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DRAFT: 9/16/96
As filed with the Securities and Exchange Commission on October 11, 1996
Registration No. 333-12613
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SERAGEN, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of
incorporation or organization)
04-2662345
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(I.R.S. Employer
Identification No.)
97 South Street, Hopkinton, Massachusetts 01748
(508) 435-2331
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(Address, including zip code,
and telephone, including area code,
of registrant's principal executive offices)
George W. Masters
Chief Executive Officer
Seragen, Inc.
97 South Street
Hopkinton, MA 01748
(508) 435-2331
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(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Copy to:
Jeffrey M. Wiesen, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
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Approximate date of commencement of proposed sale to public: As soon as
practicable 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. / /
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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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier 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. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
PROSPECTUS
SERAGEN, INC.
13,833,406 SHARES OF COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------------------
The 13,833,406 shares of Common Stock of Seragen, Inc., a Delaware
corporation (the "Company" or "Seragen"), offered hereby are being sold by the
selling stockholders identified herein (the "Selling Stockholders"). Such offers
and sales may be made on one or more exchanges, in the over-the-counter market,
or otherwise, at prices and on terms then prevailing, or at prices related to
the then-current market price, or in negotiated transactions, or by underwriters
pursuant to an underwriting agreement in customary form, or in a combination of
any such methods of sale. The Selling Stockholders may also sell such shares in
accordance with Rule 144 under the Securities Act of 1933, as amended (the "1933
Act"). The Selling Stockholders are identified and certain information with
respect to them is provided under the caption "Selling Stockholders" herein, to
which reference is made. The expenses of the registration of the securities
offered hereby, including fees of counsel for the Company, will be paid by the
Company. The following expenses will be borne by the Selling Stockholders:
underwriting discounts and selling commissions, if any, and the fees of legal
counsel, if any, for the Selling Stockholders. The filing by the Company of this
Prospectus in accordance with the requirements of Form S-3 is not an admission
that any person whose shares are included herein is an "affiliate" of the
Company.
The Selling Stockholders have advised the Company that they have not
engaged any person as an underwriter or selling agent for any of such shares,
but they may in the future elect to do so, and they will be responsible for
paying such a person or persons customary compensation for so acting. The
Selling Stockholders and any broker executing selling orders on behalf of any
Selling Stockholders may be deemed to be "underwriters" within the meaning of
the 1933 Act, in which event commissions received by any such broker may be
deemed to be underwriting commissions under the 1933 Act. The Company will not
receive any of the proceeds from the sale of the securities offered hereby. The
Common Stock is listed on the Nasdaq Stock Market ("Nasdaq") under the symbol
SRGN. On October 7, 1996, the closing sale price of the Common Stock, as
reported by Nasdaq, was $2 7/8 per share.
--------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
No person is authorized in connection with any offering made hereby to
give any information or to make any representations other than as contained in
this Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company. This Prospectus is
not an offer to sell, or a solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
--------------------------
The date of this Prospectus is October 11, 1996.
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AVAILABLE INFORMATION
---------------------
The Company is subject to certain informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at its regional
offices located at 7 World Trade Center, Suite 1300, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such reports, proxy statements and other information can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, DC 20549 at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov. Additional
updating information with respect to the securities covered herein may be
provided in the future to purchasers by means of appendices to this Prospectus.
The Company has filed with the Commission in Washington, DC a
registration statement (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the 1933 Act with respect to
the securities offered or to be offered hereby. This Prospectus does not contain
all of the information included in the Registration Statement, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information about the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits
thereto.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to Seragen, Inc., 97 South Street, Hopkinton, MA 01748, telephone
(508) 435-2331 and directed to the attention of Thomas N. Konatich, Vice
President for Finance and Chief Financial Officer.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C>
RISK FACTORS........................................................... - 4 -
GLOSSARY OF TECHNICAL TERMS............................................ - 13 -
THE COMPANY............................................................ - 15 -
SELLING STOCKHOLDERS................................................... - 17 -
PLAN OF DISTRIBUTION................................................... - 18 -
LEGALITY OF COMMON STOCK............................................... - 19 -
EXPERTS .............................................................. - 19 -
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...................... - 19 -
</TABLE>
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RISK FACTORS
An investment in the shares being offered by this Prospectus involves a
high degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
carefully consider the following risk factors before purchasing the shares
offered hereby. This Prospectus contains and incorporates by reference
forward-looking statements within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Reference is made in particular to the
discussion set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (the Form 10-K") and the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30
1996, and under "Business" in the Form 10-K, incorporated in this Prospectus by
reference. Such statements are based on current expectations that involve a
number of uncertainties including those set forth in the risk factors below.
Actual results could differ materially from those projected in the
forward-looking statements.
EARLY STAGE OF PRODUCT DEVELOPMENT
Seragen has not yet marketed or generated revenues from the
commercialization of its potential therapeutic products. All of the Company's
potential products will require significant development, laboratory and clinical
testing and regulatory review prior to their commercialization. There can be no
assurance that the Company's products now in pre-clinical trials will be
successful in human clinical trials, or that unintended or toxic side effects
will not occur. With respect to those products currently in, or which in the
future advance to, various phases of human clinical trials, there can be no
assurance that such products will prove to be efficacious or that unintended or
toxic side effects will not occur. Furthermore, any of these products which are
successfully developed over the course of several years of rigorous pre-clinical
and clinical testing will be subject to significant regulatory review and
approval, which may take an additional several years, prior to their commercial
sale. There can be no assurance that, even after such time and expenditures,
regulatory approvals will be obtained for any products developed by the Company.
Moreover, if regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which it may be marketed. Further,
even if such regulatory approval is obtained, a marketed product and its
manufacturer are subject to continual review, and discovery of previously
unknown problems with a product or manufacturer may result in restrictions on
such product or manufacturer, including withdrawal of the product from the
market. See "Business--Government Regulation" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "1995 Form 10-K").
Generally, only a small percentage of new pharmaceutical products are approved
for sale. No assurance can be given that the Company will succeed in the
development and marketing of any new therapeutic products, or that such
products, if developed, can be produced in commercial quantities at reasonable
costs to the Company. Seragen expects that its products currently at the most
advanced stages of development will not be available for commercial sale or use
for several years, if at all. See "Business--Products" and "Business--Product
Development Update" in the 1995 Form 10-K.
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HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT
The Company has experienced significant operating losses in each year
since its inception and as of June 30, 1996, had an accumulated deficit of
approximately $162 million since May 31, 1985. The Company expects to incur
additional operating losses over the next several years and expects cumulative
losses to increase as the Company's research and development and clinical trial
efforts expand. The Company's ability to achieve a profitable level of
operations is dependent, in large part, on completing product development and
commercialization, obtaining regulatory approvals for its products, and making
the transition from research and development to manufacturing and marketing.
There can be no assurance that the Company will ever achieve a profitable level
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 (the "June 30, 1996 Form 10-Q").
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL FUNDING
The Company has expended and will continue to expend substantial funds
to complete the research and development of its products, establish
commercial-scale manufacturing facilities and market its products. The Company
currently has only limited manufacturing facilities, limited internal capability
to conduct and evaluate human clinical trials, and no sales or marketing
organization. The Company will require funds for these purposes. The Company
anticipates that its available cash and existing sources of funding should be
adequate to maintain its currently planned operations until approximately
December 31, 1996, including the continuation of a pivotal trial for cutaneous
T-cell lymphoma ("CTCL"). It is assumed that the Company's strategic partner Eli
Lilly and Company ("Lilly"), will provide the funds required for the CTCL
clinical trial under the terms of its agreement with the Company. Lilly,
however, has the right to terminate its funding of this trial based on findings
that occur as clinical trials progress and input from regulatory agencies is
received, guided by the medical need for and potential commercial reward of IL-2
Fusion Proteins for this indication. If Lilly exercises its option to terminate
its funding of the CTCL trial, the Company will need additional funding in order
to carry on the trial. In addition, the Company will need additional funding in
order to conduct pivotal trials in other disease indications. The Company's
ability to finance its operations beyond October 15, 1996 is dependent upon its
ability to raise additional capital through equity or debt financings,
possible additional payments under the strategic alliance with Lilly, or such
other sources of financing, including partnerships, as may be required. No
assurance can be given that additional funds will be available to the Company
to finance its development on acceptable terms, if at all, or, if available,
that such arrangements would not require the Company to relinquish rights to
certain products or markets in exchange for funding. In addition, no assurance
can be given that Seragen will receive any payments under the alliance with
Lilly other than the initial $10 million payment received in August 1994 (see
"The Company"), and approximately $4.9 million reimbursement for clinical trial
costs received as of June 30, 1996. If additional funds are raised by issuing
equity securities, further dilution to existing stockholders may result. If
adequate additional funds are not available from operations or other sources of
financing, the Company's business will be materially and adversely affected. If
adequate additional funds are not available, the Company may determine to
allocate available financial resources only to certain product development
programs. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the June 30, 1996 Form 10-Q.
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CONTROL BY BOSTON UNIVERSITY; CONFLICTS OF INTEREST
Boston University owns approximately 50% of the total shares of
outstanding Common Stock of the Company, and is able to elect a majority of the
Directors and control the corporate actions of the Company. Boston University is
a charitable, non-profit corporation, and as such its operations and investments
are subject to review and monitoring by the Attorney General of Massachusetts.
Boston University has agreed to provide the Attorney General with information
concerning its investment in Seragen. Although Boston University has advised
Seragen that it currently has no intention of selling any shares of Common Stock
at any particular time, Boston University may determine to sell all or a portion
of the shares of Common Stock held by it or otherwise take actions which the
Trustees of Boston University deem to be in the best interests of Boston
University but which may be adverse to the interests of all other stockholders
of the Company. If the Attorney General were to conclude that Boston
University's investment in the Company was not prudent, he could institute a
suit to require Boston University to divest itself of all or part of its shares
of Common Stock. Due to its control of the Board of Directors of Seragen and
certain of its agreements with the Company to register its shares, Boston
University has the ability to require the Company to file a registration
statement under the 1933 Act with respect to such a sale, subject to the
agreements described above. Such sales, whether or not pursuant to a
registration statement, could have a material adverse effect on prevailing
market prices and impair the Company's ability to raise capital at such time
through the sale of its equity securities.
RELIANCE ON FUSION PROTEIN TECHNOLOGY; TECHNOLOGICAL CHANGE AND COMPETITION
Although the Company has products under development for a number of
different disease indications, all of the Company's potential products are based
on fusion protein technology. The Company's future success is entirely dependent
on the clinical and commercial viability of fusion protein products. The
biotechnology industry is subject to rapid and significant technological change.
Competitors of the Company are numerous and include, among others, major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. There can be no assurance that the
Company's competitors will not succeed in developing other fusion proteins,
technologies and products that are more effective than any which are being
developed by the Company, or which would render the Company's technology and
products obsolete and noncompetitive. Many of these competitors (including
certain competitors developing other fusion protein products) have substantially
greater financial and technical resources, and production and marketing
capabilities than does the Company. In addition, many of the Company's
competitors have significantly greater experience than the Company in
undertaking pre-clinical testing and human clinical trials of new or improved
pharmaceutical products and obtaining U.S. Food and Drug Administration ("FDA")
and other regulatory approvals of products for use in health care. The Company
has limited experience in conducting and managing pre-clinical and clinical
testing necessary to obtain such approvals. Although the Company's alliance with
Eli Lilly could enhance its ability to obtain such approvals, there can be no
assurance that the alliance with Eli Lilly will continue. Moreover, even with
such alliance, the Company's competitors may succeed in obtaining FDA approval
for products more rapidly than the Company. If the Company commences significant
commercial sales of its products, it will also be competing with respect to
manufacturing and marketing capabilities, areas in which it has limited or no
experience. See "Business--Competition" in the Company's 1995 Form 10-K.
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DEPENDENCE ON COLLABORATIVE PARTNERS
In August 1994, Seragen entered into a strategic alliance with Lilly
which gives Lilly the exclusive worldwide development, distribution and
marketing rights, except in certain Asian countries, to Seragen's IL-2 Fusion
Protein for the treatment of cancer, and the option to acquire such rights for
other indications for IL-2 Fusion Protein and for other Seragen products under
development. As part of this alliance, Lilly is currently funding the costs of a
Phase III clinical trial for CTCL. Although the Company has received
approximately $4.9 million reimbursement for clinical development costs from
Lilly as of June 30, 1996, Lilly has the right under its agreement with the
Company to terminate its future funding of the CTCL clinical trials.
Accordingly, there can be no assurance that Seragen will receive any further
payments under the alliance. Even if Lilly does continue its funding under the
strategic alliance, there can be no assurance that this collaboration will
result in a successfully commercialized product. If Lilly terminates its funding
of the CTCL clinical trials or declines to exercise its options with respect to
other fusion protein indications, the Company may seek other collaborative
arrangements to develop and commercialize its products in the future. There can
be no assurance that the Company will be able to negotiate acceptable
collaborative arrangements in the future, or that such collaborative
arrangements will be successful.
Lilly has provided substantially all of the Company's revenues for the
current fiscal year. The Company anticipates that all or a significant portion
of its revenues for the remainder of this fiscal year will be derived from
Lilly. There can be no assurance that the Company will receive any further
revenues from Lilly. If the Company does not receive anticipated funding from
Lilly and does not receive adequate additional funds, the Company's business
will be materially adversely affected. See "Additional Financing Requirements
and Access to Capital Funding."
PATENTS, LICENSES AND PROPRIETARY RIGHTS
Seragen has licenses and rights to obtain licenses (many of which are,
or will be, exclusive licenses) to patents and patent applications which have
been filed by its institutional collaborators. In addition, Seragen has itself
been issued patents and has filed applications for a number of patents. There
can be no assurance that any licenses or issued patents will provide the Company
with significant protection against competitors, that patent applications will
result in patents being issued to the Company or its institutional collaborators
or that the Company will be able to exercise its rights to obtain such licenses.
Moreover, in certain circumstances, exclusive licenses may become nonexclusive.
A portion of the Company's technology was transferred to the Company by
Boston University. Boston University acquired such technology in August 1987
from Hafslund Nycomed AS ("Nycomed"), a former stockholder in the Company. Under
the terms of the agreement governing the transfer from Boston University to the
Company, the Company is required to pay Boston University and Nycomed certain
royalties on the sales by the Company of any products covered by such
technology. In addition, Boston University retains a security interest in the
technology and could reacquire all ownership rights in the technology upon a
default by the Company under the terms of such agreement. The events which would
allow Boston University to reacquire ownership rights to the technology are
continuing default by the Company under the agreement, a default under any
agreement or instrument evidencing borrowing by the Company guaranteed by Boston
University, the Company suspending or discontinuing its business, or the
bankruptcy or insolvency of the Company. See "Certain Transactions" and
"Business--Patents, Licenses and Proprietary Rights" in the
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Company's 1995 Form 10-K. The Company is also obligated to pay certain royalties
to Harvard College and others on certain product sales by the Company.
The Company's success will depend, in part, on its ability to obtain
patent protection for its products, both in the United States and in other
countries. The patent position of biotechnology firms generally is highly
uncertain and involves complex legal and factual questions. The Company has
filed and intends to continue to file applications as appropriate for patents
covering both its products and processes. Worldwide, the Company owns or holds
exclusive licensing rights to over 40 issued patents covering certain aspects of
its technology, products, and the methods for their production and use. There
can be no assurance that the Company's patent applications will result in
patents being issued or that, if issued, the patents will afford protection
against its competitors.
Competitors have filed applications for patents or have been issued
patents, and they may obtain additional patents and other proprietary rights,
relating to products intended to be comparable in function to products being
developed by the Company, as well as products or processes competitive with
those of the Company. The scope and validity of such patents, the extent to
which the Company may be required to obtain licenses under any such patents or
other proprietary rights and the cost and availability of such licenses are
presently unknown.
In December 1994, the Company entered into a license agreement with
Ajinomoto Co., Inc. ("Ajinomoto") which provides the Company with worldwide
rights to Ajinomoto's IL-2 gene patents as they relate to the Company's fusion
proteins. The Company is also aware that Ajinomoto has filed a patent
application in Japan for the use of an IL-2 fusion protein for the treatment of
autoimmune diseases. Ajinomoto has informed the Company that there are no
counterpart applications to this patent application outside of Japan, and has
agreed not to assert any of its rights under this patent application against the
Company.
In addition, the Company may need to obtain a license to certain other
United States and foreign patents for certain products or processes contemplated
by the Company. There can be no assurance that licenses will be available from
the owners of such patents or will be available on terms acceptable to the
Company. Moreover, there can be no assurance that all United States and foreign
patents that may pose a risk of infringement have been identified.
The Company also relies upon unpatented proprietary technology. There
can be no assurance that the Company can adequately protect its rights in such
unpatented proprietary technology, or that others will not independently develop
substantially equivalent proprietary information or techniques, otherwise gain
access to the Company's proprietary technology, or disclose such technology. See
"Business--Patents, Licenses and Proprietary Rights" in the Company's 1995 Form
10-K.
STATUTORY AND GOVERNMENT REGULATION
The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation by numerous
governmental authorities in the United States and other countries. Rigorous
pre-clinical and clinical testing requirements and the regulatory approval
process will take a number of years and require the expenditure of substantial
resources. Delays in obtaining regulatory approvals would adversely affect the
marketing of products developed by the Company and the Company's ability to
receive product revenues or royalties. The Company has entered into a strategic
alliance with Lilly in connection with the development, production,
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<PAGE> 11
marketing and sale of its IL-2 fusion protein. If Lilly does not exercise its
options to add future fusion protein molecules to the strategic alliance, the
Company may enter into additional corporate partnerships and other agreements in
connection with the development, manufacturing, marketing and sale of those
products that do not become part of the Lilly alliance. Such arrangements would
be subject to fair trade regulation by numerous governmental and
inter-governmental authorities in the United States and other countries. There
can be no assurance that any agreements entered into by the Company and
international pharmaceutical partners on terms favorable to the Company would be
found to be binding and enforceable if subject to any judicial or administrative
action by any governmental authority. If the agreement with Lilly were
terminated, and the Company failed to establish additional partnerships in
developing, producing, marketing and selling certain of its products, such
failure could have a material adverse effect on the Company.
The Company is also subject to numerous environmental and safety laws
and regulations, including those governing the use and disposal of hazardous
materials. Any violation of, and the cost of compliance with, these regulations
could adversely impact the Company's operations. See "Business--Government
Regulation" in the Company's 1995 Form 10-K.
The Company is unable to predict the extent of adverse government
regulation which might arise from future or pending United States or foreign
legislative or administrative action. See "Business--Government Regulation" in
the Company's 1995 Form 10-K.
LIMITED MANUFACTURING CAPABILITIES
The Company has not yet introduced any therapeutic products
commercially. To be successful, the Company's products must be manufactured in
commercial quantities, in compliance with regulatory requirements, and at
acceptable costs. Although the Company has produced its products in the
laboratory and scaled its production process to pilot levels, production in
commercial quantities will create technical, regulatory and financial challenges
for the Company. In 1993, the Company completed construction of a manufacturing
facility for future production of commercial quantities of fusion proteins and
recently completed the start up and testing of this manufacturing facility. The
fermentation and isolation systems of the new facility are operational and
currently going through validation. There is no assurance, however, that these
systems will be successful in the validation phase, or that the facility will
meet the Company's future needs. Moreover, the Company itself has never engaged
in large-scale manufacturing. Although the Company's ability to engage in
large-scale manufacturing may be enhanced by its alliance with Lilly, there can
be no assurance that the Company's alliance with Lilly will continue. In
addition, in order for the new manufacturing facility to produce material that
can be marketed, it must be inspected and licensed by the FDA and, once
licensed, operated in accordance with current GMP (Good Manufacturing
Practices). The Company has limited manufacturing experience, and no assurance
can be given that it will be able to make the transition to commercial
production successfully. The Company regularly contracts with a variety of firms
for testing and manufacturing services, some of which services are essential to
the Company. Generally, these agreements may be terminated at any time by any of
the parties thereto. No assurance can be given that the Company will be able to
make the transition to commercial production successfully.
The Company initiated a Phase III pivotal clinical trial in patients
with cutaneous T-cell lymphoma with DAB389IL-2 in the first quarter of 1995. The
Company anticipates that the patients enrolled in the projected Phase III
pivotal study would receive DAB389IL-2 produced in the
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Company's new manufacturing facility. Accordingly, a delay in the licensing by
the FDA of the new facility could potentially result in a delay of the approval
for marketing of that product.
NEED FOR COMMERCIAL SALES AND MARKETING CAPABILITIES
Although the Company may market certain of its products through a
direct sales force, if and when regulatory approvals are obtained, it currently
has no marketing or sales staff. Significant additional expenditures, management
resources and time will be required to develop a sales force to the extent that
the Company determines not to, or is unable to, arrange third party distribution
for its products. There can be no assurance that the Company will be able to
establish such a sales force or be successful in gaining market acceptance for
its products. In addition, although Lilly, the Company's strategic partner, has
significant expertise in sales and marketing, there can be no assurance that the
strategic alliance with Lilly will continue or that Lilly will be successful in
selling and marketing the Company's fusion protein products. While health
insurance providers typically cover the cost of in-patient therapy, the entire
health care industry is becoming increasingly price sensitive, and there can be
no assurance that the marketing of the Company's products will be supported by
appropriate reimbursement.
DEPENDENCE ON KEY PERSONNEL
Because of the specialized nature of the Company's business, the
Company's success will depend in large part on its continued ability to attract
and retain highly qualified scientific and business personnel with the skills
and experience appropriate to the Company's stage of development. Competition
for such personnel is intense. The loss of key personnel, or the inability to
attract and retain the highly skilled employees required for the advancement and
expansion of the Company's activities, could adversely affect its business.
UNCERTAIN EXTENT OF REIMBURSEMENT
In both the U.S. and foreign markets, Seragen's ability to
commercialize its products successfully may depend in part on the extent to
which reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
insurers and other organizations. Third-party payors are increasingly
challenging the price and cost-effectiveness of medical products and services.
See "Potential Adverse Impact of National Health Care Reform." Significant
uncertainty may exist 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 to enable Seragen to maintain price levels or sales volume
sufficient to realize an appropriate return on its investment in product
development. In addition, Congress has given drug pricing extensive scrutiny and
proposals have been made to control pricing of pharmaceuticals. Such controls,
if adopted, may further serve to limit the Company's return on its investment in
product development.
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POTENTIAL ADVERSE IMPACT OF NATIONAL HEALTH CARE REFORM
There have been, and the Company expects that there will be, a number
of proposals for a government-directed national health care system in the United
States. Adoption of such a system could limit reimbursement for medical products
and services, and prevent the Company from maintaining price levels sufficient
to realize an appropriate return on its investment in product development.
Although the Company is not able to predict whether any such proposal will be
adopted, the adoption of such reform measures could have a material, adverse
effect on the Company's business financial condition and profitability.
PRODUCT LIABILITY
The testing, marketing and sale of human health care products entail an
inherent risk of allegations of product liability, and there can be no assurance
that product liability claims will not be asserted against the Company. Although
the Company currently maintains what management believes to be adequate product
liability insurance for its current stage of development, such existing coverage
may not be adequate either currently or as and when the Company further develops
products. There can be no assurance that the Company will be able to maintain or
increase its current insurance coverage in the future on acceptable terms or
that any claims against the Company will not exceed the amount of such coverage.
POSSIBLE VOLATILITY OF STOCK PRICE
There has been significant volatility in the market price of securities
of biotechnology companies, including the Common Stock of the Company. Various
factors and events, including announcements by the Company or its competitors
concerning patents, proprietary rights, technological innovations, actual or
potential results of clinical trials or new commercial products, as well as
public concern about the safety of biotechnology, may have a significant impact
on the Company's business and on the market price of the Common Stock.
Boston University's investment in Seragen has from time to time been
the subject of media attention. Additionally, the media has reported extensively
on investigations by the Attorney General of Massachusetts of the relationships
among Boston University (a charitable, nonprofit corporation whose operations
are subject to review and monitoring by the Attorney General), its Chancellor
and its Trustees, some of whom are Directors of the Company, to determine
whether they have fulfilled their fiduciary responsibilities to Boston
University and whether there are any conflicts of interest between Boston
University and its President and/or Trustees in certain financial dealings.
Although Boston University has entered into a settlement agreement with the
Attorney General establishing policies and procedures for the selection and
terms of office of Boston University's trustees, voting on interested
transactions and approval of compensation of its officers, there can be no
assurance that further publicity about Boston University's investment or the
Attorney General's reported investigation, including adverse publicity, will not
occur or that such publicity will not create volatility in the market price of
the Common Stock.
- 11 -
<PAGE> 14
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market could
have an adverse effect on the price of the Company's Common Stock. Approximately
6.3 million shares of Common Stock are currently freely tradeable on the open
market. In addition, approximately 9.0 million shares are eligible for sale
pursuant to Rule 701 or Rule 144 of the Act. Also, there were a total of
1,660,372 options to purchase Common Stock outstanding as of September 16, 1996
pursuant to the Company's stock option plans and 1,148,279 of such options can
be exercised at any time prior to their respective expiration dates. As of
September 16, 1996, 281,751 shares of Common Stock were issuable upon the
exercise of warrants issued in connection with the Company's February 1994
private placement and 2,776,664 shares of Common Stock were issuable upon the
exercise of warrants issued in connection with the Company's June 1995 loan
guarantee. In addition to the 13,833,406 shares offered hereby, the 3,058,415
shares of Common Stock issuable upon exercise of the warrants and an additional
1,127,004 shares of Common Stock issued in the Company's February 1994 private
placement have been registered under the Act for resale by the holders thereof.
In August 1994, the Company issued 787,092 shares of its Common Stock to Lilly
in a private placement. Lilly has the right under an agreement with the Company
to include its shares in certain registrations filed by the Company under the
Act. As of September 16, 1996, 434 Preferred Stock (the "Series A Shares") were
converted into 196,620 shares of Common Stock and are currently freely tradeable
in the open market. As of September 16, 1996, there were 3,566 Series A Shares
which were immediately convertible into shares of Common Stock.
DILUTION
Dilution is likely to occur upon the exercise of outstanding stock
options and warrants, and conversion of preferred stock. See "Shares Eligible
for Future Sales".
ABSENCE OF DIVIDENDS
Since its inception, the Company has not paid any cash dividends on the
Common Stock. The Company does not anticipate paying cash dividends in the
foreseeable future.
- 12 -
<PAGE> 15
GLOSSARY OF TECHNICAL TERMS
AIDS Acquired Immune Deficiency Syndrome. A viral disease,
caused by infection of the immune system with HIV,
which often leads to other life-threatening
infections and malignancies.
Autoimmune disease A disease in which the immune system mistakenly
identifies the body's cells and tissues as foreign
and attempts to destroy them. Rheumatoid Arthritis,
Recent Onset Type-1 Diabetes, Multiple Sclerosis and
Lupus are believed to be autoimmune diseases.
Cytotoxic Toxic or lethal to cells.
Diphtheria toxin A toxic protein produced and secreted by the bacteria
Corynebacterium diphtheriae. In its natural form,
diphtheria toxin is highly cytotoxic for many human
cells and tissues.
EGF Epidermal Growth Factor. A polypeptide hormone which
stimulates cell growth and proliferation of a variety
of cells.
FDA United States Food and Drug Administration. The
government agency responsible for approving the
commercial sale of drugs.
Fusion protein A genetically engineered protein comprised of domains
of a toxin molecule that are genetically linked to a
targeting ligand such as a growth factor or
polypeptide hormone.
GMP Good Manufacturing Practices. A set of FDA
established guidelines for the manufacture of drugs
and biologics.
Growth factor A substance that promotes the growth of cells or
tissues.
HIV Human Immunodeficiency Virus. The virus responsible
for AIDS and related diseases.
IL-2 Interleukin-2. A protein produced by lymphocytes
which is involved in signalling between cells of the
immune system.
Ligand A molecule or compound capable of binding to a
receptor.
Lupus Systemic Lupus Erythematosus. An autoimmune disease
characterized by the production of antibodies against
host substances leading to inflammation and damage to
multiple organs and tissues.
Lymphoma A malignant proliferation of the lymphatic tissue or
lymph glands.
Partial response In cancer clinical trials, elimination of 50% to 99%
of the targeted tumor for a period of four weeks or
more.
- 13 -
<PAGE> 16
Peptide A molecule composed of two or more amino acids.
Larger peptides are typically referred to as
proteins.
Pharmacokinetics The rates of absorption, distribution, metabolism and
excretion of a drug.
Polypeptide hormone A protein formed by one organ which acts on another
organ to stimulate functional activities.
Protein A large molecule composed of amino acids. Antibodies
and fusion proteins are examples of proteins.
Psoriasis An inflammatory and proliferative disease of skin,
believed to be an autoimmune disease.
Recent Onset Type-1
Diabetes An autoimmune condition, characterized by lymphocyte
damage to the pancreatic cells which produce insulin,
leading to the inability to control blood glucose
levels.
Receptor A molecule on a cell surface to which a substance,
such as a ligand, selectively binds.
Rheumatoid Arthritis An autoimmune disease resulting in inflammation and
destruction primarily of joint tissues.
Solid tumor A circumscribed growth which arises from existing
tissue but grows unregulated and independently of the
normal rate of the tissue.
T-cell A type of lymphocyte active in the immune response.
Toxin A molecule, usually a protein, that is poisonous or
lethal to living cells.
- 14 -
<PAGE> 17
THE COMPANY
Seragen is a leader in the discovery and development of a new class of
therapeutic products known as fusion proteins. Fusion proteins consist of
fragments of toxins fused to ligands that target specific cell surface
receptors. These fused molecules are designed to (1) bind to specific receptors
which are present on the surface of disease-causing or diseased cells, (2)
penetrate the targeted cells and (3) destroy their ability to manufacture
proteins, thereby killing the targeted cells and eliminating their ability to
spread disease. The Company's fusion proteins were developed using proprietary
technology and have potential applications in a wide range of human diseases,
including diseases that are either incurable or for which existing therapies are
of limited effect. These diseases include cancers and autoimmune diseases, such
as psoriasis, rheumatoid arthritis, and recent onset type-1 diabetes, as well as
other conditions and diseases involving the immune system, such as HIV
infection/AIDS. The Company believes that the highly selective nature of its
potential products may allow for greater potency and result in significantly
fewer adverse effects than existing or other potential drugs designed to treat
the same diseases. The Company has not yet introduced any therapeutic products
commercially.
Seragen's IL-2 Fusion Protein is the primary focus of the Company's
current development efforts. With its second generation agent, DAB389IL-2, the
Company has engaged in Phase I/II clinical trials in patients with currently
unresponsive lymphomas, psoriasis, severe rheumatoid arthritis, recent onset
type-1 diabetes, and HIV infection. Promising indications of safety and efficacy
have been seen in certain of these disease indications. Phase III clinical
trials of DAB389IL-2 in patients with cutaneous T-cell lymphoma were initiated
in 1995. The Company initiated a double-blind placebo controlled Phase II
clinical trial to determine the safety and effectiveness of DAB389IL-2 in
patients with moderate-to-severe psoriasis in 1995. The study was concluded in
December 1995 to allow the Company to conduct a broad safety review of the trial
data because one patient in the trial had unexpectedly developed blood clots. In
April 1996, after review of the safety data supplied by the Company, the U.S.
Food and Drug Administration (the "FDA") agreed to allow the Company to proceed
with developing its next clinical trial for psoriasis. Seragen initiated a Phase
I/II clinical trial with a second fusion protein, DAB389EGF (Epidermal Growth
Factor Fusion Protein), in January 1994. The Phase I/II dose escalation clinical
trials of DAB389EGF in patients with certain solid tumors that express the EGF
receptor investigated safety, tolerability, pharmacokinetics and biological
effects. In August 1996, Seragen initiated a Phase I/II dose escalation clinical
trial with DAB389EGF in patients with non-small cell lung cancer.
Fusion proteins represent a new class of therapeutic products that are
based on a rational product design and are distinct from drugs produced and
created through other biotechnology or traditional methods. Seragen's fusion
proteins build upon a product template, or platform, contained within the
diphtheria toxin molecule. Including its IL-2 and EGF Fusion Proteins, the
Company has created six potential fusion protein products, each of which
consists of fragments of diphtheria toxin fused to a targeting ligand such as a
polypeptide hormone or growth factor using genetic engineering techniques. These
potential products represent a family of fusion proteins, each differentiated by
its specific targeting ligand, which has been selected on the basis of a cell
surface receptor present in specific diseases. Each potential fusion protein
product will require separate clinical trials and regulatory approvals and will
be approved only for treating a specific disease.
Seragen's long-term strategic objective is to build a pharmaceutical
company around its proprietary fusion protein technology. Until 1994, the
Company generally worked to prove the
- 15 -
<PAGE> 18
viability of its fusion protein products independently of pharmaceutical
industry partners, maintaining all worldwide commercial rights to such products.
In August 1994, Seragen and Lilly signed an agreement to form a global strategic
alliance. The alliance gives Lilly exclusive worldwide development,
distribution, and marketing rights, except in certain Asian countries, to
Seragen's IL-2 Fusion Protein for the treatment of cancer. Lilly also has the
option to obtain worldwide development, distribution, and marketing rights for
additional indications for IL-2 Fusion Protein and for other Seragen products
under development. Seragen retains exclusive rights to promote IL-2 Fusion
Protein and future fusion proteins for dermatologic applications, outside of
oncology, and will be responsible for bulk manufacturing of all products for all
indications.
Since the Company's initial public offering in April 1992, the Company
has completed a second offering of 2,012,500 shares of common stock in March
1993 raising approximately $16 million in net proceeds to the Company. In
February 1994, the Company completed a private placement of units consisting of
1,127,004 shares of common stock at $6.00 per share and warrants to purchase an
additional 281,751 shares of common stock at $10.00 per share, raising
approximately $6.5 million in net proceeds to the Company. Seragen issued common
stock to Lilly in connection with the formation of its global strategic alliance
with Lilly. In June 1995, the Company issued warrants (the "June 1995 Warrants")
to purchase 2,776,664 shares of its Common Stock immediately exercisable at
$4.75 per share and expiring in 2005 to the guarantors of $23.8 million in bank
financing. The estimated fair market value of the June 1995 Warrants of
$4,164,996, or $1.50 per warrant, was being recognized as interest expense over
the life of the loan guarantees. As a result of the loan restructuring described
below, the remaining value of the June 1995 Warrants of $3,008,053 was expensed
on July 1, 1996.
In May 1996, the Company raised gross proceeds of $4 million
(approximately $3.8 million net of offering fees) through the sale of 4,000
shares of the Company's non-voting convertible Series A Preferred Stock ("Series
A Shares") to investors outside the United States. The Series A Shares are
convertible at the option of the holders into shares of Seragen's Common Stock
at a conversion price equal to the lesser of $4.125 or 73 percent of the average
closing bid prices for a five day period prior to the conversion date. Terms of
the preferred stock also provide for 8% cumulative dividends payable in shares
of Seragen Common Stock at the time of each conversion. Each Series A Share has
a liquidation preference equal to $1,000 plus an amount equal to any accrued and
unpaid dividends from the date of issuance of the Series A Shares in the event
of a voluntary or involuntary liquidation, dissolution or winding up of the
Company. Series A Shares which remain outstanding on November 29, 1997 will be
automatically converted into shares of the Company's Common Stock.
In July 1996, the Company restructured its arrangement with the
guarantors of the $23.8 million bank financing to release the Company from its
liability to the banks involved. The lines of credit have been replaced with
23,800 shares of redeemable convertible Series B preferred stock (the "Series B
Shares"). The Series B Shares are convertible at a price based on the market
price for the Common Stock at the time of conversion. The investors are entitled
to receive cumulative cash dividends, payable quarterly. The investors also
received warrants to purchase an aggregate of 5,950,000 shares of Common Stock
at an exercise price of $4.00 per share (the "July 1996 Warrants"). The July
1996 Warrants are exercisable commencing on January 1, 1997 and expire on July
1, 2006. At any time, with the approval of the Company's Board of Directors,
Audit Committee or comparable body, the Company may redeem any or all of the
Series B Shares for cash.
In September 1996, the Company raised net proceeds of approximately $5
million through the sale of 5,000 shares of the Company's non-voting convertible
Series C Preferred Stock ("Series C Shares") in a private placement under
Regulation D of the 1933 Act. The Series C Shares are convertible at the option
of the holder into shares of Seragen's Common Stock at a conversion price equal
to the lesser of $2.75 or 73 percent of the average closing bid prices for a
five day period prior to the conversion date. Terms of the Preferred Stock also
provide for 8% cumulative dividends payable in shares of Seragen Common Stock at
the time of each conversion. Each Series C Share has a liquidation preference
equal to $1,000 plus an amont equal to any acrued and unpaid dividends from the
date of issuance of the Series C Shares in the event of a voluntary or
involuntary, liquidation, dissolution or winding up of the Company. Series C
Shares which remain outstanding on March 30, 1998 will be automatically
converted into shares of the Company's Common Stock.
- 16 -
<PAGE> 19
In November 1995, the Company formed Seragen Biopharmaceuticals Ltd.
("SBL"), a privately held Canadian research and development company located in
Montreal. In a private financing, SBL raised approximately $10.0 million from a
group of six Canadian investors. The Canadian investors, with their contribution
of $10.0 million, own 51 percent of the new company and were granted warrants to
purchase 519,033 shares of Seragen common stock at $8.79 per share. Seragen,
with its contribution of technology and prior laboratory and clinical
development, owns 49 percent of the new company. SBL will conduct research and
development and clinical trials of Seragen's proprietary fusion protein products
in Canada. The new company will also market and receive royalties from sales of
Seragen's products in Canada for the applications Seragen has retained under its
prior agreements with Lilly.
The Company was organized as a Massachusetts corporation in 1979 in a
joint venture between Boston University and several of its scientific faculty
members. It adopted its present name in 1980 and was reincorporated as a
Delaware corporation in February 1982. Since 1985, the Company has focused
substantially all of its efforts and resources on research and development of
its fusion protein technology. Boston University became the Company's majority
stockholder in 1987, and the Company's principal source of working capital from
that time until its initial public offering in April 1992 was provided by Boston
University. Boston University beneficially owns approximately 61.5% of the
outstanding common stock of the Company.
The Company's executive offices and laboratories are located at 97
South Street, Hopkinton, Massachusetts 01748, and its telephone number is (508)
435-2331.
- 17 -
<PAGE> 20
SELLING STOCKHOLDERS
The shares offered hereby by the Selling Stockholders are issuable upon
conversion of shares of the Company's Series B Shares into Common Stock and
exercise of the July 1996 Warrants acquired by the Selling Stockholders in
connection with the July 1996 restructuring of certain bank financing of the
Company previously guaranteed by the Selling Stockholders in June 1995. The
following table sets forth information with respect to the beneficial ownership
of the Company's Common Stock as of September 16, 1996 (including shares of
Common Stock issuable upon exercise of the July 1996 Warrants and upon
conversion of the Series B Shares) and as adjusted to reflect the sale of the
Common Stock offered hereby by each Selling Stockholder.
<TABLE>
<CAPTION>
Shares Number of Shares
Owned Prior to Shares Being Owned After
Selling Stockholder Offering(1) (2) (3) Offered (3) Offering(1)
- ------------------- ------------------- ------------ -----------
Number Number Percent
------ ------ -------
<S> <C> <C> <C> <C>
Boston University(3)(4) 16,549,322 6,858,579 9,690,743 53.3%
Leon C. Hirsch(5) 4,885,315 4,068,649 816,666 *
Turi Josefsen (6) 2,093,707 1,743,707 350,000 *
Gerald S.J. Cassidy 1,424,972 1,162,471 262,501 *
and Loretta P.
Cassidy(7)
</TABLE>
- --------------------------------
* Less than 1%.
(1) The persons named in this table have sole voting and
investment control with respect to all shares of Common Stock
shown as beneficially owned by them, subject to the
information contained in the footnotes to this table.
(2) Based on 16,803,139 shares of Common Stock outstanding on
September 16, 1996.
(3) Assumes that the Series B Shares are convertible at a
conversion price of $3.019, the conversion price in effect on
September 16, 1996, based on the average of the closing sale
prices of the Common Stock for the ten consecutive trading
days preceding that date. Assumes that the July 1996 Warrants
are exercisable.
(4) Includes 15,000 shares issuable upon exercise of stock
options exercisable within 60 days. The Boston University
Nominee Partnership is a partnership that was created to act
as the record holder of certain securities owned by Boston
University. John E. Bagalay, Jr. and Kenneth G. Condon,
Directors of
- 18 -
<PAGE> 21
Seragen, are general partners of such partnership and are
required to vote and take other actions with respect to such
shares of Common Stock as instructed by duly authorized
officers of Boston University. Officers of Boston University
are duly authorized by the actions of the Trustees of Boston
University. General partners of the Boston University Nominee
Partnership (Dr. Bagalay and Mr. Condon) and the Trustees of
Boston University (James M. Howell and John R. Silber)
disclaim beneficial ownership of such shares.
(5) Does not include 350,000 and 750,000 shares issuable upon
exercise of the 1995 Warrants and the July 1996 Warrants,
respectively, held by Turi Josefsen, Mr. Hirsch's wife, as to
which Mr. Hirsch disclaims beneficial ownership.
(6) Does not include 816,666 and 1,750,000 shares issuable upon
exercise of 1995 Warrants and the July 1996 Warrants,
respectively, held by Leon C. Hirsch, Ms. Josefsen's husband,
as to which Ms. Josefsen disclaims beneficial ownership.
(7) Includes 8,000 shares issuable upon exercise of options held
by Mr. Cassidy that are exercisable within 60 days. Mr.
Cassidy's shares are owned jointly with his wife, Loretta P.
Cassidy.
PLAN OF DISTRIBUTION
The 13,833,406 shares of Common Stock of the Company offered hereby may
be offered and sold from time to time by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest. Such offers and
sales may be made from time to time on one or more exchanges or in the
over-the-counter market, or otherwise, at prices and on terms then prevailing or
at prices related to the then-current market price, or in negotiated
transactions. The 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
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; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(e) privately negotiated transactions; and (f) a combination of any such methods
of sale. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from Selling Stockholders or from
the purchasers in amounts to be negotiated immediately prior to the sale. The
Selling Stockholders may also sell such shares in accordance with Rule 144 under
the 1933 Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the shares being offered hereunder until
the earlier of the date upon which all of the shares of Common Stock offered
hereby have been sold or the date on which the Selling Stockholders who are not
deemed to be "affiliates" of the Company as defined in Rule 144 under the 1933
Act are permitted to publicly resell such shares of Common Stock under Rule
144(k) under the 1933 Act, as the same may be amended from time to time, or any
successor regulation.
The Selling Stockholders and any brokers participating in such sales
may be deemed to be underwriters within the meaning of the 1933 Act. There can
be no assurance that the Selling Stockholders will sell any or all of the shares
of Common Stock offered hereunder.
- 19 -
<PAGE> 22
All proceeds from any such sales will be the property of the Selling
Stockholders who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees.
LEGALITY OF COMMON STOCK
The validity of the issuance of the shares of Common Stock offered
hereby is being passed upon for the Company by Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., Boston, Massachusetts.
EXPERTS
The balance sheets of the Company as of December 31, 1995 and 1994 and
the statements of operations, stockholders' (deficit) equity and cash flows for
each of the three years in the period ended December 31, 1995, incorporated by
reference in this Prospectus have been incorporated herein in reliance on the
report, which includes an explanatory paragraph concerning factors which raise
substantial doubt about the Company's ability to continue as a going concern,
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, filed pursuant to Section 13 or 15(d) of the 1934 Act (File
Number 0-19855).
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1996 and June 30, 1996, filed pursuant to Section 13 or
15(d) of the 1934 Act (File No. 0-19855).
(c) The Company's Current Report on Form 8-K for the June 6, 1996
event.
(d) The Company's Current Report on Form 8-K for the July 1, 1996
event.
(e) The Company's Current Report on Form 8-K for the September 30, 1996
event.
(f) The description of the Company's capital stock contained in the
Company's registration statement on Form 8-A under the 1934 Act (File No.
0-19855), including amendments or reports filed for the purpose of updating such
description.
All reports and other documents subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act,
prior to the filing of a post-effective amendment which indicates that all
securities covered by this Prospectus have been sold or which deregisters all
such securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
- 20 -
<PAGE> 23
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 14. Other Expenses of Issuance and Distribution
- -----------------------------------------------------
<TABLE>
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
registration fee, the amounts stated are estimates.
<CAPTION>
<S> <C>
Registration Fee $13,416.02
Legal Fees and Expenses 3,500.00
Accounting Fees and Expenses 5,000.00
Miscellaneous 500.00
----------
TOTAL $22,416.02
==========
</TABLE>
The Selling Stockholders will bear the expense of their own legal
counsel and miscellaneous fees and expenses, if any.
Item 15. Indemnification of Officers and Directors
- ---------------------------------------------------
The Subscription and Registration Agreement dated as of June 28, 1996
[filed as Exhibit 10.57 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, incorporated herein by reference] provides for
indemnification by the Registrant of the Selling Stockholders against certain
liabilities under the 1933 Act, the 1934 Act, state securities laws or
otherwise, and provides for indemnification by the Selling Stockholders of the
Registrant and its directors, its officers and certain control persons against
certain liabilities under the 1933 Act, the 1934 Act, state securities laws, or
otherwise.
Item 16. Exhibits.
- -------------------
Exhibit
Number Description
- ------ -----------
4.1 Article 4 of the Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, File No. 0-19855)
4.2 Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.2 to the Registrant's Registration Statement on Form
S-1, No. 33-45515)
4.3 Form of Purchase Agreement executed by Gerald M. Stern, Gerald
M. Stern-Keogh Account, Gerald M. Stern-IRA Account, Ira A.
Lipman, Guardsmark, Inc., Aegis Select Limited Partnership
III, BancBoston Ventures, Inc., Charles River Partnership II,
Charles River Partnership III, Charles River Partnership IV,
Allstate Insurance Company, Robert E. Thorne, William R.
Breetz, Gerald S. J. Cassidy, James R. Welch and John R.
Whiting, Jonathan D. Schiller, Walter J. Zackrison, Francis D.
Burke, Fred Chicos, Donald E. Griesdorn, Edward J. King,
Maximillian Ma, Morrie Moss and David R.
II-1
<PAGE> 24
Thissen (incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-1, No. 33-45515)
4.4 Agreement and Plan of Corporate Reorganization, among the
Registrant, Seragen Diagnostics, Inc., Nyegaard & Co. A.S. and
certain stockholders of the Registrant, dated May 28, 1985
(incorporated by reference to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-1, No. 33-45515)
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., with respect to the legality of the securities being
registered
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(see Exhibit 5)
24 Power of Attorney (filed in Part II of this Registration
Statement)
99 Subscription and Registration Agreement dated as of June 28,
1996, among the Registrant and the Selling Stockholders
(incorporated by reference to Exhibit 10.57 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, File No. 0-19855)
Item 17. Undertakings.
- -----------------------
A. Rule 415 Offering
-----------------
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
1933 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ([Section]230.424(b) of
this chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
II-2
<PAGE> 25
(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 paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the 1933
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.
B. Filings Incorporating Subsequent Exchange Act Documents by
----------------------------------------------------------
Reference
---------
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the 1934 Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the 1934 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.
C. Request for Acceleration of Effective Date or Filing of
-------------------------------------------------------
Registration Statement on Form S-8
----------------------------------
Insofar as indemnification for liabilities arising under the 1933 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 Commission such indemnification is
against public policy as expressed in the 1933 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 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 26
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Hopkinton, Massachusetts on October 10, 1996.
SERAGEN, INC.
By: /s/ George W. Masters
-------------------------------
George W. Masters
Vice Chairman, President and
Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
* Chairman of the Board and October 10, 1996
- --------------------------------- Director
James M. Howell, Ph.D.
/s/ George W. Masters Vice Chairman, President, October 10, 1996
- --------------------------------- Chief Executive Officer and Director
George W. Masters (principal executive officer)
</TABLE>
II-4
<PAGE> 27
<TABLE>
<S> <C> <C>
/s/ Thomas N. Konatich Vice President for Finance, October 10, 1996
- ------------------------------------- Chief Financial Officer,
Thomas N. Konatich Treasurer and Secretary
(principal financial and
accounting officer)
* Director October 10, 1996
- -------------------------------------
John E. Bagalay, Jr., Ph.D., Esq.
* Director October 10, 1996
- -------------------------------------
Gerald S. J. Cassidy
* Director October 10, 1996
- -------------------------------------
Kenneth G. Condon, C.P.A.
* Director October 10, 1996
- -------------------------------------
Norman A. Jacobs
* Director October 10, 1996
- -------------------------------------
John R. Murphy
* Director October 10, 1996
- -------------------------------------
John R. Silber, Ph.D.
</TABLE>
* By: /s/ Thomas N. Konatich
------------------------------------
Thomas N. Konatich, Attorney-in-fact
* By: /s/ George W. Masters
------------------------------------
George W. Masters, Attorney-in-fact
II-5
<PAGE> 28
SERAGEN, INC.
-------------
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
Exhibit Sequential
Number Description Page No.
- ------ ----------- --------
4.1 Article 4 of the Restated Certificate
of Incorporation of the Registrant
(incorporated by reference to Exhibit
3.3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter
ended June 30, 1996, File No. 0-19855)
4.2 Form of Common Stock Certificate
(incorporated by reference to Exhibit
4.2 to the Registrant's Registration
Statement on Form S-1, No. 33-45515)
4.3 Form of Purchase Agreement executed by
Gerald M. Stern, Gerald M. Stern-Keogh
Account, Gerald M. Stern-IRA Account,
Ira A. Lipman, Guardsmark, Inc., Aegis
Select Limited Partnership III, BancBoston
Ventures, Inc., Charles River Partnership
II, Charles River Partnership III, Charles
River Partnership IV, Allstate Insurance
Company, Robert E. Thorne, William R.
Breetz, Gerald S. J. Cassidy, James R.
Welch and John R. Whiting, Jonathan D.
Schiller, Walter J. Zackrison, Francis D.
Burke, Fred Chicos, Donald E. Griesdorn,
Edward J. King, Maximillian Ma, Morrie
Moss and David R. Thissen (incorporated
by reference to Exhibit 4.3 to the
Registrant's Registration Statement on
Form S-1, No. 33-45515)
4.4 Agreement and Plan of Corporate
Reorganization, among the Registrant,
Seragen Diagnostics, Inc., Nyegaard & Co.
A.S. and certain stockholders of the
Registrant, dated May 28, 1985
(incorporated by reference to Exhibit 4.4
to the Registrant's Registration Statement
on Form S-1, No. 33-45515)
II-6
<PAGE> 29
5 Opinion of Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C.,
with respect to the legality of the
securities being registered (previously
filed)
23.1 Consent of Coopers & Lybrand L.L.P. II-8
23.2 Consent of counsel (Reference
is made to Exhibit 5)
24 Power of Attorney to file future
amendments (filed in Part II of
the Registration Statement)
99 Subscription and Registration
Agreement dated as of June 28, 1996
among the Registrant and the Selling
Stockholders (filed as Exhibit 10.57
to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended
June 30, 1996, File No. 0-19855)
II-7
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in amendment No. 1 to the
registration statement on Form S-3 of our report, which includes an explanatory
paragraph concerning factors which raise substantial doubt about the Company's
ability to continue as a going concern, dated February 23, 1996, on our audits
of the financial statements of Seragen, Inc. We also consent to the reference to
our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
--------------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 11, 1996
II-8
