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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1999
REGISTRATION STATEMENT NO. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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AVANIR PHARMACEUTICALS
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
33-0314804
(I.R.S. Employer Identification No.)
9393 Towne Centre Drive, Suite 200
San Diego, California 92121
(619) 558-0364
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Gerald J. Yakatan, Ph.D.
President and Chief Executive Officer
AVANIR Pharmaceuticals
9393 Towne Centre Drive, Suite 200
San Diego, California 92121
(619) 558-0364
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
John J. Hentrich, Esq.
Baker & McKenzie
101 West Broadway, Suite 1200
San Diego, CA 92101
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE FEE
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<S> <C> <C> <C> <C>
Class A Common Stock, no
par value per share... 875,000 $0.75 $656,250 $182.44
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(1) Represents 500,000 shares of Class A Common Stock issuable upon exercise of
the Class I Stock Purchase Warrant and 375,000 shares of Class A Common
Stock issuable upon exercise of the Class K Stock Purchase Warrant.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933. Pursuant to Rule
457(c), the maximum offering price per share is $0.75, the average of the
bid and asked prices of a share of the Registrant's Class A Common Stock as
reported on the Nasdaq National Market System on May 4, 1999, and the
maximum aggregate offering price of $656,250 is the product of $0.75 and
the number of shares of the Registrant's Class A Common Stock being
registered hereby.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED MAY 6, 1999
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PROSPECTUS
AVANIR PHARMACEUTICALS
875,000 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE
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On behalf of certain selling shareholders of the company, we are
registering for resale up to 875,000 shares of our Class A Common Stock, no par
value. See "Selling Shareholders" for more information. The shares that we are
registering consist of:
- 500,000 shares of Class A Common Stock that are issuable upon the
exercise of a Class I Stock Purchase Warrant that we issued to
JMBL LLC, a Delaware limited liability company, in exchange for
consulting services on regulatory matters; and
- 375,000 shares of Class A Common Stock that are issuable upon the
exercise of a Class K Stock Purchase Warrant that we issued to
Redington, Inc., a Connecticut corporation, in exchange for
investor relations services.
We will deliver this prospectus to purchasers upon resale of the
above-described shares as required by applicable law or the regulations of the
SEC. This prospectus is neither an offer to sell these shares nor a solicitation
of an offer to buy the shares in any state where the offer or sale is not
permitted.
The selling shareholders have advised us that they may offer the shares
registered under this prospectus to purchasers from time to time in transactions
taking place on the Nasdaq National Market System, in negotiated transactions,
or by a combination of these methods, at fixed prices that may be changed, at
market prices prevailing at the time of the resale, at prices related to such
market prices or at negotiated prices. The selling shareholders may sell these
shares to or through broker-dealers who may receive compensation in the form of
discounts or commissions from the selling shareholders or the purchasers of
these shares for whom the broker-dealers may act as an agent or to whom they may
sell as a principal, or both. We will not receive any proceeds from the resale
of these shares by the selling shareholders. We will receive, however, certain
cash consideration if either of the selling shareholders exercises its warrant.
See "Use of Proceeds" for additional information. The selling shareholders and
their intermediaries through which the shares registered under this prospectus
are sold may be considered "underwriters" (within the meaning of the Securities
Act of 1933) with respect to the resale of such shares, and any profits realized
or commissions received may be considered underwriting compensation. See "Plan
of Distribution" for additional information.
This prospectus is dated May 6, 1999.
Our Class A Common Stock trades on the Nasdaq National Market System
under the trading symbol "AVNR" (formerly "LDAKA"). On May 4, 1999, the closing
bid price of our Class A Common Stock was $0.75 and the closing ask price was
$0.75.
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INVESTING IN OUR CLASS A COMMON STOCK INVOLVES VARIOUS RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
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AVANIR PHARMACEUTICALS
TABLE OF CONTENTS
<TABLE>
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SUMMARY 4
THE COMPANY 4
RISK FACTORS 6
USE OF PROCEEDS 12
SELLING SHAREHOLDERS 12
PLAN OF DISTRIBUTION 14
LEGAL MATTERS 15
EXPERTS 15
WHERE YOU CAN OBTAIN MORE INFORMATION 16
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus and in any accompanying prospectus supplement. No
one has been authorized to provide you with different information.
The shares of Class A Common Stock of our company are not being offered
in any jurisdiction where the offer is not permitted.
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You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date provided on
the front page of the documents.
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SUMMARY
You should read the following summary together with the more detailed
information contained elsewhere in this prospectus regarding our company, the
shares of our Class A Common Stock being registered by this prospectus and our
financial statements and related notes. In particular, you should read the
section entitled "Risk Factors," which explains that your investment in shares
of our Class A Common Stock involves a high degree of risk. This prospectus
contains forward-looking statements concerning future events or performance of
our company. You should not rely excessively on these forward-looking
statements, because they are only predictions based on our current expectations
and assumptions. Forward-looking statements often contain words like "estimate,"
"anticipate," "believe" or "expect." Many known and unknown risks and
uncertainties could cause our actual results to differ materially from those
indicated in these forward-looking statements. You should review carefully the
risks and uncertainties identified in this prospectus, including those explained
below and in our other SEC filings such as our Form 10-K/A for the fiscal year
ended September 30, 1998. We have no obligation to update or announce revisions
to any forward-looking statements to reflect actual events or developments.
CLASS I STOCK PURCHASE WARRANT AND CLASS K STOCK PURCHASE WARRANT
We are registering for resale the shares of our Class A Common Stock
issuable upon exercise of the following two stock purchase warrants that we
issued to consultants in exchange for their services:
Class I Stock Purchase Warrant. On March 4, 1999, we engaged the
services of JMBL LLC to provide us with advice and counsel in preparing various
materials for submission to regulatory approval agencies and in monitoring the
progress of these submissions. The contract for consulting services is for a
period of 18 months. In connection with the consulting services, we issued to
JMBL LLC a Class I Stock Purchase Warrant for the purchase of 500,000 shares of
our Class A Common Stock at an exercise price of $0.78125 per share. The warrant
vested fully upon issuance. JMBL LLC has agreed, however, to render consulting
services during the entire 18-month period as consideration for receipt of the
Class I Stock Purchase Warrant. The exercise of any unexercised portion of this
warrant is subject to JMBL LLC continuing to render consulting services during
this period. The Class I Stock Purchase Warrant expires on March 3, 2004.
Class K Stock Purchase Warrant. On April 1, 1999, we engaged the
services of Redington, Inc. to provide investor relations services for a period
of one year. In connection with the consulting services, we issued a Class K
Stock Purchase Warrant for the purchase of up to 375,000 shares of our Class A
Common Stock at an exercise price of $1.125 per share. The vesting schedule for
the warrant requires that Redington, Inc. achieve certain performance milestones
during the one-year consulting period, with the exception of 62,500 shares of
Class A Common Stock that vested on April 1, 1999. The Class K Stock Purchase
Warrant expires on March 31, 2004.
THE COMPANY
We are a development stage company organized to discover, develop and
market novel therapeutic products to treat human diseases. Since our inception
in 1988, we have operated in one business segment -- pharmaceutical product
development.
Our primary product under development is docosanol cream, a topical
treatment for oral-facial herpes, more commonly known as cold sores and fever
blisters. In December 1998, we appropriately delayed product launch plans for
docosanol cream when we received a "not approvable" letter from the U.S. Food
and Drug Administration following its review of the initial information that we
submitted with our new drug application for docosanol cream. The letter
indicated that the FDA had completed its review and stated that additional
evidence was needed to substantiate the efficacy findings of studies that we
submitted with the new drug application. In March 1999, we responded to the
FDA's letter by providing additional evidence of the effectiveness of docosanol
cream and met with the FDA to discuss the
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additional evidence and other issues. The FDA currently is evaluating the
additional evidence. We expect that the FDA will require at least one additional
meeting with our scientists and statisticians before it reaches a decision.
If we do not receive FDA approval to distribute docosanol cream as a
prescription product in the next round of FDA discussions or if we determine
that the time and cost to obtain approval is excessive, in management's opinion,
then we intend to develop and market a modified formulation of our product to
meet the FDA's guidelines for an over-the-counter product for cold sores.
If we commercialize docosanol cream either as a prescription product or
with a modified formulation as an over-the-counter product, then our company
will need to, among other things, build a marketing and sales infrastructure
that includes marketing staff, market research capacity, a sales force, sales
management structure and internal sales support. However, the timing of these
potential marketing efforts currently is uncertain in light of the uncertain
timing of a decision by the FDA. Furthermore, we cannot assure you that:
- we ultimately will develop effective advertising or increase
awareness of oral facial herpes or that patients will seek
medical treatment or select our product;
- we will hire and train a sufficient sales force in a timely
fashion, as competition for competent sales staff is intense;
- we will secure co-promotion or additional license agreements on
favorable terms; or
- we will raise sufficient additional financing necessary to (1)
conduct the additional clinical trials that may be required by
the FDA with respect to docosanol cream or (2) both market
docosanol cream and continue our other drug discovery and
development programs currently underway.
Our failure to implement an effective sales organization in a timely
manner will affect materially our business and financial condition. Because we
cannot predict whether the marketplace will accept our docosanol cream product
as a topical treatment for oral-facial herpes, we might not achieve a level of
sales sufficient to sustain our operations.
We also are engaged in much earlier stages of research and/or
development of several other potential therapeutic products, including potential
new drugs for treatment of allergies, asthma and inflammatory diseases and a
treatment for symptoms associated with Amyotrophic Lateral Sclerosis (ALS, or
Lou Gehrig's disease). These additional products will not be available for sale
to the market for several years, if at all.
Our executive offices are located at 9393 Towne Centre Drive, Suite 200,
San Diego, California 92121. Our telephone number is (619) 558-0364; our e-mail
address is [email protected]; and our home page address is
http://www.avanir.com.
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RISK FACTORS
This prospectus contains forward-looking statements concerning future
events or performance of our company. You should not rely excessively on these
forward-looking statements, because they are only predictions based on our
current expectations and assumptions. Forward-looking statements often contain
words like "estimate," "anticipate," "believe" or "expect." Many known and
unknown risks and uncertainties could cause our actual results to differ
materially from those indicated in these forward-looking statements. You should
review carefully the risks and uncertainties identified in this prospectus,
including those explained below and in our other SEC filings such as our Form
10-K/A for the fiscal year ended September 30, 1998. We have no obligation to
update or announce revisions to any forward-looking statements to reflect actual
events or developments.
We are a development stage company with a history of continuing losses
and have "going concern" uncertainties as explained in the explanatory paragraph
of the Independent Auditors' Report for the fiscal year ended September 30,
1998. In their report on our financial statements for the fiscal year ended
September 30, 1998, our independent auditors refer to our activities as those of
a development stage enterprise and indicate that we will need to raise
additional outside capital to continue as a going concern. Development stage
companies face various problems, delays, expenses and difficulties, many of
which are difficult to control. We likely will encounter many unanticipated
problems or challenges, including those relating to product development and
formulation, clinical testing, regulatory compliance, production and marketing,
additional costs and competition. From our inception through December 31, 1998,
we have generated only limited revenues and have incurred net losses totaling
approximately $55.6 million. These losses have resulted primarily from expenses
relating to our organizational and research and development activities. We
expect to continue to incur operating losses until such time that we can
generate significant revenues from our proposed products. These proposed
products are not fully developed and still require regulatory approvals. Even if
we implement successfully our marketing strategy or achieve significant revenues
or profitable operations, we cannot assure you that we can continue as a going
concern.
We require significant capital reserves and additional financing to
commercialize docosanol cream and our other products. We will require additional
capital substantially greater than currently on hand to commercialize docosanol
cream and any other proposed products. Accordingly, we must raise additional
capital or possibly collaborate with one or more pharmaceutical companies to
obtain the necessary financing and expertise to obtain regulatory approvals, to
complete clinical development, and to manufacture and market other proposed
products. We might not raise additional capital (or sufficient capital) or enter
into other collaborative and licensing arrangements on acceptable terms
necessary to further develop or commercialize docosanol cream or any other
proposed products. Our ability to carry out our proposed operations will be
limited significantly if we fail to obtain required additional financing or to
enter into additional collaborative and licensing arrangements for the continued
development, manufacturing and distribution of our proposed products.
We received a not-approvable letter from the FDA on docosanol cream and
have no assurance of FDA approval. On December 22, 1998, we received a letter
from the FDA stating that the new drug application for docosanol cream is
"not-approvable." The letter indicated that:
- the FDA has completed its review of the new drug application for
docosanol cream;
- we must submit additional evidence to substantiate the drug's
effectiveness;
- one additional clinical trial may be sufficient to substantiate
the efficacy findings of the studies that we have already
submitted; and
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- according to the FDA, the other sections of the new drug
application were not the basis for the "not-approvable" action.
These sections include chemistry, manufacturing and controls,
pharmacology/toxicology and evidence for safety of docosanol
cream for its proposed human use.
In our meeting with the FDA in mid-March 1999, the FDA indicated that it
will continue to evaluate the additional effectiveness data submitted and will
respond to us with its findings. The FDA indicated that this process would
require at least one additional meeting between the FDA and us. We can give no
assurance as to the possible outcome of our future discussions with the FDA.
Failure to receive FDA approval or a substantial delay in receiving FDA approval
for docosanol cream would affect materially and adversely our current business
plan for docosanol cream as a prescription product.
We may face certain risks if we modify our product formulation of
docosanol cream as an over-the-counter product. We have determined that, with a
few minor changes made to the existing formulation of docosanol cream, we could
meet the FDA's regulations for marketing an over-the-counter ("OTC") fever
blister/cold sore product. We will pursue this strategy only if we determine
that the cost and timing of obtaining FDA marketing approval of a prescription
product are too onerous. If we pursue commercialization of an OTC product for
cold sores/fever blisters, then we will face various risks in reformulating the
product, including:
- identification of suitable ingredients to be used in the
reformulation;
- long term stability of the revised formulation; and
- timely compliance with FDA regulations for marketing an OTC
product.
We cannot assure you that we will reformulate successfully docosanol
cream to meet the OTC standards of the FDA.
In addition, marketing docosanol cream as an OTC product involves
similar risks associated with its sale and marketing as a prescription product,
including our ability to:
- execute a professional communications program;
- build product awareness among customers or retail store decision
makers;
- entice major retail customers to buy, stock and recommend
docosanol cream;
- enforce docosanol patents and maintain exclusivity in the OTC
market; and
- price the product at a significant premium to competing products
in the market.
We cannot assure you that docosanol cream, if marketed and distributed
as an OTC product, will be superior to existing and proposed OTC products for
oral herpes, or will gain widespread acceptance in the OTC consumer market.
Market acceptance for docosanol cream is uncertain and its sales
channels are not yet established. Pending our evaluation of the recent FDA
decision, we currently intend to build integrated sales and marketing capacity
to support the potential launch of docosanol cream as a prescription product.
Although our marketing plans currently are on hold, we have engaged an
advertising agency for advertising and promotional materials to prepare for a
possible product launch of docosanol cream. However, we might not develop
effective advertising or increase the awareness of treatments for oral herpes,
cold sores or fever blisters, so that patients will seek medical treatment or
select our product. In addition, if we continue to develop and eventually launch
docosanol cream, then we will rely substantially on our sales organization. We
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will face difficulties in hiring and training sales staff in a timely fashion,
because there is intense competition for competent sales staff. Our failure to
implement an effective sales organization in a timely manner would affect
materially and adversely our business and financial condition. Market acceptance
for docosanol cream as a topical treatment for oral-facial herpes is uncertain.
We might not attain a level of sales sufficient to sustain our operations.
We are in the early stages of research and development for our products,
and our unproven products may result in the possible loss of product development
costs. We might not develop successfully any of our research and development
programs and potential products. In addition, we might not develop our potential
products to:
- be safe and efficacious in clinical trials;
- be more effective than formulated products based on existing or
newly developed technologies;
- meet applicable regulatory standards;
- demonstrate substantial therapeutic benefits in the treatment of
any disease;
- be capable of being produced in commercial quantities at
reasonable costs; or
- be marketed successfully.
Furthermore, the effectiveness of any of our technologies in
pre-clinical studies performed in vitro or in animal models may not be relevant
to the development of, or indicate the efficacy of, a proposed product for human
use. Our drug development programs are subject to all the risks inherent in
product development based on innovative technologies, including unanticipated
development problems and the possible lack of funds that could result in the
abandonment or substantial change in the development of a specific product. The
development process for medical products is lengthy and capital intensive. We
face substantial risks of failing to complete the development of our proposed
products. Any of the foregoing or following factors could affect materially and
adversely our business operations and financial condition:
- unsuccessful clinical trial results for proposed products;
- failure to complete product development successfully; or
- our decision, for economic or other reasons, not to complete the
development of a particular product.
We may not acquire in-licensed technologies. We intend to become a
licensing and development company with products at various stages in the drug
development pipeline. We plan to seek additional products through in-licensing
and co-promotion arrangements. To achieve this objective, we must acquire and/or
in-license new products and technologies to further develop, market and/or
sublicense them to others. We will face intense competition for these
in-licensed products and technologies and we might not locate suitable products
and technologies to fit our strengths or obtain them on acceptable terms.
We need to comply with government regulations to develop, produce, test,
manufacture and market our products. Governmental authorities in the U.S.
(including the FDA) and other countries regulate significantly the development,
production, testing, manufacturing and marketing of pharmaceutical products. The
clinical testing and regulatory approval process can take a number of years and
require the expenditure of substantial resources. Accordingly, we may not obtain
regulatory approval for any of our proposed products. We are using a significant
portion of our financial resources for research and development and the clinical
trials necessary to obtain such approvals for our proposed products. Although we
intend to do so, we may not identify and enter into additional collaborative
arrangements with pharmaceutical companies to provide the financing necessary to
complete the required testing and regulatory review
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processes necessary for our proposed products. We will continue to incur costs
of development without any assurance that we will obtain regulatory approvals.
Failure to obtain (or delays in obtaining) such approvals will affect adversely
our business operations, including our ability to commence marketing of any
proposed products. In addition, we cannot predict the extent to which adverse
governmental regulation might arise from future U.S. or foreign legislative or
administrative action. Moreover, we cannot predict with accuracy the effect of
unspecified, but possible, future changes in the regulatory approval process and
in the domestic health care system. Future changes could affect the time frame
required for regulatory review and the sale prices of our proposed products, if
approved for sale.
Our business is subject to rapid technological change and competition.
The pharmaceutical industry is subject to rapid, unpredictable and significant
technological change. We face intense competition from universities, research
institutions and pharmaceutical, chemical and bio-engineering companies.
Docosanol cream, if ultimately marketed, will compete with, among others, the
following products:
- Zovirax(R) acyclovir and Valtrex(R) valacyclovir products
marketed by Glaxo-Wellcome Corp;
- Famvir(R) famciclovir and Denavir(R) penciclovir products
marketed by SmithKline Beecham; and
- over-the-counter preparations, including well known products like
Blistex(R) and Carmex(R).
Developments by our competitors or potential competitors could render our
proposed products obsolete. Most of our competitors have greater financial
resources, research and development facilities and manufacturing and marketing
experience than we do. If we launch successfully our first proposed product,
docosanol cream, then it will compete with several prescription products for
oral-facial herpes currently on the market in the U.S., as well as other
products or potential products that are or may be under development or
undergoing the FDA regulatory approval process. Our proposed products may not
achieve commercial success in this intense competitive environment.
We depend on key personnel. Our success depends on the performance of
our officers and key employees, especially our Chief Executive Officer, Dr.
Gerald J. Yakatan. We do not have "key person" life insurance policies on any of
our employees. Furthermore, we only have "at-will" employment agreements for our
officers and key employees with whom we have agreements. Given our early stage
of development, we depend on our ability to retain and motivate high quality
personnel, especially our management. Our future success also depends on our
continuing ability to identify, hire, train and retain highly qualified
scientific, technical, sales, marketing and customer service personnel.
Moreover, the industry in which we compete has a high level of employee mobility
and aggressive recruiting of skilled personnel. We face intense competition for
qualified personnel, particularly in product research, development, sales and
marketing.
Our patents and proprietary rights may be challenged. We own or have
rights to eleven U.S. and eight foreign patents on our products or technologies.
We also have pending U.S. and foreign patent applications. These patents and
patent applications cover medical uses of docosanol and related compounds,
hu-PBL-SCID technologies and IgE regulating compounds. We cannot assure you,
however, that:
- the claims in the pending patent applications will be issued as
patents;
- present and future competitors will not develop similar or
superior technologies independently, duplicate our technologies
or design around the patented aspects of our technologies;
- our proposed technologies will not infringe other patents or
rights owned by others, including licenses which may not be
available to us;
- any issued patents will provide us with significant competitive
advantages; or
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- third parties will not challenge the validity or enforceability
of any patent that we own or, if instituted, that these
challenges will not be successful. In particular, Dr. David Katz
(our former president and chief executive officer) is seeking a
court declaration that he and his wife, Lee R. Katz, have rights
to certain IgE technology that Dr. Katz asserts are superior to
the company's rights.
The cost of litigation to uphold the validity and prevent infringement
of our patents could be substantial. In addition, the National Institute of
Health regulations provide that, if federally-funded institutions do not timely
pursue patent applications for patentable inventions, then the government can
exercise its right to own such inventions.
In addition, the process for the approval of patent applications in
foreign countries may differ significantly from the process in the U.S. Approval
in one country does not necessarily indicate that approval can be obtained in
other countries. The patent authorities in each country administer that
country's laws and regulations relating to patents independently of the laws and
regulations of any other country and the patents must be sought and obtained
separately.
In some cases, we may rely on trade secrets and confidentiality
agreements to protect our innovations. We cannot assure you that our trade
secrets will be established, or that secrecy obligations will be honored, or
that others will not develop independently similar or superior technology. To
the extent that consultants, key employees or other third parties apply
technological information independently developed by them or by others to the
projects of our company, disputes may arise as to the proprietary rights to such
information in which we do not receive a favorable resolution.
We will depend upon third-party arrangements to manufacture or market
docosanol cream and our other products. We do not have and do not expect to have
in the foreseeable future the resources to manufacture or market directly on a
large commercial scale docosanol cream or any other proposed products which we
may develop. To commercialize successfully docosanol cream or any other proposed
products, we will need to enter into collaborative arrangements with
pharmaceutical or biotechnology companies to assist in funding various aspects
of commercialization costs, including development costs, clinical testing
necessary to obtain regulatory approvals and manufacturing and marketing costs.
Such collaborative arrangements likely will cause higher costs or the sharing of
profits with third parties.
In addition, we have entered into several licensing agreements to cover
the clinical development, manufacturing and marketing of docosanol cream in
foreign markets. We might not finalize any licensing or distributorship
arrangements for territories not covered by existing agreements on favorable
terms, if at all. We ultimately may establish our own manufacturing and/or
marketing capabilities, at least for certain proposed products, which likely
would require substantial additional funds and personnel.
We are exposed to risks relating to the foreign sales of docosanol cream
and other products. We are subject to various foreign trade risks relating to
the continued development of docosanol cream by foreign licensees, and, possibly
in the future, to the manufacture, marketing and distribution of docosanol cream
overseas by foreign licensees. Certain risks that could impact significantly our
ability to deliver products include:
- changes in the regulatory and competitive environments in foreign
countries;
- changes in a specific country's or region's political or economic
conditions;
- shipping delays;
- difficulties in managing operations across disparate geographic
areas;
- fluctuations in foreign currency exchange rates;
- difficulties associated with enforcing agreements through foreign
legal systems; and
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- trade protection measures such as customs duties and export
quotas.
The market price of our Class A Common Stock is volatile. The market
price of our Class A Common Stock is volatile, as evidenced by the recent and
historical fluctuations in the market price of our Class A Common Stock. Many
factors have impacted or likely will continue to impact significantly the market
price of our Class A Common Stock, including:
- fluctuations in our operating results;
- developments relating to the progress of clinical trials for our
proposed products;
- our relationships with present and potential licensees and
distributors;
- announcements of technological innovations or new products by us
or our competitors; and
- changes in market conditions and the economy in general.
Furthermore, the market prices for securities of many biotechnology
companies have fluctuated widely, but not necessarily in relation to the
operating performance of such companies.
The testing, marketing and sale of our products involve product
liability risks, and we currently have limited insurance coverage. The testing,
marketing and sale of pharmaceutical products involve the risk of product
liability claims by consumers and other third parties. For example, the eventual
end-users of our proposed products, if any, could assert claims against us. We
have maintained product liability insurance coverage for our clinical trials in
the amount of $2,000,000 per incident and in the aggregate. Such insurance may
not cover sufficiently all possible liabilities. In the event of a successful
suit against our business or proposed products, the lack or insufficiency of
insurance coverage could affect materially and adversely our business and
financial condition. Furthermore, certain distributors of pharmaceutical
products require minimum product liability insurance coverage prior to their
purchase or acceptance of products for distribution. Failure to satisfy such
insurance requirements could impede our ability to achieve broad distribution of
our proposed products, which could affect materially and adversely our business
and financial condition.
The conversion or exercise of certain outstanding securities will have a
dilutive effect on the shares of our Class A Common Stock. As of the date of
this prospectus, the following securities exercisable or convertible into shares
of Class A Common Stock were outstanding:
- 200 shares of Series D Convertible Preferred Stock convertible
into 2,688,895 shares of Class A Common Stock (assuming a
conversion price of $0.7438 per share as of May 4, 1999);
- stock options to purchase an aggregate of 7,344,598 shares of
Class A Common Stock (at exercise prices ranging from $0.72 to
$6.4375 per share) and 403,000 shares of Class B Common Stock (at
exercise prices ranging from $0.0125 to $0.50 per share);
- Class D Warrants exercisable into 1,387,689 shares of Class A
Common Stock (at an exercise price of $1.50 per share);
- Class G Stock Purchase Warrants exercisable into 2,030,455 shares
of Class A Common Stock (at an exercise price of $2.97 per
share);
- Class H Stock Purchase Warrants exercisable into 100,000 shares
of Class A Common Stock (at an exercise price of $2.40 per
share);
11
<PAGE> 13
- Class I Stock Purchase Warrant exercisable into 500,000 shares of
Class A Common Stock (at an exercise price of $0.78125 per
share);
- Class J Stock Purchase Warrants exercisable into 100,000 shares
of Class A Common Stock (assuming an exercise price of $1.05 per
share);
- Class K Stock Purchase Warrant exercisable into 375,000 shares of
Class A Common Stock (at an exercise price of $1.125 per share);
and
- 65,000 shares of Class B Common Stock (each convertible into one
share of Class A Common Stock).
In addition, we intend to issue up to 300 additional shares of Series D
Convertible Preferred Stock and related Class J Stock Purchase Warrants, which
are convertible or exercisable into shares of Class A Common Stock. To the
extent that our outstanding or other securities are exercised or converted, our
shareholders will experience dilution of their ownership percentages. Sales in
the public market of shares of Class A Common Stock that underlie stock options
and warrants may affect adversely the prevailing market prices for shares of
Class A Common Stock. Accordingly, negative price movements in the shares of
Class A Common Stock likely would have adverse effects on our ability to obtain
additional equity capital on favorable terms, if at all.
We will not declare or pay cash dividends in the foreseeable future. We
do not intend to declare or pay cash dividends in the foreseeable future. We
expect to retain any earnings, if and when achieved, to finance our business.
USE OF PROCEEDS
We will receive certain cash consideration if either of the selling
shareholders exercises its warrant. We intend to use any cash proceeds that we
receive from exercise of the warrants for working capital purposes. Otherwise,
we will not receive any proceeds from the resale of any of the shares registered
under this prospectus. We will pay all of the costs of the registration of the
shares of Class A Common Stock registered under this prospectus. See "Selling
Shareholders" for additional information.
SELLING SHAREHOLDERS
The following table sets forth information with respect to the selling
shareholders, the shares of Class A Common Stock beneficially owned by the
selling shareholders, and the shares of Class A Common Stock issuable upon
exercise of the Class I Stock Purchase Warrant and the Class K Stock Purchase
Warrant, which shares we have agreed to register for resale by the selling
shareholders. Except as otherwise disclosed in this prospectus, the selling
shareholders neither have nor within the past three years had any position,
office or other material relationship with our company or any of its
predecessors or affiliates. Because the selling shareholders may offer all or a
portion of the shares of Class A Common Stock registered hereby pursuant to this
prospectus, we cannot estimate the number of shares that will be held by the
selling shareholders after such sales.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
NUMBER OF
SHARES OF
NUMBER OF NUMBER OF CLASS A
SHARES OF SHARES OF COMMON STOCK
COMMON STOCK CLASS A BENEFICIALLY
BENEFICIALLY OWNED COMMON STOCK OWNED AFTER
NAME OF SELLING SHAREHOLDER AS OF MAY 4, 1999 (1) OFFERED HEREBY OFFERING (2)
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JMBL LLC 500,000 500,000 0
Redington, Inc. 62,500(3) 375,000 0
</TABLE>
12
<PAGE> 14
(1) Beneficial ownership is determined in accordance with SEC rules and
generally includes voting or investment power with respect to securities.
Shares of our Class A Common Stock that are issuable upon exercise of the
Class I Stock Purchase Warrant and the Class K Stock Purchase Warrant, to
the extent that such securities are currently exercisable within 60 days
of May 4, 1999, are treated as outstanding for computing each selling
shareholder's percentage ownership of shares of our Class A Common Stock.
(2) Assumes that all of the shares of Class A Common Stock registered under
this prospectus are resold pursuant to this prospectus and that the
selling shareholders will not hold any other shares of Class A Common
Stock.
(3) The remaining 312,500 shares of Class A Common Stock underlying the Class
K Stock Purchase Warrant will vest in five increments of 62,500 shares if
the Class A Common Stock attains for ten consecutive trading days certain
closing sale prices before April 1, 2000.
Under each of the Class I Stock Purchase Warrant and the Class K Stock
Purchase Warrant, we agreed to register certain shares of Class A Common Stock
for resale by the selling shareholders to permit the resale from time to time in
the market or in privately-negotiated transactions. We will prepare and file
such amendments and supplements to this registration statement as may be
necessary in accordance with the rules and regulations of the Securities Act of
1933, to keep it effective until the earlier of the date on which the selling
shareholders have sold all of the shares covered by this registration statement
or the expiration of the warrant terms for the Class I Stock Purchase Warrant
and the Class K Stock Purchase Warrant. We have agreed to bear certain expenses
(other than broker discounts and commissions) in connection with this
registration statement.
13
<PAGE> 15
PLAN OF DISTRIBUTION
The selling shareholders have advised us that they may offer the shares
of Class A Common Stock registered under this prospectus to purchasers from time
to time:
- in transactions in the Nasdaq National Market System, in
negotiated transactions, or by a combination of these methods;
- at fixed prices that may be changed; at market prices prevailing
at the time of the resale;
- at prices related to such market prices; or
- at negotiated prices.
At the date of this prospectus, the selling shareholders have not
entered into any underwriting arrangements. The selling shareholders may sell
the shares registered under this prospectus to or through:
- ordinary brokers' transactions;
- transactions involving cross or block trades or otherwise on the
Nasdaq National Market;
- purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this
prospectus;
- "at the market" to or through market makers or into an existing
market for our Class A Common Stock;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
agents;
- through transactions in options, swaps or other derivatives
(whether exchange-listed or otherwise);
- in privately negotiated transactions;
- to cover short sales; or
- any combination of the foregoing.
From time to time, one or more of the selling shareholders may pledge,
hypothecate or grant a security interest in some or all of the shares of Class A
Common Stock registered under this prospectus owned by them, and the pledgees,
secured parties or persons to whom such shares have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be selling shareholders
under this prospectus. The number of shares of Class A Common Stock registered
under this prospectus and beneficially owned by those selling shareholders who
so transfer, pledge, donate or assign those shares will decrease as and when
they take such actions. The plan of distribution for shares sold under this
prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling shareholders under this
prospectus. In addition, a selling shareholder may, from time to time, sell
short shares of Class A Common Stock. In such instances, this prospectus may be
delivered in connection with such short sales and the shares of Class A Common
Stock offered hereby may be used to cover such short sales.
A selling shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Class A
Common Stock in the course of hedging the positions they assume with that
selling
14
<PAGE> 16
shareholder, including, without limitation, in connection with distributions of
the Class A Common Stock by the broker-dealers. A selling shareholder also may
enter into option or other transactions with broker-dealers that involve the
delivery of the shares of Class A Common Stock registered under this prospectus
to the broker-dealers, who then may resell or otherwise transfer these shares. A
selling shareholder also may loan or pledge the shares of Class A Common Stock
registered under this prospectus to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default may sell or otherwise transfer the
pledged shares.
Broker, dealers, underwriters or agents participating in the
distribution of the shares of Class A Common Stock registered under this
prospectus as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholders and/or purchasers of the
Class A Common Stock for whom the 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 less than or in excess of customary commissions). The
selling shareholders and any broker-dealers who act in connection with the sale
of the shares of Class A Common Stock under this prospectus may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any
commissions they receive and proceeds of any sale of the shares of Class A
Common Stock may be deemed to be underwriting discounts and commissions under
the Securities Act of 1933. Neither we nor any of the selling shareholders can
presently estimate the amount of this compensation. We know of no existing
arrangements between any of the selling shareholders, any other shareholder,
broker, dealer, underwriter or agent relating to the sale or distribution of the
shares of Class A Common Stock registered under this prospectus.
We will pay substantially all of the expenses relating to the
registration, offer and sale of the shares of Class A Common Stock registered
under this prospectus to the public other than commissions or discounts of
underwriters, broker-dealers or agents. We also have agreed to indemnify the
selling shareholders and certain related persons against any losses, claims,
damages or liabilities under the Securities Act of 1933 or otherwise that arise
out of, or are based upon, any untrue or alleged untrue statement of a material
fact or the omission or alleged omission instating a material fact under this
registration statement or prospectus. To the extent that indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons, we have been advised that, in the
opinion of the SEC, this indemnification is against public policy as expressed
in the Securities Act of 1933 and is therefore, unenforceable.
LEGAL MATTERS
The validity of the securities offered hereby have been passed upon for
our company by Baker & McKenzie, San Diego, California.
EXPERTS
The financial statements incorporated in this prospectus by reference
from the Company's Annual Report on Form 10-K/A for the year ended September 30,
1998 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report, which is incorporated herein by reference (which report
expresses an unqualified opinion and includes explanatory paragraphs relating to
the status of the Company as a development stage enterprise, the Company's
ability to continue as a going concern, and the Company as a defendant in
certain lawsuits), and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
15
<PAGE> 17
WHERE YOU CAN OBTAIN MORE INFORMATION
AVAILABLE INFORMATION
We are required to follow the reporting requirements of the Securities
Exchange Act of 1934. To comply with these requirements, we file a number of
reports, including annual and quarterly reports, proxy statements, information
statements and other information with the SEC. You may inspect and copy any of
this information that we have filed with the SEC at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, IL 60661-2511. You may obtain information
on the operation of the public reference room by calling the Commission at
1-800-SEC-0330. You also may obtain copies of such material at prescribed rates
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You also may inspect such reports, proxy
statements, information statements and other information concerning us at the
offices of The Nasdaq Stock Market, Inc. at 1735 K Street, N.W., Washington,
D.C. 20006. You also may access the materials that we file electronically with
the SEC at the SEC's website (http://www.sec.gov), which contains the reports,
proxy statements, information statements and other information that we file
electronically with the SEC.
We have filed with the SEC a Registration Statement on Form S-3 under
the Securities Act of 1933, with respect to the shares covered by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement, because certain parts are omitted in accordance with
the rules and regulations of the SEC. Statements made in this prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete and, with respect to each such contract, agreement or other
document filed as an exhibit to the registration statement, we refer you to such
exhibit for a more complete description of the matter involved. Each such
statement is deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We incorporate by reference in this prospectus and encourage you to read
the following documents that we have filed with the SEC pursuant to the
requirements of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 filed with the SEC on January 4, 1999, and
amended Annual Report on Form 10-K/A filed with the SEC on
February 2, 1999;
2. Our Definitive Proxy Statement filed with the SEC on January 4,
1999;
3. Our Quarterly Report on Form 10-Q for the quarter ended December
31, 1998 filed with the SEC on February 16, 1999;
4. Our Current Reports on Form 8-K filed with the SEC on January 25,
1999, March 11, 1999, April 1, 1999 and April 20, 1999;
5. Our Definitive Proxy Statement filed with the SEC on April 13,
1999;
6. The description of our Class A Common Stock contained in our
Registration Statement on Form 8-A filed with the SEC on July 31,
1990, including any amendments or reports filed for the purpose
of updating the description; and
7. All documents that we subsequently filed in accordance with
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, prior to the termination of the offering of shares of
our Class A Common Stock for resale as described in this
prospectus.
We also incorporate by reference as part of this prospectus and
encourage you to read all reports and other documents that we have filed (or
will file) with the SEC under the Securities Exchange Act of 1934, that are
after the date of this prospectus and before the termination of the offering of
the shares registered under this prospectus. You should
16
<PAGE> 18
understand that, if any statement contained in a report or document that is
incorporated by reference in this prospectus is modified or superseded, then the
later filed report or document will modify or supersede the statements contained
in this prospectus.
We 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 that person, a copy of any and all documents incorporated by
reference in this prospectus (not including, however, the exhibits to those
documents unless those exhibits are specifically incorporated by reference in
such documents). Requests should be sent to the attention of the Secretary of
our company, at 9393 Towne Centre Drive, Suite 200, San Diego, California 92121
or you may call and ask for the Secretary of our company at (619) 558-0364.
17
<PAGE> 19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated cumulative expenses of this registration of shares Class A
Common Stock for resale by the selling shareholders, all of which are to be paid
by the registrant in connection with the issuance and distribution of the shares
being registered, are estimated as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Registration Fee - SEC ........................ $ 182(1)
Accounting Fees and Expenses .................. 3,000
Legal Fees and Expenses ....................... 6,000
Miscellaneous ................................. 2,000
-------
Total ......................................... $11,182
-------
</TABLE>
- ----------
(1) Registration fee paid upon the initial filing of this registration
statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We hereby incorporate by reference Sections 204(a)(10) and (11), 204.5
and 317 of the California General Corporation Law which covers the
indemnification of directors, officers, employees and agents of a corporation.
We refer you to Article 6 of our Restated Articles of Incorporation, and Section
3.15 of our Amended and Restated Bylaws, which provide for indemnification by
our company in the manner and to the full extent permitted by California law.
Beginning August 10, 1992, we have maintained directors' and officers'
liability insurance with policy limits of $7,500,000. The policy covers 100
percent of losses arising from, among other things, claims of breach of duty,
neglect, error, alleged misstatement, misleading statement or omission by the
directors and officers in their capacity as such. Payment for loss would be made
to or on our behalf where we are required or permitted to indemnify directors or
officers for covered losses pursuant to statutory or common law, our Restated
Articles of Incorporation or Amended and Restated Bylaws or by agreement. The
policy provides for retention of $5,000 per director or officer, subject to a
maximum of $10,000 for each loss, except in the case of payment for loss to or
on our behalf, in which case the retention is $100,000.
II-1
<PAGE> 20
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(a) Exhibits
- -------- --------------------------------------------------------------------
<S> <C>
3.1 -- Restated Articles of Incorporation of the registrant (4)
3.2 -- Certificate of Amendment of the Articles of Incorporation of
the registrant (11)
3.3 -- Certificate of Determination with respect to Series D
Convertible Preferred Stock of the registrant (12)
3.4 -- Certificate of Determination with respect to Series C Junior
Participating Preferred Stock (10)
3.5 -- Amended and Restated By-Laws of the registrant (8)
4.1 -- Forms of Class A and Class B Common Stock Certificates (2)
4.2 -- Class D Warrant Agreement (including form of Class D Warrant
Certificate) (3)
4.3 -- Convertible Note, dated February 26, 1997, issued to RGC
International Investors, LDC (6)
4.4 -- Form of Class G Stock Purchase Warrant (6)
4.5 -- Rights Agreement, dated as of March 5, 1999, between AVANIR
Pharmaceuticals and American Stock Transfer & Trust Company
(10)
4.6 -- Form of Rights Certificate with respect to the Rights
Agreement dated as of March 5, 1999 (10)
4.7 -- Form of Series D Convertible Preferred Stock Certificate (11)
4.8 -- Amended and Restated Class I Stock Purchase Warrant dated
March 4, 1999 (13)
4.9 -- Form of Class J Stock Purchase Warrant (11)
4.10 -- Form of Class K Stock Purchase Warrant dated April 1, 1999
(13)
5.1 -- Opinion of Baker & McKenzie
10.1 -- 1989 Stock Option Plan (2)
10.2 -- Licensing Agreement with Yamanouchi Europe b.v. (1)
10.3 -- 1994 Stock Option Plan (5)
10.4 -- 1998 Stock Option Plan (14)
10.5 -- Supplemental Agreement with Yamanouchi Europe b.v. (5)
10.6 -- Employment Agreement with Gerald J. Yakatan (7)
10.7 -- Form of Retention Agreement with certain executive officers of
the registrant (7)
</TABLE>
II-2
<PAGE> 21
<TABLE>
<CAPTION>
(a) Exhibits
- -------- --------------------------------------------------------------------
<S> <C>
10.8 -- Form of Indemnification Agreement with certain Directors and
executive officers of the registrant (7)
10.9 -- Registration Rights Agreement with Promethean Investment
Group, L.L.C. (9)
10.10 -- Class A Common Stock Investment Agreement with Promethean
Investment Group, L.L.C. (9)
10.11 -- Amendment to the Class A Common Stock Investment Agreement
(12)
10.12 -- Securities Purchase Agreement for Series D Convertible
Preferred Stock (11)
10.13 -- Registration Rights Agreement for Series D Convertible
Preferred Stock (11)
23.1 -- Independent Auditors' Consent
23.2 -- Consent of Baker & McKenzie (included in Exhibit 5.1)
</TABLE>
- ----------
1. Incorporated by reference to the similarly described exhibits included
with the registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, filed January 11, 1992.
2. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Registration Statement on Form S-1,
File No. 33-32742, declared effective by the SEC on May 8, 1990.
3. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Registration Statement on Form S-1,
File No. 33-49082, declared effective by the SEC on October 26, 1992.
4. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Amendment No. 4 to the Registration
Statement on Form S-1, File No. 33-32742, declared effective by the SEC
on April 13, 1994.
5. Incorporated by reference to the similarly described exhibit included
with the registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed December 29, 1994.
6. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed March 10, 1997.
7. Incorporated by reference to the similarly described exhibit included
with the registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
8. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on October 30,
1998.
9. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on January 25,
1999.
10. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on March 11,
1999.
11. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 1, 1999.
II-3
<PAGE> 22
12. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 1, 1999.
13. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 20,
1999.
14. Incorporated by reference to the similarly described attachment to the
registrant's Definitive Proxy Statement (Def 14A) filed on January 4,
1999.
(b) All other schedules are omitted for the reason that the information
is included in the financial statements or the related notes or that they are
not required or are not applicable.
ITEM 17. UNDERTAKINGS.
We hereby undertake:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. To reflect in this prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement; and
iii. To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities registered therein, and
the offering of such securities at that time will be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions of its Restated Articles of
Incorporation and Amended and Restated By-Laws of the registrant, the California
General Corporation Law or otherwise, the registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933, and is therefore unenforceable. If a
claim for indemnification against such liabilities (other than the payment by
the issuer of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, then the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in La Jolla, California,
on May 6, 1999.
AVANIR PHARMACEUTICALS
By: /s/ Gerald J. Yakatan, Ph.D.
-------------------------------------
Gerald J. Yakatan, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Gerald J. Yakatan, Ph.D. and
Gregory P. Hanson, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution and resubstitution, for
him in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with exhibits thereto and other
documents in connection therewith, with the SEC, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys-in-fact to any and all amendments to this
registration statement.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on May 6, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Gerald J. Yakatan, Ph.D. President, Chief Executive Officer and a Director
- ------------------------------------ (Principal Executive Officer)
Gerald J. Yakatan, Ph.D.
/s/ Gregory P. Hanson Vice President, Finance and Chief Financial
- ------------------------------------ Officer (Principal Financial and Accounting
Gregory P. Hanson Officer)
/s/ George P. Rutland Chairman of the Board of Directors
- ------------------------------------
George P. Rutland
</TABLE>
II-5
<PAGE> 24
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Dennis J. Carlo, Ph.D. Director
- ------------------------------------
Dennis J. Carlo, Ph.D.
/s/ Michael W. George Director
- ------------------------------------
Michael W. George
/s/ Edward L. Hennessy, Jr. Director
- ------------------------------------
Edward L. Hennessy, Jr.
Director
- ------------------------------------
James B. Glavin
/s/ Kenneth E. Olson Director
- ------------------------------------
Kenneth E. Olson
/s/ Stuart A. Samuels Director
- ------------------------------------
Stuart A. Samuels
/s/ Joseph E. Smith Director
- ------------------------------------
Joseph E. Smith
</TABLE>
II-6
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------- -------------------------------------------------------------
<S> <C>
3.1 Restated Articles of Incorporation of the registrant (4)
3.2 Certificate of Amendment of the Articles of Incorporation of
the registrant (11)
3.3 Certificate of Determination with respect to Series D
Convertible Preferred Stock of the registrant (12)
3.4 Certificate of Determination with respect to Series C Junior
Participating Preferred Stock (10)
3.5 Amended and Restated By-Laws of the registrant (8)
4.1 Forms of Class A and Class B Common Stock Certificates (2)
4.2 Class D Warrant Agreement (including form of Class D Warrant
Certificate) (3)
4.3 Convertible Note, dated February 26, 1997, issued to RGC
International Investors, LDC (6)
4.4 Form of Class G Stock Purchase Warrant (6)
4.5 Rights Agreement, dated as of March 5, 1999, between AVANIR
Pharmaceuticals and American Stock Transfer & Trust Company
(10)
4.6 Form of Rights Certificate with respect to the Rights
Agreement dated as of March 5, 1999 (10)
4.7 Form of Series D Convertible Preferred Stock Certificate (11)
4.8 Amended and Restated Class I Stock Purchase Warrant dated
March 4, 1999 (13)
4.9 Form of Class J Stock Purchase Warrant (11)
4.10 Form of Class K Stock Purchase Warrant dated April 1, 1999
(13)
5.1 Opinion of Baker & McKenzie
10.1 1989 Stock Option Plan (2)
10.2 Licensing Agreement with Yamanouchi Europe b.v. (1)
10.3 1994 Stock Option Plan (5)
10.4 1998 Stock Option Plan(14)
</TABLE>
II-7
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------- -------------------------------------------------------------
<S> <C>
10.5 Supplemental Agreement with Yamanouchi Europe b.v. (5)
10.6 Employment Agreement with Gerald J. Yakatan (7)
10.7 Form of Retention Agreement with certain executive officers
of the registrant (7)
10.8 Form of Indemnification Agreement with certain Directors and
executive officers of the registrant (7)
10.9 Registration Rights Agreement with Promethean Investment
Group, L.L.C. (9)
10.10 Class A Common Stock Investment Agreement with Promethean
Investment Group, L.L.C. (9)
10.11 Amendment to the Class A Common Stock Investment Agreement
(12)
10.12 Securities Purchase Agreement for Series D Convertible
Preferred Stock (11)
10.13 Registration Rights Agreement for Series D Convertible
Preferred Stock (11)
23.1 Independent Auditors' Consent
23.2 Consent of Baker & McKenzie (included in Exhibit 5.1)
</TABLE>
- ----------
1. Incorporated by reference to the similarly described exhibits included
with the registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, filed January 11, 1992.
2. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Registration Statement on Form S-1,
File No. 33-32742, declared effective by the SEC on May 8, 1990.
3. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Registration Statement on Form S-1,
File No. 33-49082, declared effective by the SEC on October 26, 1992.
4. Incorporated by reference to the similarly described exhibit filed in
connection with the registrant's Amendment No. 4 to the Registration
Statement on Form S-1, File No. 33-32742, declared effective by the SEC
on April 13, 1994.
5. Incorporated by reference to the similarly described exhibit included
with the registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed December 29, 1994.
6. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed March 10, 1997.
7. Incorporated by reference to the similarly described exhibit included
with the registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
8. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on October 30,
1998.
II-8
<PAGE> 27
9. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on January 25,
1999.
10. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on March 11,
1999.
11. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 1, 1999.
12. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 1, 1999.
13. Incorporated by reference to the similarly described exhibit included
with the registrant's Current Report on Form 8-K filed on April 20,
1999.
14. Incorporated by reference to the similarly described attachment to the
registrant's Definitive Proxy Statement (Def 14A) filed on January 4,
1999.
II-9
<PAGE> 1
EXHIBIT 5.1
Opinion of Baker & McKenzie
May 6, 1999
AVANIR Pharmaceuticals
9393 Towne Centre Drive, Suite 200
San Diego, California 92121
Ladies and Gentlemen:
We have acted as counsel to AVANIR Pharmaceuticals, a California
corporation (the "Company"), in connection with its filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), of a Registration Statement on Form S-3, including exhibits
thereto (the "Registration Statement"), covering up to 875,000 shares (the
"Shares") of the Company's Class A Common Stock, no par value per share.
We have examined the originals, or photostatic or certified copies, of
such records of the Company, certificates of officers of the Company and of
public officials, and such other documents as we have deemed relevant and
necessary as the basis of the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as photostatic or certified copies and the
authenticity of the originals of such copies.
Based upon our examination, we are of the opinion that the Shares have
been validly authorized and are legally issued, fully paid and non-assessable.
We express no opinion as to the applicability of, compliance with, or
effect of federal law or the law of any jurisdiction other than the General
Corporation Law of the State of California.
We hereby consent to the use of our opinion as herein set forth as an
exhibit to the Registration Statement and to the use of our name under the
caption "Legal Matters" in the prospectus forming a part of the Registration
Statement. This consent is not to be construed as an admission that we are a
person whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act.
Very truly yours,
BAKER & MCKENZIE
/s/ Baker & McKenzie
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
AVANIR Pharmaceuticals:
We consent to the incorporation by reference in this Registration Statement of
AVANIR Pharmaceuticals, formerly LIDAK Pharmaceuticals, (a development stage
enterprise) (the "Company") on Form S-3 of our report dated December 24, 1998
(which report expresses an unqualified opinion and includes explanatory
paragraphs relating to the status of the Company as a development stage
enterprise, the Company's ability to continue as a going concern, and the
Company as a defendant in certain lawsuits), appearing in the Annual Report on
Form 10-K/A of AVANIR Pharmaceuticals for the year ended September 30, 1998 and
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Diego, California
May 6, 1999
