repair of the knee,
including procedures involving articular cartilage, meniscus and ligament,
performed annually in the United States.
CARDIOVASCULAR. Through the use of our technology, we are developing blood
vessels that will grow and repair normally. Potentially, these blood vessels
could provide enhanced biocompatibility and improved patency with a reduced need
for the anticoagulant drugs required with currently available products. In
collaboration with the Department of Bioengineering at the University of
California, San Diego, we are currently leading an effort to design, construct
and evaluate blood vessel grafts produced from cells grown on a scaffold that
would be compatible with implantation. This project is using current advances
in various scientific areas, such as cell culture, bioreactor technology,
biomaterials and blood vessel mechanics to create a unique, living tissue
replacement for blood vessels. The successful integration of these technologies
could lead to the development of grafts to treat coronary and peripheral artery
vascular diseases.
In the United States, over 900,000 people die each year from cardio-
vascular disease. More specifically, 14 million people suffer from coronary
artery disease and over 380,000 coronary artery bypass procedures are performed
annually in the United States. Likewise, each year approximately 70,000
patients undergo surgery for the replacement of peripheral blood vessels.
SMITH & NEPHEW PLC. In April 1996, we entered into an agreement with
Smith & Nephew to form a joint venture for the worldwide commercialization of
Dermagraft in the treatment of diabetic foot ulcers. The Dermagraft Joint
Venture was expanded in 1998 to include venous ulcers, pressure ulcers, burns
and other skin tissue wounds. Under the joint venture agreement with Smith &
Nephew, we are principally responsibility for manufacturing and Smith & Nephew
has primary responsibility for the worldwide sales and marketing of Dermagraft
and TransCyte. Smith & Nephew is a world leader in wound care sales with an
established sales force in over 90 countries. It develops, manufactures and
markets a wide range of tissue repair products, principally addressing the areas
of bone, joints, skin and other soft tissue. Smith & Nephew is known in the
United States for its comprehensive training and customer education programs,
and it has successfully launched several advanced wound care products.
In 1994, we entered into a separate joint venture with Smith & Nephew for
the worldwide development, manufacture and marketing of human cartilage tissue
based on our technology for orthopedic applications. Under the terms of the
agreement, we are responsible for supervising the manufacturing of the cartilage
tissue products. The joint venture will execute the research and development
program, develop a worldwide marketing plan, and will utilize Smith & Nephew's
established selling and distribution network to market the products.
INAMED CORPORATION. We recently entered into a strategic alliance with
Inamed Corporation for the development and marketing of aesthetic and certain
reconstructive applications of our technology. Specifically, we licensed Inamed
rights to develop, market and sell certain products for use in cosmetic surgery,
cartilage for plastic and reconstructive applications, and a product for breast
reconstruction. Inamed has also licensed rights to certain of our products
which potentially may be used for soft tissue augmentation such as in wrinkle
and cosmetic correction, and for the treatment of urinary incontinence. Inamed
Corporation is a global surgical and medical device company engaged in the
development, manufacture and marketing of medical devices for the plastic and
reconstructive, bariatric and general surgery markets.
Dermagraft[R], TransCyte[TM] and NeoCyte[TM] are our trademarks. This
prospectus also includes names and trademarks of other companies.
Advanced Tissue Sciences was incorporated in Delaware in 1987. Our
principal executive offices are located at 10933 North Torrey Pines Road, La
Jolla, California 92037, and our telephone number is (858) 713-7300.
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RECENT DEVELOPMENTS
In September 1999, in an expansion of our strategic alliance, we announced
Inamed Corporation had acquired license rights to develop and market human
collagen based on our technology for wrinkle and cosmetic correction and as a
bulking agent for urinary incontinence. As a part of the licensing rights, we
received an additional $4 million, including $2 million for licensing rights and
$2 million for Inamed's purchase of approximately 316,500 shares of common
stock. We also granted Inamed a five-year warrant to purchase up to an
additional 200,000 shares of common stock.
At the end of September, we notified the holders of the series B preferred
stock of our election to redeem for cash at 105% of liquidation value any
preferred shares submitted for conversion from October 1, 1999 to December 31,
1999 at a conversion price equal to or below $3.58 per share. For example,
for each share of preferred stock submitted for conversion at a conversion
price equal to or below $3.58 per share, we would be required under this
election to redeem each share by paying the holder $52,500 plus accrued
dividends. If all of the shares were submitted for conversion at or below
$3.58 per share, we would be required to use approximately $5.4 million of our
existing cash and investments to redeem those shares. If the shares are
submitted for conversion at a conversion price above $3.58 per share, the
preferred stock would be converted at a minimum price of at least $4.77 per
share. These conversions would generally be at a discount to the then
current market price of our common stock. This could result in the
issuance of up to approximately 1.1 million shares of our common stock and
additional dilution to you.
We may withdraw this redemption election on five days advance notice. We
may also continue the election on a quarter by quarter basis for so long as we
have adequate cash available for the redemption. We may not have enough cash
available to continue this election if this offering is not successful. If we
decide to discontinue or do not have sufficient cash available to redeem the
preferred stock, conversions of the preferred stock can be made at conversion
prices at or below $3.58 per share. As the conversion price is determined based
on stock prices over a 45-day period, conversion prices will vary and can be at
a substantial discount to the market price. There is no limit as to how low the
conversion price can go. As a result you could experience substantial dilution
as a result of any such conversions. As of November 4, 1999, the conversion
price is $3.04 per share. If all the outstanding preferred shares were
converted at this price, we would issue another 1.7 million shares of common
stock.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AND UNCERTAINTIES BEFORE DECIDING TO
PURCHASE SHARES OF OUR COMMON STOCK. AN INVESTMENT IN OUR COMMON STOCK INVOLVES
A HIGH DEGREE OF RISK.
RISKS RELATED TO OUR BUSINESS
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WE HAVE A HISTORY OF LOSSES AND MAY NOT BECOME PROFITABLE.
To date, we have experienced significant operating losses in funding the
research, development, testing and marketing of our products and expect to
continue to incur substantial operating losses. To June 30, 1999, we had
incurred cumulative net operating losses of $228.7 million. Our ability to
achieve profitability depends in part upon our ability to successfully
manufacture and market Dermagraft and TransCyte for skin ulcers and burns. We
may never achieve a profitable level of operations or even if we achieve
profitability, we may not be able to sustain it on an ongoing basis.
IF OUR PRODUCTS FAIL IN CLINICAL STUDIES, WE WILL BE UNABLE TO OBTAIN FDA
APPROVAL AND WILL NOT BE ABLE TO SELL THOSE PRODUCTS.
In order to sell our products that are under development, and our existing
products for additional applications, we must receive regulatory approval for
our products. To obtain those approvals, we must conduct clinical studies
demonstrating that our products are safe and effective. If we cannot obtain FDA
approval for a product or any additional application of a product, that product
cannot be sold and revenues will suffer.
Early in 1998, an FDA Advisory Panel recommended the FDA approve Dermagraft
for marketing in the United States for the treatment of diabetic foot ulcers.
The Advisory Panel's recommendation included certain conditions we would have
needed to satisfy after the commercial introduction of Dermagraft. However, in
June 1998, the FDA requested we complete an additional controlled clinical trial
to support our application for approval to market Dermagraft for the treatment
of diabetic foot ulcers. We are currently conducting this additional pivotal
clinical trial. Commercial introduction within the United States is subject to
successful completion of the additional clinical trial and FDA approval.
Although Dermagraft appears promising based on clinical studies to date,
it may not be successful in this additional clinical trial or other future
clinical trials. Our ongoing clinical study of Dermagraft, and clinical
studies of our other products, may be delayed or halted for various reasons,
including:
- the product is not effective, or physicians think that it is not
effective;
- patients experience severe side effects during treatment;
- patients do not enroll in the study at the rate we expect, or
- product supplies are not sufficient to treat the patients in the study.
In addition, the FDA and foreign regulatory authorities have substantial
discretion in the approval process. The FDA and foreign regulatory authorities
may not agree that we have demonstrated that Dermagraft, or any of our other
products, are safe and effective after we complete clinical trials.
WE WILL NEED ADDITIONAL FUNDS TO SUPPORT OPERATIONS. IF WE ARE UNABLE TO OBTAIN
THEM, WE WOULD BE UNABLE TO COMPLETE OUR PRODUCT DEVELOPMENT PROGRAMS AND WOULD
HAVE TO REDUCE OR CEASE OPERATIONS, OR ATTEMPT TO SELL SOME OR ALL OF OUR
OPERATIONS OR TO MERGE WITH ANOTHER ENTITY.
The further development of our technology and products as well as any
further development of manufacturing capabilities or the establishment of
additional sales, marketing and distribution capabilities will
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require the commitment of substantial funds. Our existing working capital
will not be sufficient to meet our needs. Potential sources of additional
funds include payments from our alliances with Smith & Nephew and Inamed and
our borrowing capacity under the cartilage joint venture with Smith & Nephew.
If, for any reason, Smith & Nephew were to terminate the Dermagraft Joint
Venture or, to a lesser extent, the cartilage joint venture, we would
experience a substantial increase in the need for and use of our working
capital to support the commercialization and manufacture of our Dermagraft and
TransCyte products or the development of our orthopedic cartilage products.
We may pursue additional public or private offerings of debt or equity
securities or other means. We could also acquire additional funding through
collaborative arrangements or the extension of existing arrangements, which
could require the issuance of additional equity interests in us and dilute
your interest.
To the extent that we choose not to or are unable to establish such
arrangements, we would experience increased capital requirements to undertake
research, development and marketing of our proposed products at our own expense.
If we are not able to meet these expenses we may be unable to continue our
operations.
We may not satisfy the milestones for additional funds under the joint
ventures with Smith & Nephew or the Inamed alliance. We also may not be
able to obtain adequate funds under other existing or future arrangements when
such funds are needed or, if available, on terms acceptable to us. In addition,
we have agreed to terminate our equity line. Thus, funds under our equity line
will be completely unavailable
Insufficient funds may require us to delay, scale back or eliminate certain
of our research and product development programs or that we license third
parties the right to commercialize products or technologies that we would
otherwise commercialize ourselves or that we attempt to merge with another
entity.
OUR PRODUCTS MAY NOT BE ACCEPTED BY THE MARKET AND MAY NOT BE SUCCESSFULLY
COMMERCIALIZED BECAUSE PHYSICIANS AND PATIENTS MAY NOT PURCHASE OR USE THEM.
Our products are based on new and innovative technologies and the medical
community or the general population may not broadly purchase or use our products
as alternatives to existing methods of treatment. Sales of our products could
be adversely affected by:
- their respective cost;
- concerns related to efficacy;
- the effectiveness of alternative methods of treatment; or
- the lack of sufficient third-party reimbursement.
Any future negative events or other unfavorable publicity involving the use
of our products could also adversely affect acceptance of our products. Both we
and Smith & Nephew have limited direct experience marketing or obtaining
third-party reimbursement for these types of products.
Additionally, TransCyte has only been marketed and sold in the United
States for a limited period of time and may not achieve commercial acceptance in
the United States. Similarly, Dermagraft has only been sold internationally and
may never achieve commercial acceptance in the United States even if it receives
FDA approval.
WE RELY ON THIRD PARTIES TO MARKET, DEVELOP AND SELL OUR PRODUCTS AND THOSE
THIRD PARTIES MAY NOT PERFORM SUCCESSFULLY. OUR DEPENDENCE ON THIRD PARTIES AND
OUR LACK OF SALES AND MARKETING PERSONNEL COULD LIMIT OUR ABILITY TO DEVELOP OUR
PRODUCTS OR TO GENERATE REVENUES FROM PRODUCTS SALES.
We are particularly dependent on Smith & Nephew with respect to the
Dermagraft and the cartilage joint ventures. The amount and timing of resources
to be devoted by Smith & Nephew is not within our control. In addition, the
Dermagraft and cartilage joint venture agreements provide that they may be
terminated prior to their expiration under certain circumstances that are
outside our control. If Smith & Nephew does not perform its obligations as
expected or if Smith & Nephew has a strategic shift in its business focus, it
would be difficult for us to successfully complete the development efforts of
the Dermagraft and cartilage joint ventures. We are relying on Smith & Nephew
and others to market our products both domestically and internationally. Our
success in generating market acceptance of Dermagraft and TransCyte will depend
on the marketing efforts of Smith & Nephew. We cannot control the amount and
timing of resources that Smith & Nephew or others may devote to
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marketing and selling our products. Smith & Nephew may not perform its
obligations under the Dermagraft Joint Venture as expected. Our failure to
achieve broad use of Dermagraft for the treatment of diabetic foot ulcers and,
to a lesser extent, TransCyte for burn care, would hurt our ability to
generate revenues and profits.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY BE UNABLE TO
PREVENT OTHER COMPANIES FROM USING OUR TECHNOLOGY IN COMPETITIVE PRODUCTS. IF
WE INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WE MAY BE PREVENTED FROM
DEVELOPING OR MARKETING OUR PRODUCTS.
Our ability to compete effectively will depend, in part, on our ability to
maintain the proprietary nature of our technology and manufacturing processes.
Our competitors may develop products that are the same as our products and
market those products after our patents expire, or may design around our
existing patents. If this happens, sales of our products would suffer and our
ability to generate revenues will be severely impacted. Furthermore, patents
may be issued to others that prevent the manufacture or sale of our products.
We may have to pay significant fees or royalties to license those patents in
order to continue marketing our products. This would cause our profits on sales
of our products to decline.
Our dependence upon having exclusive rights to the technology covered
under our patent applications and licensed patent applications is subject to
the following risks:
- applications may not result in issued patents;
- current or future issued or licensed patents, trade secrets or know-how
may not afford protection against competitors with similar technologies
or processes;
- any patents issued may be infringed upon or designed around by others;
or
- others may independently develop technologies or processes that are
the same as or substantially equivalent to ours.
In addition to patent protection, we also rely on trade secrets, know-how
and technology advances. We enter into confidentiality agreements with our
employees and others, but these agreements may not be effective in protecting
our proprietary information. Others may independently develop substantially
equivalent information or obtain access to our know-how.
Litigation, which is very expensive, may be necessary to enforce or defend
our patents or rights and may not end favorably for us. Any of our licenses,
patents or other intellectual property may be challenged, invalidated, canceled,
infringed or circumvented and may not provide any competitive advantage to us.
IF THE THIRD-PARTY SUPPLIERS THAT SUPPLY THE MATERIALS NECESSARY TO MANUFACTURE
OUR PRODUCTS DO NOT SUPPLY QUALITY MATERIALS IN A TIMELY MANNER, IT MAY DELAY OR
IMPAIR OUR ABILITY TO DEVELOP AND COMMERCIALIZE PRODUCTS ON A TIMELY AND
COMPETITIVE BASIS OR ADVERSELY AFFECT OUR POTENTIAL FUTURE PROFITABILITY.
Although most of the raw materials used in the manufacture of our
Dermagraft and TransCyte products are available from more than one supplier,
changes in certain critical components could cause the FDA to require us to
prove equivalency of the materials or potentially to modify or perform
additional clinical trials for our Dermagraft and TransCyte products. This
could have the effect of restricting our ability to commercialize our products.
The mesh framework used by us in the manufacture of Dermagraft is available
under a supply agreement with only one FDA-approved manufacturing source.
Similarly, the synthetic mesh framework used by us in the manufacture of
TransCyte is only available under a supply agreement with a different
FDA-approved manufacturing source. Because the FDA approval process requires
manufacturers to specify their proposed suppliers of active ingredients and
certain component parts and packaging materials in their applications, FDA
approval of a new supplier would be required if these materials become
unavailable from the current supplier.
Interruptions in supplies for the manufacture of our Dermagraft and
TransCyte products may occur in the future and we may have to obtain substitute
vendors for these materials. Any significant supply interruption would delay
our clinical trials as well as our product development and marketing programs.
In addition, an uncorrected
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impurity or supplier's variation in a raw material, either unknown to us or
incompatible with our manufacturing process, could prevent or delay our
ability to manufacture products.
IF OUR PRODUCTS THAT ARE IN AN EARLY STAGE OF DEVELOPMENT ARE NEVER SUCCESSFULLY
COMMERCIALIZED WE MAY NOT HAVE REVENUES TO CONTINUE OPERATIONS.
We have products that are in an early stage of development. To date only
TransCyte has been approved for commercial sale, and only Dermagraft has
advanced to clinical trials for the treatment of diabetic foot ulcers in the
United States. However, Dermagraft will still require further marketing
approvals from the FDA, and all of our other products are at earlier stages of
research, development and testing. These products, including additional
indications for Dermagraft and TransCyte, will require significant additional
research and development, as well as extensive preclinical and clinical testing.
Since our products are based on innovative technologies, there are many
reasons why our products may not advance beyond their early stage of
development. These reasons include the possibilities that:
- any or all of these products will be found to be unsafe or ineffective
or otherwise fail to receive necessary regulatory approvals;
- our products are uneconomical to market;
- third parties may hold legal rights that preclude us from marketing
such products; or
- our products fail to achieve market acceptance in light of competing
technologies and products.
RISKS RELATED TO OUR INDUSTRY
- -----------------------------
IF WE FAIL TO OBTAIN REGULATORY APPROVAL TO COMMERCIALLY MANUFACTURE OR SELL ANY
OF OUR PRODUCTS, OR IF APPROVAL IS DELAYED, IT COULD INCREASE THE COST OF
PRODUCT DEVELOPMENT, OR ULTIMATELY PREVENT OR DELAY OUR ABILITY TO SELL OUR
PRODUCTS AND GENERATE REVENUES.
We and our collaborators are subject to extensive government regulation.
The FDA and other state and foreign regulatory authorities require rigorous
preclinical testing, clinical trials and other product approval procedures for
our products. Numerous regulations also govern the manufacturing, safety,
labeling, storage, record keeping, reporting and marketing of our products. The
process of obtaining these approvals and complying with applicable government
regulations is time consuming and expensive. The FDA and other state or foreign
regulatory authorities have limited experience with our technology and products.
As a result, our products are susceptible to requests for clinical modifications
or additional supportive data, or changes in regulatory policy, which could
substantially extend the test period for our products resulting in delays or
rejections. Even after substantial time and expense, we may not be able to
obtain regulatory product approval by the FDA or any equivalent state or foreign
authorities. If we obtain regulatory product approval, the approval may limit
the uses for which we may market the product.
For example, in June 1998, the FDA indicated that our marketing application
for Dermagraft for the treatment of diabetic foot ulcers was not approvable
without supportive data from an additional clinical trial. We are currently
conducting the additional clinical trial of Dermagraft in the treatment of
diabetic foot ulcers as requested by the FDA. If the trial is not successful
or if we do not receive FDA approval at the conclusion of the clinical trial
it will prevent or at least delay sales of Dermagraft.
In addition, although the FDA has classified TransCyte as a medical
device, the state of California and the state of New York have notified us
that we must register as a tissue bank in order to manufacture or distribute
TransCyte in those states. Although many states do not regulate tissue banks,
there are certain other states besides California and New York that do.
Such states could take a position similar to California and New York with
regard to the regulatory status of TransCyte. In June 1997, we submitted a
request to the FDA for an advisory opinion that the FDA's regulation of this
product as a medical device preempts New York from regulating it as human
tissue under a different licensing scheme. Both New York and California have
provided written submissions to the FDA urging the agency to deny our request.
To date, the FDA has not ruled. If states are permitted to regulate TransCyte
as a human tissue, we and our customers could be subjected to a costly new
layer of regulation. In addition, under
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the laws of some states that regulate tissue, including New York and Florida,
the sale of human tissues for valuable consideration is prohibited. We
are currently distributing TransCyte in the State of New York under a
provisional tissue banking license. Due to the similarities of the products,
regulations applicable to TransCyte are also expected to apply to our Dermagraft
product as well.
After regulatory approval is obtained, our product, its manufacture and
related manufacturing facilities will be subject to continual review and
periodic inspections. Any subsequent discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on the
product or manufacturer, including withdrawal of the product from the market.
For example, after inspecting the manufacturing facility early in 1998 in
conjunction with our application for the approval of Dermagraft for the
treatment of diabetic foot ulcers, the FDA notified us of numerous
objectionable conditions under a Form FDA 483 list of observations. These
observations concerned our manufacturing processes and systems for Dermagraft
and TransCyte. In March 1998, the FDA issued a warning letter requiring us to
investigate and correct the conditions identified by the FDA. In September
1998, we successfully completed a reinspection by the FDA of our manufacturing
facility and quality systems. However, we must continue to pass future
inspections by the FDA of our manufacturing facility.
Our research and development activities and operations involve the
controlled use of small quantities of radioactive compounds, chemical solvents
and other hazardous materials. In addition, our business involves the growth
of human tissues. In the event of an accident, we could be held liable for
any damages that result. In addition, these research activities and operations
are subject to continual review under the Occupational Safety and Health Act,
the Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other federal, state or local laws and
regulations which impact our ability to develop and market our products.
HEALTHCARE REFORM MEASURES AND REIMBURSEMENT PROCEDURES MAY PREVENT US FROM
OBTAINING AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR PRODUCTS THAT IN TURN WOULD
DECREASE OUR ABILITY TO GENERATE REVENUES.
Our ability to commercialize products successfully will 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. In the United States,
government and other third-party payors are increasingly attempting to contain
healthcare costs by limiting both coverage and the level of reimbursement for
new products approved for marketing by the FDA. In some cases, such payors may
refuse to provide any coverage for uses of approved products for indications
that the FDA has not granted marketing approval. Initiatives to reform
healthcare delivery are increasing these cost containment efforts. As managed
care organizations continue to expand as a means of containing healthcare costs,
we believe there may be attempts by such organizations to restrict the use of,
delay authorization to use, or limit coverage and the level of reimbursement
for, new products, such as those being developed and commercialized by us,
pending completion of cost/benefit analyses of such products by those managed
care organizations. Internationally, where national healthcare systems are
prevalent, little if any funding may be available for new products, and cost
containment and cost reduction efforts can be more pronounced than in the United
States.
We have supported health economics studies and research and have developed
cost offset or cost-effectiveness models with respect to our TransCyte and
Dermagraft products in an effort to help obtain appropriate and adequate third
party coverage and reimbursement for these products. However, these products
are novel and as such are subject to inherent uncertainty in the area of
reimbursement. Adequate government or private payor coverage or levels of
reimbursement may not be available for any of our products and we may not be
able to maintain price levels sufficient for the realization of an appropriate
return on our investment in such products. Failure to obtain sufficient
coverage and reimbursement levels for uses of our products could decrease the
market acceptance of such products.
DISCOVERIES OR DEVELOPMENTS OF NEW TECHNOLOGIES BY OUR COMPETITORS OR OTHERS MAY
MAKE OUR PRODUCT LESS COMPETITIVE OR MAKE OUR PRODUCTS OBSOLETE.
The biomedical technology industry is subject to rapid, unpredictable and
significant technological change. Competition from universities, research
institutions and pharmaceutical, chemical and biotechnology companies is
intense. Many competitors or potential competitors have greater financial
resources, research and development
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<PAGE>
capabilities and manufacturing and marketing experience than we do. In
general, the first biomedical product to be commercialized for a particular
therapeutic indication is often at a significant competitive advantage
relative to later entrants to the market. Accordingly, the relative speed
with which we can develop products, complete clinical trials, obtain
regulatory approvals and develop commercial manufacturing capability may
affect our competitive position.
In the area of burns, we compete primarily with cadaver skin or porcine
tissue. We are also aware of several companies that have developed
technologies involving processed cadaver skin used as a skin replacement, such
as LifeCell Corporation, or sheets of cells grown from the patient's own skin,
such as Genzyme Tissue Repair and Cell Culture Technology. Integra Life
Sciences or Integra has Integra Artificial Skin consisting of a bovine or
animal-derived matrix with a synthetic covering, for the treatment of burn
wounds. In June 1999, Integra announced that Johnson & Johnson Medical
obtained worldwide exclusive marketing and sales rights, excluding Japan, to
Integra Artificial Skin. In addition, we are aware that Ortec International,
Inc. has completed a pilot clinical trial with its composite cultured skin
product, consisting of two types of skin cells, fibroblasts and keratinocytes,
on a bovine or animal-derived collagen sponge, for the treatment of burn
wounds. Several other companies are also developing or plan to develop growth
factors as a treatment for second degree or small first degree burns.
In the area of diabetic foot ulcers, Chiron Corporation and the Ortho-
McNeil division of Johnson & Johnson have received FDA approval and are
marketing a platelet-derived growth factor for the treatment of diabetic foot
ulcers. In addition, Organogenesis, Inc. has completed clinical trials for
the use of Apligraf, a product using cultured human cells seeded onto a bovine
or animal-derived matrix, for the treatment of diabetic foot ulcers.
Organogenesis received FDA approval to market Apligraf in the treatment of
venous ulcers or "leg ulcers" in May 1998. Organogenesis has also entered
into an alliance with Novartis Pharma AG for the marketing of Apligraf.
With respect to cartilage repair, Genzyme Tissue Repair is currently
selling a service to process a patient's own cartilage cells as a treatment
for defects in the knee. We are also aware that Integra and Osiris
Therapeutics, Inc. are engaged in research on cultured cartilage products.
Other factors such as our ability to secure regulatory approval for our
products, to implement production and marketing plans, and to secure adequate
capital resources will also impact our competitive position. We may not have
the resources to compete successfully.
IF WE ARE NOT ABLE TO ATTRACT KEY PERSONNEL AND ADVISORS OR IF OUR CURRENT
MANAGEMENT AND TECHNICAL PERSONNEL LEAVE THE COMPANY, IT MAY ADVERSELY AFFECT
OUR ABILITY TO OBTAIN FINANCING OR DEVELOP OUR PRODUCTS.
Our success will depend in large part upon our ability to attract and
retain qualified scientific, administrative and management personnel as well as
the continued contributions of our existing senior management and scientific and
technical personnel. We face strong competition for such personnel and we
cannot give any assurance that we will be able to attract or retain such
individuals. In particular, if we lose the services of either Arthur J.
Benvenuto, our chairman and chief executive officer, or Dr. Gail K. Naughton,
our president and chief operating officer, it will limit our ability to achieve
our business objectives and could make it difficult to raise additional funds or
to attract partners.
WE MAY NOT HAVE ADEQUATE INSURANCE AND IF WE BECOME SUBJECT TO PRODUCT LIABILITY
CLAIMS, IT MAY RESULT IN REDUCED DEMAND FOR OUR PRODUCTS OR DAMAGES THAT EXCEED
OUR INSURANCE LIMITATIONS.
The use of any of our products, whether for commercial applications or
during clinical trials, exposes us 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 healthcare
institutions, contract laboratories or others selling or using such products.
We currently maintain product liability insurance coverage; however, such
insurance coverage might not be sufficient to fully cover any potential claims.
Such insurance can be expensive and difficult to obtain. Adequate insurance
coverage may not be available in the future at an acceptable cost, if at all, or
in sufficient amounts to protect us against any such liability. Any product
liability claim in excess of insurance coverage would have to be paid out of our
cash reserves which would have a detrimental effect on our financial condition.
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DISCOVERY OF PREVIOUSLY UNKNOWN PROBLEMS WITH A PRODUCT, MANUFACTURER, OR
FACILITY, COULD RESULT IN PRODUCT RECALLS OR WITHDRAWALS AND SIGNIFICANTLY
REDUCE OUR RESOURCES.
Our tissue repair and transplantation products are complex and must be
manufactured under well-controlled and sterile conditions, in addition to
meeting strict product release criteria. Any manufacturing errors or defects,
or uncorrected impurity or variation in a raw material, either unknown or
undetected by us, could affect the quality and safety of our products. If any
of the defects were material, we could be required to undertake a market
withdrawal or recall of the affected products. The cost of a market withdrawal
or product recall could significantly reduce our resources.
IF WE OR OUR SUPPLIERS FAIL TO BE YEAR 2000 OR Y2K COMPLIANT IT COULD CAUSE
INTERRUPTIONS IN OUR SUPPLY OF PRODUCTS FOR CLINICAL TRIALS, DELAY THE
COMPLETION OF THE TRIALS, AND GENERATE SUBSTANTIAL EXPENSES FOR OUR BUSINESS.
The Y2K issue is a situation that results from computer systems and
software products being coded using two digits rather than four to define the
applicable year. Computer systems and software products utilize embedded
technology that is time-sensitive and may recognize a date as the year 1900
rather than the year 2000 which could cause computer system failures and errors
leading to a disruption of our business operations. The Y2K issue could affect
not only our operations but also the operations of our business partners,
customers, suppliers and regulatory agencies among others.
In response to the risks presented by the Y2K issue, we developed and have
implemented a Y2K compliance plan. We approached the Y2K issue in two specific
phases. Phase I involved the review and analysis of computer systems, software
products, equipment and vendor relationships considered critical to our
operations. Phase II involved the review and analysis of computer systems,
software products, equipment and vendor relationships not considered critical to
our operations. In both phases, we have used qualified independent consultants
to help achieve compliance goals. We currently estimate the cost of our phase I
and II activities to be less than $200,000, exclusive of internal manpower
costs. These estimated costs are primarily for consulting services and
equipment upgrades. We do not expect these costs to be material to our financial
condition or results of operations.
With respect to phase I and II, substantially all required system
modifications have been made to computer servers, operating systems and
telecommunication network equipment. We identified several pieces of
manufacturing and laboratory equipment and facility access control systems
which are currently being upgraded. We believe all significant Y2K problems
relating to systems considered critical to our operations have been identified
and specific plans are in place to assure Y2K compliance, thereby reducing the
risk of a critical Y2K failure or error. We are also assessing approximately
260 vendor relationships. Every reasonable effort will be made to identify
and correct or develop contingency plans for those that are not Y2K compliant.
We expect to complete a formal contingency plan relative to undetected Y2K
problems prior to December 1999. However, at the current time, there does not
appear to be any critical piece of equipment for which backup cannot be
provided. The worst case scenario would likely involve adding additional
short-term labor to perform repetitive manufacturing tasks. There could also be
some incremental costs of replacing current testing capabilities should on-site
test equipment fail. While these extra costs have not yet been estimated, they
are currently not expected to have a material impact on our financial condition
or operating results. In a worst case scenario, if we have not been able to
identify all relevant Y2K issues or resolve any third party issues, our supply
of products and clinical trials could be delayed resulting in substantial
expenses.
RISKS RELATED TO THIS OFFERING
- ------------------------------
OUR STOCK PRICE COULD CONTINUE TO BE VOLATILE AND YOUR INVESTMENT COULD SUFFER A
DECLINE IN VALUE, ADVERSELY AFFECTING OUR ABILITY TO RAISE ADDITIONAL CAPITAL
WHICH COULD IN TURN DELAY COMMERCIALIZATION OF OUR PRODUCTS.
The market price of our common stock has fluctuated significantly in recent
years and is likely to fluctuate in the future. For example, from September
1997 to October 1999, our common stock has closed as high as $17.00 per share
and as low as $1.97 per share. Factors contributing to this volatility have
included:
- the results of research or scientific discoveries by us or others;
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- progress or the results of preclinical and clinical trials;
- new technological innovations;
- the approval and commercialization of products;
- developments concerning technology rights;
- litigation and related developments; and
- public perception regarding the safety and efficacy of our products.
Fluctuations in our financial performance from period to period, the issuance of
analysts' reports and general industry and market conditions also tend to have a
significant impact on the market price of our common stock.
BECAUSE THIS OFFERING IS NOT BEING UNDERWRITTEN YOU RUN THE RISK OF RELYING UPON
INFORMATION IN THIS PROSPECTUS WHICH HAS NOT BEEN INDEPENDENTLY REVIEWED BY A
PROFESSIONAL UNDERWRITER FOR ACCURACY OR COMPLETENESS.
Because this offering is not being underwritten, this prospectus has not
undergone due diligence review by a professional underwriter whereby such
underwriter would make efforts to independently verify the accuracy or
completeness of information included in this prospectus. As a result, you run
the risk of relying upon information in this prospectus which has not been
independently verified.
THE LIQUIDITY OF YOUR WARRANTS IS UNCERTAIN BECAUSE THERE WILL BE NO PUBLIC
MARKET FOR THE WARRANTS WHICH WILL LIMIT YOUR ABILITY TO RESELL THE WARRANTS AND
WILL IMPACT THE PRICE YOU ARE ABLE TO OBTAIN FOR THE WARRANTS.
Because the warrants will not be traded on the Nasdaq National Market there
will be no public market for the warrants. As a result, liquidity of the
warrants is uncertain and limited, and you may not be able to resell the
warrants at or above the price you paid, if at all.
FUTURE SALES OF OUR SECURITIES IN THE PUBLIC MARKET COULD LOWER OUR STOCK PRICE
AND IMPAIR OUR ABILITY IN NEW STOCK OFFERINGS TO RAISE FUNDS TO CONTINUE
OPERATIONS.
The market price of our securities could drop due to sales of a large
number of our securities or the perception that these sales could occur. Such
sales also might make it more difficult for us to sell equity securities in the
future at a price that we deem appropriate.
PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
IN THE NET TANGIBLE BOOK VALUE OF THEIR STOCK.
You will suffer immediate and substantial dilution in this offering. For
example, assuming an offering price of $4.00 per unit, the pro forma net
tangible book value of the common stock as of June 30, 1999 would be $0.55 per
share resulting in dilution to you of $3.45 per share. To the extent that the
warrants offered with the units or other outstanding warrants or options to
purchase the common stock are exercised, there will be further dilution. In
addition, to the extent that at any time during the 60-day period following the
closing of this offering, we sell any additional shares of common stock or
securities convertible into our common stock for a per share price that is less
than the price per unit of the units offered in this offering, we have agreed,
with some exceptions, to pay the investors in this offering an amount equal to
the difference between what we sold shares of common stock or convertible
securities in any such transaction and what the investors paid for such
equivalent shares of common stock in this offering. This difference may be paid
in either cash or additional shares of our common stock. Such payment will
result in additional expense or dilution.
THE LACK OF A MINIMUM OFFERING REQUIREMENT IN THIS OFFERING MAY LIMIT OUR
ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES.
In connection with this offering, the amount of funds we may raise is
uncertain. In the event we do not raise sufficient funds, we may not accomplish
our business objectives.
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<PAGE>
OUR CHARTER DOCUMENTS AND STOCKHOLDER RIGHTS PLAN MAY PREVENT US FROM
PARTICIPATING IN TRANSACTIONS THAT COULD BE BENEFICIAL TO YOU.
Our stockholder rights plan and provisions in our certificate of
incorporation and bylaws may discourage transactions involving an actual or
potential change in our ownership, including transactions in which you might
otherwise receive a premium for your shares over the then-current market prices.
These provisions also may limit your ability to approve transactions that you
deem to be in your best interests. In addition, our board of directors may
issue shares of preferred stock without any further action by you. Such
issuances may have the effect of delaying or preventing a change in our
ownership.
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS PROSPECTUS MAY CONTAIN
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED IN THE SECTION ENTITLED "RISK FACTORS," AS
WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS OR IN DOCUMENTS
INCORPORATED BY REFERENCE. WE ARE NOT OBLIGATED TO UPDATE OR REVISE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT NEW EVENTS OR CIRCUMSTANCES.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public on the SEC's website at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings we make with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
1. Our annual report on Form 10-K for the fiscal year ended December 31,
1998, as amended on September 15, 1999, including certain information
in our definitive proxy statement in connection with our 1999 annual
meeting of stockholders;
2. Our quarterly report on Form 10-Q for the quarterly period ended March
31, 1999;
3. Our quarterly report on Form 10-Q for the quarterly period ended June
30, 1999, as amended on August 20, 1999 and September 15, 1999;
4. Our proxy statement for our annual meeting of stockholders held on May
25, 1999;
5. Our current report on Form 8-K filed May 28, 1999, as amended on
November 2, 1999;
6. The description of our common stock contained in our registration
statement on Form 8-A filed July 28, 1992, including any amendments or
reports filed for the purpose of updating such descriptions; and
7. The description of our preferred stock purchase rights, contained in
our registration statement on Form 8-A filed on January 6, 1995,
including any amendments or reports filed for the purpose of updating
such descriptions.
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The reports and other documents that we file after the date of this
prospectus will update and supersede the information in this prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
Advanced Tissue Sciences, Inc.
10933 North Torrey Pines Road
La Jolla, California 92037
(858) 713-7300
Attn: Investor Relations
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. WE ARE NOT MAKING OR AUTHORIZING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THE DOCUMENT.
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USE OF PROCEEDS
Assuming an offering price of $4.00 per unit, we estimate that the net
proceeds from this offering will be approximately $14.9 million, after deducting
our estimated offering expenses. If shares of our series B preferred stock are
submitted for conversion and we can redeem those shares, we intend to use up to
$5.4 million of the net proceeds to redeem such shares of our series B preferred
stock. We expect the balance of the net proceeds of this offering will be used
to fund existing operations. If we receive less than all of the net proceeds
estimated above either due to a lower purchase price per unit, fewer units being
sold or both, there will be less proceeds available to fund our existing
operations. In addition, should we receive less than all the net proceeds, we
will need to raise additional funds from the sources described below.
We will require substantial additional funds other than those raised in
this offering to conduct our existing operations in the future. We believe that
our existing resources, including the proceeds of this offering and interest
earned thereon, together with anticipated funding of estimated reimbursable
costs, equity investments and milestone payments under collaborative agreements
will be sufficient to support our current operations until approximately June
2000. We are pursuing funds from each of the above sources. However, we may
not be able to raise sufficient funds from these other sources. Pending
application of the proceeds as described above, we intend to invest the net
proceeds of this offering in investment-grade, interest-bearing instruments.
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DILUTION
As of June 30, 1999, the net tangible book value applicable to our common
stockholders was approximately $11.6 million, or $0.22 per share. "Net tangible
book value per share" represents the amount of our total tangible assets reduced
by total liabilities and the liquidation value of our preferred stock
outstanding, divided by the number of shares of common stock we have
outstanding.
Assuming we sell all 3,750,000 units at $4.00 per unit, and after giving
effect to purchases of our common stock by Inamed Corporation since June 30,
1999, the pro forma net tangible book value of the common stock as of June 30,
1999 would have been $31.0 million, or $0.55 per share, after deducting the
estimated expenses of this offering. This represents an immediate increase in
net tangible book value of $0.25 per share to existing stockholders and an
immediate dilution of $3.45 to the investors on purchasing shares of common
stock in this offering. "Dilution per share" represents the difference between
the price per share of common stock paid by the investors in this offering and
the net tangible book value per share at June 30, 1999 as adjusted to give
effect to the sale of 3,750,000 units in this offering and to purchases of our
common stock by Inamed Corporation since June 30, 1999. The dilution to
investors in this offering will be increased to the extent we sell less than
3,750,000 units.
The following table illustrates the dilution per share taking into account
the estimated expenses of this offering:
Assumed public offering price per share $ 4.00
------
Net tangible book value per share as of June 30, 1999 0.22
Increase to present stockholders due to Inamed stock purchases 0.08
Increase to present stockholders due to this offering 0.25
------
Pro forma net tangible book value after this offering 0.55
------
Dilution to investors in this offering $ 3.45
======
_________
Our calculations do not assume the exercise of stock options and
warrants exercisable for 6,010,751 shares of common stock outstanding
on June 30, 1999 or the up to 1,750,000 shares of common stock that
could be issued as a result of the exercise of warrants related to the
units to be sold in this offering. To the extent these options and
warrants are exercised, there could be further dilution to investors.
We estimated expenses of the offering to be $125,000.
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PLAN OF DISTRIBUTION
The units are being offered directly by us to a limited number of
investors. We determined the price of the units through negotiations between us
and the purchasers which took place after effectiveness of the registration
statement. We did not accept any investor funds prior to effectiveness of the
registration statement. The price of the units we offer could be below the
current market price. This would result in dilution to existing stockholders.
It could also have an adverse effect on the market for our securities. We
cannot be certain that we will be able to sell all of the units offered, and it
is possible we will close this offering for less than the 3,750,000 units being
offered.
Our chief executive officer, with the assistance of other officers as
needed, will participate in the sale of the common stock to the investors.
These officers will not receive any compensation for these activities. They
will not be deemed to be brokers pursuant to Rule 3a4-1 under the Exchange Act.
They will seek to identify prospective investors from among institutional and
other potential investors known to have investments in the biotechnology
industry, as well as current stockholders who may be interested in increasing
their investment in Advanced Tissue Sciences. No broker-dealers will
participate as potential investors.
On the closing date, all investor funds will be transmitted directly to us.
Upon receipt of such funds, we will instruct our transfer agent to deliver the
shares of common stock and we will deliver the warrants to the purchasers. The
offering will not continue after the closing date.
In order to comply with the securities laws of certain states, if
applicable, the units will be sold in these jurisdictions only through
registered or licensed brokers or dealers.
We will pay all the expenses for the offering and the sale of the units to
the public. We estimate such expenses to be $125,000.
DESCRIPTION OF WARRANTS
Each unit includes a warrant to purchase up to 0.46666666 shares of our
common stock at a purchase price of $4.00 per whole share, subject to certain
adjustments described below. The warrants may be exercised at any time
beginning on the date of the warrant and ending three years following such date.
The warrants are not tradable on the Nasdaq National Market but separate
immediately upon issuance from the common stock comprising the Units, which
common stock is traded on the Nasdaq National Market under the symbol "ATIS."
The warrant provides that the exercise price and the number of shares of
our common stock issuable upon exercise of the warrant will be adjusted in the
event of any stock subdivisions, combinations, stock dividends or other
distributions with respect to our common stock. The warrant further provides
that in the case of our merger or consolidation with or into another corporation
or any reclassification of our common stock, the holder of the warrant will have
the right, upon subsequent exercise of the warrant, to receive the kind and
amount of securities that could be received upon such merger, consolidation or
reclassification had the warrant been exercised immediately prior to the event.
In addition, the purchase price will be appropriately adjusted.
Fractional shares of our common stock will not be issued upon exercise of
the warrants. Instead a cash adjustment based on the last sale price of our
common stock as reported on the Nasdaq National Market or, if applicable, as
reported on a national securities exchange, on the date of the exercise will be
made. The warrants do not confer upon its holder any voting, preemptive or
other stockholder rights.
The warrants may be exercised at any time commencing on the date of their
issuance and ending three years following such date, provided that at the time
of exercise we have filed a current prospectus with the SEC covering the shares
of common stock issuable upon exercise of the warrants and such shares have been
qualified under applicable state securities laws. In order to exercise the
warrants, the holders must surrender to us a duly executed certificate
evidencing the warrants. This certificate must be accompanied by payment in
full payable to us for the purchase price multiplied by the number of shares of
our common stock to be acquired pursuant to such exercise.
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LEGAL MATTERS
Brobeck, Phleger & Harrison LLP, San Diego, California, is giving its
opinion on the validity of the securities you are purchasing in this offering.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Advanced Tissue Sciences, Inc. and the combined
financial statements of the Dermagraft Joint Venture included in our annual
report on Form 10-K for the year ended December 31, 1998, as set forth in their
reports, which are incorporated by reference in this prospectus and elsewhere in
the registration statement. Our financial statements are incorporated by
reference in reliance upon Ernst & Young LLP's reports, given on their authority
as experts in accounting and auditing.
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WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT IS
IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT
IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN
OFFER TO SELL, NOR IS IT AN OFFER TO BUY, THESE SECURITIES IN ANY STATE IN WHICH
THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS
COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER THAT
DATE.
3,750,000 UNITS
ADVANCED TISSUE
SCIENCES, INC.
UNITS CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE WARRANT TO PURCHASE UP
TO 0.46666666 OF A SHARE OF OUR COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
NOVEMBER 5, 1999
