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This filing is made pursuant
to Rule 424(b)(3) under
the Securities Act of
1933 in connection with
Registration No. 33-49082
Upper right corner of Prospectus cover:
For supplemental information regarding AVANIR Pharmaceuticals since this
Prospectus was prepared, see Prospectus Supplements dated May 6, 1999 and July
29, 1999, which are attached to the back page of this Prospectus beginning on
Page S-1. The Prospectus Supplements describe the reduction in exercise price
and extension of expiration date of the outstanding Class D Warrants, and
provides updates concerning our new drug application with the U.S. Food and Drug
Administration, financing plans, legal proceedings, and status of the listing of
our Class A Common Stock on the Nasdaq National Market System.
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AVANIR PHARMACEUTICALS
SUPPLEMENT TO PROSPECTUS DATED APRIL 29, 1999
AND PREVIOUS SUPPLEMENT DATED MAY 3, 1999
JULY 29, 1999
Reduction in Exercise Price and Extension of Expiration Date of Class D
Warrants:
On July 16, 1999, we reduced the exercise price of the outstanding Class D
Warrants from $1.50 to $1.375 per share of Class A Common Stock. As part of the
reduction in exercise price, we issued an additional 126,166 Class D Warrants
and an equal number of shares of Class A Common Stock underlying these
additional warrants were authorized. In June 1999, we extended the expiration
date of the Class D Warrants from June 30, 1999 to August 31, 1999.
Status of Discussions with the FDA Regarding Docosanol Cream:
As discussed in the Prospectus dated April 29, 1999 and updated by the
Prospectus Supplement dated May 3, 1999, we have had ongoing discussions with
the Food and Drug Administration since mid-March 1999 regarding the additional
evidence of efficacy of docosanol cream. On July 21, 1999, we received a letter
from the FDA stating it had reviewed the additional evidence of efficacy that we
had submitted during the last several months. The FDA requested additional
statistical analyses to "assess the consistency of the (clinical) data." We
intend to submit the results of the requested analyses to the FDA within the
next two weeks, to complete the information that the FDA has requested. The FDA
stated "that the review of that material can be accomplished relatively
quickly."
Status of Financing Plans:
At a Special Meeting of Shareholders on May 21, 1999, our shareholders
approved the issuance of over 20% of the currently issued and outstanding shares
of Class A Common Stock in connection with the potential issuance of Class A
Common Stock underlying the Series D Convertible Preferred Stock, the Class J
Stock Purchase Warrants and a potential financing through an equity line. Our
ability to access the equity line depends on various conditions including, but
not limited to, our Class A Common Stock trading at or above $1.00 per share and
the continued listing of our Class A Common Stock on the Nasdaq National Market
System. In addition, the Company is required to file with the SEC a registration
statement to register the Class A Common Stock underlying the equity line with
the SEC. We have not yet filed this registration statement pending a review of
recent SEC interpretations regarding the use of equity lines as a form of
financing.
Update to Legal Proceedings:
Dr. David H. Katz's claims against us have been reduced from fifteen to
six, either by his withdrawal of claims or rulings by the court by summary
adjudication in our favor. The trial on the remaining causes of action is set to
begin on August 23, 1999. Such causes still include:
1. Dr. Katz's claim for reinstatement of voting rights with respect to the
shares of Class B Common Stock that he sold to Healthmed, Inc.;
2. A determination of whether Dr. Katz was fired for "cause" and therefore is
entitled to severance pay;
3. Whether the exercise date for Mrs. Katz's options to exercise 10,000
shares of Class B Common Stock should be extended;
4. Whether Dr. Katz was "defamed" by statements that he was fired for
"cause";
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5. Whether we interfered with any contractual relations between Dr. Katz and
Medical Biology Institute; and
6. An accounting for unreimbursed expenses allegedly advanced to us by Dr.
Katz.
We also expect that our cross-complaint against Dr. Katz will go to trial.
Neither our counsel nor we can express an opinion on the likely outcome of the
lawsuits with Dr. Katz. However, we intend to defend the claims from, and pursue
claims against, Dr. Katz vigorously. Discovery is now complete, and we are
currently engaged in trial preparation.
Status of Listing with Nasdaq National Market:
Nasdaq still considers the bid price of our Class A Common Stock to be
deficient. Since February 8, 1999, the date on which Nasdaq sent to us the
notice of non-compliance, the closing bid price of our Class A Common Stock has
exceeded the minimum bid price requirement of $1.00 on several occasions.
However, as of close of the Nasdaq market on July 26, 1999, the closing bid
price of our Class A Common Stock was below $1.00 and has been below $1.00 for
30 consecutive days. Thus, delisting remains a serious risk.
Also, several factors could negatively impact the bid price of our Class A
Common Stock. For example, negative news from the FDA regarding our new drug
application for docosanol cream would likely cause a lower market price.
Additionally, if the holders of Series D Convertible Preferred Stock exercise
their rights to convert into shares of Class A Common Stock, then the effect
could dilute the ownership of holders of our Class A Common Stock. Any
conversion could cause downward pressure on the market price of our Class A
Common Stock. In turn, this lower market price would allow for conversion into
more shares of Class A Common Stock, causing additional downward pressure on the
market price.
Nasdaq also requires that we maintain net tangible assets of at least $4
million. Our net tangible assets for June 30, 1999 are below $4.0 million. If we
do not complete all of the terms and conditions necessary to obtain additional
financing previously arranged with our investors to support operations, then we
likely will not achieve Nasdaq's minimum listing requirement for net tangible
assets, which would cause the delisting of our Class A Common Stock.
On July 1, 1999, we attended an oral hearing with Nasdaq to discuss our
financing plans and other plans for improving the trading price of our Class A
Common Stock to acceptable levels. As of July 26, 1999, we had not received a
report from the oral hearings panel regarding the outcome of the meeting. If
Nasdaq delists our Class A Common Stock, then we may face significant
difficulties in raising additional capital on favorable terms, if at all.
Delisting also will negatively affect shareholder liquidity.
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