As Filed with the Securities and Exchange Commission on July 2, 1998
File No. 333-36925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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APHTON CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 95-3640931
(State or other jurisdiction 444 Brickell Avenue (I.R.S. Employer
of incorporation or organization) Suite 51-507 Identification Number)
Miami, Florida 33131-2492
(305) 374-7338
</TABLE>
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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PHILIP C. GEVAS
President and Chief Executive Officer
APHTON CORPORATION
444 Brickell Avenue
Suite 51-507
Miami, Florida 33131-2492
(305) 374-7338
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
TIMOTHY B. GOODELL, ESQ.
WHITE & CASE LLP
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [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 effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES AMOUNT TO PROPOSED MAXIMUM AGGREGATE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED BE REGISTERED PRICE PER SHARE(1) AGGREGATE OFFERING REGISTRATION FEE
PRICE)(2)
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Common Stock, $.001 par value 715,000 13.56(2) $9,697,188 $2,939
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Common Stock, $.001 par value,
issuable upon exercise of the Warrant 225,000 $17.50(3) $3,937,500 $1,193
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Total 940,000 $4,132
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(1) Estimated solely for the purpose of calculating the Registration Fee in
accordance with Rule 457 of the Securities Act of 1933.
(2) Based on average of the high and low prices of the Common Stock reported on
NASDAQ National Market System on September 30, 1997.
(3) Based on the exercise price of the Warrants pursuant to which such shares
may be issued.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED JULY __, 1998
940,000 SHARES OF COMMON STOCK, $.001 PAR VALUE
APHTON CORPORATION
This Prospectus relates to offers and sales, if any, of up to 715,000
shares (the "Resale Shares") of common stock, $.001 par value (the "Common
Stock"), of Aphton Corporation (the "Company" or "Aphton"), which may be offered
or sold from time to time by the selling stockholder named herein (the "Selling
Stockholder"). This Prospectus also relates to the issuance after June 16, 1998
of up to 225,000 shares of Common Stock (the "Warrant Shares" and together with
the Resale Shares, the "Shares") upon exercise by the Selling Stockholder of
that certain Warrant, dated June 16, 1997, of the Company (the "Warrant") issued
to the Selling Stockholder. The Company issued the Resale Shares and the Warrant
to the Selling Stockholder through a private placement of such securities
completed on June 16, 1997.
The Company will receive no part of the proceeds of any sales of Resale
Shares by the selling Stockholder, but will receive the exercise price for each
Warrant Share issued pursuant to any exercise of the Warrant. The exercise price
is $17.50 per share, subject to adjustment in accordance with the terms of the
Warrant, and the maximum aggregate exercise price is $3,937,500 (subject to
adjustment). The Company has agreed to pay the costs and expenses incurred in
connection with the registration of the Shares, but the Selling Stockholder will
be responsible for all selling commissions, transfer taxes and related charges
in connection with offers and sales, if any, by it of Shares. See "Plan of
Distribution."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------
SEE "RISK FACTORS" COMMENCING ON page 8 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK.
The Selling Stockholder may sell all or a portion of the Shares in
transactions (which may involve one or more block transactions) on the National
Association of Securities Dealers Inc. Automated Quotation System ("NASDAQ")
National Market System, in negotiated transactions or in the over-the-counter
market at then-prevailing market prices, at prices related to such prices or at
negotiated prices. The Selling Stockholder may effect some or all of such
transactions by selling to or through one or more broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholder. The Selling Stockholder and any
broker-dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any discounts,
concessions or commissions received by such broker-dealers and any profits
realized on the resale of Resale Shares by them may be deemed to be underwriting
discounts and commissions under the Securities Act. The Company has agreed to
indemnify the Selling Stockholder against certain liabilities, including,
without limitation, certain liabilities under the Securities Act. To the extent
required, the specified Resale Shares to be sold, the public offering price, the
names of any such broker-dealers, and any applicable commission or discount with
respect to any particular offer will be set forth in a prospectus supplement.
See "Plan of Distribution."
The Common Stock of the Company is traded on the NASDAQ National Market
System under the symbol "APHT". On July 1, 1998, the last reported sales price
of the Company's Common Stock on the NASDAQ National Market System was $16.50
per share.
The date of this Prospectus is July __, 1998.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY APHTON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF APHTON SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1204, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048, and
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a web site on the internet at http://www.sec.gov, that contains the
Company's reports, proxy statements and other information. Such material can
also be inspected at the offices of the Nasdaq National Market, 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement"), with respect to the Shares, of which
this Prospectus forms a part. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. For further information regarding the Company and the Shares,
reference is made to such Registration Statement and the exhibits and schedules
thereto. The Registration Statement and the exhibits and schedules thereto may
be inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Room 1204, Washington, D.C. 20549, and copies may be obtained from the
Commission at prescribed rates.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and made a part hereof, except as superseded or
modified herein: the Company's Transition Report on Form 10-K filed May 1, 1998
and the Company's Quarterly Report on Form 10-Q for the three months ended April
30, 1998.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Shares covered by
this Prospectus shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in any document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS THAT HAVE BEEN OR
MAY BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS). SUCH REQUESTS SHOULD BE DIRECTED TO THE COMPANY: APHTON CORPORATION,
444 BRICKELL AVENUE, SUITE 51-507, MIAMI, FLORIDA 33131-2492 (TELEPHONE: (305)
374-7338).
PROJECTIONS AND FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Securities Act. Such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those stated in the Prospectus. Such risks and
uncertainties include, among others, those described under the heading "Risk
Factors." Forward-looking statements are made based upon management's
expectations, assumptions, judgments and beliefs concerning future developments
and global economic, industry and financial market conditions, and their
potential effect upon the Company.
<PAGE>
THE COMPANY
Aphton Corporation is a biopharmaceutical company developing products
using its innovative vaccine-like technology for neutralizing hormones that
participate in gastrointestinal system and reproductive system cancer and
non-cancer diseases and the prevention of pregnancy. These products, called
immunogens, treat the following diseases: (a) Gastroesophageal Reflux Disease
(GERD, or severe heartburn), ulcers and colorectal, stomach, liver and
pancreatic cancers; (b) endometriosis and prostate, breast, endometrial and
ovarian cancers.
Aphton's approach to the treatment of major diseases is to employ
(anti) "hormone therapy." Aphton's hormone therapy involves neutralizing, or
blocking, hormones which play a critical role in diseases of the
gastrointestinal and reproduction systems. Aphton has selected the strategy of
hormone therapy because it has proved, over many years, to be efficacious in the
treatment of major diseases, both malignant and non-malignant; in short, because
this risk-averse strategy has been proven to be effective in humans.
Well-documented examples of such efficacy in humans are: blocking gastrin
(Proglumide) and histamine (Zantac, Tagamet), which in turn is stimulated by
gastrin, in order to reduce stomach acid to treat ulcerations of the esophagus
and to heal or prevent peptic ulcers; blocking estrogen (Tamoxifen) for breast
cancer therapy and blocking testosterone for prostate cancer therapy.
Aphton has completed both safety and dose-ranging phases of its Phase
I/II clinical trials with its immunotherapeutic product, Gastrimmune(TM) in
terminal cancer patients. Aphton has demonstrated, during the dose-ranging
phase, that Gastrimmune(TM) induces large antibody responses in terminally ill
patients whose colon cancer had not only metastasized to the liver, but were
considered "end stage". Aphton plans to conduct clinical trials and apply for
approval for all of the above gastrointestinal system cancers and stomach cancer
has been selected as the first indication for which regulatory approval will be
sought. There is no current effective therapy for stomach cancer.
In 1997 Aphton signed an agreement with Pasteur Merieux Connaught
("PMC") (Rhone-Poulenc Group), for a strategic alliance for all human cancer
applications of Gastrimmune(TM) including stomach, colorectal, liver, esophageal
and pancreatic cancers. Under the terms of the twenty-year agreement, Aphton is
responsible for product development, clinical trials and regulatory agency
approvals, and PMC is responsible for and will fund the promotion, advertising,
marketing, distribution and sales of Gastrimmune(TM) in North America, Mexico
and Europe. In addition, Aphton and PMC have entered and will enter into further
agreements providing for the supply of Gastrimmune(TM) to PMC and the supply of
certain components of Gastrimmune(TM) and other Aphton products from PMC to
Aphton. Discussions are continuing between PMC and Aphton for marketing rights
to Gastrimmune(TM) in Japan and other Asian markets.
In August 1997, Aphton announced that it formed an exclusive worldwide
strategic alliance with Schering-Plough Animal Health for the development,
clinical testing, manufacturing and marketing of Aphton's proprietary
anti-gastrin 17 immunogen, a veterinary product, that reduces stomach acid.
Equine ulcers was selected as the first indication to be pursued. Under the
terms of the agreement, Schering-Plough Animal Health will work closely with
Aphton's scientists and management to bring the anti-gastrin 17 immunogen to
market. Schering-Plough is responsible for all capital costs and financial
requirements, product development, clinical trials and marketing for each animal
health indication. Schering-Plough Animal Health and Aphton will share in all
product profits.
In November, 1997, Aphton announced that it was issued a U.S. patent
relating to Aphton's anti-Gonadotropin Releasing Hormone (GnRH) product
Gonadimmune(TM), for the therapeutic treatment of prostate cancer, breast
cancer, endometrial cancer and endometriosis. Gonadimmune(TM) has completed the
toxicology testing (safety) required for human use, having previously completed
extensive and successful preclinical animal testing (safety and efficacy).
Aphton plans to initiate a Phase I/II clinical trial for both breast cancer,
prostate cancer and also patients with other diseases.
Aphton has exclusive manufacturing, distribution and sales rights for
an immunocontraceptive product, also utilizing vaccine-like technology. Aphton
is collaborating with the World Health Organization (WHO) on the clinical
development of the product. This product will be sold, when approved, worldwide
in both the developed and the developing countries and will confer protective
immunity and prevent pregnancy.
Aphton's strengths include its innovative technology and products which
specifically neutralize, or block, hormones in a novel manner, providing
significant benefits and advantages over conventional drugs (blockers), some of
which have severe disadvantages. Aphton's products, of course, must proceed
successfully through the clinical trials and regulatory process in the same
manner as many newly discovered drugs whose mode of action, in contrast, have
not been demonstrated previously to be clinically effective in humans. However,
Aphton believes that employing a strategy of therapeutic approach that has been
proven effective in humans significantly reduces risk and enhances the
likelihood of: clinical trials success; obtaining regulatory agency approval;
achieving commercial success in the market place; and, benefiting large numbers
of patients suffering from these serious diseases.
In view of the foregoing, Aphton believes that its crucial task, in
addition to proper planning and execution during clinical trials, is to
demonstrate in human trials that each product induces the patient's immune
system to neutralize, or block, its targeted hormone. Aphton believes that
therapeutic efficacy should then follow and be demonstrated in the pivotal Phase
III trials, given the history of success and efficacy for hormone therapy in
humans, in which the targeted hormone is blocked.
On January 29, 1998, the Company's predecessor, a California
corporation ("Aphton California"), completed a reincorporation (the
"Reincorporation") in Delaware through the merger of Aphton California with and
into the Company which was Aphton California's wholly-owned Delaware subsidiary,
with the Company being the surviving corporation. As of the effective date of
such merger, Aphton California ceased to exist. The Reincorporation effected
only a change in domicile. It did not result in any change of the name,
business, management, employees, assets or liabilities or trading symbol of the
Company. Pursuant to the Agreement and Plan of Merger between the Company and
Aphton California, dated as of January 29, 1998, each outstanding share of
Aphton California's common stock, no par value, was automatically converted into
one share of Common Stock, par value $.001 per share, of the Company. Each stock
certificate representing issued and outstanding shares of Aphton California's
common stock represents the same number of shares of the Company's Common Stock.
In addition, each outstanding option or right to acquire shares of Aphton
California's common stock was converted into an option or right to acquire an
equal number of shares of the Company's Common Stock, under the same terms and
conditions as the original options or rights.
In June 1998, Aphton signed an agreement with SmithKline Beecham plc
("SmithKline Beecham") to form a worldwide strategic alliance relating to
Aphton's Gonadimmune(TM). The agreement provides that SmithKline Beecham will
receive exclusive rights worldwide to Aphton's related patents and proprietary
technology and will fund all costs of product development, clinical trials and
approvals for worldwide marketing and distribution. Aphton and SmithKline
Beecham will collaborate in a development program with the objective of
developing products related to the diagnosis, treatment and prevention of
GnRH-related cancers and other diseases. Clinical trials will be conducted
jointly by Aphton and SmithKline Beecham. Prostate cancer has been selected as
the subject for the first human clinical study.
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered.
EARLY STAGE OF PRODUCT DEVELOPMENT. All of the Company's potential
products are in research and development, and no revenues have been generated
from product sales. The Company's most advanced potential product, an immunogen
for the treatment of colorectal cancer, has completed the dose-ranging clinical
trial phase in the United Kingdom, and results obtained in preclinical studies
are not necessarily indicative of results that will be obtained in the clinical
trial. The Company's other current potential products, for the treatment of
stomach cancer, pancreatic cancer, GERD, chronic peptic ulcers, breast cancer,
endometriosis and prostate cancer are at the same (stomach and pancreatic
cancer) or even earlier phases of development. All of the Company's potential
products will require significant additional research and development and
expensive, extensive, time consuming clinical testing prior to commercial use.
Accordingly, the Company does not expect to derive revenues from these products
for a number of years, if at all. There can be no assurance that these potential
products will be successfully developed into immunogens that can be administered
to humans or that any such immunogen will prove safe and effective in clinical
trials or cost-effective to manufacture and administer. In addition, there can
be no assurance that the Company will not encounter problems in clinical trials
that will cause the Company to delay or suspend a clinical trial, that such of
the Company's products as are currently under development will be completed
successfully within any specified time period, if at all, that such testing will
show such products to be safe or effective or that any of the Company's products
will receive required regulatory approval. Further, if any of the Company's
products do receive regulatory approval, there can be no assurance that the
Company will be capable of producing such products in commercial quantities at
reasonable costs or that such products will be accepted by the marketplace.
ABSENCE OF PROFITABLE OPERATIONS; NO DIVIDENDS. The Company has
experienced significant operating losses since its inception in 1981 and expects
to continue to incur substantial operating losses for at least the next several
years. Losses are expected to increase as a result of the expenses associated
with clinical testing and research and development. As of January 31, 1998, the
Company had an accumulated deficit of approximately $32 million. The Company's
ability to achieve profitability depends upon its ability, alone or through
relationships with third parties, to successfully develop its technology and
products, to obtain required regulatory approvals and to manufacture, market and
sell such products. There can be no assurance that the Company will ever have
profitable operations or that profitability, if achieved, can be sustained on an
ongoing basis.
The Company has never paid any dividends and does not expect to pay
cash dividends in the foreseeable future.
CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING. The
development of the Company's technology and products will require a commitment
of substantial funds to conduct the costly and time-consuming research and
clinical trials necessary for such development. The Company's future capital
requirements will depend on many other factors including continued scientific
progress in the research and development (clinical trials) of the Company's
products, the ability of the Company to collaborate with others for the
manufacture, marketing and sale of its products, the cost of regulatory
approvals, the cost of establishing, maintaining and enforcing intellectual
property rights, competing technological and market developments and changes in
Aphton's existing research relationships. The Company's net rate of expenditure
during the two year period ended January 31, 1998 averaged approximately
$600,000 per month. The rate of expenditure, however, is anticipated to increase
substantially as the Company proceeds through, its Phase III clinical trials for
its Gastrimmune(TM) products. Such rate of expenditure may increase further if
the Company pursues preclinical studies or clinical trials for its other
products at a faster rate than currently anticipated. The Company believes that
its current capital resources, which are composed primarily of cash and cash
equivalents, should be sufficient, barring unforeseen circumstances, to fund its
operating expenses and capital requirements as currently planned into the year
2000.
The Company may seek additional financing through collaborative
arrangements or through public or private equity or debt financings. There can
be no assurance that additional financing will be available on acceptable terms
or at all. If additional funds are raised by issuing equity securities, dilution
to the interests of shareholders may result. If adequate funds are not
available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its research or development programs or to obtain funds
through arrangements with collaborative partners or others that may require the
Company to relinquish rights to certain of its technologies, potential products
or products that the Company would otherwise seek to develop or commercialize
itself.
DIFFERENT APPROACH TO DISEASE TREATMENT; NO PROOF OF EFFICACY OR MARKET
ACCEPTANCE. The Company believes that its products under development are based
on an approach to disease therapy and prevention which previously has not been
utilized successfully by any pharmaceutical or biotechnology company. There can
be no assurance that the Company's product development efforts will be
successfully completed, that the Company's products will be proven to be safe
and effective, that approval by the U.S. Food and Drug Administration ("FDA") or
any other applicable regulatory agency will be obtained or that medical centers,
hospitals, physicians or patients will accept the Company's products as readily
as current drug therapies or other forms of treatment. Undesirable and
unintended side effects or unfavorable publicity concerning any of the Company's
products or other products incorporating a similar approach could limit or
curtail commercial use of the Company's products and could have an adverse
effect on the Company's ability to obtain regulatory approvals and to achieve
physician and patient acceptance.
GOVERNMENT REGULATION AND PRODUCT APPROVALS. The research, preclinical
development, clinical trials, manufacturing and marketing of Aphton's products
are subject to extensive regulation by numerous governmental authorities in the
United States and other countries. Clinical trials and manufacturing and
marketing of products will be subject to rigorous testing and approval processes
by the FDA and equivalent foreign regulatory authorities, including the
Medicines Control Agency ("MCA") in the United Kingdom. The process of obtaining
FDA and other required regulatory approvals is lengthy and expensive. The time
required for FDA approval is uncertain, and typically takes a number of years,
depending on the type, complexity and novelty of the product. Since certain of
the Company's planned products involve the application of new technologies and
are based on a new therapeutic approach, regulatory approvals may be obtained
more slowly than for products produced using more conventional technologies.
Additionally, delays or disapprovals may be encountered based upon additional
government regulation resulting from future legislation or administrative action
or changes in FDA or equivalent foreign regulatory policy made during the period
of product development and regulatory review.
The Company plans to apply for MCA approval to commercialize its
potential immunogen for the treatment of one or more of the gastrointestinal
system cancers and ulcerations previously described prior to applying for
similar FDA approval. Even if the Company obtains MCA approval, FDA approval
would still be required prior to marketing such a product in the United States.
To date, the Company has not filed any application with the FDA for any of its
planned products. There is no assurance as to if or when the Company will be
able to file an Investigational New Drug application ("IND") (a type of
submission used to ultimately obtain FDA approval to market a new drug) with the
FDA or as to if or when after such filing the FDA would permit the Company to
proceed with clinical trials in the United States. Clinical trials will seek
safety data as well as efficacy data and will require substantial time and
significant funding. There is no assurance that clinical trials in the United
Kingdom will be fully completed and no assurance that clinical trials will be
started or completed successfully in the United States or any other country
within any specified time period, if at all, with respect to any of the
Company's products. Furthermore, the Company, the MCA or the FDA may suspend
clinical trials at any time if it is determined that the participants in such
trials are being exposed to unacceptable health risks. Aphton cannot assure that
approval for any products developed by the Company will be granted by applicable
regulatory agencies on a timely basis, if at all, or, if granted, that such
approval will cover all the clinical indications for which the Company is
seeking approval or will not contain significant limitations in the form of
warnings, precautions or contraindications with respect to conditions of use.
Any delay in obtaining, or failure to obtain, such approvals would adversely
affect the Company's ability to generate product revenue. Failure to comply with
the applicable regulatory requirements can, among other things, result in fines,
suspensions of regulatory approvals, product recalls, operating restrictions and
criminal prosecution. In addition, the marketing and manufacturing of drugs and
biological products are subject to continuing FDA review, and later discovery of
previously unknown problems with a product, its manufacture or its marketing may
result in the FDA requiring further clinical research or restrictions on the
product or the manufacturer, including withdrawal of the product from the
market.
TECHNOLOGICAL CHANGE; COMPETITION. The treatment of diseases such as
those to which the Company's products are directed is subject to rapid,
unpredictable and significant change. The Company's products under development
seek to address certain cancers and diseases currently addressed, to some
extent, by existing or evolving products and technologies of other biotechnology
and pharmaceutical companies. Competition from other biotechnology companies,
large pharmaceutical companies and universities and other research institutions
is intense and is expected to increase. Many of these companies and institutions
have substantially greater resources, research and development staffs and
facilities than the Company and have substantially greater experience in
obtaining regulatory approval, and in manufacturing and marketing pharmaceutical
products. In addition, other technologies may in the future be the basis of
competitive products. There can be no assurance that the Company's competitors
will not succeed in developing technologies and products that are more effective
than those being developed by the Company or that would render the Company's
technology and products obsolete or noncompetitive.
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS. The
Company's success will depend in large part on its ability to obtain patents,
both in the United States and in other countries, maintain its unpatented trade
secrets and operate without infringing on the proprietary rights of others. The
patent positions of biotechnology and pharmaceutical companies can be highly
uncertain and involve complex legal and factual questions, and therefore the
breadth and enforceability of claims allowed in patents obtained by the Company
cannot be predicted.
The Company holds issued patents and has pending patent applications
and patent applications in preparation. Aphton intends to file additional patent
applications, when appropriate, relating to its technologies, improvements to
its technologies and specific products it may develop. There can be no
assurance, however, that its pending applications or patent applications in
preparation or to be prepared will be issued as patents. Additionally, there can
be no assurance that any issued, pending or future patents, will not be
challenged, invalidated or circumvented, or that the rights granted will provide
proprietary protection or competitive advantages to the Company. If any of the
Company's patents are invalidated or held to be unenforceable, the Company could
lose the protection of rights believed by it to be valuable, and its business
could be materially and adversely affected. Additionally, the existing patents,
patents pending and patents that may subsequently be obtained by the Company
will not necessarily preclude competitors from developing products that can be
marketed in competition with products developed by the Company and thus would
substantially lessen the value of the Company's proprietary rights.
The commercial success of the Company also will depend, in part, on
Aphton not infringing patents issued to others. There is no assurance that the
Company's products will not infringe on the patents or proprietary rights of
others. The Company may be required to obtain licenses to patents, patent
applications or other proprietary rights of others. The Company cannot assure
that any such licenses would be made available on terms acceptable to the
Company, if at all. If the Company does not obtain such licenses, it could
encounter delays in product introductions while it attempts to design around
such patents, or the development, manufacture or sale of products requiring such
licenses could be precluded. The Company could incur substantial costs,
including diversion of management time, in defending itself in litigation
brought against it on such patents or in litigation in which the Company asserts
its patents against another party, or in litigation brought by another party
asserting its patents against the Company. If competitors of the Company prepare
and file patent applications in the United States that claim technology also
claimed by the Company, the Company may have to participate in interference
proceedings declared by the U.S. Patent and Trademark Office to determine
priority of invention, which could result in substantial financial costs to the
Company and diversion of management attention, even if the eventual outcome is
favorable to the Company. The Company believes there will continue to be
significant litigation in the industry regarding patent and other intellectual
property rights.
The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Thus, Aphton protects its proprietary, technology and processes, in
part, by confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.
DEPENDENCE ON OTHERS FOR MANUFACTURING AND MARKETING. The Company has
no manufacturing facilities for commercial production of its products under
development and has no experience in marketing, sales or distribution. The
Company intends to continue establishing arrangements with and rely on third
parties, including large pharmaceutical companies, to manufacture, market, sell
and distribute any product it develops. Although the Company believes that
parties to any future arrangements will have an economic incentive to
successfully perform their contractual responsibilities, the amount and timing
of resources to be dedicated to these activities will not be within the
Company's control. There can be no assurance that such parties will perform
their obligations as expected, that the Company will derive any revenues from
such arrangements or that the Company's reliance on others for manufacturing
products will not result in unforeseen problems with product supply. If the
Company should encounter delays or difficulties in its current relationships or
in seeking to establish relationships with third parties to produce, package and
distribute any product it develops, market introduction and subsequent sales of
such products would be adversely affected. Moreover, contract manufacturers that
the Company may use must adhere to current good manufacturing practice ("GMP")
regulations enforced by the FDA through its facilities inspection program. If
these facilities cannot pass a pre-approval plant inspection, any FDA pre-market
approval of the Company's potential products would be adversely affected.
Additionally, such manufacturers are subject to continual review and periodic
inspections by the FDA and discovery of previously unknown problems with a
manufacturer or facility may result in FDA restrictions which could adversely
affect the manufacture and marketing of the Company's products.
DEPENDENCE ON AND NEED FOR KEY PERSONNEL. The Company is dependent upon
the services of its senior management, none of whom are subject to an employment
agreement with the Company. The Company has not insured itself against the loss,
due to death or disability, of any key personnel. The Company believes, however,
that the loss of the services of any key personnel would not have a material
adverse effect on the Company. Because of the specialized nature of its
business, the Company's success also depends upon its ability to attract and
retain highly qualified scientists and other technical personnel. The Company
faces intense competition for such persons and there can be no assurance that
the Company will be able to attract or retain such individuals.
UNCERTAIN EFFECT OF HEALTH CARE REFORMS. The levels of revenues and
profitability of biotechnology and pharmaceutical companies, including the
Company, may be affected by the continuing efforts of governmental and
third-party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United
States, there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to control health care costs. It is
uncertain what legislative proposals, if any, will be adopted or what actions
federal, state or third-party payors may take in response to any health care
reform proposals or legislation. The Company cannot predict the effect health
care reforms may have on its business, and no assurance can be given that any
such reforms will not have a material adverse effect on the Company. Further, to
the extent that such proposals or reforms have an adverse effect on the
business, financial condition and profitability of other biotechnology or
pharmaceutical companies that are prospective corporate partners for certain of
the Company's products, the Company's ability to commercialize its products may
be adversely affected.
THIRD PARTY REIMBURSEMENT. Successful commercialization of the
Company's products will depend in part on the availability of adequate
reimbursement from third-party health care payors, such as government and
private health insurers and other organizations for its products intended for
human use. Third-party payors are increasingly challenging the pricing of
medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. There can be no
assurance that any product that the Company succeeds in bringing to market will
be eligible for reimbursement at a level which is sufficient to enable the
Company to achieve market acceptance of its products or to maintain appropriate
pricing. Without such reimbursement, the market for the Company's products may
be limited. Significant reductions in insurance coverage also may have an
adverse affect on the Company's future operations.
PRODUCT LIABILITY CLAIMS AND UNINSURED RISK. The use of any of the
Company's products, whether for commercial applications or during pre-clinical
or clinical trials, exposes the Company to an inherent risk of product liability
claims in the event such products cause injury or result in adverse effects.
Such liability might result from claims made directly by health care
institutions, contract laboratories or others selling or using such products.
The Company currently maintains product liability coverage against risks
associated with testing its products in clinical trials. Insurance coverage for
product liabilities, however, is becoming increasingly expensive and difficult
to obtain. There can be no assurance that insurance coverage will be available
in the future at an acceptable cost, if at all, or in sufficient amounts to
protect the Company against such liability. The obligation to pay any product
liability claim in excess of whatever insurance the Company is able to acquire
could have a material adverse effect on the business, financial condition and
future prospects of the Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS. The Company's research and
development activities involve the controlled use of hazardous materials,
chemicals, cultures and various radioactive compounds. The Company is subject to
federal, state and local laws and regulations governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
such materials and certain waste products. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by such laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company.
The Company may be required to incur significant costs to comply with
environmental laws and regulations in the future. Current or future
environmental laws or regulations could materially adversely affect the
Company's business, financial condition and results of operations.
CONCENTRATION OF OWNERSHIP. At May 29, 1998, the Company's officers and
directors, together with the principal co-founders of the Company who are
members of its Scientific Advisory Board, beneficially own approximately 48%
(47% on a fully-diluted basis) of the Company's outstanding Common Stock. Such a
high level of ownership by such persons may have a significant effect in
delaying, deferring or preventing any potential change in control of the
Company.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's
Common Stock, like that of securities of other biotechnology companies, has
fluctuated significantly in recent years and is likely to fluctuate in the
future. Announcements by the Company or others regarding scientific discoveries,
technological innovations, litigation, commercial products, patents or
proprietary rights, the progress of clinical trials, government regulation,
public concern as to the safety of drugs and reliability of the Company's
testing processes, and general market conditions may have a significant effect
on the market price of the Common Stock. Fluctuations in financial performance
from period to period also may have a significant impact on the market price of
the Common Stock.
OUTSTANDING WARRANTS; SHARES AVAILABLE FOR FUTURE ISSUANCE AND SALE. As
of May 29, 1998, the Company had outstanding warrants to purchase 2,005,300
shares of Common Stock expiring at various dates through December 31, 2015, with
exercise prices ranging from $0.25 to $24.00 per share, all of which contain
anti-dilution provisions. The exercise of these warrants could result in
dilution of the value of the Shares and the voting power represented thereby.
The Company may issue additional capital stock, warrants and/or options to raise
capital in the future which could result in additional dilution. See, "Risk
Factors -- Capital Requirements; Uncertainty of Additional Financing."
Additionally, to attract and retain key personnel, the Company may issue
additional securities, including stock options.
No prediction can be made as to the effect, if any, that future sales
of shares of Common Stock, or the availability of shares for future sale, will
have on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of the Common Stock in the public market, or the
perception that such sales could occur, could adversely affect the market price
of the Common Stock and may make it more difficult for the Company to sell its
equity securities in the future at a time and price which it deems appropriate.
Public or private sales of substantial amounts of the Common Stock by persons or
entities that have exercised options and/or warrants could adversely affect the
prevailing market price of the Common Stock.
DILUTION
Net tangible book value per share is determined by dividing the
difference between the total amount of tangible assets and the total amount of
liabilities by the number of shares of Common Stock outstanding. As of April 30,
1998, the net tangible book value of the Company was approximately $8,995,000 or
$.63 per share.
If the Warrant is exercised in full, as of April 30, 1998 there would
be 14,406,217 shares of Common Stock outstanding with a net tangible book value
of $.89 per share (assuming no change to the shares outstanding or net tangible
book value as of April 30, 1998 other than pursuant to such conversion). Based
on the foregoing assumption, the purchase of the Warrant Shares through the
exercise of the Warrant at an exercise price of $17.50 per share would result in
the Warrant holder suffering immediate dilution of $16.61 per share.
The sale of any Resale Shares by the Selling Stockholder, however, will
transfer ownership of such Shares to purchasers participating in such offerings
so that their sale will not have an effect on the Company's capitalization,
balance sheet or net tangible book value per share.
SELLING STOCKHOLDER
The following table sets forth certain information with respect to the
Selling Stockholder. The Selling Stockholder named below may sell the Resale
Shares offered hereby from time to time and may choose to sell less than all or
none of such shares. The Selling Stockholder has not had any material
relationship with the Company within the past three years.
The number of shares to be owned by the Selling Stockholder following
the offering of the Resale Shares assuming all Resale Shares are sold will be
5.2 percent of Aphton's outstanding Common Stock.
BENEFICIAL MAXIMUM BENEFICIAL
OWNERSHIP NUMBER OF OWNERSHIP
PRIOR TO SHARES AFTER OFFERING
NAME OFFERING(1) OFFERED NUMBER OF SHARES(2)
Smith Barney 1,425,000 715,000 710,000
Fundamental Value Fund
- --------------------
(1) Assumes the Selling Stockholder has fully exercised the Warrant.
(2) Assumes all Resale Shares are sold by the Selling Stockholder.
<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of any Resale Shares
by the Selling Stockholder.
Assuming the Warrant is fully exercised at the exercise price of $17.50
per share, the proceeds received by the Company from such exercise will total
$3,937,500. These proceeds will be added to working capital and used to fund
operations (including clinical trials for Aphton's immunogens for colorectal,
pancreatic and stomach cancers, GERD, chronic peptic ulcers, breast and prostate
cancers and endometriosis) for product development and other general purposes.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, .001 par value and 2,000,000 shares of preferred stock,
$.001 par value.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the shareholders. Holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities to creditors and to the holders of the Company's preferred stock
that may at the time be outstanding. Holders of Common Stock have no preemptive
rights, cumulative voting rights and no right to convert their Common Stock into
any other securities. There are no restrictions on alienation of the Common
Stock, and no redemption or sinking fund provisions applicable to the Common
Stock. All outstanding shares of Common Stock are, and, upon payment of the
exercise price for and issuance of the Warrant Shares pursuant to the Warrant,
all shares outstanding will be, fully paid and nonassessable.
PREFERRED STOCK
No shares of preferred stock have been issued. The Company's Board is
authorized to divide the preferred stock into one or more classes or series and,
with respect to each class or series, to determine the voting powers, full or
limited, if any, and such other relative rights, powers and preferences,
including, without limitation, the dividend rate, conversion rights, if any,
redemption price and liquidation preference and such qualifications, limitations
or restrictions thereof, as shall be stated in the resolutions providing for the
issuance of such class or series.
Depending upon the rights of such preferred stock, the issuance of
preferred stock could have an adverse effect on the holders of Common Stock by
delaying or preventing a change in control of the Company, making removal of the
present management of the Company more difficult or resulting in restrictions
upon the payment of dividends and other distributions to the holders of Common
Stock.
WARRANTS
As of May 29, 1998, there were warrants outstanding to purchase
2,005,300 shares expiring at various dates through December 31, 2015, with
exercise prices ranging from $0.25 to $24.00. All of the warrants outstanding
contain anti-dilution provisions. Except for institutional holders, which
comprise less than 20% of the total, all of the warrants and the underlying
common stock, if and when issued, have restrictive conditions and holding
periods.
TRANSFER AGENTS AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is U.S.
Stock Transfer Corporation, Glendale, California 91204.
PLAN OF DISTRIBUTION
The Warrant entitles the Selling Stockholder, at any time after June
16, 1998 and not later than June 18, 2004, to exercise the Warrant in whole at
any time, or in part (but not for less than 100 shares at any time) from time to
time, for the purchase of up to an aggregate of 225,000 shares of Common Stock
at an exercise price of $17.50 per share. The exercise price is subject to
certain anti-dilution adjustments in accordance with the terms of the Warrant.
The sale of all or a portion of the Resale Shares offered hereby by the
Selling Stockholder may be effected in transactions (which may involve one or
more block transactions) on the NASDAQ National Market System, in negotiated
transactions or in the over-the-counter market at then-prevailing market prices,
at prices related to such prices or at negotiated prices. The Selling
Stockholder may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder. The Selling
Stockholder and any broker-dealers that participate in the distribution may
under certain circumstances be deemed to be "underwriters" within the meaning of
the Securities Act, and any discounts, concessions or commissions received by
such broker-dealers and any profits realized on the resale of Resale Shares by
them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Company and the Selling Stockholder may agree to indemnify
such broker-dealers against certain liabilities, including, without limitation,
certain liabilities under the Securities Act, or, if such indemnity is
unavailable, to contribute toward amounts required to be paid in respect of such
liabilities.
The Selling Stockholder, to the knowledge of the Company, has not
entered into any selling agreement underwriting agreement or other arrangement
with any underwriting firm or broker-dealer for the offer or sale of the Resale
Shares.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any such broker-dealers,
(b) the number of shares involved, (c) the price at which such shares are to be
sold, (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this prospectus, as supplemented, and (f) other facts material to the
transaction.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Resale Shares may not simultaneously
engage in market-making activities with respect to such shares for a period of
one or five business days prior to the commencement of such distribution. In
addition to, and without limiting, the foregoing, each of the Selling
Stockholder and any other person participating in a distribution will be subject
to the applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of any of the Resale Shares by the
Selling Stockholder or any such other person. All of the foregoing may affect
the marketability of the Resale Shares.
The Selling Stockholder, to the knowledge of the Company, has not
entered into any selling agreement, underwriting agreement or other arrangement
with any underwriting firm or broker-dealer for the offer or sale of the Resale
Shares.
There is no assurance that the Selling Stockholder will sell any or all
of the Resale Shares offered hereby.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the Shares, except that the Selling
Stockholder will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of Resale Shares.
In order to comply with the Securities laws of certain states, if
applicable, the Resale Shares will be sold in such jurisdictions, if required,
only through registered or licensed broker dealers.
The Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including, without limitation, certain liabilities under
the Securities Act.
The Company has agreed to keep the registration statement relating to
the offering and sale by the Selling Stockholder of the Resale Shares
continuously effective (a) in case of the Resale Shares until the earlier to
occur of (i) June 16, 1999 and (ii) such earlier date as such Resale Shares
shall have been sold by the Selling Stockholder and (b) in case of the Warrant
Shares (i) June 16, 2004 and (ii) such earlier date as all the Warrant Shares
shall have been issued by the Company.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
the Company by the law firm of White & Case LLP, New York, New York.
EXPERTS
The Company's balance sheets as of January 31, 1998, April 30, 1997 and
April 30, 1996 and statements of operations, stockholders' equity, and cash
flows for the nine months ended January 31, 1998 and for each of the three years
in the period ended April 30, 1997 incorporated by reference in this prospectus
have been incorporated herein in reliance on the report of
PricewaterhouseCoopers L.L.P., independent accountants, given on the authority
of said firm as experts in accounting and auditing.
<PAGE>
II-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
SEC Registration fee.................................................$ 4,132
Legal fees and expenses.............................................. 15,000
Accounting fees and expenses......................................... 2,400
NASDAQ Listing Fee................................................... 17,500
Miscellaneous........................................................ 0
Total.......................................................$39,032
* All amounts are estimated except for the SEC Registration Fee.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
permits the Company to indemnify its directors, officers, employees and agents
(each an "Insider") against liability for each such Insider's acts taken in his
or her capacity as an Insider in a civil action, suit or proceeding if such
actions were taken in good faith and in a manner which the Insider believed to
be in or not opposed to the best interests of the Company, and in a criminal
action, suit or proceeding, if the Insider had no reasonable cause to believe
his or her conduct was unlawful, including under certain circumstances, suits by
or in the right of the Company for any expenses, including attorneys' fees, and
for any liabilities which the Insider may have incurred in consequence of such
action, suit or proceeding under conditions stated in said Section 145. The
Company's Certificate of Incorporation and By-Laws provide that the Company
shall indemnify its directors and officers to the fullest extent authorized by
the DGCL; provided, that the Company may modify the extent of such
indemnification by individual contracts with its directors and executive
officers, and, provided further, that the Company will not be required to
indemnify any director or executive officer in connection with a proceeding
initiated by such person, with certain exceptions.
As permitted by Section 102(b)(7) of the DGCL, Article NINTH of the
Company's Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
as amended, which concerns unlawful payments of dividends, stock purchases or
redemption, or (iv) for any transaction from which the director derived an
improper personal benefit.
The Company's Certificate of Incorporation permits the Company to
secure insurance on behalf of any director, officer, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the Company would have the power to indemnify such person against such
liability under the DGCL.
Item 16. EXHIBITS.
Exhibit No. Description
2.1 Agreement and Plan of Merger of Aphton Corporation, a Delaware
corporation, and Aphton Corporation, a California corporation, dated
as of January 29, 1998 (incorporated by reference to Item 2.1 of the
Company's Current Report on Form 8-K filed on January 30, 1998).
4.1 Specimen of Common Stock Certificate (Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A filed
on January 30, 1998).
5.1* Opinion and consent of White & Case LLP.
23.1* Written consent of PricewaterhouseCoopers L.L.P.
23.2 Written consent of White & Case LLP (included in their opinion filed
as Exhibit 5.1 hereto).
24.1 Power of Attorney appointing Philip C. Gevas and Frederick W. Jacobs
to sign and file amendments hereto (see "Power of Attorney" in the
Registration Statement).
* Filed herewith.
Item 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(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
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13
or 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Miami, Florida, on the 2nd day of July, 1998.
Aphton Corporation
By: /s/Philip C. Gevas
----------------------------
Philip C. Gevas
Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Chairman of the Board, Chief July 2, 1998
- -------------------------------------- Executive Officer and President
Philip C. Gevas
*
- -------------------------------------- Treasurer and Chief Accounting Officer July 2, 1998
Frederick W. Jacobs
*
- -------------------------------------- Director July 2, 1998
Robert S. Basso
*
- -------------------------------------- Vice Chairman of the Board and July 2, 1998
William A. Hasler Director
*
- -------------------------------------- Director July 2, 1998
Nicholas John Stathis
By /s/ Philip C. Gevas
----------------------------------
Philip C. Gevas
Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Merger of Aphton Corporation, a Delaware
corporation, and Aphton Corporation, a California corporation, dated
as of January 29, 1998 (incorporated by reference to Item 2.1 of the
Company's Current Report on Form 8-K filed on January 30, 1998).
4.1 Specimen of Common Stock Certificate (Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A filed
on January 30, 1998).
5.1* Opinion and consent of White & Case LLP.
23.1* Written consent of PricewaterhouseCoopers L.L.P.
23.2 Written consent of White & Case LLP (included in their opinion filed
as Exhibit 5.1 hereto).
24.1 Power of Attorney appointing Philip C. Gevas and Frederick W. Jacobs
to sign and file amendments hereto (see "Power of Attorney" in the
Registration Statement).
* Filed herewith.
White & Case
Limited Liability Partnership
1155 Avenue of the Americas
New York, New York 10036-2787
July 1, 1998
Aphton Corporation
80 S.W. 8th Street
Miami, Florida 33130-3047
Dear Sirs:
We have examined the Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
in the form in which it is to be filed today by Aphton Corporation (the
"Company") with the Securities and Exchange Commission (the "Commission"), in
connection with the sale from time to time by Smith Barney Security and Growth
Fund (the "Selling Stockholder") of 715,000 shares of common stock, no par
value, of the Company (the "Resale Shares"), and the issuance by the Company to
the Selling Stockholder of up to 225,000 shares of common stock of the Company
(the "Warrant Shares") upon exercise of a warrant issued to the Selling
Stockholder on June 16, 1997. The terms of the warrant provide that it may not
be exercised, and the Warrant Shares will not be issued, prior to June 16, 1998.
Terms used but not defined herein have the meanings given to them in the
Registration Statement.
In connection with our opinion expressed below, we have examined originals
or copies certified to our satisfaction of such agreements, documents,
certificates and other statements of government officials and corporate officers
of the Company and such other papers as we have deemed relevant and necessary as
a basis for such opinion. As to certain facts material to our opinion, we have
relied, to the extent that we deem such reliance proper, upon certificates of
public officials and of officers of the Company. In rendering such opinion, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as certified, conformed or
photostatic copies.
Based upon and subject to the foregoing, it is our opinion that, (i) the
Resale Shares have been validly issued, and are fully paid and nonassessable,
and (ii) when the Warrant Shares are delivered against payment therefor, the
Warrant Shares will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm appearing under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement. In giving
this consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission.
Very truly yours,
WHITE & CASE LLP
TBG:GPP:LMS
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Aphton Corporation on Form S-3 (File No. 333-36925) of our report dated March
23, 1998, on our audits of the financial statements of Aphton Corporation as of
January 31, 1998 and April 30, 1997 and 1996 and for the nine months ended
January 31, 1998 and each of the fiscal years ended April 30, 1997, 1996 and
1995, which report is included in 1998 Annual Report on Form 10-K incorporated
by reference in this registration statement. We also consent to the reference to
our firm under the caption "Experts".
PricewaterhouseCoopers L.L.P
Honolulu, Hawaii
July 2, 1998
