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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-83293
PROSPECTUS
CELTRIX PHARMACEUTICALS, INC.
10,075,000 SHARES OF COMMON STOCK
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 2 IN
DETERMINING WHETHER TO PURCHASE THE COMMON STOCK.
The selling stockholders identified on pages 12 and 13 of this
prospectus are offering these shares of common stock. For additional information
on the methods of sale, you should refer to the section entitled "Plan of
Distribution" on page 10. We will not receive any portion of the proceeds from
the sale of these shares.
Celtrix's common stock is quoted on the Nasdaq National Market under
the symbol "CTRX."
On July 13, 1999, the last sale price of the common stock on the Nasdaq
National Market was $1.625 per share.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS SELLING STOCKHOLDERS
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Per Share.......................... See Text Above See Text Above See Text Above
Total..............................
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THE DISCLOSURES IN THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August 9, 1999
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TABLE OF CONTENTS
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THE COMPANY.................................................................1
RISK FACTORS................................................................2
USE OF PROCEEDS............................................................10
ISSUANCE OF COMMON STOCK AND WARRANTS TO SELLING STOCKHOLDERS..............10
PLAN OF DISTRIBUTION.......................................................10
SELLING STOCKHOLDERS.......................................................12
LEGAL MATTERS..............................................................14
EXPERTS....................................................................14
WHERE YOU CAN FIND MORE INFORMATION........................................14
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this prospectus is current as of the date on the cover.
THE COMPANY
Celtrix is a biopharmaceutical company developing novel drug candidates to
treat seriously debilitating, degenerative conditions primarily associated with
aging, chronic diseases and severe trauma. Our focus is on restoring lost
tissues and bodily processes essential for the patient's health and quality of
life. Our product development programs have targeted severe osteoporosis,
including hip fracture surgery in the elderly, diabetes, and acute traumatic
injury as in severe burns. Other potential development programs may target
protein wasting diseases (involving deterioration or degeneration of body
tissue) associated with cancer, AIDS, advanced kidney failure, and comparable
life-threatening conditions.
Our leading drug candidate is SomatoKine, a naturally occurring complex
comprised of the tissue-producing (or anabolic) hormone insulin-like growth
factor-I (IGF-I) and its primary binding protein, BP3. IGF-I is known to play a
major role in diverse biological processes, including bone and muscle formation,
tissue repair, and endocrine regulation. However, IGF-I does not naturally exist
in large quantities free of its binding proteins, and limitations associated
with administering free IGF-I therapeutically have proven significant. When
IGF-I is bound to BP3, as it is in nature, it does not display these acute
limitations. BP-3 is critical in regulating the availability of IGF-I to the
body's cells.
We completed a Phase II clinical feasibility study in December 1998 using
SomatoKine to treat severely osteoporotic patients recovering from hip fracture
surgery. Final results from the Phase II study suggest that SomatoKine has the
potential to amplify bone metabolism and reverse the loss of bone mineral
density that usually occurs following a hip fracture and improves the patient's
functional independence. In April 1999, we established a corporate partnership
with Elan Corporation, plc and Elan International Services, Ltd. to form a new
jointly owned subsidiary that will continue global development of SomatoKine for
treatment of severe osteoporosis, including recovery from hip fracture surgery.
We have also conducted a Phase II feasibility study in patients with severe
burns. Data from the study show that SomatoKine has a normalizing effect on
protein metabolism and patients treated with SomatoKine recorded improvements in
several measures of their immune systems and heart functions. We believe that
SomatoKine has the potential to provide severely burned patients with critical
protection from serious infection, and it may speed their recovery and reduce
their hospital stay. Recently we were notified by the United States Food and
Drug Administration (also known as the FDA) that SomatoKine qualifies for orphan
drug status in treatment of severe burns and the beneficial marketing rights
that are associated with that designation. Specifically, orphan drug status will
guarantee us seven years of market exclusivity in the United States following
FDA approval of SomtoKine for the treatment of severe burns, since orphan drug
status applies to products that address diseases or conditions, such as severe
burns, that affect less than 200,000 persons in the United States and for which
development would otherwise not be economically feasible.
In January 1999, we completed a Phase II study in patients with Type I
diabetes. Final data revealed that average daily insulin requirements for
patients who received SomatoKine decreased significantly and these patients'
average daily glucose levels were also decreased. Based on such findings, we
believe that SomatoKine has potential to improve insulin sensitivity and help
diabetics manage their disease, and in so doing avoid complications which
ultimately accompany diabetes.
We plan to seek corporate collaborations to develop SomatoKine not only for
treatment of severe burns and diabetes, but also in connection with protein
wasting diseases, such as cancer, AIDS, advanced kidney failure, and similar
life-threatening conditions. SomatoKine's tissue-producing effects offer the
potential to preserve and restore muscle strength and mobility important for
these patients' survival and quality of life.
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We also have a product development, license and marketing agreement with
Genzyme Corporation for TGF-beta-2. Genzyme is currently developing TGF-beta-2
for tissue repair and the treatment of systemic indications. We are not
currently pursuing an in-house TGF-beta-2 program.
Celtrix was spun off from Collagen Corporation and was incorporated in
Delaware in December 1990 as "Celtrix Laboratories, Inc." We changed our name to
"Celtrix Pharmaceuticals, Inc." in December 1991.
Our principal executive offices are located at 2033 Gateway Place, Suite
600, San Jose 95110 and our telephone number is (408) 988-2500. As used in this
prospectus, "we," "us," "our" and "Celtrix" refer to Celtrix Pharmaceuticals,
Inc., a Delaware corporation.
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED BY THIS PROSPECTUS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER
INFORMATION APPEARING IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
BECAUSE OUR PRODUCTS ARE IN AN EARLY STAGE OF DEVELOPMENT, NONE HAVE
RECEIVED REGULATORY APPROVAL OR BEEN RELEASED FOR COMMERCIAL SALE
Our potential products are in the research and development stage and we
have generated no material revenues to date from product sales. To achieve
profitable operations, we must, either, alone or with others, successfully
develop, obtain regulatory approval for, manufacture and market our products
currently in development. Much clinical development work for our potential
products remains to be completed. No assurance can be given that our product
development efforts will be successfully completed, that required regulatory
approvals will be obtained or that any products, if developed and introduced,
will be successfully marketed or achieve market acceptance.
WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT
We have incurred net operating losses in every year of operation since
our inception. As of March 31, 1999, we had an accumulated deficit of
approximately $130.4 million. Losses have resulted principally from costs
incurred in connection with our research and development activities and from
general and administrative costs associated with our operations. We expect to
incur substantial and increasing operating losses for at least the next several
years. Our ability to achieve profitability will depend in part on our
completing research and development of, and obtaining regulatory approvals for,
our products and successfully commencing product commercialization.
OUR STOCK PRICE HAS BEEN VOLATILE AND WE HAVE NEVER PAID DIVIDENDS
Since our common stock became listed for public trading, its market
price has fluctuated over a wide range and we expect that it will continue to
fluctuate. Like securities of biopharmaceutical and biotechnology companies
generally, our stock price has from time to time experienced significant price
and volume fluctuations that are unrelated to our operating performance. In
addition, announcements concerning Celtrix or our competitors, the results of
clinical trials, technological innovations or new commercial products,
government regulations, developments concerning proprietary rights, litigation
or public concern as to safety of our potential products as well as changes in
general market conditions may have a significant effect on the market price of
our common stock.
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We have never paid dividends on our capital stock and we do not
anticipate paying any cash dividends in the foreseeable future.
ALTHOUGH WE REQUIRE FUTURE CAPITAL FOR OPERATIONS, ADDITIONAL FUNDING
IS UNCERTAIN
We anticipate that proceeds from financings we completed in November
1998 and April 1999, as well as proceeds from the sale of fixed assets in
connection with our discontinuation of manufacturing operations in the fall of
1998 and a $600,000 payment received in March 1999 from Yoshitomi
Pharmaceuticals Industries, Ltd. pursuant to a settlement agreement will be
sufficient to fund our operations (other than clinical research and development)
into the third calendar quarter of 2000. However, further development of our
products will require the commitment of substantial resources to conduct the
time-consuming research and development, clinical studies and regulatory
activities necessary to bring any potential therapeutic products to market and
to establish production, marketing and sales capabilities. Such additional
funding will need to be raised through collaborative arrangements or through
public or private financings, including equity financings. Our joint venture
transaction with Elan Corporation plc in April 1999 provides for the future
purchase by Elan of additional Celtrix stock and we will use the proceeds from
such stock sales to fund our share of anticipated clinical expenses associated
with the joint venture's large scale trial in osteoporosis (hip fractures).
There can be no assurance that any future financing will be available
to us or on attractive terms, or that we can enter into future collaborative
relationships with corporate partners for the continuation of clinical trials in
any of our current areas of development. In February 1999, the Securities and
Exchange Commission informed us that we did not have a valid exemption for the
sale of our securities in the November 1998 financing and, consequently, we have
offered the purchasers from that financing an opportunity to rescind their
purchase of those securities. The exercise by any of the investors of such
rescission right will reduce our available cash and cash equivalents, and could
have a material adverse effect on our ability to conduct our business in the
future. To date, all purchasers from the financing have informed us they do not
intend to rescind their purchases and they have agreed to waive certain rights
(including certain financial penalties) in connection with the timing of our
obligation to register the securities they purchased in the November 1998
financing with the Securities and Exchange Commission, and, accordingly, our
published financial statements do not reflect the impact of such a rescission.
OUR POTENTIAL PRODUCTS ARE SUBJECT TO STRINGENT GOVERNMENT REGULATION
IN ORDER TO OBTAIN REQUIRED APPROVALS
The preclinical testing and clinical trials of any compounds we or our
collaborative partners develop and the manufacturing and marketing of any drugs
produced from such compounds are subject to regulation by numerous federal,
state and local governmental authorities in the United States, the principal one
being the FDA, and by similar agencies in other countries in which drugs
developed by Celtrix or our collaborative partners may be tested and marketed.
Any compound developed by Celtrix or our collaborative partners must receive
approval from applicable regulatory agencies before it may be marketed as a drug
in a particular country. The regulatory process, which includes preclinical
testing and clinical trials of each compound in order to establish its safety
and efficacy, can take many years and requires the expenditure of substantial
resources. Data obtained from preclinical and clinical activities are subject to
varying interpretations which could delay, limit or prevent regulatory agency
approval. In addition, delays or rejections may be encountered based on changes
in regulatory agency policies during the period in which a drug is being
developed and/or the period required for review of any application for
regulatory agency approval of a particular compound. Delays in obtaining
regulatory agency approvals could adversely affect the marketing of any drugs we
or our collaborative partners develop. Such delays could result in the
imposition of costly procedures on our and on our collaborative partners'
activities, diminish any competitive advantages that we or our collaborative
partners may attain and adversely affect our ability to
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receive royalties, any of which could have a material adverse effect on our
business, financial condition and results of operations.
There can be no assurance that, even after considerable time and funds
have been expended, regulatory agency approvals will be obtained for any
compounds we develop alone or in collaboration with partners. Moreover, if
regulatory agency approval for a drug is granted, such approval may include
limitations on the indicated uses for which the drug may be marketed and this
could limit the potential market for any such drug. Furthermore, if and when we
obtain approval for any of our products, the marketing and manufacture of such
products remains subject to extensive regulatory requirements. The discovery of
previously unknown problems with a drug or its manufacturer may result in
restrictions on such drug or the drug's manufacturer, including withdrawal of
the drug from the market. Failure to comply with regulatory requirements could,
among other things, result in fines, suspension of regulatory approvals,
operating restrictions and criminal prosecution. In addition, regulatory agency
approval of pricing is required in many countries and may be required for the
marketing in such countries of any drug we or our collaborative partners
develop.
WE FACE UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial sale of any of
our products under development, we must demonstrate through preclinical studies
and clinical trials that the product is safe and efficacious for use in each
target indication. The results from preclinical studies and early clinical
trials may not accurately predict results that will be obtained in large-scale
testing, and there can be no assurance that our clinical trials will demonstrate
the safety and efficacy of any products or will result in marketable products. A
number of companies in the biotechnology industry have suffered significant
setbacks in advanced clinical trials, even after experiencing promising results
in earlier trials. For example, in fiscal year 1995, we discontinued our
in-house TGF-beta-2 program for the treatment of ophthalmic conditions as a
result of disappointing clinical study results.
The rate of completion of our clinical trials is dependent on, among
other factors, the rate of patient enrollment. Patient enrollment is a function
of many factors, including the size of the patient population, the nature of the
protocol, the proximity of patients to clinical sites and the eligibility
criteria for the study. Delays in patient enrollment may result in increased
costs and delays for the trial, which could have a material adverse effect on
our business, financial condition and results of operations.
THERE IS NO ASSURANCE OF MARKET ACCEPTANCE FOR OUR POTENTIAL PRODUCTS
There can be no assurance that any products which we successfully
develop, if approved for marketing, will achieve market acceptance. The products
and therapies which we are attempting to develop will compete with a number of
well-established traditional drugs and therapies manufactured and marketed by
major pharmaceutical companies. The degree of market acceptance of any products
we develop will depend on a number of factors, including the establishment and
demonstration in the medical community of the clinical efficacy and safety of
our product candidates, their potential advantage over existing treatment
methods, and reimbursement policies of government and third-party payors,
including insurance companies. Our competitors may also develop new technologies
or products which are more effective or less costly, or that are perceived to be
more cost-effective than SomatoKine. There is no assurance that physicians,
patients or the medical community in general will accept and utilize any
products that we may develop. Our business, financial condition and results of
operations may be materially adversely affected if SomatoKine does not receive
market acceptance for any reason.
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WE FACE SUBSTANTIAL COMPETITION
In each of our potential product areas, competition from large
pharmaceutical companies, biotechnology companies and other companies,
universities and research institutions is substantial. At least three large
biotechnology and pharmaceutical companies with substantial financial and legal
resources have patent applications on file in the United States and abroad
directed at the production of recombinant IGF-I by various methods and its use
in various clinical indications. Relative to Celtrix, most of these entities
have substantially greater capital resources, research and development staffs,
facilities and experience in conducting clinical trials and obtaining regulatory
approvals, as well as in manufacturing and marketing pharmaceutical products.
Furthermore, we believe that our competitors have used, and may continue to use,
litigation to gain a competitive advantage. In addition, these and other
entities may have or may develop new technologies or use existing technologies
that are, or may in the future be, the basis for competitive products.
Any potential products that we successfully develop and for which we
gain regulatory approval will have to compete for market acceptance and market
share. For certain of our potential products, an important factor in such
competition may be the timing of market introduction of competitive products.
Accordingly, the relative speed with which we can develop products, complete the
clinical testing and regulatory approval processes and supply commercial
quantities of the product to the market are expected to be important competitive
factors. We expect that competition will be based, among other things, on
product efficacy, safety, reliability, availability, timing and scope of
regulatory approval and price. There can be no assurance that our competitors
will not succeed in developing technologies and products that are more effective
than any that we are developing or that would render our technology and products
obsolete or noncompetitive. In addition, many of our competitors may achieve
product commercialization or patent protection earlier than we will. Our failure
to compete effectively would have a material adverse effect on our business,
financial condition and results of operations.
ALTHOUGH OUR SUCCESS DEPENDS ON PROTECTION OF OUR PROPRIETARY
TECHNOLOGY, THERE ARE UNCERTAINTIES INVOLVED WITH PATENT PROSECUTION
Our success will depend in part on our ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others, both in the United States and in other countries. The patent
positions of pharmaceutical, biopharmaceutical and biotechnology companies,
including Celtrix, are highly uncertain and involve complex legal and factual
questions. Patent law relating to the scope of claims in the technology fields
in which we operate is still evolving. The degree of future protection for our
proprietary rights is therefore uncertain. No consistent policy has emerged
regarding the permissible breadth of coverage of claims in biotechnology
patents. Therefore, no assurance can be given that any of our or our licensors'
patent applications will issue as patents or that any such issued patents will
provide competitive advantages for our products or will not be successfully
challenged or circumvented by our competitors. In addition, there can be no
assurance that others will not independently develop substantially equivalent
proprietary technology that is not covered by our patents or that others will
not be issued patents that may prevent the sale of our proposed products or
require us to license technology from third parties and pay significant fees or
royalties.
We are aware that at least three large biotechnology and pharmaceutical
companies have issued patents and/or have filed patent applications in the
United States and abroad directed at the production of recombinant IGF-I by
various methods and its use in various clinical indications. The earliest date
of filing of these patent applications is April 25, 1983, but most are much more
recent -- within the last five years. Unless and until all such applications
issue, it is not possible for us to determine the breadth of our competitors'
claims regarding processes for production of IGF-I or for the
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use of IGF-I for particular indications. Furthermore, a large biotechnology and
pharmaceutical company with substantial financial and legal resources has a
patent issued in the United States directed towards certain DNA molecules
encoding BP3 and the corresponding BP3 protein. This same patent was previously
granted in Europe, which we successfully opposed. However, this large
biotechnology and pharmaceutical company has recently appealed the decision in
Europe and there can be no assurance that the appeal will not be successful, nor
is it possible to determine what, if any, claims will be reinstated or the
breadth of such claims. In addition, we expect our competitors to defend
their patent positions vigorously.
We have developed a new process for the production of IGF and BP3 which
we do not believe infringes other patents relating to recombinant protein
production in general or other patents relating to the production of IGF and BP3
in particular, although there can be no assurance that a contrary position will
not be asserted by our competitors. A large number of other companies have
pending patent applications and/or issued patents which claim certain methods of
use of IGF. There can be no assurance that third parties will not claim that our
technology, current or future products or manufacturing processes infringe their
proprietary rights. If other companies were to successfully bring legal actions
against us claiming patent or other intellectual property infringements, in
addition to any potential liability for damages, we could be required to obtain
a license in order to continue to use the affected process or to manufacture or
use the affected products, or alternatively, we could be required to cease using
such products or process if enjoined by a court. Any such claim, with or without
merit, could result in costly litigation or might require us to enter into
royalty or licensing agreements, all of which could delay or otherwise adversely
impact the development of our potential products for commercial use. If any
licenses are required, there can be no assurance that we will be able to obtain
them on commercially favorable terms, if at all, and if such licenses are not
obtained, we might be prevented from pursuing the development of certain of our
potential products. Our breach of an existing license, our failure to obtain, or
our delay in obtaining a license to any technology that we require to
commercialize our products may have a material adverse impact on our business,
financial condition and results of operations.
It may be necessary for us to undertake costly litigation to enforce
any patents issued or licensed to us or to determine the scope and validity of
another party's proprietary rights. There can be no assurance that our issued or
licensed patents would be held to be valid by a court of competent jurisdiction.
An adverse outcome in litigation or an interference or other proceeding in a
court or patent office could subject us to significant liabilities to other
parties, require disputed rights to be licensed from other parties or require us
to cease using such technology, any of which could have a material adverse
effect on our business, financial condition and results of operations.
We also rely on trade secrets to protect technology, especially where
patent protection is not believed to be appropriate or obtainable. We attempt to
protect our proprietary technology and processes in part by confidentiality
agreements with employees, consultants and contractors. There can be no
assurance that such agreements will not be breached, that we will have adequate
remedies for any breach, or that our trade secrets will not otherwise become
known or will be independently discovered by competitors in such a manner that
we have no practical recourse. To the extent that we or our consultants or our
research collaborators use intellectual property owned by others in work
performed for Celtrix, disputes may also arise as to the rights in related or
resulting know-how and inventions.
WE HAVE LIMITED MANUFACTURING EXPERIENCE AND CAPACITY
Our products must be manufactured in compliance with regulatory
requirements and at
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acceptable costs. In September 1998, we implemented a restructuring plan to
focus our operations on clinical development of SomatoKine, our leading drug
compound, and to reduce our cash burn rate. With what we believe to be
sufficient clinical grade SomatoKine to support the conduct of clinical trials
for approximately two years, we discontinued our in-house manufacturing
operations. In the future, we will need to contract with others for our
manufacturing operations or establish corporate partnering arrangements that
will support manufacturing of drug material to support additional clinical drug
needs and eventual commercial manufacturing. There can be no assurance that we
will be able to successfully identify and contract with a third party
manufacturer to manufacture our current or future products on a commercial
scale, nor that such products can be manufactured at a cost or in quantities to
make commercially viable products. Failure to obtain sufficient commercial
quantities of SomatoKine at acceptable terms will have an adverse impact on our
attempts to seek approval for this product, or to commercialize it.
WE HAVE LIMITED SALES AND MARKETING EXPERIENCE
If we are permitted to commence commercial sales of products, we will
face competition with respect to commercial sales, marketing and distribution,
areas in which we have no experience. To market any of our products directly, we
must develop a marketing and sales force with technical expertise and with
supporting distribution capability. Alternatively, we may obtain the assistance
of a pharmaceutical company with a large distribution system and a large direct
sales force. There can be no assurance that we will be able to establish sales
and distribution capabilities or be successful in gaining market acceptance for
our proprietary products. To the extent we enter into co-promotion or other
licensing arrangements, any revenues we receive will be dependent on the efforts
of third parties and there can be no assurance that such efforts will be
successful.
WE RELY ON QUALIFIED AND KEY PERSONNEL
We are highly dependent on the principal members of our scientific and
management staff, the loss of whose services might significantly delay or
prevent the achievement of research, development, or business objectives.
Although we believe we have retained sufficient employees to achieve our
near-term business objectives after reduction of our work force in September
1998, there can be no assurance that the loss of certain employees would not
impede our objectives. Furthermore, there can be no assurance that the reduction
in force will not adversely affect our ability to retain our remaining
employees. The loss of key management or scientific personnel could adversely
affect our continued business.
Our potential expansion into areas and activities requiring additional
expertise, such as further clinical trials, governmental approvals, contract
manufacturing and marketing, are expected to place additional requirements on
our management, operational and financial resources. These demands are expected
to require an increase in management and scientific personnel and the
development of additional expertise by existing management personnel. The
failure to attract and retain such personnel or to develop such expertise could
materially adversely affect prospects for our success.
WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS AND THE AVAILABILITY OF
INSURANCE
The use of our potential products or technology in clinical trials and
the sale of such products may expose us to liability claims. Such risks exist
even with respect to those potential products, if any, that receive regulatory
approval for commercial sale. Although we have taken and will continue to take
what we believe are appropriate precautions, there can be no assurance that we
will avoid significant product liability exposure. We currently have in force
general liability insurance, with coverage limits of $3.0 million per incident
and $4.0 million in the aggregate annually, and product liability insurance with
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coverage limits of $1.0 million per incident and $3.0 million in the aggregate
annually. Our insurance policies provide coverage for product liability on a
claims made basis and general liability on an occurrence basis. These policies
are subject to annual renewal. Such insurance may not be available in the future
on acceptable terms or at all. There can be no assurance that our insurance
coverage will be adequate or that a product liability claim or recall would not
materially adversely affect our business or financial condition.
OWNERSHIP OF OUR STOCK IS CONCENTRATED AMONG SEVERAL STOCKHOLDERS
As of June 1, 1999 our directors and officers and their affiliates
beneficially owned approximately 25% of our outstanding common stock. As a
result, these stockholders have been able to exercise significant influence over
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. Such concentration of
ownership may have the effect of delaying or preventing a change in control of
Celtrix.
WE FACE RISKS ASSOCIATED WITH THE IMPACT OF YEAR 2000 ON OUR OPERATING
AND COMPUTER SYSTEMS
We are currently assessing the impact of year 2000, or Y2k, on our
existing software and systems. We expect to implement successfully the systems
and software changes necessary to address Y2k issues, and do not believe that
the costs of such actions will have a material effect on our results of
operations or financial condition. However, many computer systems will
experience problems handling dates beyond the year 1999 and we do not know the
extent, if any, of the impact of the year 2000 on other systems and equipment of
third parties with which we do business. There can be no assurance that third
parties will address Y2k issues in a timely fashion, or at all. Any Y2k
compliance problem or delay of either Celtrix, our suppliers, our clinical
research organizations, or our collaborative partners could have a material
adverse effect on our business, operating results and financial conditions.
WE FACE ONGOING COMPLIANCE ISSUES IN CONNECTION WITH OUR NASDAQ LISTING
In November 1998, we received notice from the Nasdaq Stock Market that
we failed to comply with two Nasdaq continued listing requirements - the minimum
net tangible assets requirement and the minimum bid price requirement. In
January 1999, Nasdaq officials confirmed that we had regained compliance with
the minimum bid price requirement, but that we would be subject to delisting if
we failed to comply with the minimum net tangible assets requirement. In
response, we requested an oral hearing before a Nasdaq Listing Qualifications
Panel to present our plan to regain compliance with the minimum net tangible
assets requirement. We presented our plan at an oral hearing on April 1, 1999,
and on July 6, 1999, the Nasdaq panel informed us that our listing would be
moved from the Nasdaq National Market to the Nasdaq SmallCap Market effective
July 8, 1999, subject to our continued compliance with SmallCap listing
requirements. Although we intend to comply with all continued listing
requirements of the Nasdaq SmallCap Market, there can be no assurance that we
will be able to satisfy Nasdaq's requirements in the future. Failure to meet
Nasdaq's requirements may result in delisting by Nasdaq, which may have a
material adverse effect on the price of our common stock and the levels of
liquidity currently available to our stockholders.
WE FACE OPERATIONAL RISKS ASSOCIATED WITH OUR RECENT RESTRUCTURING
In order to reduce our cash burn rate and preserve value in our core
assets and technologies, in the second quarter of 1998, we restructured our
operations to eliminate manufacturing and announced a reduction in work force of
up to 90%. Such actions were designed to permit us to continue our clinical
development of SomatoKine. There can be no assurance that our recent
restructuring efforts will be successful or that we will be able to sustain our
clinical development activities going forward (with the
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exception of the large scale Phase II trial in osteoporosis (hip fracture) which
will be undertaken by the Celtrix/Elan joint venture company newly formed in
April 1999). In addition, there can be no assurance that our management will not
deem it appropriate to undertake other restructuring efforts in the future or to
what degree any such efforts will result in improved performance or a reduction
in our cash burn rate.
FUTURE SECURITY ISSUANCES WILL HAVE DILUTIVE AND POTENTIAL DILUTIVE
EFFECTS ON STOCKHOLDERS
In November 1998, pursuant to the terms of a Common Stock and Warrant
Purchase Agreement dated October 12, 1998, we completed a private placement of
4,000,000 shares of our common stock, resulting in net proceeds, after deducting
estimated transaction costs, of approximately $1.9 million. Also in connection
with the offering, for every share of stock issued, we issued one and one-half
warrants to purchase additional shares at $0.55 per share. In April 1999, we
completed a private placement of 1,508,751 shares of our common stock to Elan
International Services, Ltd., resulting in net proceeds, after deducting
estimated transaction costs, of approximately $2.3 million. The foregoing
issuances of shares of our securities diluted the beneficial ownership of our
existing stockholders. Any additional equity financing may be dilutive to our
stockholders, and any debt financing, if available, may involve restrictions on
our ability to pay future dividends on our capital stock or the manner in which
we conduct business.
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<PAGE> 12
USE OF PROCEEDS
We will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders in the Offering.
ISSUANCE OF COMMON STOCK AND WARRANTS TO SELLING STOCKHOLDERS
On November 20, 1998, pursuant to a Common Stock and Warrant Purchase
Agreement dated as of October 12, 1998, we completed the sale of 4,000,000
shares of our common stock and warrants to purchase 6,000,000 shares of our
common stock to the selling stockholders in a private placement transaction. We
also issued a warrant exercisable for 75,000 shares of common stock to Credit
Suisse First Boston Corporation who had previously acted as our placement agent.
This prospectus covers the resale of the 10,075,000 shares of our common stock
issued (or issuable upon exercise of the warrants issued) in connection with the
private placement to the selling stockholders.
PLAN OF DISTRIBUTION
Shares of common stock offered by this prospectus may be offered and
sold from time to time by the selling stockholders. The selling stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The selling stockholders may sell shares on the
Nasdaq National Market, or in private sales at negotiated prices directly or
through a broker. The selling stockholders and any underwriters, dealers or
agents who participate in the distribution of the shares may be deemed to be
"underwriters" under the Securities Act of 1933. Any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. We have agreed to indemnify the
selling stockholders against certain liabilities arising under the Securities
Act.
The selling stockholders will pay selling commissions or brokerage
fees, if any, with respect to the sale of the common stock offered by this
prospectus in amounts customary for this type of transaction. Each selling
stockholder will also pay all applicable transfer taxes and fees for its legal
counsel incurred in connection with the sale of shares.
The anti-manipulation rules under the Securities Exchange Act of 1934
may apply to sales of the shares offered by this prospectus in the market, and
to their own activities and those of their affiliates. The selling stockholders
have advised us that during the time they are engaged in attempting to sell the
shares offered by this prospectus, they will:
- notify us of its intent to sell any shares at least three (3) full
business days prior to such sale; and
- furnish to each person to whom shares may be offered, and to each
broker-dealer, if any, through whom shares are offered, copies of this
prospectus, as supplemented or amended, as may be required by such person.
We have agreed to use our best efforts to maintain the effectiveness of
this registration statement until the earlier of either the date that each
holder of shares can sell all of the shares it holds in any three-month period
in compliance with Rule 144 promulgated under the Securities Act or November 20,
2000. No sales may be made pursuant to this prospectus after the expiration date
unless we amend or
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<PAGE> 13
supplement this prospectus to indicate that we have agreed to extend the period
of effectiveness. The selling stockholders may sell all, some or none of the
shares offered by this prospectus.
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<PAGE> 14
SELLING STOCKHOLDERS
The following table sets forth certain information as of June 1, 1999
with respect to the selling stockholders. The following table assumes that the
selling stockholders sell all of the shares offered by this prospectus. We are
unable to determine the exact number of shares that actually will be sold.
The number and percentage of shares beneficially owned is based on
26,569,804 shares outstanding at June 1, 1999 determined in accordance with Rule
13d-3 of the Exchange Act. The information is not necessarily indicative of
beneficial ownership for any other purpose. Under Rule 13d-3, beneficial
ownership includes any shares as to which an individual has sole or shared
voting power or investment power, and also includes shares which an individual
has the right to acquire within 60 days of June 1, 1999 through the exercise of
any stock option, warrant or other right. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares such
powers with his or her spouse) with respect to the shares shown as beneficially
owned.
No selling stockholder has had any material relationship with us or any
of our predecessors or affiliates within the last three years.
<TABLE>
<CAPTION>
Shares Beneficially Shares Offered Shares Beneficially
Owned Prior by this Owned After
Selling Stockholder to the Offering(1) Prospectus the Offering
------------------- ------------------- -------------- -------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Biotechnology Development Fund, L.P. 3,095,774 11.1% 1,250,000 1,845,774 6.9%
Frank Kung, General Partner
575 High Street, Suite 201
Palo Alto, CA 94301
Biotechnology Development Fund, III L.P. 2,500,000 8.9% 2,500,000 0 *
Frank Kung, General Partner
575 High Street, Suite 201
Palo Alto, CA 94301
Veron International, Ltd. 3,272,887 11.6% 2,350,000 922,887 3.6%
Chinachem Golden Plaza
77 Mody Road
Tsin Sha Tsui East
Kowloon, Hong Kong
Attn: W.K. Leung
Lee Wei Chen 2,350,000 8.4% 2,350,000 0 *
c/o Fu Sheng Industrial Co., Ltd.
172 Nanking East Road, Sec. 2
Taipei 104, Taiwan, R.O.C.
Attn: Shubbin King
Hofung Holdings Limited 1,042,287 3.8% 950,000 92,287 *
20 F East Town Bldg.
41 Lockard Rd.
Wanchai, Hong Kong
Attn: Robert Ho
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
Shares Beneficially Shares Offered Shares Beneficially
Owned Prior by this Owned After
Selling Stockholder to the Offering(1) Prospectus the Offering
------------------- ------------------- -------------- -------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Wanpyng Chuang and Jesse Chen 342,287 1.3% 250,000 92,287 *
1608 Pebble Beach Ct.
Milpitas, CA 95035
Nai-Ping Leung 211,518 * 150,000 61,518 *
95A, Hill Road 1/F
Western District
Hong Kong
Wen-Chen Yuan 200,000 * 200,000 0 *
8/F 33 One hundred fifty first Avenue
Fourth District
Ren-ai Street
Taipei, R.O.C.
Credit Suisse First Boston Corporation 75,000 * 75,000 0 *
Eleven Madison Avenue
New York, NY 10010-3629
Total 10,075,000
</TABLE>
- ----------
* Less than 1%
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<PAGE> 16
LEGAL MATTERS
The validity of the issuance of the common stock offered by this
prospectus will be passed upon by Venture Law Group, A Professional Corporation,
Menlo Park, California, counsel to Celtrix.
EXPERTS
The consolidated financial statements of Celtrix Pharmaceuticals, Inc.
appearing in Celtrix Pharmaceuticals, Inc.'s Annual Report (Form 10-K) for the
year ended March 31, 1999, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commissions. Certain information in the
registration statements has been omitted from this prospectus in accordance with
the rules of the SEC. We file proxy statements and annual, quarterly and special
reports and other information with the SEC. You can inspect and copy the
registration statement as well as the reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C., and at the SEC Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. You can call the SEC at 1-800-732-0330 for further information about
the public reference rooms. We are also required to file electronic versions of
these documents with the SEC, which may be accessed from the SEC's World Wide
Web site at http://www.sec/gov. Reports, proxy and information statements and
other information concerning Celtrix may be inspected at The Nasdaq Stock Market
at 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC after the effective date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the selling
stockholders have sold all the shares.
The following documents filed with the SEC are incorporated by
reference in this prospectus:
1. Our Current Report on Form 8-K dated July 7, 1999.
2. Our Annual Report on Form 10-K for the year ended March 31, 1999
(File No 0-18976).
3. Our definitive Proxy Statement dated July 29, 1998 filed in
connection with our September 10, 1998 Annual Meeting of Stockholders.
4. The description of our common stock in our Registration Statement on
Form 10 filed with the SEC on January 24, 1991.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, other than
exhibits to those documents. You should direct any requests for documents to
Chief Financial Officer, 2033 Gateway Place, Suite 600, San Jose, CA 95110,
telephone: (408) 988-2500.
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