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PROSPECTUS Filed pursuant to Rule 424(b)(3)
Registration File No. 333-58219
CREATIVE BIOMOLECULES, INC.
5,939,227 SHARES OF COMMON STOCK, $.01 PAR VALUE
This Prospectus relates to the offer and sale by certain persons listed
herein as "Selling Stockholders" (the "Selling Stockholders") of shares (the
"Shares") of Common Stock $.01 par value per share (the "Common Stock"), of
CREATIVE BIOMOLECULES, INC. ("CREATIVE BIOMOLECULES" or the "Company"), issuable
upon conversion of the Company's Series 1998/A Convertible Preferred Stock, $.01
par value per share (the "Series 1998/A Preferred Stock") acquired by the
Selling Stockholders on May 27, 1998, consisting of up to 5,939,227 shares of
Common Stock issuable upon conversion of the Series 1998/A Preferred Stock and
an indeterminate number of additional shares of Common Stock as may from time to
time become issuable upon conversion of the Series 1998/A Preferred Stock by
reason of stock splits, stock dividends and other similar transactions, which
shares are registered hereunder pursuant to Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"). The Shares may be offered by the
Selling Stockholders or by pledgees, donees, transferees or other successors in
interest that receive such Shares as a gift, partnership distribution or other
non-sale related transfer. The Series 1998/A Preferred Stock and the Common
Stock issuable upon conversion of the Series 1998/A Preferred Stock have been
and will be issued in transactions exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) or 3(a)(9) thereof or otherwise. See
"Selling Stockholders" and "Plan of Distribution." The Shares are being
registered by the Company pursuant to the registration rights granted to the
Selling Stockholders.
The Shares may be offered and sold by the Selling Stockholders from time to
time in transactions on The Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Plan of
Distribution." The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses (other than selling commissions or discounts) in connection with the
registration and sale of the Shares being offered by the Selling Stockholders,
estimated at $50,000.00. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act.
The Common Stock of the Company is traded on The Nasdaq National Market
under the symbol "CBMI." On June 26, 1998, the last sale price for the Common
Stock as quoted on The Nasdaq National Market was $4.625 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
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.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commission or discounts under the Securities
Act.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO PERSON IS AUTHORIZED
IN CONNECTION WITH ANY OFFERING MADE HEREBY 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 THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN
THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SHARES OFFERED HEREBY TO
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION.
The date of this Prospectus is July 17, 1998
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ADDITIONAL INFORMATION
This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement"), filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement which the
Company has filed with the Commission under the Securities Act and to which
reference is hereby made; certain parts of this Prospectus have been omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus 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 or incorporated by
reference as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the shares offered hereby, reference is hereby made
to the Registration Statement and the exhibits and schedules thereto.
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
Commission in Washington, D.C. Such reports, proxy materials and other
information concerning the Company filed in accordance with the Exchange Act and
the Registration Statement and exhibits and schedules thereto may be inspected,
without charge, at the public reference facility maintained at the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
on request, at the Commission's regional offices at 7 World Trade Center, 13th
Floor, New York, New York 10048 and the Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained, at prescribed rates, from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Common Stock
of the Company is quoted on The Nasdaq National Market. Reports, proxy and
information statements and other information concerning the Company may be
inspected at The Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C.
20006. In addition, the Commission also maintains a web site (address:
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
The information contained in this Prospectus as well as in the documents
incorporated herein by reference is qualified in its entirety by the more
detailed information and financial data, including "Risk Factors," appearing
elsewhere in this Prospectus and in the documents incorporated herein by
reference. In addition to historical information contained herein, this
Prospectus contains forward-looking statements that involve risks and
uncertainties. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in "Risk Factors." The Company
does not undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated herein by reference:
1. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998, filed with the Commission on May 14, 1998;
2. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 30, 1998;
3. The Company's Current Report on Form 8-K, filed with the Commission on
June 5, 1998; and
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, filed with the Commission on December 3,
1992, including any amendments or reports filed for the purpose of updating such
description.
In addition to the foregoing, all reports and other documents subsequently
filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, after the date of this Prospectus and prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement contained in a document
incorporated by reference herein shall be deemed modified or superseded for
purposes of this Prospectus to the extent that a statement contained or
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to CREATIVE BIOMOLECULES, INC., 45 South Street, Hopkinton,
Massachusetts, 01748, Attn: Chief Financial Officer, telephone (508) 782-1100.
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PROSPECTUS SUMMARY
The following is qualified in its entirety by the more detailed information
appearing elsewhere in this Prospectus and by the more detailed information and
financial statements appearing in the documents incorporated herein by
reference. As used herein, unless the context otherwise requires, references to
the "Company" or "CREATIVE BIOMOLECULES" include CREATIVE BIOMOLECULES, INC., a
Delaware corporation, and its subsidiary. An investment in the Shares offered
hereby involves a high degree of risk. This Prospectus, including the documents
incorporated herein by reference, contains forward-looking statements that
involve risks and uncertainties. Actual events or results may differ materially
from those discussed in such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, the
factors discussed under the heading "Risk Factors" as well as those discussed
elsewhere in this Prospectus and in the documents incorporated herein by
reference.
THE COMPANY
CREATIVE BIOMOLECULES, INC. ("CREATIVE BIOMOLECULES" or the "Company") is
developing products for the regeneration and restoration of human tissues and
organs based on morphogenic proteins identified and characterized by the
Company. The Company's lead morphogenic protein, OP-1, has been shown to induce
formation of several types of tissues including bone, cartilage, kidney, tooth
and brain. For orthopaedic and dental applications of OP-1, the Company's
corporate partner is Stryker Corporation ("Stryker"), a leading surgical and
medical products company. Stryker has completed a pivotal trial to evaluate the
use of an OP-1 device as a bone graft substitute for severe fractures. Stryker
has initiated filing of a Pre-Market Approval ("PMA") application with the
United States Food and Drug Administration ("FDA"). Stryker is conducting
additional clinical trials in orthopaedic applications of OP-1 devices, as well
as preclinical studies in cartilage regeneration. The Company's corporate
partner in development of renal disease therapies is Biogen, Inc. ("Biogen"), a
leading biopharmaceutical company with expertise in development and
commercialization of protein therapies. CREATIVE BIOMOLECULES and Biogen are
developing OP-1 products to treat acute and chronic renal failure. In addition
to the Stryker and Biogen programs, CREATIVE BIOMOLECULES has proprietary
programs in place to develop product candidates for neurological disorders and
osteoporosis.
The Company has discovered a family of morphogenic proteins that initiate
the cascade of cellular events responsible for tissue formation. One member of
this family is OP-1, a naturally occurring morphogenic protein produced
primarily in the kidney. OP-1 has the capacity to trigger the formation or
repair of a variety of tissues by activating cells to respond to their specific
environment. The activated cells then differentiate and form the type of tissue
dictated by their environment. The Company believes that as a result of such
action, OP-1 may be helpful in the treatment of defects and diseases involving a
number of different types of human tissues and organs. OP-1 was first isolated
and characterized by CREATIVE BIOMOLECULES' scientists and is the subject of
issued patents covering the protein itself as well as OP-1 based products for
certain applications.
The Company's agreement with Stryker grants Stryker the exclusive right to
develop, market and sell OP-1 based products for use in the repair or
replacement of bone and joint tissue ("orthopaedic reconstruction") and for use
as dental therapeutics. This agreement provides for the payment of royalties to
the Company on such sales, grants the Company the exclusive right to supply
Stryker's worldwide commercial requirements for such products and provides for
research funding to the Company. The Company's agreement with Biogen grants
Biogen the exclusive right to develop, manufacture, market and sell OP-1 based
products for use in the treatment of renal disease. This agreement provides for
payment of royalties to the Company on such sales and provides for milestone
payments and research funding to the Company. The Company has retained
commercial rights to OP-1 based products for all indications other than
orthopaedic reconstruction, dental therapeutics and kidney disorders. The
Company's retained applications include neurological disorders such as stroke
and metabolic bone diseases such as osteoporosis.
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ORTHOPAEDIC RECONSTRUCTION AND DENTAL THERAPEUTICS
The availability of a bone graft material which can induce bone formation
is important to successful repair in many orthopaedic applications including
open fracture reductions of acute or non-healing fractures, spinal fusions,
maxillofacial reconstructions, prosthetic fixations and gap filling procedures.
Stryker has completed a pivotal study of an OP-1 bone regeneration product
designed to induce new bone formation. This trial was conducted in 122 patients
with non-union fractures of the tibia, the major bone of the lower leg. The
objective of this trial was to demonstrate that treatment with the OP-1 device
could repair non-union fractures of the tibia comparably to autograft, a
procedure which involves removal of bone from the hip and implanting that bone
at the fracture site to induce healing. The results of the trial, presented in
March 1998, demonstrated that the OP-1 bone regeneration product had comparable
clinical success to the autograft group without the need for a second invasive
procedure to harvest autograft bone. Based on the results of the trial, other
clinical and preclinical data, and the Company's development of a commercial
scale manufacturing process, Stryker has initiated a modular filing of its PMA
application for this OP-1 bone regeneration product. The PMA application is
Stryker's formal request to the FDA for approval to market the product. The
initial sections of this modular PMA application have been submitted and are
currently under review by the FDA.
In addition to the pivotal trial in non-union fractures, the Company's
corporate partner, Stryker, has initiated clinical studies in other bone graft
indications. Stryker and the Company are also evaluating the possible role of
OP-1 in the treatment of cartilage defects.
The Company and Stryker are also developing an OP-1 product for the
treatment of periodontal disease. Based on completed preclinical studies, the
Company believes that an OP-1 product may restore the periodontal tissues
necessary to maintain tooth attachment when used in conjunction with standard
surgical treatments of periodontal disease.
KIDNEY DISORDERS
Acute renal failure involves the rapid loss of kidney function and is
associated with a high mortality rate. Chronic renal failure, in contrast, is
the slow progressive loss of kidney function ultimately resulting in the need
for kidney transplantation or dialysis. The high risk of acute renal failure and
the substantial costs associated with dialysis therapy represent areas of
significant unmet medical and economic healthcare needs. CREATIVE BIOMOLECULES
and its partner, Biogen, are developing OP-1 product candidates to treat both
acute and chronic renal failure. The Company believes that there is a
substantial commercial opportunity for renal therapies that could delay or
eliminate the need for costly dialysis treatments. Preclinical studies have
shown that OP-1 administration improves kidney function in animal models of both
acute and chronic renal failure.
NEUROLOGICAL DISORDERS
CREATIVE BIOMOLECULES is developing OP-1 and other protein candidates for
use in the treatment of stroke and other neurological disorders. Research
studies have shown that OP-1 enhances survival of neurons and can promote the
establishment of new neuronal connections which aid recovery from brain injury
or disease. In several preclinical studies presented in 1997, the Company
demonstrated the ability of OP-1 to improve the recovery rate of motor function
in an animal model of stroke.
OTHER PROGRAMS
In addition to its work with the OP-1 protein, the Company has a program
underway to develop small molecules that can stimulate the same regeneration
results induced by morphogenic proteins via interaction with various steps in
the tissue formation cascade. Such small molecule agents may provide appropriate
therapies for
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chronic renal failure, osteoporosis and chronic neurological diseases. The
Company is also investigating the role in tissue formation of other related
morphogenic proteins in its proprietary portfolio.
The Company's principal offices are located at 45 South Street, Hopkinton,
Massachusetts 01748, and its telephone number is (508) 782-1100. The Company is
the successor to a California corporation of the same name organized in 1981. In
1987, the Company completed a corporate reorganization and became a Delaware
corporation.
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RISK FACTORS
An investment in the Common Stock offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information
included or incorporated by reference in this Prospectus, prospective investors
should consider carefully the following risk factors before purchasing the
Common Stock offered hereby. This Prospectus, including the documents
incorporated herein by reference, contains forward-looking statements that
involve risks and uncertainties. Actual events or results may differ materially
from those discussed in such forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, the
factors discussed below as well as those discussed elsewhere in this Prospectus
and in the documents incorporated herein by reference.
EARLY STAGE OF DEVELOPMENT
CREATIVE BIOMOLECULES has not yet generated revenues from the
commercialization of its products, and there is substantial uncertainty
regarding the timing and amount of any such future revenues. Although the
Company cannot predict with accuracy the timing of marketing approval for any
products under development, the first such approval is not expected until late
1999 at the earliest and no significant product revenues or royalties will be
generated before such approval is obtained. There can also be no assurance that
the Company's products will be proven safe and effective in clinical trials,
meet applicable regulatory standards, be capable of being produced in commercial
quantities at reasonable cost, be marketed successfully or achieve customer
acceptance. Moreover, there can be no assurance that government health
administration authorities, private health care providers or other third party
payors will accept the Company's products, even if the Company's products prove
to be safe and effective and are approved for marketing by the FDA and other
regulatory authorities.
RELIANCE ON LEAD PRODUCT CANDIDATE
The Company's research and development resources are primarily dedicated to
its programs based on its proprietary recombinant morphogenic protein, OP-1, the
Company's lead product candidate for several potential therapeutic indications.
Progress in the area of orthopaedic reconstruction is within the control of
Stryker Corporation ("Stryker") and progress in the area of renal disease is
within the control of Biogen, Inc. ("Biogen"). Stryker and Biogen are the
Company's collaborative partners. Significant delays in Stryker's efforts to
obtain regulatory approval for the commercialization of OP-1 or Biogen's
preclinical trials of OP-1, unfavorable results in these trials or clinical
trials, failure to obtain regulatory approval for the commercialization of OP-1
products or failure to achieve market acceptance of OP-1 would have a material
adverse effect upon the Company. See "-- Dependence on Efforts of Stryker and
Biogen and Other Collaborative Partners to Commercialize Products."
CONTINUING OPERATING LOSSES AND ACCUMULATED DEFICIT
The Company has experienced significant operating losses since its
inception and, as of March 31, 1998, had an accumulated deficit of approximately
$93.0 million. The Company expects its operating expenses to increase and its
operating losses to continue over the next several years as it expands its
research and development, clinical testing and manufacturing efforts. The
Company's ability to achieve profitability is dependent in large part on
obtaining regulatory approvals for its products and entering into agreements for
product development and commercialization. There can be no assurance that the
Company will ever become profitable.
UNCERTAINTIES RELATED TO COMPANY'S ABILITY TO RAISE ADDITIONAL NECESSARY CAPITAL
The Company has spent and expects to continue to spend substantial funds
for continuation of the research and development of product candidates,
preclinical and clinical testing, the establishment of commercial-scale
manufacturing facilities, and filing, prosecuting and enforcing patent claims.
The Company may also require additional funds in order to acquire technologies
or products that complement the Company's efforts. To satisfy its capital
requirements, the Company may seek to raise funds in the public or private
capital markets or make
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collaborative arrangements with corporate partners or from other sources. See
"-- Reliance on Collaborative Arrangements as a Part of the Company's Funding
Strategy." No assurance can be given that such additional funds will be
available to the Company on acceptable terms, if at all. If adequate funds are
not available from operations or additional sources of financing, the Company's
business will be materially adversely affected and the Company may be required
to delay, scale back or eliminate one or more of its development programs or
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies, product
candidates or products that the Company would otherwise retain for itself. If
additional funds are raised by issuing equity securities, further substantial
dilution to existing stockholders may result.
RELIANCE ON COLLABORATIVE ARRANGEMENTS AS A PART OF THE COMPANY'S FUNDING
STRATEGY
The Company has relied and plans to continue to rely on collaborative
arrangements with established health care companies to fund a portion of its
research and development. Pursuant to such arrangements, the Company would seek
to have collaborative partners provide capital in exchange for certain
technology, product, manufacturing and/or marketing rights related to the
collaborative research. There can be no assurance that the Company will be able
to negotiate acceptable collaborative arrangements or that such collaborative
arrangements will succeed.
The Company's collaborative partners, Stryker and Biogen, have provided a
substantial portion of the Company's revenues during the past several years. The
Company anticipates that a significant portion of its research revenues for the
next several years will be derived from Stryker and Biogen. However, such
continued funding is dependent upon the Company performing research for Stryker
and Biogen and supplying material for preclinical and clinical testing by
Stryker and Biogen. There can be no assurance that the Company will satisfy the
requirements for the receipt of payments from Stryker and Biogen. If the Company
does not receive anticipated payments from Stryker and Biogen and does not
receive adequate additional funds, the Company's business would be materially
adversely affected. The Company and Stryker are currently involved in
discussions regarding the future research work plans between the parties. In
connection with such discussions the parties have agreed to extend the most
recent research work plan until September 30, 1998. There can be no assurance
that the Company and Stryker will enter into a mutually agreeable work plan in
the future. See "-- Uncertainties Related to Company's Ability to Raise
Additional Necessary Capital."
DEPENDENCE ON EFFORTS OF STRYKER AND BIOGEN AND OTHER COLLABORATIVE PARTNERS TO
COMMERCIALIZE PRODUCTS
The Company's collaborative arrangements with Stryker and Biogen provide,
and future arrangements between the Company and other collaborative partners may
provide, that the collaborative partner complete product development, perform
clinical trials, obtain regulatory approvals and market products resulting from
such collaboration. The Company does not control the amount of resources or the
schedule of product development in its collaborations with Stryker and Biogen
and may not be able to control the efforts that any future collaborative
partners may devote to their respective programs with the Company. The timing
and amount of any future royalties and manufacturing revenues of the Company
with respect to product development pursuant to such collaborative arrangements
will therefore depend on the level of commitment, timing and success of such
collaborative partners' efforts. Should Stryker, Biogen or any other
collaborative partner fail to develop and to commercialize marketable products
successfully, the Company's business would be materially adversely affected.
COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
The biotechnology and pharmaceutical industries are rapidly evolving fields
in which developments are expected to continue at a rapid pace. Competitors of
the Company in the United States and abroad are numerous and include, among
others, pharmaceutical and biotechnology companies, universities and other
research institutions. The Company's success depends upon developing and
maintaining a competitive position in the development of products and
technologies in its areas of focus. Competition from other biotechnology and
pharmaceutical companies is intense and is expected to increase as new products
enter the market and as new
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technologies are discovered and commercialized. The Company's competitors may
develop technologies and products that are more effective than any which have
been or are being developed by the Company, or that render the Company's
technologies or products obsolete or noncompetitive. Furthermore, the Company's
competitors may obtain patent protection or other intellectual property rights
that block the Company from developing its potential products, or they may
obtain regulatory approval for the commercialization of their products more
rapidly or for a wider array of indications than those obtained by the Company.
Finally, many of these competitors have substantially greater research and
development capabilities, clinical, manufacturing, regulatory and marketing
experience and financial and managerial resources than the Company.
Other companies are engaged in the research and development of morphogenic
proteins for various applications. The Company is aware that Genetics Institute,
Inc. ("Genetics Institute"), a wholly-owned subsidiary of American Home Products
Corporation, is pursuing the development of bone morphogenetic proteins.
Genetics Institute has also entered into relationships with Yamanouchi
Pharmaceuticals Co., Ltd. and Sofamor Danek Group, Inc. covering development and
marketing of bone morphogenetic proteins. The Company believes that other
biopharmaceutical companies also are developing recombinant human proteins,
primarily growth factors, for use in the local repair of orthopaedic and
skeletal defects and in other indications. A number of other companies are
pursuing traditional therapies that may compete with the Company's products,
including autografts, allografts and electrical stimulation devices for the
repair of orthopaedic and other skeletal defects.
LACK OF EXPERIENCE IN COMMERCIAL MANUFACTURING; UNCERTAINTY AS TO TRANSITION TO
COMMERCIAL PRODUCTION
The Company has not yet introduced any products commercially and has never
engaged in large-scale commercial manufacturing. To be successful, the Company's
products must be manufactured in commercial quantities, at acceptable costs and
in compliance with regulatory requirements. There can be no assurance that the
Company's manufacturing facility in Lebanon, New Hampshire will meet the
Company's future needs or those of its collaborative partners. In addition,
manufacturing facilities must be inspected and, in some cases, licensed by the
U.S. Food and Drug Administration (the "FDA") prior to the production of
commercial products and must be operated in compliance with current Good
Manufacturing Practices ("cGMP") for any products manufactured for either
clinical research or commercial use. No assurance can be given that the Company
will be able to make the transition to commercial production successfully.
LACK OF COMMERCIAL SALES AND MARKETING EXPERIENCE
The Company does not have experience in marketing, sales or distribution of
commercial products. To market any of its products, the Company will need to
develop a substantial marketing and sales force or will have to arrange for
third parties to market and distribute its products. To the extent that the
Company determines not to, or is unable to, arrange third party distribution for
its products, significant additional expenditures, management resources and time
will be required to develop a sales force. There can be no assurance that the
Company will be able to establish such a sales force or be successful in gaining
market acceptance for its products.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY
The biotechnology and pharmaceutical industries place considerable emphasis
on obtaining patent and maintaining trade secret protection for new
technologies, products and processes, and the Company's success will depend, in
part, on its ability to obtain patent protection for its products and
manufacturing processes, preserve its trade secrets and operate without
infringing the proprietary rights of third parties. In addition to the Company's
own patents and patent applications, Stryker has exclusively and irrevocably
licensed rights in certain patents and patent applications to the Company. The
Company expects to seek additional patents in the future, but there can be no
assurance as to the Company's success or timeliness in obtaining any such
patents or as to the breadth or degree of protection which any such patents may
afford the Company. The patent position of biotechnology and pharmaceutical
firms is often highly uncertain and usually involves complex legal and factual
questions. There is a substantial backlog of biotechnology patent applications
at the U.S. Patent and Trademark Office. No consistent policy has emerged
regarding the breadth of claims covered in biotechnology patents. Accordingly,
there can be no
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assurance that patent applications relating to the Company's products or
technology will result in patents being issued or that, if issued, such patents
will afford adequate protection to the Company, or that such patents will not be
challenged, invalidated or infringed. Furthermore, there can be no assurance
that others will not independently develop similar products and processes,
duplicate any of the Company's products or, if patents are issued to the
Company, design around such patents. In addition, the Company could incur
substantial costs in defending itself in suits brought against it or in suits in
which the Company may assert its patent rights against others. If the outcome of
any such litigation is adverse to the Company, the Company's business could be
materially adversely affected. To determine the priority of inventions, the
Company also may have to participate in interference proceedings declared by the
U.S. Patent and Trademark Office, which could result in substantial cost to the
Company.
PATENT INFRINGEMENT RISK
The Company may be subject to claims that it infringes the patents of
others. Competitors of the Company may obtain patents claiming products or
processes that are necessary for or useful to the development, use or
manufacture of the Company's products. Such competitors could bring legal
actions against the Company claiming infringement and seeking damages and
injunctive relief. The Company may be required to obtain licenses from others to
continue to develop, manufacture or market its products or may be required to
cease those activities. There can be no assurance that the Company will obtain
such licenses on acceptable terms, if at all. There can be no assurance that the
Company's current and proposed future activities in the field of morphogenic
proteins will not be challenged in the future in the United States or abroad,
that the Company necessarily will prevail in any such challenge, that patents
have not issued or will not issue containing claims which may materially
constrain the proposed activities of the Company, or that the Company will not
become involved in costly, time-consuming litigation or interference proceedings
regarding patents in the field of morphogenic proteins, including actions
brought to challenge or invalidate the Company's own patent rights.
POTENTIAL INABILITY TO PROTECT UNPATENTED TECHNOLOGY
The Company also seeks to protect its proprietary technology, including
technology which may not be patented or patentable, in part by confidentiality
agreements and, in certain cases, inventors' rights agreements with its
collaborators, advisors, employees and consultants. There can be no assurance
that these agreements will not be breached, that the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
be disclosed to, or discovered by, competitors.
NO ASSURANCE OF FDA APPROVAL; COMPREHENSIVE GOVERNMENT REGULATION
The production and marketing of products developed through the Company's
technologies and its ongoing research and development activities are subject to
regulation by numerous federal, state and local governmental authorities in the
United States and by similar regulatory agencies in other countries where the
Company or any collaborative partner may be testing or intend to test and market
products which have yet to be developed. All of the Company's products require
governmental approvals for commercialization which have not yet been obtained.
Clinical trials and manufacturing of many of the Company's products will be
subject to the rigorous testing and approval processes of the FDA and
corresponding foreign regulatory authorities. The regulatory process, which
includes preclinical testing and clinical trials of each potential product to
establish its safety and efficacy, can take many years and require the
expenditure of substantial resources. Data obtained from preclinical and
clinical activities are susceptible to varying interpretations which could
delay, limit or prevent regulatory approvals. In addition, delays or rejections
may be encountered based upon changes in regulatory policy for product approval
during the period of product development and regulatory review. There can be no
assurance that, even after such time and expenditures, regulatory approvals will
be obtained for any products developed utilizing the Company's technologies.
Moreover, if regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which it may be marketed. Further,
even if such regulatory approval is obtained, a marketed product and its
manufacturer are subject to continual review, and discovery of previously
unknown problems with a product or manufacturer may result in restrictions on
such product or manufacturer, including withdrawal of the product from the
market. Regulatory approval of product prices is required in many countries
outside the United
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<PAGE> 11
States. There can be no assurance that such regulatory limitations will not
prevent the Company and its collaborative partners from realizing an adequate
return on their investment in product development.
USE AND DISPOSAL OF HAZARDOUS MATERIALS
The Company is subject to numerous environmental and safety laws and
regulations, including those governing the controlled use and disposal of
hazardous materials such as radioactive compounds, toxins and other chemicals
used in the Company's research, development and manufacturing activities. Any
violation of, and the cost of compliance with, these regulations could adversely
impact the Company's operations. While the Company believes that its safety
procedures relating to the handling and disposing of such materials comply with
applicable regulatory standards, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. If such an accident were
to occur, the Company could be held liable for any resulting damages and any
such liability could exceed the resources of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in large part upon Michael M. Tarnow, its
President and Chief Executive Officer, and Charles Cohen, Ph.D., its Chief
Scientific Officer. The loss of the services of either of these key employees
could have a material adverse effect on the Company. The Company is also
dependent on certain key management and scientific personnel, the loss of whose
services could significantly impede the achievement of its development
objectives. The Company's continued expansion in areas and activities requiring
additional expertise will necessitate the recruitment of additional management
and scientific personnel. There can be no assurance that the Company will be
able to attract and retain such personnel on acceptable terms, given the high
level of competition for such personnel among numerous pharmaceutical and
biotechnology companies, government entities and research and academic
institutions.
DEPENDENCE ON ACADEMIC COLLABORATORS
The Company has relationships with academic collaborators who investigate
the potential utility of the Company's proprietary technology for various
therapeutic applications. The Company's academic collaborators are not employees
of the Company. The Company has limited control over their activities, and only
limited amounts of their time are dedicated to the Company's projects. The
Company's academic collaborators may have relationships with other commercial
entities, some of which compete with the Company. Although the precise nature of
each relationship varies, the academic collaborators and their primary
affiliated institutions generally sign agreements which provide for
confidentiality of the Company's proprietary technology and results of studies.
There can be no assurance, however, that the Company will be able to maintain
the confidentiality of its technology or study results in connection with every
collaboration, and dissemination of such technology or study results could have
an adverse effect on the Company's business. Also, the Company seeks to obtain
exclusive rights to license developments that may result from these studies.
However, there can be no assurance that such licenses will be available on
acceptable terms, if at all.
UNCERTAINTY OF REIMBURSEMENT
The ability of the Company and its collaborative partners to commercialize
the Company's products successfully may depend in part on the extent to which
reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
insurers and other organizations. Third-party payors are increasingly
challenging the price of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products,
and there can be no assurance that adequate third-party coverage will be
available to enable the Company and its collaborative partners to maintain price
levels sufficient to realize an appropriate return on its investment in product
development.
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<PAGE> 12
PRODUCT LIABILITY INSURANCE
The testing, marketing and sale of health care products entail an inherent
risk of allegations of product liability, and there can be no assurance that
product liability claims will not be asserted against the Company. The Company
currently maintains product liability insurance at a level which the Company
believes is consistent with industry practice. However, such existing coverage
may not be adequate as the Company continues to pursue clinical testing of its
potential products or seeks to commercialize products. In addition, there can be
no assurance that the Company will be able to maintain or increase its current
insurance coverage in the future on acceptable terms or that any claims against
the Company will not exceed the amount of such coverage.
VOLATILITY OF STOCK PRICE
The market prices for securities of biotechnology companies have been
volatile. The market price for the Company's Common Stock has fluctuated
significantly since public trading commenced in 1992, and it is likely that the
market price will continue to fluctuate in the future. Announcements of
technological innovations or new commercial products by the Company or its
competitors, developments concerning proprietary rights, including patents and
litigation matters, publicity regarding actual or potential clinical trial and
medical results relating to products under development by the Company or its
competitors, regulatory developments in both the United States and foreign
countries, public concern as to the safety of biotechnology products and
economic and other external factors may have a significant impact on the
Company's business and on the market price of the Common Stock. In addition, the
Company has experienced and expects to continue to experience significant
fluctuations in its quarterly operating results, due primarily to the timing of
revenue received under its manufacturing contract with Biogen. The Company
believes that fluctuations in quarterly results may cause the market price of
its Common Stock to fluctuate substantially.
SHARES ELIGIBLE FOR FUTURE SALE
Substantially all of the Company's shares are eligible for sale in the
public market. Sales of substantial amounts of Common Stock in the public market
after this offering could adversely affect the market price of the Common Stock.
As of June 26, 1998, there were options outstanding to purchase 5,400,038 shares
of Common Stock with an average exercise price of $5.37 per share, and warrants
to purchase 841,596 shares of Common Stock with an average exercise price of
$2.385 per share. Additional shares may also become available for sale in the
public market from time to time in the future. Exercise of such options and
warrants would dilute the percentage ownership of existing holders of Common
Stock and the sale of such shares could have a significant adverse effect on the
market price of the Common Stock.
POSSIBLE DILUTION FROM CONVERSION OF SERIES 1998/A PREFERRED STOCK
The number of shares of Common Stock issuable upon conversion of the Series
1998/A Preferred Stock is not fixed and may result in substantial dilution to
current stockholders. The sales of the underlying shares of Common Stock could
adversely affect the market price of the Common Stock. As of June 26, 1998,
25,000 shares of the Company's Series 1998/A Preferred Stock were issued and
outstanding. Each share of the Series 1998/A Preferred Stock is convertible into
such number of shares of Common Stock as is determined by dividing $1,000 plus
an amount accrued from the issuance date to the conversion date of such share of
Series 1998/A Preferred Stock by the then current conversion price (which is
determined by reference to the then current market price). If converted on June
26, 1998, the Series 1998/A Preferred Stock would have been convertible into
approximately 5,547,505 shares of Common Stock, but this number of shares could
prove to be significantly greater in the event of a decrease in the trading
price of the Common Stock, subject to an aggregate limitation of 6,701,170
shares of Common Stock (subject to adjustment for stock splits and the like)
unless issuance of a greater number of shares of Common Stock is approved by the
Company's stockholders in accordance with the requirements of Nasdaq or waived
by Nasdaq (the "Maximum Share Amount"). Purchasers of Common Stock could
therefore experience substantial dilution of their investment upon conversion of
the Series 1998/A Preferred Stock. The shares of Series 1998/A Preferred Stock
are not registered and may be sold only if registered under the Securities Act
or sold in
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<PAGE> 13
accordance with an applicable exemption from registration, such as Rule 144. The
shares of Common Stock into which the Series 1998/A Preferred Stock may be
converted are being registered for resale pursuant to this Registration
Statement. In the event the Company is not able to register the underlying
Common Stock or the holders of the Series 1998/A Preferred Stock are otherwise
unable to sell the underlying Common Stock under certain circumstances, the
Company could be subject to various obligations, including the obligation to
redeem shares of Series 1998/A Preferred Stock if required by the holders of
shares of Series 1998/A Preferred Stock.
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends on the Common Stock since
inception and does not anticipate paying cash dividends in the foreseeable
future.
ANTI-TAKEOVER PROVISIONS
The Board of Directors has the authority to issue shares of preferred stock
with rights and preferences, including dividend and liquidation rights, senior
to those of the Common Stock without further action by the stockholders of the
Company. In addition, the Company's Restated Certificate of Incorporation and
Restated Bylaws contain certain provisions that could have the effect of making
it more difficult for a third party to acquire, or discouraging a third party
from attempting to acquire, control of the Company. Such provisions could limit
future prices that certain investors might be willing to pay for shares of
Common Stock. These provisions, which include classification of the Board of
Directors, could also make it more difficult for stockholders to change the
management of the Company or to effect certain transactions. Certain provisions
of Delaware and Massachusetts corporate law also may have the effect of
deterring a hostile takeover or delaying or preventing changes in control or
management of the Company.
IMPACT OF YEAR 2000
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to be modified to distinguish 21st
century dates from 20th century dates. As a result, in less than two years,
computer systems and software used by many companies may need to be upgraded to
comply with such "Year 2000" requirements.
The Company has conducted a review of its computer systems to identify
those areas that could be affected by the Year 2000 issue. The Company completed
implementation of new financial accounting software in the second quarter of
1998, which software has been designed by the vendor to properly process
transactions which could be impacted by the Year 2000 problem. The Company
presently believes that, with routine upgrades to other existing hardware and
software systems, the Year 2000 problem will not pose significant operational
problems and costs to complete this process are not material to its financial
position or results of operations in any one year. The Company expects to
complete these upgrades by mid-1999.
The Company is in the process of contacting its major suppliers to
determine the extent to which the Company may be vulnerable to those parties'
failure to timely correct their own Year 2000 problems. To date, the Company is
unaware of any situations of noncompliance that would materially adversely
affect its operations or financial condition. There can be no assurance,
however, that instances of noncompliance which could have a material adverse
effect on the Company's operations or financial condition will be identified;
that the systems of other companies with which the Company transacts business
will be corrected on a timely basis; or that a failure by such entities to
correct a Year 2000 problem or a correction which is incompatible with the
Company's information systems would not have a material adverse effect on the
Company's operations or financial condition.
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<PAGE> 14
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
DIVIDEND POLICY
The Company has not declared or paid dividends in the past and does not
intend to declare or pay dividends in the foreseeable future.
SELLING STOCKHOLDERS
The following table sets forth as of June 29, 1998 certain information with
respect to the Selling Stockholders, including (i) the names of the Selling
Stockholders, (ii) the number of shares of Common Stock beneficially owned by
the Selling Stockholders prior to the offering, and (iii) the maximum number of
shares of such Common Stock to be offered hereby. See "Plan of Distribution."
The Shares being offered hereby by the Selling Stockholders may be
acquired, from time to time, upon the conversion of 25,000 shares of the Series
1998/A Preferred Stock which were acquired by them from the Company in a private
placement. This Prospectus covers the resale by the Selling Stockholders of the
Shares consisting of up to 5,939,227 shares, plus, in accordance with Rule 416
under the Securities Act, such presently indeterminate number of additional
shares as may be issuable upon conversion of the Series 1998/A Preferred Stock
by reason of stock splits, stock dividends and other similar transactions,
including fluctuations in the conversion price of the Series 1998/A Preferred
Stock, subject to the Maximum Share Amount. The offer and sale by the Company of
the Series 1998/A Preferred Stock pursuant to certain Subscription Agreements,
dated as of May 22, 1998 (the "Subscription Agreements"), were made pursuant to
an exemption from registration under Section 4(2) of the Securities Act.
<TABLE>
<CAPTION>
Ownership After
Names Number of Shares Maximum Number the Offering(2)
of Selling Owned Prior of Shares ------------------
Stockholders to Offering(1) Being Offered(1) SHARES PERCENT
----------------------------------- ------------------------- ------------------------ ------ -------
<S> <C> <C> <C> <C>
Delta Opportunity Fund, Ltd.(3) 2,613,260 2,613,260 0 0%
ACI/DA Investors I LLC 593,923 593,923 0 0%
Midway Capital Ltd.(4) 61,768 61,768 0 0%
CCG Capital Ltd.(4) 124,486 124,486 0 0%
CCG Investment Fund Ltd.(4) 124,486 124,486 0 0%
Fisher Capital Ltd.(4) 1,147,933 1,147,933 0 0%
Wingate Capital Ltd.(4) 617,680 617,680 0 0%
Omicron Partners, L.P. 655,691 655,691 0 0%
</TABLE>
(1) Represents each Selling Stockholder's pro rata portion (based on their
ownership of Series 1998/A Preferred Stock) of the 5,939,227 shares of
Common Stock being registered hereby. The 5,939,227 shares of Common Stock
shown in the above table represent shares which would be issuable to the
Selling Stockholders upon conversion of all of the Series 1998/A Preferred
Stock assuming a conversion price of $4.525 (which represents the average
of the five lowest closing bid prices during the twenty consecutive trading
days prior to and including June 29, 1998 and is subject to fluctuations
from time to time based on changes in the closing bid price of the Common
Stock) including an amount of shares equal to the accrual amount provided
in the Certificate of Designations for the Series 1998/A Preferred Stock,
accrued for a period of 18 months from the date of issuance. Does not
include an indeterminate number of additional shares of Common Stock as may
from time to time become issuable upon conversion of the Series 1998/A
Preferred Stock by reason of stock splits, stock dividends and other
similar transactions, including fluctuations in the conversion
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<PAGE> 15
price thereof, which shares are registered hereunder pursuant to Rule 416
under the Securities Act. Pursuant to the Company's Certificate of
Designations of the Series 1998/A Preferred Stock, no Selling Stockholder
can convert Series 1998/A Preferred Stock to the extent such conversion
would cause such Selling Stockholder's beneficial ownership of the Common
Stock (other than shares deemed beneficially owned through ownership of
unconverted shares of the Series 1998/A Preferred Stock) to exceed 4.9% of
the outstanding shares of Common Stock.
(2) Assumes the sale of all of the Shares offered by each Selling Stockholder.
(3) Diaz & Altschul Advisors, LLC, a New York limited liability company ("D&A
Advisors"), serves as investment advisor to Delta Opportunity Fund, Ltd.
("Delta") and may be deemed to share beneficial ownership of the Shares
beneficially owned by Delta by reason of shared power to dispose of the
shares beneficially owned by Delta. D&A Advisors disclaims beneficial
ownership of the shares beneficially owned by Delta.
(4) Citadel Limited Partnership is the trading manager of Midway Capital Ltd.,
CCG Capital Ltd., CCG Investment Fund Ltd., Fisher Capital Ltd. and Wingate
Capital Ltd. (collectively, the "Citadel Entities") and consequently has
voting control and investment discretion over securities held by the
Citadel Entities. The ownership for each of the Citadel Entities does not
include the ownership information for the other Citadel Entities. Citadel
Limited Partnership and each of the Citadel Entities disclaims beneficial
ownership of the Shares held by the other Citadel Entities.
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<PAGE> 16
PLAN OF DISTRIBUTION
The Shares being offered hereby by the Selling Stockholders were acquired
by them from the Company in private placement transactions pursuant to the
Subscription Agreements.
In accordance with registration rights granted to the Selling Stockholders
in connection with the Subscription Agreements, the Company has filed with the
Commission, under the Securities Act, a Registration Statement on Form S-3, of
which this Prospectus forms a part, with respect to the resale of the Shares and
has agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep such Registration Statement
effective until the Shares are no longer required to be registered for the
resale thereof by the Selling Stockholders.
The Company will receive no proceeds from this Offering. The Shares offered
hereby may be sold by the Selling Stockholders or by pledgees, donees,
transferees or other successors in interest that receive such Shares as a gift,
partnership distribution or other non-sale related transfer. The Shares may be
sold from time to time in transactions on The Nasdaq National Market, in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers, including block trades in which
brokers or dealers will attempt to sell the Shares as agent but may position and
resell the block as principal to facilitate the transaction, or in one or more
underwritten offerings on a firm commitment or best efforts basis. Sales of
Selling Stockholders' Shares may also be made pursuant to Rule 144 under the
Securities Act, where applicable.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from a Selling
Stockholder and/or purchasers of Selling Stockholders' Shares, for whom they may
act (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder. In addition, a Selling Stockholder may, from
time to time, sell short the Common Stock of the Company, and in such instances,
this Prospectus may be delivered in connection with such short sales and the
Shares offered hereby may be used to cover such short sales.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign such Selling Stockholders' Shares to lenders or others
and each of such persons will be deemed to be a "Selling Stockholder" for
purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by those Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take such
actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Stockholders hereunder.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with such Selling
Stockholder, including, without limitation, in connection with distributions of
the Common Stock by such broker-dealers. A Selling Stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the Common Stock to the broker-dealers, who may then resell or otherwise
transfer such Common
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<PAGE> 17
Stock. A Selling Stockholder may also loan or pledge the Common Stock to a
broker-dealer and the broker-dealer may sell the Common Stock so loaned or upon
a default may sell or otherwise transfer the pledged Common Stock.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not bid for or purchase shares of
Common Stock during a period which commences one business day (five business
days, if the Company's public float is less than $25 million or its average
daily trading volume is less than $100,000) prior to such person's participation
in the distribution, subject to exceptions for certain passive market making
activities. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M,
which may limit the timing of purchases and sales of shares of the Company's
Common Stock by such Selling Stockholder.
The Shares were originally issued to the Selling Stockholders pursuant to
an exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof. The Company agreed to register the Shares under the
Securities Act and to indemnify and hold the Selling Stockholders harmless
against certain liabilities under the Securities Act that could arise in
connection with the sale by the Selling Stockholders of the Shares. The Company
has agreed to pay all reasonable fees and expenses incident to the filing of
this Registration Statement.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. of East Hartford, Connecticut.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by the
Company hereby will be passed upon for the Company by Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts ("Mintz Levin"). Certain
members of Mintz Levin beneficially own an aggregate of 14,000 shares of Common
Stock of the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy to any
person in any jurisdiction in which such offer or solicitation would be unlawful
or to any person to whom it is unlawful. Neither the delivery of this Prospectus
nor any offer or sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company or that
the information contained herein is correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS
Page
----
Additional Information............................................ 2
Available Information............................................. 2
Safe Harbor Statement............................................. 2
Incorporation of Documents by Reference........................... 3
Prospectus Summary................................................ 4
The Company....................................................... 4
Risk Factors...................................................... 7
Use of Proceeds................................................... 14
Dividend Policy................................................... 14
Selling Stockholders.............................................. 14
Plan of Distribution.............................................. 16
Transfer Agent and Registrar...................................... 17
Legal Matters..................................................... 17
Experts........................................................... 17
================================================================================
================================================================================
CREATIVE BIOMOLECULES, INC.
5,939,227 SHARES OF
COMMON STOCK, $.01 PAR VALUE
----------------
PROSPECTUS
----------------
JULY 17, 1998
================================================================================
