PROSPECTUS
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100,000 Shares
AMERICAN BIOGENETIC SCIENCES, INC.
Class A Common Stock
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This Prospectus relates to an aggregate of 100,000 shares (the
"Shares") of Class A Common Stock, $.001 par value per share ("Class A Common
Stock"), of American Biogenetic Sciences, Inc. (the "Company") which may be
offered and sold from time to time, by The Sage Group, Inc. (the "Selling
Stockholder") upon the exercise of options (collectively, the "Options") to
purchase up to 50,000, 25,000 and 25,000 shares of Common Stock on or before
February 28, 2000, October 12, 2000 and December 13, 2000, respectively, each at
an exercise price of $2.25 per share. See "Selling Stockholder."
The Shares may be offered for sale by the Selling Stockholder from
time to time in the over-the-counter market, in privately negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Shares may be sold directly by the Selling Stockholder or through one or more
broker-dealers. Such broker-dealers may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholder and/or
purchasers of Shares for whom such broker-dealers may act as agent, or to whom
they may sell as principal, or both (which compensation as to a particular
broker-dealer may be in excess of customary commissions). The Selling
Stockholder and such broker-dealers may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"),
and any discounts, commissions and concessions and any profits realized on any
sale of the Shares may be deemed to be underwriting compensation. See "Selling
Stockholder" and "Plan of Distribution".
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholder. However, the Company will receive proceeds
from the exercise of the Options, if exercised. See "Use of Proceeds". The
Company will bear all expenses in connection with the filing of the Registration
Statement of which this Prospectus forms a part, except that the Selling
Stockholder will pay all discounts and commissions payable to broker-dealers and
the fees and expenses, if any, of its counsel.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
The Class A Common Stock is quoted on The Nasdaq Stock Market's
National Market System ("Nasdaq/NMS") under the symbol MABXA. On October 15,
1996, the closing price of the Class A Common Stock on Nasdaq/NMS was $5.875 per
share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is October 16, 1996
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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 statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http:// www.sec.gov) that contains reports, proxy and
information statements and other information electronically filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
The Common Stock is currently quoted on The Nasdaq Stock Market and such reports
and other information can also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement (No. 333-13615) under the Securities Act with respect to
the Shares (the "Registration Statement"). As permitted by the rules of the
Commission, this Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Shares offered hereby, reference
is made to the Registration Statement and the exhibits and schedules filed
therewith. Statements contained in this Prospectus, and in any document
incorporated herein by reference, as to the contents of any contract or any
other document referred to 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 such document, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement may be inspected without charge at the Commission's principal office,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part of the Registration Statement may be obtained from
such office upon the payment of the fees prescribed by the Commission. The
Registration Statement has been filed through EDGAR and is publicly available
through the Commission's Web site (http://www.sec.gov).
INFORMATION INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the
Commission (File No. 0-19041) pursuant to Section 13(a) of the Exchange Act are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, (iii) the
Company's Current Report on Form 8-K dated (date of earliest event reported)
September 30, 1996 and (iv) the description of the Company's Class A Common
Stock contained in the Registration Statement on Form 8-A filed by the Company
on February 26, 1991, including any amendment or report filed for the purpose of
updating such description. Each document filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus but prior to the termination of this offering shall be deemed to
be incorporated by reference into this Prospectus and to be part hereof from the
date of the filing of such document. Any statement contained in this Prospectus
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO EACH PERSON (INCLUDING
ANY BENEFICIAL OWNER) TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY DOCUMENT INCORPORATED
BY REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS UNLESS SUCH EXHIBITS ARE
EXPRESSLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS SHOULD BE
DIRECTED TO AMERICAN BIOGENETIC SCIENCES, INC., 1375 AKRON STREET, COPIAGUE, NEW
YORK 11726 (516) 789-2600, ATTENTION: JOSEF C. SCHOELL, VICE PRESIDENT, FINANCE.
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THE COMPANY
American Biogenetic Sciences, Inc. is engaged in the research and
development of cardiovascular and neurobiology products for commercial
development. The Company's enabling technology is a patented antigen-free mouse
colony which allows the generation of highly specific monoclonal antibodies that
are difficult to obtain from conventional systems. The Company has utilized this
technology to supply antibodies for its innovative in vitro and in vivo
diagnostic products.
Over the last few years the Company has directed its efforts
primarily toward the development of cardiovascular and neurobiology products,
which has led to the development of the Company's Thrombus Precursor Protein
(TpP(TM)) test, an assay for the detection of active thrombosis (blood clots),
and Functional Intact Fibrinogen (FiF(TM)) test, an assay to measure levels of
fibrinogen in blood, as well as the Company's patented specific monoclonal
antibody MH1, with radioisotope, for use as an in vivo imaging agent.
The Company was incorporated in Delaware on September 1, 1983. The
Company's principal executive offices are located at 1375 Akron Street,
Copiague, New York 11726, and its telephone number at that address is (516)
789-2600.
RISK FACTORS
An investment in the securities offered hereby is speculative in
nature, involves a high degree of risk and should not be made by any investor
who cannot afford the loss of his entire investment. In evaluating an investment
in the Company, prospective investors should carefully consider the following
risk factors in addition to the other information included herein and in the
information incorporated and deemed to be incorporated herein by reference (see
"Information Incorporated by Reference", above). Certain statements included in
this Prospectus (and the information incorporated and deemed to be incorporated
herein by reference) concerning the Company's future results, future
performance, intentions, objectives, plans and expectations are forward-looking
statements. Those statements are subject to a number of known and unknown risks
and uncertainties that, in addition to general economic and business conditions,
could cause actual results, performance and achievement to differ materially
from those described or implied in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below.
DEVELOPMENT STAGE COMPANY; HISTORY OF LOSSES; ACCUMULATED DEFICIT.
The Company commenced operations more than ten years ago and remains in the
development stage as it has not yet generated any revenues from product sales,
although the Company has received an aggregate of $1,265,000 in licensing fees
under collaborative agreements since inception. While the Company has products
at various stages of development, there can be no assurance as to when the
Company may begin generating revenues from product sales and cease being a
development stage company. The development of the Company's products has
required, and is expected to continue to require, significant research and
development, preclinical testing and clinical trials, as well as regulatory
approvals. These activities, together with the Company's general and
administrative expenses, have resulted in significant losses and are expected to
continue to result in significant losses for the foreseeable future. At June 30,
1996, the Company had an accumulated deficit of $37,712,000. The Company's
ability to achieve profitability is dependent, in part, on its ability to
successfully complete its existing products and products under development,
obtain required regulatory approvals and manufacture and market such products
directly or through partners. Due to the time before the Company expects to be
able to manufacture and commercially market its existing and under development
products, the Company expects to incur operating losses for the foreseeable
future. The Company's operations are subject to numerous risks associated with
the development of pharmaceutical products, including the competitive and
regulatory environment in which the Company operates. In addition, the Company
may encounter unanticipated problems, including development, manufacturing,
distribution and marketing difficulties, some of which may be beyond the
Company's financial and technical abilities to resolve. Accordingly, there can
be no assurance that the Company's existing, under development or proposed
products will prove to be commercially viable, or that the Company will
successfully market any products or achieve significant revenues or profitable
operations.
NEED FOR ADDITIONAL FINANCING. At June 30, 1996, the Company had
working capital of $8,099,000 ($16,700,000 adjusted to give effect to the
estimated net proceeds received by the Company from the sale, on
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September 30, 1996, of an aggregate $9,000,000 principal amount of 7%
Convertible Debentures due September 30, 1998). However, the research,
development, commercialization, manufacturing and marketing of the Company's
existing, under development and proposed products is likely to require financial
resources significantly in excess of those presently available to the Company.
Accordingly, the Company intends to seek additional financing (which may result
in borrowings that could affect its results of operations or the issuance of
additional shares of the Company's capital stock and/or rights to acquire
additional shares of capital stock that could cause a dilution of the interests
of then existing stockholders in the Company). The Company also intends to seek
collaborative, licensing, co-marketing or other arrangements with large
pharmaceutical companies or other third parties to provide additional funding
and clinical expertise to perform tests necessary to obtain regulatory
approvals, provide manufacturing expertise and market the Company's products,
which may result in the Company sharing the benefits of its products with such
third parties as well as sharing with, or relying upon, the management of others
for the development, testing and/or marketing of its products.
There can be no assurance that the Company will be able to arrange
financing, collaborative arrangements or other third party arrangements on
acceptable terms necessary to fully develop and commercialize any of its
products. If the Company is unable to enter into such arrangements or obtain the
substantial financing necessary on acceptable terms, it would be unable to
complete development of or commercialize its products.
UNPROVEN PRODUCTS. The Company's existing products and products under
development are in the developmental stage and are subject to the risks inherent
in the development of products based upon biotechnology. These products require
further research, development, testing and regulatory clearance. All of the
Company's products will require demonstration of commercial scale manufacturing
before any can be proven to be commercially viable. The Company is unable to
predict with any degree of certainty when, or if, the research, development,
testing and regulatory approval process for any of its products will be
completed. There can be no assurance that the Company's technology will result
in any product meeting applicable regulatory standards, be capable of being
produced in commercial quantities at reasonable costs, be acceptable to the
medical community, or be successfully marketed. Accordingly, the Company is
unable to predict whether its technology will result in any commercially viable
product.
CERTAIN EFFECTS OF GOVERNMENT REGULATION. The investigation,
manufacture, exportation and sale of diagnostic and therapeutic products and
vaccines in or from the United States is subject to regulation by the Food and
Drug Administration (the "FDA"), including review and/or approval before
marketing, as well as by comparable foreign and state agencies. Some in vitro
diagnostic products are eligible for an accelerated application process in
accordance with Section 510(k) of the 1976 Medical Device Amendments to the
Federal Food, Drug and Cosmetic Act as a product "substantially equivalent" to
another product in commercial distribution in the United States before May 28,
1976. The Company has filed for Section 510(k) regulatory review for its
microtiter plate format in vitro TpP diagnostic test and intends to seek such
clearance as to a microtiter plate format of its FiF diagnostic test. There can
be no assurance that such products, or other in vitro diagnostic test products
that the Company may develop, will be eligible to use the 510(k) procedure.
Therefore, the Company may be required to utilize other regulatory approval
processes which may result in higher costs and require more extensive time in
bringing products to market. The Company is proceeding with the development of
its in vitro products through use of its resources and through arrangements with
contractors and consultants. The cost of obtaining FDA approval for in vivo
products (such as is required for the Company's patented specific monoclonal
antibody MH1 obtained from the Company's antigen free mouse colony) is far more
expensive and time consuming than the costs associated with the review of
products for in vitro use. Therefore, the Company intends to seek joint ventures
or licensing arrangements with respect to its existing MH1 imaging product and
other proposed in vivo products under which the costs associated with the
regulatory review and/or approval process will be borne by, or shared with, the
joint venturer or licensee. There can be no assurance that the Company will be
able to enter into any such arrangements nor, if it is able to, the terms
thereof. Also, there can be no assurance that regulatory review and/or approval
will be obtained for its TpP, FiF and MH1 imaging products or for any additional
products the Company may develop. Even if regulatory review and/or approval is
obtained initially, a marketed product is subject to continual FDA review, and
the discovery of previously unknown problems may result in restrictions on a
product's marketing or the withdrawal of approval to market the product.
DEPENDENCE ON ACCEPTANCE BY MEDICAL COMMUNITY. Sales on a commercial
basis of the Company's products for use as diagnostics or therapeutics will be
substantially dependent on acceptance by the medical community. Widespread
acceptance of the Company's in vitro diagnostic tests as a useful adjunct to
diagnosis
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and treatment will require educating the medical community as to the benefits
and reliability of such products. Similarly, the use of any products for in vivo
diagnosis (including those utilizing mouse antibodies) and therapy will require
educating the medical community as to their benefits, reliability, safety and
effectiveness. There can be no assurance that any of the Company's products will
be accepted in the medical community, and the Company is unable to estimate
whether it will be able to, and if so the length of time it would take to, gain
such acceptance.
MARKETING ARRANGEMENTS OR SALES PERSONNEL. During the fourth quarter
of 1995, the Company entered into a license and collaboration agreement with a
large pharmaceutical company to co-develop and market the Company's TpP assay
and to market its TpP test in latex based particle agglutination format and
entered into another license agreement with a second large pharmaceutical
company for marketing another format of the TpP assay. The Company intends to
seek arrangements with other large pharmaceutical companies to market these, its
FiF, under development and proposed in vitro products. In the event the Company
is unable to enter into other arrangements or if the arrangements which it has
entered into or may enter into in the future are not successful, the Company
would likely seek to market such products through independent distributors which
would require the Company to develop a marketing program to support sales. In
such event, the Company would be required, among other things, to pay the
expenses of developing promotional literature and aides, hiring sales
representatives and completing studies to interest distributors in selling the
Company's in vitro diagnostic tests. Any independent distributors that the
Company may use would in all likelihood also market competitive products. There
can be no assurance that the Company will be able to enter into arrangements for
the distribution of any in vitro products on satisfactory terms. Any in vivo
products will require the marketing and sales organization of a large
pharmaceutical company to establish them in the marketplace. In the event the
Company were unable to enter into satisfactory marketing arrangements, it would
be unable to commercially market any in vivo products.
MANUFACTURING FACILITIES. While the Company is presently producing a
limited quantity of monoclonal antibodies for testing and evaluation of its in
vitro products, there can be no assurances that the Company will be able to
either finance or meet FDA regulations for good manufacturing procedures
required in order to convert and operate such facility for commercial production
of such products. The Company does not intend to establish its own manufacturing
operations for its in vivo products unless and until, in the opinion of
management of the Company, the size and scope of its business and its financial
resources so warrant. The Company has entered into an agreement under which a
third party is to manufacture the Company's in vivo diagnostic monoclonal
antibody for use in clinical testing. It is the Company's intention to seek
additional third parties to manufacture its in vivo monoclonal antibody or enter
into a joint venture or license agreement with a partner who will be responsible
for future manufacturing. Each joint venture partner or contract manufacturer
participating in the manufacturing process of the Company's monoclonal antibody
must comply with FDA regulations and file documentation with the FDA to support
that part of the manufacturing process in which it is involved. There is no
assurance that third parties will be able to manufacture sufficient quantities
of the Company's in vivo monoclonal antibody necessary to obtain full FDA
clearance, that the FDA will accept the Company's manufacturing arrangements, or
that these commercial manufacturing arrangements can be obtained on acceptable
terms.
PATENTS AND PROTECTION OF PROPRIETARY INFORMATION. The Company's
policy is to seek patent protection for its products and products resulting from
any development and licensing arrangements into which the Company may enter.
Such patents generally require one to five years before issuance. There can be
no assurance that any pending or future patent applications will issue as
patents. If patents do not issue from present or future patent applications, the
Company may be subject to greater competition. Moreover, other technology which
does not infringe upon the Company's technology could be independently developed
by others who would then be free to use the technology in competition with the
Company. Also, there can be no assurance that any of the patents which the
Company has obtained or which may be issued in the future will provide the
Company with significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of any such patents or, if
instituted, that such challenges will not be successful. The cost of litigation
to uphold the validity of a patent and prevent infringement can be substantial
even if the Company were to prevail. Furthermore, there can be no assurance that
others have not independently developed, or will not develop, similar
technologies and products or will not develop distinctively patentable
technology duplicating the Company's technology or design around the patented
aspect of the Company's technologies and products or that the Company will not
infringe patents or other rights owned by others, licenses to which may not be
available to the Company or, if available, may not be available on commercially
reasonable terms.
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In certain cases, the Company may rely on trade secrets and
contractual confidentiality agreements with consultants, employees and others to
protect any proprietary technology that it develops. There can be no assurance
that trade secrets will be developed, or that secrecy obligations will be
honored, or that others will not independently develop similar or superior
technology. The Company's scientific advisors may be employed by or have
agreements with third parties and any inventions discovered by such individuals
may not necessarily become the property of the Company.
COMPETITION; RAPID TECHNOLOGICAL CHANGES. Many companies, including
large pharmaceutical, chemical, biotechnology and agricultural concerns,
universities and other research institutions, with financial resources and
research and development staffs and facilities substantially greater than those
of the Company, as well as a number of small companies, are engaged in
researching and developing products which are or may be similar to, or
competitive with, the Company's existing, under development and proposed
products.
Other products now in use, presently undergoing the regulatory
approval process, or under development by others may perform similar functions
as the Company's existing, under development and proposed products. The industry
is characterized by rapid technological advances, and competitors may develop
products which may render the Company's existing, under development and proposed
products obsolete or which have advantages over the Company's products, such as
greater accuracy and precision or greater acceptance by the medical community.
In addition, competitors may be able to complete the regulatory approval process
sooner and, therefore, market their products earlier than the Company.
RETENTION AND ATTRACTION OF KEY PERSONNEL. The success of the Company
may be dependent on the efforts of Alfred J. Roach, Chairman of the Board of
Directors and a major stockholder of the Company, Dr. Paul E. Gargan, President,
Chief Scientific Officer and a Director of the Company, and P. Scott Waterhouse,
Executive Vice President and Chief Operating Officer of the Company. Only Dr.
Gargan is a party to an employment agreement with the Company. The loss of the
services of Mr. Roach, Dr. Gargan or Mr. Waterhouse, as well as certain other
personnel, could adversely affect the Company's business and prospects.
Because of the nature of its business, the Company's success is
dependent upon its ability to attract and retain technologically qualified
personnel, particularly research scientists. There is substantial competition
for qualified personnel, including competition from companies with substantially
greater resources than the Company. There is no assurance that the Company will
be successful in recruiting or retaining personnel of the requisite caliber or
in adequate numbers to enable it to conduct its business, and it may be time
consuming and costly to recruit qualified personnel.
The Company's scientific advisors are employed by or work for others,
and they are expected to devote only a small portion of their time to the
Company. In addition, these individuals have employment, consulting or other
advisory arrangements with other entities and, as a result, their obligations to
these other entities may conflict or compete with their obligations to the
Company.
PRODUCT LIABILITY; ABSENCE OF INSURANCE COVERAGE. The testing,
marketing and sale of pharmaceutical products entails a risk of product
liability claims by consumers and others. Additionally, the Company's monoclonal
antibodies are generated from an antigen free mouse colony and instances of the
human immune system negatively reacting to mouse derived antibodies have been
reported by others. Product liability claims may be asserted by physicians,
laboratories, hospitals or patients relying upon the results of the Company's
diagnostic tests. Claims may also be asserted against the Company by end users
of the Company's products, including persons who may be treated with any in vivo
diagnostic or therapeutics.
Certain distributors of pharmaceutical products require minimum
product liability insurance coverage as a condition precedent to purchasing or
accepting products for distribution. Failure to satisfy such insurance
requirements could impede the ability of the Company to achieve broad
distribution of products, which would have a material adverse effect upon the
business and financial condition of the Company.
The Company does not maintain product liability insurance coverage
and, although the Company will attempt to obtain product liability insurance
prior to the marketing of its existing or under development products, there is
no assurance that the Company will be able to obtain such insurance or, if
obtained, that such insurance can be acquired at a reasonable cost or will be
sufficient to cover all possible liabilities. In the event of a
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successful suit against the Company, lack or insufficiency of insurance coverage
could have a material adverse effect on the Company.
CONTROL BY ALFRED J. ROACH. As at September 30, 1996, Alfred J.
Roach, Chairman of the Company's Board of Directors, owned and had the power to
vote all 1,375,500 outstanding shares of the Company's Class B Common Stock and
513,250 shares of the Company's Class A Common Stock (and held immediately
exercisable options to purchase an additional 1,017,500 shares of the Company's
Class A Common Stock). Each share of Class B Stock is entitled to ten votes,
while each share of Class A Common Stock is entitled to one vote. Accordingly,
at such date, Mr. Roach was entitled to cast approximately 47.6% of all votes
entitled to be cast by stockholders at meetings or by consent without a meeting.
POTENTIAL ISSUANCES OF SHARES. In addition to the 16,210,673 shares
of Class A Common Stock outstanding on September 30, 1996, the Company had
10,328,504 shares of Class A Common Stock reserved for future issuance as
follows: (i) 1,375,500 shares were reserved for issuance upon conversion of
Class B Common Stock, (ii) 3,010,250 shares were reserved for issuance upon the
exercise of outstanding options under the Company's 1986 Stock Option Plan
(which plan has expired as to the future grant of options) at prices ranging
from $1.50 to $10.00 per share, (iii) 1,000,000 shares were reserved for
issuance upon the exercise of options granted or which may be granted in the
future under the Company's 1996 Stock Option Plan, under which options to
purchase 135,000 shares, at exercise prices ranging from $4.78 to $5.25 per
share, were outstanding, (iv) 487,500 shares were reserved for issuance upon the
exercise of options granted or which may be granted in the future under the
Company's 1993 Non-Employee Director Stock Option Plan, under which options to
purchase 80,000 shares at exercise prices ranging from $2.75 to $6.75 per share
were outstanding, (v) 3,052,500 shares, representing the maximum number of
shares issuable upon conversion of $9,000,000 principal amount of the Company's
7% Convertible Debentures due September 30, 1998 (including interest for one
calendar quarter since any accrued but unpaid interest is also convertible into
Common Stock), were reserved for issuance upon conversion of such Debentures
(which are convertible to the extent of 25% of the principal amount thereof
commencing on the earlier of the effective date a registration statement under
the Securities Act (which the Company is to file on or prior to October 20,
1996) covering the underlying shares or December 29, 1996, and on each of the
30th, 60th and 90th days thereafter, at a conversion price equal to 83% of the
average closing bid prices of the Company's Class A Common Stock for the five
consecutive trading days ending on the trading day immediately prior to the
conversion date, subject to a minimum conversion price of $3.00 per share and a
maximum conversion price of $8.00 per share, provided that if the conversion
price would otherwise be less than $3.00 per share, the Debentureholder will
also be entitled to receive an amount of cash equal to the decrease in the
number of shares issued as a result of such limit multiplied by such market
price of the Company's Class A Common Stock, (vi) a minimum of 605,655 shares
were reserved for issuance upon conversion of the $1,900,000 principal amount of
the Company's 8% Convertible Debentures due October 13, 1998, which were
outstanding on September 30, 1996 and convertible (with interest from October
13, 1995) at a price equal to the lesser of $3.375 or 85% of the average closing
bid price of the Company's Class A Common Stock for the five trading days prior
to the conversion date, and (vii) 797,099 shares (including the Shares) were
reserved for issuance upon the exercise of warrants and options issued to
unaffiliated third parties (at exercise prices ranging from $2.25 to $6.75 per
share). The issuance of reserved shares would dilute the equity interest of
existing stockholders and could have a significant adverse effect on the market
price of the Company's Class A Common Stock. See also "--Shares Eligible for
Future Sale", below.
NO DIVIDENDS. The holders of Class A and Class B Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor. To date, the Company has not paid any
cash dividends. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition, and other relevant
factors. The Board does not intend to declare any dividends in the foreseeable
future, but instead intends to retain all earnings, if any, for use in the
Company's business operations. As the Company will be required to obtain
additional financing, it is likely that there will be restrictions on the
Company's ability to declare any dividends.
SHARES ELIGIBLE FOR FUTURE SALE. At September 30, 1996, the Company
had outstanding 16,210,673 shares of Class A Common Stock and 1,375,500 shares
of Class B Common Stock (which are convertible into Class A Common Stock on a
share for share basis). Of such shares, approximately 15,606,223 shares of Class
A Common Stock are presently freely transferable without restriction under the
Securities Act.
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Of the remaining 1,979,950 outstanding shares (including the
1,375,500 shares of Class A Common Stock issuable upon conversion of Class B
Common Stock), 1,974,950 shares are held by persons who may be deemed to be
"affiliates" of the Company and are presently eligible for sale under Rule 144
promulgated by the Commission under the Securities Act ("Rule 144"). Rule 144
provides, in general, that all persons (including affiliates) who have satisfied
a two year holding period with respect to "restricted securities", as well as
affiliates with respect to all other securities held by them, may, subject to
fulfillment of certain requirements, sell within any three month period a number
of shares of Class A Common Stock which does not exceed the greater of 1% of the
then outstanding shares of Class A Common Stock or the average weekly trading
volume in Class A Common Stock during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of
"restricted securities" without any quantity or other limitation by a person who
is not an affiliate of the Company (and has not been an affiliate for at least
three months preceding the sale) and who has satisfied a three year holding
period. "Affiliates" are persons who control, are controlled by or are under
common control with the Company.
Upon issuance of the 100,000 Shares covered by this Prospectus, such
Shares will also be freely transferable without restriction under the Securities
Act subject to applicable Prospectus delivery requirements. In addition, all
605,655 shares that may be issued upon conversion of the Company's 8%
Convertible Debentures are likely to be tradeable without restriction upon such
conversion, and all shares issuable upon the exercise of options under the
Company's stock option plans have been registered for issuance with the
Securities Act and, unless held by "affiliates" of the Company (who will be able
to sell such shares by complying with Rule 144, discussed above, but without any
additional holding period), will be freely tradeable upon issuance. Furthermore,
the Company has filed separate registration statements under the Securities Act
concerning the resale of (i) 5,000 shares of Class A Common Stock issued in June
1996 and 25,000 shares of Class A Common Stock subject to an option held by a
former consultant and (ii) 350,000 shares of Class A Common Stock subject to
warrants held by the underwriter of a public offering conducted by the Company.
In addition, the Company has undertaken to file, on or prior to October 20,
1996, a registration statement under the Securities Act covering the maximum
number of shares of Class A Common Stock (3,052,500) issuable upon the
conversion of $9,000,000 principal amount of 7% Convertible Debentures issued by
the Company on September 30, 1996, which registration statement will also cover
15,618 shares of Class A Common Stock subject to warrants held by the placement
agent for such 7% Convertible Debentures. See "--Potential Issuances of Shares",
above.
Any sale of a substantial number of the foregoing shares could have a
significant adverse effect on the market price of the Class A Common Stock.
NO ASSURANCE OF CONTINUED NASDAQ/NMS LISTING. The Nasdaq/NMS
requires, for continued listing thereon, that a Company maintain among other
criteria, tangible net worth of at least $4,000,000 (to be reduced if the
Company attains profitability) and an aggregate market value of shares held by
persons other than officers or directors of at least $1,000,000 (with a minimum
bid price of $1.00 per share) or such aggregate market value of at least
$3,000,000 and tangible net worth of at least $4,000,000, as well as compliance
with various other rules. There can be no assurance that the Company will
continue to be eligible for trading on Nasdaq/NMS.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholder. However, the Company will receive $2.25 for each
Option exercised or an aggregate of $225,000 if all Options are exercised
(resulting in the issuance of an aggregate of 100,000 shares of Class A Common
Stock). Such proceeds (before giving effect to the expenses of this offering,
estimated at $5,000) will be used by the Company for working capital.
SELLING STOCKHOLDER
The Sage Group, Inc., the Selling Stockholder, has advised the
Company that, except for the 100,000 shares subject to the Options (which shares
represent less than 1% of the outstanding Class A Common Stock), it is not the
beneficial owner of any shares of capital stock of the Company and that,
immediately following the sale of the Shares offered hereby, will own no shares
of capital stock of the Company.
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<PAGE>
The Options were issued to the Selling Stockholder pursuant to an
agreement under which the Selling Stockholder served as a consultant to the
Company from March 1, 1995 until February 29, 1996 for the purpose of
identifying potential opportunities for the Company to raise funds through
collaborating with third parties in the development and commercialization of the
Company's products and intellectual property and implementing such opportunities
(including with respect to two collaborative arrangements entered into by the
Company).
The Registration Statement (of which this Prospectus forms a part)
was filed at the request of the Selling Stockholder made in accordance with the
registration rights provided in the Options. The Company has also agreed in the
Options to indemnify the Selling Stockholder and certain related persons against
certain liabilities, including liabilities under the Securities Act, in certain
instances related to the Registration Statement.
PLAN OF DISTRIBUTION
The Shares may be offered for sale by the Selling Stockholder from
time to time in the over-the-counter market, in privately negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Shares may be sold directly by the Selling Stockholder or through one or more
broker-dealers. Such broker-dealers may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholder and/or
purchasers of Shares for whom such broker-dealers may act as agent, or to whom
they may sell as principal, or both (which compensation as to a particular
broker-dealer may be in excess of customary commissions). The Selling
Stockholder has agreed to limit the number of Shares it may sell in any week to
10,000 shares unless the Company consents to a larger number of Shares. The
Selling Stockholder and such broker-dealers may be deemed to be "underwriters"
within the meaning of the of Securities Act, and any discounts, commissions and
concessions and any profit realized on any sales of the Shares may be deemed to
be underwriting compensation.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by
Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New
York 10036.
EXPERTS
The consolidated financial statements, including the related notes
and schedules thereto, as of December 31, 1995 and for each of the three years
in the period then ended, which are incorporated by reference in this Prospectus
and elsewhere in the Registration Statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
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<PAGE>
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NO PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH THE OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS OR A
SUPPLEMENT TO THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION 100,000 SHARES
OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE AMERICAN BIOGENETIC SCIENCES, INC.
SELLING STOCKHOLDER OR ANY OTHER
PERSON. NEITHER THIS PROSPECTUS NOR
ANY SUPPLEMENT TO THIS PROSPECTUS COMMON STOCK
CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY,
ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR
AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT PROSPECTUS
IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY
SUPPLEMENT TO THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATES AS
OF WHICH SUCH INFORMATION IS
FURNISHED. October 16, 1996
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TABLE OF CONTENTS
Page
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Available Information.............. 2
Information Incorporated by
Reference......................... 2
The Company........................ 3
Risk Factors....................... 3
Use of Proceeds.................... 8
Selling Stockholder................ 8
Plan of Distribution............... 9
Legal Matters...................... 9
Experts............................ 9
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