<PAGE>
As filed with the Securities and Exchange Commission on September 15, 2000
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
REGISTRATION STATEMENT
ON
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AVI BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0797222
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258
(503) 227-0554
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
DENIS R. BURGER, PH.D.
CHIEF EXECUTIVE OFFICER
AVI BIOPHARMA, INC.
ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258,
(503) 227-0554
(Name, address, including zip code, and telephone number,
including area code of agent for service)
---------------
COPY TO:
BYRON W. MILSTEAD, ESQ.
ATER WYNNE LLP
222 S.W. COLUMBIA, SUITE 1800, PORTLAND, OR 97201-6618
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT.
---------------
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
investment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, 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, 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(d) under
the Securities Act, 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. [ ]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(a) Common Stock, $.0001 par value 1,725,120 $8.50 $14,663,520 $3,872
-----------------------------------------------------------------------------------------------------------------------
TOTAL $14,663,520 $3,872
=======================================================================================================================
</TABLE>
(1) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on September 8, 2000, which was approximately $8.50
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
SELLING SHAREHOLDERS'
PROSPECTUS
AVI BIOPHARMA, INC.
1,725,120 COMMON SHARES
NASDAQ NATIONAL MARKET
AVII
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE RISK FACTORS
BEGINNING ON PAGE 8.
--------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON SHARES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- This is an offering of Common Shares by existing shareholders of AVI
BioPharma, Inc.
- The selling shareholders will receive all of the proceeds from the
sale of the Common Shares, less any commissions or discounts paid to
brokers or other agents. We will not receive any of the proceeds from
the sale of the Common Shares.
- The selling shareholders may offer and sell the Common Shares on the
Nasdaq National Market at prevailing market prices, or in privately
negotiated transactions at prices other than the market price. On
September 8, 2000, the closing sale price for our Common Shares on the
Nasdaq National Market was $8.25.
- The Common Shares were obtained by the selling shareholders in
transactions that were exempt from the registration requirements of
the Securities Act of 1933, as amended, and represent approximately 8%
of the Company's outstanding Common Stock.
September ___, 2000
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3
SUMMARY 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 6
RISK FACTORS 8
BUSINESS 13
OUR SELLING SHAREHOLDERS 22
PLAN OF DISTRIBUTION 23
DESCRIPTION OF CAPITAL SHARES 25
LEGAL MATTERS 25
EXPERTS 25
ADDITIONAL INFORMATION
</TABLE>
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which we filed with the Securities and Exchange
Commission are incorporated by reference in this Prospectus:
(1) our Annual Report on Form 10-K for the year ended December 31, 1999,
which we refer to in the rest of this document as our Annual Report;
(2) our Report on Form 10-Q dated August 9, 2000, for the quarter ended
June 30, 2000; and
(3) our Amended Repot on Form 10-Q/A dated August 14, 2000, for the
quarter ended June 30, 2000.
In addition, all documents which we file with the Securities and Exchange
Commission ("Commission") pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the
Registration Statement and before termination of the offering of Common Shares,
including all annual reports on Form 10-K, and all filings on Forms 10-Q and
8-K, will be deemed to be incorporated by reference in this Prospectus and to be
a part of this Prospectus from the date those documents are filed. Any statement
contained in a document which is incorporated, or deemed to be incorporated, by
reference into this Prospectus, shall be considered modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
You may request a copy of any document incorporated by reference in this
Prospectus at no cost. To receive a copy, write or call us at AVI BioPharma,
Inc., One S.W. Columbia, Suite 1105, Portland, Oregon 97258, Attention: Mr. Alan
P. Timmins (503) 227-0554.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, including the Registration
Statement on Form S-3 of which this Prospectus is a part, may be inspected and
copied at the public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Commission's telephone number is 1-800-SEC-0330. These materials may be
obtained electronically by visiting the Commission's web site on the Internet at
http://www.sec.gov. Our Common Stock is listed on the Nasdaq National Market.
Reports, proxy statements and other Company materials also can be inspected at
1735 K Street, N.W., Washington, D.C. 20006-1506.
3
<PAGE>
SUMMARY
MANY OF THE MATTERS SET FORTH IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH HEREIN. WE REFER YOU TO
CAUTIONARY INFORMATION CONTAINED ELSEWHERE HEREIN AND IN OTHER DOCUMENTS WE FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME.
OUR COMPANY
BUSINESS
We are a biopharmaceutical company developing therapeutic products based on
our two core technologies, cancer immunotherapy and NeuGene antisense. Our
principal products target life-threatening diseases, with initial applications
in pancreatic and colorectal cancers, cardiovascular restenosis, and infectious
disease as summarized in the following table.
<TABLE>
<CAPTION>
TECHNOLOGY PRODUCT INDICATION STAGE
---------- ------- ---------- -----
<S> <C> <C> <C>
Cancer immunotherapy Avicine therapeutic vaccine Cancer Clinical
Xactin monoclonal antibodies Cancer Pre-clinical
NeuGene antisense Resten-NG Restenosis Clinical
Oncomyc-NG Cancer Pre-clinical
NeuBiotics Infectious disease Pre-clinical
</TABLE>
Currently approved drugs or other therapies for these diseases often prove
to be ineffective in treating advanced stages of these diseases or produce
numerous undesirable side effects. Our pre-clinical and clinical studies
indicate that our two core technologies may produce significantly fewer side
effects and offer more effective treatment options than currently approved
products for these diseases. Our technologies are protected by a strong patent
position including 44 issued patents and 49 applications pending. Each of our
lead products, Avicine and Resten-NG, addresses a large market estimated to
exceed $1 billion worldwide.
CANCER IMMUNOTHERAPY
We have completed three Phase I and two Phase II clinical trials with
Avicine, our therapeutic cancer vaccine, which is our most advanced product.
Avicine is administered to patients who already have cancer to stimulate an
immune response that may be effective in fighting the existing cancer. The
therapeutic benefit of a cancer vaccine depends on the existence of specific
target sites, called tumor antigens, on cancer cells. The target for Avicine is
a hormone called human chorionic gonadotropin, or hCG, which is responsible for
stimulating fetal development during pregnancy. It is also a tumor antigen on
all major types of cancer, including cancers of the colon, pancreas, prostate,
lung and breast. We believe that hCG plays an important role in the spread of
cancer. The effectiveness of Avicine is based on stimulating an immune response
against hCG.
From our clinical studies involving more than 200 patients, we believe that
Avicine is a safe and essentially non-toxic therapy capable of producing a
specific immune response in most patients. Further, the patients who mounted an
immune response to hCG lived longer on average than patients treated with
chemotherapy. We intend to investigate further the use of Avicine alone and in
conjunction with chemotherapy in Phase II and Phase III clinical trials.
In April 2000, we entered into an alliance with SuperGen, Inc. for shared
development and marketing rights for Avicine. Under the terms of the agreement,
AVI and SuperGen, Inc. will equally share in future clinical development and FDA
registration costs as well as in profits from product sales in the United
States. Closing of the transaction occurred in July 2000.
We have an exclusive product license agreement with Abgenix, Inc. for the
use of its technology to produce fully human monoclonal antibodies against hCG
cancer targets, which we call Xactin antibodies. These Xactin antibodies are
directed at targets identified by our Avicine clinical trials. Two Xactin
antibodies
4
<PAGE>
are in pre-clinical development and are designed to treat cancer patients as a
standalone therapy or in combination with Avicine.
NEUGENE ANTISENSE
We have developed gene-inactivating compounds called NeuGene antisense
drugs that we believe are more stable, specific, efficacious, and safe than
other antisense or gene-inactivating technologies. Our NeuGene drugs are
distinguished by a novel chemical structure which differs from the earlier
generation structures of competing technologies.
NeuGenes are synthetic drugs that are designed to block the function of
specific genetic sequences involved in the disease process. Targeting specific
genetic sequences provides for greater selectivity than is available through
conventional drugs. NeuGenes have the potential to provide safe and effective
treatment for a wide range of human diseases.
We have completed pre-clinical studies using our NeuGene compounds in the
treatment of restenosis, which is the blockage of arteries following balloon
angioplasty, and cancer. We finished a Phase I clinical trial of Resten-NG for
restenosis in April 2000 and a Phase II clinical study commenced in June 2000.
We began Phase I testing of the oral formulation of Resten-NG in July 2000. We
plan to commence Phase I/II clinical studies in cancer with Oncomyc-NG late in
2000. Finally, we intend to complete pre-clinical development of our first
NeuGene-based antibiotic, called NeuBiotics, later this year.
DEVELOPMENT AND COMMERCIALIZATION STRATEGY
Our experience and resources enable us to initiate drug discovery and
development and to move drug candidates through pre-clinical development and
into Phase I and II human clinical trials. Our near-term strategy is to
co-develop products with strategic partners or to license the marketing rights
for our products to pharmaceutical partners after we complete one or more Phase
II clinical trials. In this manner, costs associated with late-stage clinical
development and marketing will be shared with, or the responsibility of, our
strategic partners. With additional resources we may consider assuming greater
responsibility for the late-stage clinical development and marketing
opportunities of future product candidates.
Our executive offices are located at One SW Columbia, Suite 1105, Portland,
Oregon 97258, and we can be reached at (503) 227-0554. Our World Wide Web
address is "http://www.avibio.com." Information on our web site does not
constitute a part of this prospectus.
5
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements regarding our plans,
expectations, estimates and beliefs. Our actual results could differ materially
from those discussed in, or implied by, these forward-looking statements.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may," and other similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. We have based these forward-looking statements largely on our
expectations. Forward-looking statements in this Prospectus include, but are not
necessarily limited to, those relating to:
- our intention to introduce new products
- FDA or other regulatory approval for our products
- our expectations about the markets for our products
- acceptance of our products in the marketplace
- our future capital needs
- success of our patent applications
- the status of Year 2000 compliance efforts
Forward-looking statements are subject to risks and uncertainties, certain
of which are beyond our control. Actual results could differ materially from
those anticipated as a result of the factors described in the "Risk Factors,"
including among others:
- delays in obtaining, or our inability to obtain, approval by the FDA
or other regulatory authorities for our products
- delays in developing, or the failure to develop, our products
- the development of competing or more effective products by other
parties
- uncertainty of market acceptance of our products
- problems that we may face in manufacturing, marketing, and
distributing our products
- our inability to raise additional capital when needed
- delays in the issuance of, or the failure to obtain, patents for
certain on our products and technologies
- problems with important suppliers and business partners
We do not undertake any obligation to update or revise any forward-looking
statements contained in this Prospectus or incorporated by reference, whether as
a result of new information, future events or otherwise. Because of these risks
and uncertainties, the forward-looking events and circumstances discussed in
this Prospectus might not transpire. Factors that cause actual results or
conditions to differ from those anticipated by these and other froward-looking
statements include those more fully described in the "Risk Factors" section and
elsewhere in this Prospectus.
6
<PAGE>
NOTES TO READERS OF THIS PROSPECTUS
We were incorporated in Oregon in 1980. When we refer to "us," "we," "our,"
"the Company" and "AVI" in this Prospectus, we mean AVI BioPharma, Inc., and its
consolidated subsidiaries. Our executive offices are located at One S.W.
Columbia, Suite 1105, Portland, Oregon 97258. Our telephone number at that
location is (503) 227-0554. Information contained on our websites does not
constitute part of this Prospectus.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, may be inspected and copied at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Commission's telephone number is 1-800-SEC-0330. These materials may be obtained
electronically by visiting the Commission's website on the Internet at
http://www.sec.gov. Reports, proxy statements and other Company materials also
can be inspected at 1735 K Street, N.W., Washington, D.C. 20006-1506 or obtained
directly from the Company at the address and telephone listed above.
This Prospectus includes our trademarks and registered trademarks,
including Avicine(TM), NEUGene(R) and Xactin(TM). Each other trademark, trade
name or service mark appearing in this Prospectus belongs to its holder.
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS LISTED BELOW, TOGETHER WITH THE
CAUTIONARY STATEMENT THAT FOLLOWS THIS SECTION AND THE OTHER INFORMATION
INCLUDED IN THIS PROSPECTUS, BEFORE PURCHASING SHARES IN THIS OFFERING. IF THE
POSSIBILITIES DESCRIBED AS RISKS BELOW ACTUALLY OCCUR, OUR OPERATING RESULTS AND
FINANCIAL CONDITION WOULD LIKELY SUFFER, AND THE TRADING PRICE OF OUR COMMON
STOCK MAY FALL, CAUSING YOU TO LOSE SOME OR ALL OF YOUR INVESTMENT IN THE SHARES
WE ARE OFFERING.
RISKS RELATING TO OUR BUSINESS
OUR PRODUCTS ARE IN AN EARLY STAGE OF DEVELOPMENT AND MAY NOT BE DETERMINED TO
BE SAFE OR EFFECTIVE.
Although we began operations in 1980, we are only in the early stages of
clinical development with our NeuGene antisense pharmaceutical products. We have
devoted almost all of our time to research and development of our technology and
products, protecting our proprietary rights and establishing strategic
alliances. Our proposed NeuGene products are in the pre-clinical or clinical
stages of development and will require significant further research,
development, clinical testing and regulatory clearances. We have no products
available for sale and we do not expect to have any products available for sale
for several years. Our proposed products are subject to development risks. These
risks include the possibilities that any of the products could be found to be
ineffective or toxic, or could fail to receive necessary regulatory clearances.
Although we have obtained favorable results in Phase II trials using Avicine to
treat colorectal cancer patients, we cannot assure that we will obtain similar
results in the contemplated Phase III trial protocol. We have not received any
significant revenues from the sale of products and we cannot assure investors
that we will successfully develop marketable products, that our sales will
increase or that we will become profitable. Third parties may develop superior
or equivalent, but less expensive, products.
WE HAVE INCURRED NET LOSSES SINCE OUR INCEPTION, AND WE MAY NOT ACHIEVE OR
SUSTAIN PROFITABILITY.
We incurred a net operating loss of $8.3 million in 1999 and of $4 million
during the six months ended June 30, 2000. "Net operating loss" represents the
amount by which our expenses, other than interest expense, exceed revenues. As
of June 30, 2000, our accumulated deficit was $55 million. Our losses have
resulted principally from expenses incurred in research and development of our
technology and products and from selling, general and administrative expenses
that we have incurred while building our business infrastructure. We expect to
continue to incur significant operating losses in the future as we continue our
research and development efforts and seek to obtain regulatory approval of our
products. Our ability to achieve profitability depends on our ability to
complete development of our products, obtain regulatory approvals and market our
products. It is uncertain when, if ever, we will become profitable.
IF WE FAIL TO ATTRACT SIGNIFICANT ADDITIONAL CAPITAL, WE MAY BE UNABLE TO
CONTINUE TO SUCCESSFULLY DEVELOP OUR PRODUCTS.
Since we began operations, we have obtained operating funds primarily by
selling shares of our company. Based on our current plans, we believe that
current cash balances will be sufficient to meet our operating needs for at
least the next 24 months. Furthermore, the actual amount of funds that we will
need will be determined by many factors, some of which are beyond our control.
These factors include the success of our research and development efforts, the
status of our pre-clinical and clinical testing, costs relating to securing
regulatory approvals and the costs and timing of obtaining new patent rights,
regulatory changes, competition and technological developments in the market. We
may need funds sooner than currently anticipated.
We anticipate that we may need to obtain additional funds at the end of
this 24-month period. If necessary, potential sources of additional funding
include strategic relationships, public or private sales of shares of our common
stock or debt or other arrangements. We do not have any committed sources of
additional financing at this time. It is uncertain whether we can obtain
additional funding when we need it on terms that will be acceptable to us or at
all. If we raise funds by selling additional shares of our common stock or
securities convertible into our common stock, the ownership interest of our
existing shareholders will be diluted. If we are unable to obtain financing when
needed, our business and future prospects would be materially adversely
affected.
8
<PAGE>
IF WE FAIL TO RECEIVE NECESSARY REGULATORY APPROVALS, WE WILL BE UNABLE TO
COMMERCIALIZE OUR PRODUCTS.
All of our products are subject to extensive regulation by the United
States Food and Drug Administration, or FDA, and by comparable agencies in other
countries. The FDA and comparable agencies require new pharmaceutical products
to undergo lengthy and detailed clinical testing procedures and other costly and
time-consuming compliance procedures. Avicine has completed three Phase I and
two Phase II studies but has not started Phase III trials. Our first NeuGene
Antisense drug, Resten-NG, completed Phase I trials but has not yet entered
Phase II efficacy studies. We cannot predict when we will initiate and complete
our clinical trials or when we will be able to submit our products for
regulatory review. Even if we submit a new drug application, there may be delays
in obtaining regulatory approvals, if we obtain them at all. Sales of our
products outside the United States will also be subject to regulatory
requirements governing clinical trials and product approval. These requirements
vary from country to country and could delay introduction of our products in
those countries. We cannot assure you that any of our products will receive
marketing approval from the FDA or comparable foreign agencies.
WE MAY FAIL TO COMPETE EFFECTIVELY, PARTICULARLY AGAINST LARGER, MORE
ESTABLISHED PHARMACEUTICAL COMPANIES, CAUSING OUR BUSINESS TO SUFFER.
The biotechnology industry is highly competitive. We compete with companies
in the United States and abroad that are engaged in the development of
pharmaceutical technologies and products. They include: biotechnology,
pharmaceutical, chemical and other companies; academic and scientific
institutions; governmental agencies; and public and private research
organizations.
Many of these companies and many of our other competitors have much greater
financial and technical resources and production and marketing capabilities than
we do. Our industry is characterized by extensive research and development and
rapid technological progress. Competitors may successfully develop and market
superior or less expensive products which render our products less valuable or
unmarketable.
IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL,
HIGHLY-SKILLED PERSONNEL REQUIRED FOR OUR ACTIVITIES, OUR BUSINESS WILL
SUFFER.
Our success will depend to a large extent on the abilities and continued
service of several key employees, including Drs. Denis Burger, Patrick Iversen
and Dwight Weller. The loss of any of these key employees could significantly
delay the achievement of our goals. Competition for qualified personnel in our
industry is intense, and our success will depend on our ability to attract and
retain highly skilled personnel.
ASSERTING, DEFENDING AND MAINTAINING OUR INTELLECTUAL PROPERTY RIGHTS COULD BE
DIFFICULT AND COSTLY, AND OUR FAILURE TO DO SO WILL HARM OUR ABILITY TO
COMPETE AND THE RESULTS OF OUR OPERATIONS.
Our success will depend on our existing patents and licenses, and our
ability to obtain additional patents in the future. We have been issued 44
patents and have filed an additional 49 patent applications in the United
States, Canada, Europe, Australia and Japan. We license the composition,
manufacturing and use of Avicine in all fields except fertility regulation from
The Ohio State University.
We cannot assure investors that our pending patent applications will result
in patents being issued in the United States or foreign countries. In addition,
we cannot guarantee that patents which have been or will be issued will afford
meaningful protection for our technology and products. Competitors may develop
products similar to ours which do not conflict with our patents. Others may
challenge our patents and, as a result, our patents could be narrowed or
invalidated. The patent position of biotechnology firms generally is highly
uncertain, involves complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the United
States Patent and Trademark Office, or USPTO, or the courts regarding the
breadth of claims allowed or the degree of protection afforded under
biotechnology patents.
Our success will also depend partly on our ability to operate without
infringing upon the proprietary rights of others, as well as our ability to
prevent others from infringing on our proprietary rights. We may be required at
times to take legal action to protect our proprietary rights and, despite our
best efforts, we may be sued for infringing on the patent rights of others.
Patent litigation is costly and, even if we prevail, the cost of such litigation
could adversely affect our financial condition. If we do not prevail, in
addition to any damages we might have to pay, we could be required to stop the
infringing activity or obtain a license. We cannot be certain that any required
license
9
<PAGE>
would be available to us on acceptable terms, or at all. If we fail to obtain a
license, our business might be materially adversely affected.
To help protect our proprietary rights in unpatented trade secrets, we
require our employees, consultants and advisors to execute confidentiality
agreements. However, we cannot guarantee that these agreements will provide us
with adequate protection if confidential information is used or disclosed
improperly. In addition, in some situations, these agreements may conflict with,
or be subject to, the rights of third parties with whom our employees,
consultants or advisors have prior employment or consulting relationships.
Further, others may independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to our trade secrets.
IF OUR RELATIONSHIP WITH SUPERGEN, INC. IS UNSUCCESSFUL, OUR BUSINESS COULD BE
HARMED.
Our strategic relationship with SuperGen, Inc. is important to our success.
We cannot assure you that we will receive any additional payments from SuperGen
or that the relationship will be commercially successful. The transactions
contemplated by our agreements with SuperGen, Inc., including the equity
purchases and cash payments, are subject to numerous risks and conditions. For
example, we may fail to achieve clinical and sales milestones; Avicine may fail
to achieve regulatory approval; Avicine may not be commercially successful;
SuperGen, Inc. may fail to perform its obligations under our agreements, such as
failing to devote sufficient resources to marketing Avicine; and our agreements
with SuperGen, Inc. may be terminated against our will. The occurrence of any of
these events could severely harm our business.
WE HAVE LIMITED SALES CAPABILITY AND MAY NOT BE ABLE TO SUCCESSFULLY
COMMERCIALIZE OUR PRODUCTS.
We have been engaged solely in the development of pharmaceutical
technology. Although some of our management have experience in biotechnology
company operations, we have limited experience in manufacturing or selling
pharmaceutical products. We also have only limited experience in negotiating and
maintaining strategic relationships, and in conducting clinical trials and other
later-stage phases of the regulatory approval process. We cannot assure
investors that we will successfully engage in any of these activities.
WE MAY BE SUBJECT TO PRODUCT LIABILITY LAWSUITS AND OUR INSURANCE MAY NOT BE
ADEQUATE TO COVER DAMAGES.
The use of our products will expose us to the risk of product liability
claims. Although we intend to obtain product liability insurance coverage, we
cannot guaranty that product liability insurance will continue to be available
to us on acceptable terms or that our coverage will be sufficient to cover all
claims against us. A product liability claim, even one without merit or for
which we have substantial coverage, could result in significant legal defense
costs, thereby increasing our expenses, lowering our earnings and, depending on
revenues, potentially resulting in additional losses.
CONTINUING EFFORTS OF GOVERNMENT AND THIRD-PARTY PAYERS TO CONTAIN OR REDUCE THE
COSTS OF HEALTH CARE MAY ADVERSELY AFFECT OUR REVENUES AND FUTURE
PROFITABILITY.
In addition to obtaining regulatory approval, the successful
commercialization of our products will depend on our ability to obtain
reimbursement for the cost of the product and treatment. Government authorities,
private health insurers and other organizations, such as health maintenance
organizations are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed health care in the United
States, the growth of healthcare organizations such as HMOs, and legislative
proposals to reform healthcare and government insurance programs could
significantly influence the purchase of healthcare services and products,
resulting in lower prices and reducing demand for our products. The cost
containment measures that healthcare providers are instituting and any
healthcare reform could affect our ability to sell our products and may have a
material adverse effect on our operations. We cannot assure investors that
reimbursement in the United States or foreign countries will be available for
any of our products, that any reimbursement granted will be maintained, or that
limits on reimbursement available from third-party payors will not reduce the
demand for, or the price of, our products. The lack or inadequacy of third-party
reimbursements for our products would have a material adverse effect on our
operations. We cannot forecast what additional legislation or regulation
relating to the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect the legislation or regulation would
have on our business.
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IF WE FAIL TO ESTABLISH STRATEGIC RELATIONSHIPS WITH LARGER PHARMACEUTICAL
PARTNERS, OUR BUSINESS MAY SUFFER.
We do not intend to conduct late-stage or Phase III human clinical trials
ourselves. We anticipate entering into relationships with larger pharmaceutical
companies to conduct later pharmaceutical trials and to market our products and
we also plan to continue to use contract manufacturing for our products. We may
be unable to enter into corporate partnerships. Lack of corporate partnerships
could impede our ability to bring our products to market. We cannot assure
investors that any corporate partnerships, if entered, will be on favorable
terms or will result in the successful development or marketing of our products.
If we are unsuccessful in establishing advantageous clinical testing,
manufacturing and marketing relationships, we are not likely to generate
significant revenues and become profitable.
RISKS RELATED TO SHARE OWNERSHIP
OUR RIGHT TO ISSUE PREFERRED STOCK, OUR CLASSIFIED BOARD OF DIRECTORS AND OREGON
ANTI-TAKEOVER LAWS MAY PREVENT YOU FROM REALIZING A PREMIUM.
Our authorized capital consists of 50,000,000 shares of common stock and
2,000,000 shares of preferred stock. Our board of directors, without any further
vote by the shareholders, has the authority to issue preferred shares and to
determine the price, preferences, rights and restrictions, including voting and
dividend rights, of these shares. The rights of the holders of shares of common
stock may be affected by the rights of holders of any preferred shares that our
board of directors may issue in the future. For example, our board of directors
may allow the issuance of preferred shares with more voting rights, higher
dividend payments or more favorable rights upon dissolution, than the shares of
common stock. If preferred shares are issued in the future, it may also be more
difficult for others to acquire a majority of our outstanding voting shares.
In addition, we have a "classified" board of directors, which means that
only one-half of our directors are eligible for election each year. Therefore,
if shareholders wish to change the composition of our Board of Directors, it
could take at least two years to remove a majority of the existing directors or
to change all directors. Having a classified board of directors may, in some
circumstances, deter or delay mergers, tender offers or other possible
transactions which may be favored by some or a majority of our shareholders.
The Oregon Control Share Act and Business Combination Act limit parties who
acquire a significant amount of voting shares from exercising control over us.
These acts may lengthen the period for a proxy contest or for a person to vote
their shares to elect the majority of our Board.
OUR STOCK PRICE IS VOLATILE AND MAY FLUCTUATE DUE TO FACTORS BEYOND OUR CONTROL.
Historically, the market price of our stock has been highly volatile. The
following types of announcements could have a significant impact on the price of
our common stock: positive or negative results of testing and clinical trials;
delays in entering into corporate partnerships; technological innovations or
commercial product introductions by ourselves or competitors; changes in
government regulations; developments concerning proprietary rights, including
patents and litigation matters; public concern relating to the commercial value
or safety of any of our products; general stock market conditions.
Further, the stock market has in recent months experienced and may continue
to experience significant price and volume fluctuations. These fluctuations have
particularly affected the market prices of equity securities of many
biopharmaceutical companies that are not yet profitable. Often, the effect on
the price of such securities is unrelated or disproportionate to the operating
performance of such companies. These broad market fluctuations may adversely
affect the ability of a shareholder to dispose of his or her shares at a price
equal to or above the price at which the shares were purchased.
THE SIGNIFICANT NUMBER OF OUR SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE
MAY CAUSE THE PRICE OF COMMON STOCK TO FALL.
As of August 31, 2000, we have outstanding 21,438,780 shares of common
stock and all are eligible for sale under Rule 144 or are otherwise freely
tradeable. The timing of the effectiveness of this registration statement is
uncertain. In addition:
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- Our employees and others hold options to buy a total of 2,492,031
shares of common stock as of August 31, 2000. The shares of common
stock to be issued upon exercise of these options, have been
registered, and therefore may be freely sold when issued.
- There are outstanding warrants to buy 7,375,432 shares of common stock
as of August 31, 2000. The shares issuable upon exercise of 4,399,499
warrants are registered. These shares may be freely sold when issued.
The holders of warrants covering 2,665,478 shares have incidental
registration rights to have the shares issuable upon the exercise of
their warrants registered. Once registered, those shares may be freely
sold when issued, for so long as the registration statement is
effective and current. The remaining warrants have no registration
rights.
- We may issue options to purchase up to an additional 456,036 shares of
common stock under our stock option plans as of August 31, 2000, which
also will be fully saleable when issued.
Sales of substantial amounts of shares into the public market could lower
the market price of our common stock.
FORWARD-LOOKING STATEMENTS
The statements which are not historical facts contained in this discussion
are forward-looking statements that involve risks and uncertainties, including,
but not limited to, the results of research and development efforts, the results
of pre-clinical and clinical testing, the effect of regulation by the FDA and
other agencies, the impact of competitive products, product development,
commercialization and technological difficulties, and other risks detailed in
our Securities and Exchange Commission filings.
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BUSINESS
CLINICAL DEVELOPMENT OVERVIEW
We are a biopharmaceutical company developing therapeutic products based on
cancer immunotherapy and NeuGene antisense technology for the treatment of
life-threatening diseases, with initial applications in cancer and
cardiovascular restenosis. Currently approved drugs or other therapies often
prove to be ineffective in treating advanced stages of these diseases or produce
numerous undesirable side effects. Our core technologies are specifically aimed
at overcoming these challenges. We currently have products at various stages of
clinical development as summarized below.
<TABLE>
<CAPTION>
PRODUCT PRE-CLINICAL PHASE I PHASE II PHASE III
<S> <C> <C> <C> <C>
CANCER IMMUNOTHERAPY
Avicine Completed Completed Completed Planned
Vaccine for colorectal cancer 1993 1995 1998 2000
Completed
Avicine Completed Completed 1998; another
Vaccine for pancreatic cancer 1994 1995 in progress
2000
Avicine Completed Completed Planned
Vaccine for prostate cancer 1995 1995 2000
Xactin In progress
Human monoclonal antibodies 2000
NEUGENE ANTISENSE
Resten-NG Completed Completed In progress
Antisense drug for restenosis 1999 2000 2000
Oncomyc-NG Completed Completed Planned
Antisense drug for cancer 1999 2000 2000
NeuBiotics In progress Planned
Antisense antibiotics 2000 2001
Oral NeuGene Delivery Completed In progress
Antisense to c-myc 1999 2000
</TABLE>
BUSINESS STRATEGY
Our strategy is to:
- reduce risk associated with product development by exploiting two core
technology platforms;
- select disease targets with broad or multiple disease applications;
- manage drug discovery, pre-clinical and early stage clinical
development in-house; and
- co-develop or license products to strategic partners after completion
of Phase II clinical trials to enhance value and share the costs of
Phase III trials and commercialization.
CANCER IMMUNOTHERAPY
Cancer is the second leading cause of death in the United States with an
incidence of 1,500 deaths per day. There are approximately eight million
Americans living with a history of cancer, and 500,000 new cases are diagnosed
annually. Lung, prostate, breast and colorectal cancers are the four most common
types of cancer,
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accounting for over 50% of all new diagnoses. In 1999, the market opportunities
for drugs to treat each of these cancer types were estimated to be in excess of
$1 billion annually.
About half of newly diagnosed cancer patients have localized disease and
can be cured with surgery alone. The other half of the patients either have
metastatic disease at diagnosis or will eventually develop metastatic disease.
The principal therapy available for the second group of patients traditionally
has been chemotherapy. Chemotherapeutic approaches produce considerable toxic
and undesirable side effects and historically have done little to influence
patient survival.
Immunotherapy with vaccines or antibodies is among the newer strategies
being investigated for treating cancer. Historically, vaccines were developed
and used to induce an immune response in order to prevent a disease. In
contrast, therapeutic vaccines are administered when the patient already has the
disease. Treatment of rabies with the rabies vaccine is an example of this
approach.
For a therapeutic vaccine to be effective in fighting a disease such as
cancer, it is necessary to first identify specific target sites on the tumor
cells, called tumor antigens. The more selective the target is to the tumor, the
greater the likelihood that the stimulated immune response will be directed at
attacking only the cancer cells. The identification of highly specific targets
has been one of the greatest challenges in the development of a useful cancer
vaccine.
AVICINE THERAPEUTIC CANCER VACCINE
TECHNICAL OVERVIEW
Avicine, our therapeutic cancer vaccine, is designed to produce an immune
response against a well-characterized target, human chorionic gonadotropin, or
hCG. hCG is a hormone produced during pregnancy that fosters the development of
a fetus in several ways. Through extensive research, scientists found that hCG
is also present in most cancers. In fact, cancer is believed to be the only
significant exception to normal hCG expression during pregnancy. Given the
selective production of hCG in cancer, we believe it represents a highly
specific target for a therapeutic cancer vaccine.
The use of hCG as a cancer vaccine target may offer the following
advantages over other potential tumor antigens:
- hCG is not usually found on normal cells, with the exception of those
present during a pregnancy. This means that it is highly selective.
- hCG is widely expressed by and found on many types of cancer,
including colon, pancreas, prostate, lung and breast.
- hCG expression has been correlated with tumor aggressiveness. In other
words, the higher the level of hCG, the more aggressive the rate of
growth or spread of the cancer.
- Antibodies to hCG are believed to block the hormonal functions that
hCG plays in pregnancy and cancer, including rapid cell division,
formation of blood vessels, invasion of other tissues, and dampening
of immune responses.
Because hCG is a natural human protein, people will not mount an immune
response to it unless they are actively immunized. We believe that the mechanism
of action of our anti-hCG vaccine is to stimulate an immune response against the
tumor and to neutralize the hormonal affects provided by hCG.
The hCG component in Avicine is a small peptide from this hormone. The
peptide is joined to a carrier, diphtheria toxoid, to enhance the immune
response. Diphtheria toxoid was selected since most of the world's population
has been vaccinated against it and there is significant experience with it as a
vaccine component in man.
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Avicine's distinguishing characteristics include:
- Fully characterized synthetic vaccine;
- Capable of being produced inexpensively in large quantities;
- Targets a widely expressed tumor antigen, hCG;
- Ready for Phase III clinical testing in colorectal cancer patients;
- Applicable to most cancer types in multiple clinical settings; and
- Twenty years of research and development and safety data.
AVICINE CLINICAL TRIAL PROGRAM
PHASE I CLINICAL TRIALS: We have completed three Phase I clinical trials
using Avicine in 87 patients with cancer. Overall, these studies showed Avicine
to be safe and essentially non-toxic, and to be effective in stimulating an
immune response to hCG in most patients. Moreover, apparent survival benefits
and some tumor regressions were noted.
COLORECTAL CANCER TRIALS: We conducted a multicenter Phase II study of
Avicine was conducted in 77 patients with advanced colorectal cancer. The
objectives of this trial were to determine whether administration of Avicine
would induce an immune response in patients with metastatic colorectal cancer,
and to measure safety and efficacy in these patients. Overall, 51 of the 77
patients responded to our vaccine by producing antibodies to hCG. The patients
that were antibody responders had a median survival of 42 weeks. Patients that
did not respond had a median survival of just 17 weeks.
Analysis of the Phase II data showed that patients who produced antibodies
to both targets on the hCG peptide had a median survival of 66 weeks. Camptosar,
the current standard of care for treating advanced colorectal cancer patients,
produces a median survival of 37-40 weeks. Through additional research efforts,
we have learned how to stimulate production of antibodies to both hCG targets in
most patients by reformulating the vaccine.
Overall, these clinical data suggest that the patients who received Avicine
and responded by making hCG antibodies had improved median survival compared to
patients treated with chemotherapeutic drugs. Avicine was found to be safe and
did not exhibit the toxicity associated with cytotoxic drug treatment. Based on
these data, we plan to initiate a Phase III pivotal trial in 500 patients with
metastatic colorectal cancer in 2000. This trial randomizes patients receiving
first-line therapy for metastatic colorectal cancer to one of two treatments:
combination chemotherapy or combination chemotherapy plus Avicine. The trial
will be evaluated by comparing time-to-disease progression and median survival
in the two treatments.
PANCREATIC AND PROSTATE CANCER TRIALS: We have completed a pilot Phase II
study using Avicine in 10 patients with advanced pancreatic cancer. For the 10
patients treated, the median survival was approximately 33 weeks. Patients with
advanced pancreatic cancer are currently treated with chemotherapy and have a
median survival of approximately 18 to 25 weeks. We believe these results are
encouraging enough to warrant the design of additional trials in pancreatic
cancer. A Phase II study of 50 patients with pancreatic cancer was initiated in
October 1999, and patient enrollment should be completed in 2000. In addition,
we plan to initiate a Phase II clinical trial involving 24 patients with
prostate cancer in 2000 to broaden our clinical applications to other types of
cancer.
AVICINE CLINICAL TRIAL SUMMARY
<TABLE>
<CAPTION>
TRIAL DESCRIPTION & TYPE PATIENTS STATUS
----- ------------------ -------- ------
<S> <C> <C> <C>
1 Phase I safety study 43 treated Completed
2 Phase I metastatic cancer 21 treated Completed
3 Phase Ib metastatic cancer 23 treated Completed
4 Phase II pancreatic and extension 10 treated Completed
5 Phase II colorectal 77 treated Completed
6 Phase II pancreatic 50 In progress
7 Phase II prostate 24 2000
8 Phase III colorectal licensing trial 500 2000
</TABLE>
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XACTIN - HUMAN MONOCLONAL ANTIBODIES FOR CANCER
Antibodies are important proteins produced by the immune system and serve
as the first line of defense against foreign pathogens. Antibodies bind to these
pathogens and help neutralize or eliminate these foreign substances.
Historically, most antibody product candidates were generated in mice and,
as a result, contained mouse protein. The presence of mouse protein in these
antibodies causes undesirable side effects in patients receiving the products.
Various approaches have evolved to engineer mouse antibodies so that they
contain mostly human proteins and thus produce fewer side effects in patients.
The XenoMouse technology that we licensed from Abgenix, Inc. enables the rapid
generation of antibodies with fully human proteins. The XenoMouse has been
genetically engineered to replace the genes that a mouse uses to make antibodies
with the genes that humans use to make antibodies. XenoMouse-generated
antibodies have several potential advantages over traditional therapies,
including:
- Faster product development;
- Fewer undesirable side effects; and
- An extended therapeutic effect.
There are now eight therapeutic antibody products marketed in the United
States, six of which were approved in the past three years. Moreover, industry
analysts estimate that antibodies account for over 20% of all biotechnology
products in clinical development today.
From our cancer vaccine clinical trials, we learned which anti-hCG
antibodies are important in prolonging patient survival. We have produced human
monoclonal antibodies to these hCG targets using the Abgenix technology. These
monoclonal antibodies, called Xactin antibodies, are both potential companion
products to Avicine and independent cancer therapeutics and are now in
pre-clinical development.
NEUGENE ANTISENSE TECHNOLOGY
TECHNICAL OVERVIEW
Most human diseases arise from the function or dysfunction of genes within
the body, either those of pathogens, such as viruses, or of one's own genes. The
Human Genome Project has led to the identification of the genes associated with
most of the major human diseases and to the determination of the sequence of
their genetic codes. Using modern methods of chemical synthesis, compounds can
be prepared that recognize target gene sequences in a pathogen or pathogenic
process. When these compounds bind tightly to the disease-causing sequence, the
genetic process is inhibited, and thus the pathogen or pathogenic process is
disabled. This is called antisense technology because the sense of the genetic
code is blocked.
Antisense compounds are composed of repeating structures, or subunits, that
are linked together forming a polymer, referred to as the antisense backbone.
Each subunit carries a genetic letter that pairs with its corresponding letter
in the gene target. Although the genetic letters are a feature common to all
antisense compounds, the structure of the subunits and the linkage groups that
string them together may differ greatly. These differences in the subunits and
the linkages define the different types of antisense backbones and their
corresponding physical and biological properties. Our NeuGene technology is
distinguished from all other antisense technologies by the characteristics of
our patented antisense backbone. The subunits which carry the genetic letters on
our backbone are synthetic products rather than modified natural materials. In
addition, the linkages used to string the subunits together carry no charge in
our backbone. We believe these differences provide pharmaceutical advantages
that are critical for antisense drug development to meet the challenges of broad
clinical utility.
The first antisense compounds had backbones composed of natural genetic
materials and linkages. These natural compounds were degraded or broken down by
enzymes in the blood and within cells and had difficulty
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crossing cellular membranes to enter the cells that contained their genetic
target. Researchers developed modified backbones which were designed to resist
degradation by enzymes and to enter tissues and cells more efficiently. The most
common of these types, the phosphorothioate backbones used by ISIS
Pharmaceuticals, Inc., Genta Incorporated, and others, use natural DNA subunits
linked together by a charged linkage. After extensive investigation, we
concluded that these early product candidates lacked the pharmaceutical
properties desirable for broad clinical utility. We abandoned development of
similar structures in 1988 and started development of a novel backbone chemistry
designed to address these drawbacks.
NEUGENE TECHNOLOGY
We have developed and patented a new class of antisense compounds, known as
NeuGenes, which have a backbone of synthetic subunits carrying each genetic
letter, with each subunit linked together by a patented uncharged linkage group.
We believe our principal competitive advantage in the antisense area is the
chemical structure of the NeuGene backbone that we developed specifically to
have the following pharmaceutical properties:
- STABILITY: Biological stability is principally determined by the
degree of resistance to enzymatic degradation. Because the NeuGene
backbone is a unique synthetic structure, there are no enzymes found
in man to degrade it. Our NeuGene drugs have been shown to be
completely stable in our human clinical trials.
- EFFICACY AND SPECIFICITY: Efficacy refers to the efficiency with which
antisense compounds block selected gene targets. In direct comparisons
with other technologies, our NeuGene compounds exhibited significantly
better efficacy in inhibition of targeted genetic sequences and
substantially greater specificity.
- DELIVERY: To reach their targets, antisense compounds must cross
tissue and cellular barriers, including cellular and nuclear
membranes. Our extensive research in the last three years has shown
that NeuGene antisense compounds achieve functional delivery in a
variety of animal models and in human clinical trials.
- SAFETY: Our Phase I human clinical trial results indicate that NeuGene
antisense agents have an excellent safety profile, even at doses in
vast excess of those anticipated for our initial human therapeutic
applications.
NEAR-TERM PRODUCT DEVELOPMENT - RESTENOSIS AND CANCER
The first application of our antisense technology is designed to treat
diseases involving abnormal cell division, such as cancer and certain
cardiovascular and inflammatory diseases, including restenosis, psoriasis,
polycystic kidney disease and chronic graft rejection. The NeuGene target for
these diseases is the genetic component named c-myc. We have finished
pre-clinical development of two NeuGene drugs, Resten-NG and Oncomyc-NG, based
on this target. In late 1999, we filed an Investigational New Drug Application,
or IND, and initiated a Phase I clinical trial for restenosis and cancer. These
Phase I safety studies in 32 patients completed in April 2000 showed these
compounds to be safe and essentially non-toxic.
In our upcoming Phase II clinical trial, Resten-NG will be used to block
c-myc expression in restenosis, a frequent complication that follows balloon
angioplasty for coronary artery disease. Restenosis, the blockage of the
arteries following balloon angioplasty, affects 100,000 to 200,000 people per
year in the United States and its occurrence is unpredictable. We believe
Resten-NG, with its combination of potency and lack of toxicity, may be useful
as a preventative measure in the more than one million balloon angioplasty
procedures performed worldwide each year.
Pre-clinical studies with Resten-NG indicated that it was both more potent
and less toxic than other antisense agents currently in clinical development for
other indications. Our trials also indicated significant preservation of vessel
passageways and prevention of arterial wall thickening following catheter
delivery of Resten-NG. We commenced Phase II human clinical trials, which will
involve 150 patients, in cardiovascular restenosis in June 2000.
We are finishing pre-clinical development of our second NeuGene drug,
Oncomyc-NG, for cancer indications. We plan to initiate Phase I/II trials for
our first cancer indication later this year.
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The broad applicability of our antisense platform has allowed us to
initiate pre-clinical development of NeuGene drugs for viral, bacterial, and
inflammatory diseases, as outlined in the following table.
NEUGENE ANTISENSE DEVELOPMENT PROGRAM
<TABLE>
<CAPTION>
ANTISENSE TARGET CLINICAL INDICATION
<S> <C>
c-myc Restenosis, cancer, psoriasis, chronic graft rejection
Cytochrome P450 Metabolic redirection of cancer drugs
NF kappa B Crohn's Disease, chronic inflammation, autoimmune disorders,
arthritis, septic shock, asthma
Bacterial ribosomes NeuBiotics for infectious diseases
Hepatitis B, C viruses Hepatitis
</TABLE>
COLLABORATIVE AGREEMENTS
We believe that our vaccine and antisense technologies are broadly
applicable for the potential development of pharmaceutical products in many
therapeutic areas. To exploit our core technologies as fully as possible, our
strategy is to enter into collaborative development agreements with strategic
partners, including major pharmaceutical companies, for cancer applications for
Avicine, and agreements directed at specific molecular targets for our NeuGene
antisense technology.
SUPERGEN ALLIANCE
In April 2000, we entered into an alliance with SuperGen, Inc. for shared
development and marketing rights for Avicine. Under the terms of the agreement,
SuperGen and we will share equally clinical development and Food and Drug
Administration, or FDA, registration costs going forward and share profit
equally from product sales in the United States with SuperGen. We will be
responsible for the manufacturing of Avicine and SuperGen will be responsible
for marketing and sales. Closing of the transaction will occur prior to the
effectiveness of this offering. Upon closing, we will receive a $20 million
equity investment from SuperGen and could receive additional payments of up to
$80 million based upon achievement of commercialization milestones.
ABGENIX ALLIANCE
We currently have an alliance with Abgenix, Inc. for the development of
human monoclonal antibodies for cancer. We have licensed the use of Abgenix
XenoMouse technology for the production of human monoclonal antibodies against
hCG. Our Avicine clinical trials have defined the hCG targets that are important
in prolonging patient survival. We have developed human monoclonal antibodies to
these targets and two of them are now in pre-clinical trials. Abgenix is to
receive payments based on achievement of clinical development milestones and a
royalty on sales if our antibodies are commercialized.
NEUGENE ALLIANCES
We anticipate that NeuGene antisense collaborative research agreements may
provide us with funding for internal programs aimed at discovering and
developing antisense compounds to inhibit the production of additional molecular
targets. Partners in antisense may be granted options to obtain licenses to
co-develop and to market drug candidates resulting from their collaborative
research programs. We currently have a research alliance with XTL
Biopharmaceuticals Ltd. for pre-clinical development of Hepatitis B and C
antisense drugs. If this program moves into clinical development stages, XTL and
we will negotiate a joint venture development and marketing agreement with XTL
under basic terms previously set forth.
We plan to market the initial products for which we obtain regulatory
approval, through co-development and marketing arrangements with strategic
partners or other licensing arrangements with larger pharmaceutical companies.
Implementation of this strategy will depend on many factors, including the
market potential of any
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products we develop and our financial resources. We do not expect to establish a
direct sales capability for therapeutic compounds for at least the next several
years. The timing of our entry into marketing arrangements or other licensing
arrangements will depend on successful product development and regulatory
approval within the regulatory framework established by the Federal Food, Drug
and Cosmetics Act. Although the implementation of initial aspects of our
marketing strategy may be undertaken before this process is completed, the
development and approval process typically is not completed in less than three
to five years after the filing of an IND application and our marketing strategy
therefore may not be implemented for several years.
MANUFACTURING
For our vaccine, we have identified potential Good Manufacturing Practices,
or GMP, manufacturers who could meet large scale, low-cost manufacturing
requirements for future Phase III trials and commercial introduction. We have
developed proprietary manufacturing techniques that will allow large-scale,
low-cost synthesis and purification of NeuGenes. Because our NeuGene compounds
are based upon a flexible backbone chemistry, we believe that NeuGene synthesis
will be more cost-effective than competing technologies. We have established
sufficient manufacturing capacity to meet research and development and
pre-clinical requirements.
We currently intend to retain manufacturing rights for all products
incorporating our patented antisense technology, whether sold directly by us or
through collaborative agreements with industry partners. We have contracted with
a GMP facility to produce our near term NeuGene products for pre-clinical and
clinical trial studies. We are currently upgrading our in-house manufacturing
capability to meet GMP standards for Phase I and II human clinical trials.
Our laboratory facility and procedures have not been formally inspected by
the FDA and will have to be approved as products move from the research phase
through the clinical testing phase and into commercialization. We will be
required to comply with GMP in connection with human clinical trials and
commercial production.
PATENTS AND PROPRIETARY RIGHTS
We own 44 patents covering various aspects of our technologies. We have 49
pending applications relating to Avicine, NeuGene, and other technologies. Our
patents cover composition of matter, genetic targets, and use of our
technologies in broad medical applications. We intend to protect our proprietary
technology with additional filings as appropriate.
We have also acquired certain product/technology licenses from The Ohio
State University and Dr. Vernon Stevens. These properties include exclusive
royalty-bearing licenses covering the composition, manufacturing and use of
Avicine in all fields of use, including treating and preventing cancer, with the
exception of fertility regulation. We have the right to commercialize any new
intellectual property relating to our licensed subject matter including access
and use of all new experimental data resulting from Dr. Stevens' research. Our
licenses have been granted for a period of 30 years or 10 years from the
expiration of the last issued patent, whichever comes later. Under these
licensing agreements, we have the right to sublicense our products and
technology throughout the world.
The proprietary nature of, and protection for, our product candidates,
processes and know-how are important to our business. We plan to prosecute and
aggressively defend our patents and proprietary technology. Our policy is to
patent the technology, inventions and improvements that are considered important
to the development of our business. We also depend upon trade secrets, know-how,
and continuing technological innovation to develop and maintain our competitive
position.
DRUG APPROVAL PROCESS AND OTHER GOVERNMENT REGULATION
The United States system of new drug approvals is the most rigorous in the
world. According to the Pharmaceutical Research and Manufacturers of America, it
costs an average of $500 million and takes an average of almost 15 years from
the discovery of a compound to bring a single new pharmaceutical to market. For
every 5,000 to 10,000 chemically synthesized molecules screened, only 250 are
ever issued an Investigational New Drug Application, or IND, and tested in
humans. Of those, the FDA will approve only one for commercialization. Yet, in
recent years, societal and governmental pressures have created the expectation
that biotech and pharmaceutical companies will reduce the costs for drug
discovery and development without sacrificing safety, efficacy and
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innovation. The need to significantly improve or provide alternative strategies
for successful pharmaceutical discovery, research and development remains a
major health care industry challenge.
DRUG DISCOVERY: In the initial stages of drug discovery before a compound
reaches the laboratory, tens of thousands of potential compounds are randomly
screened for activity against an assay assumed to be predictive for particular
disease targets. This drug discovery process can take several years. Once a
company locates a screening lead, or starting point for drug development,
isolation and structural determination may begin. The development process
results in numerous chemical modifications to the screening lead in an attempt
to improve its drug properties. After a compound emerges from the above process,
the next steps are to conduct further preliminary studies on the mechanism of
action, further in vitro test tube screening against particular disease targets
and, finally, some in vivo or animal screening. If the compound passes these
barriers, the toxic effects of the compound are analyzed by performing
preliminary exploratory animal toxicology. If the results are positive, the
compound emerges from the basic research mode and moves into the pre-clinical
phase.
PRE-CLINICAL TESTING: During the pre-clinical testing stage, laboratory and
animal studies are conducted to show biological activity of the compound against
the targeted disease, and the compound is evaluated for safety. These tests
typically take approximately three and one-half years to complete.
INVESTIGATIONAL NEW DRUG APPLICATION: During the pre-clinical testing, an
IND is filed with the FDA to begin human testing of the drug. The IND becomes
effective if not rejected by the FDA within 30 days. The IND must indicate the
results of previous experiments, how, where and by whom the new studies will be
conducted, the chemical structure of the compound, the method by which it is
believed to work in the human body, any toxic effects of the compound found in
the animal studies and how the compound is manufactured. In addition, an
Institutional Review Board, comprised of physicians at the hospital or clinic
where the proposed studies will be conducted, must review and approve the IND.
Progress reports detailing the results of the clinical trials must be submitted
at least annually to the FDA.
PHASE I CLINICAL TRIALS: After an IND becomes effective, Phase I human
clinical trials can begin. These tests, involving usually between 20 and 80
patients or healthy volunteers, typically take approximately one year to
complete. The Phase I clinical studies also determine how a drug is absorbed,
distributed, metabolized and excreted by the body, and the duration of its
action.
PHASE II CLINICAL TRIALS: In Phase II clinical trials, controlled studies
are conducted on approximately 100 to 300 volunteer patients with the targeted
disease. The purpose of these tests is to evaluate the effectiveness of the drug
on the volunteer patients as well as to determine if there are any side effects.
These studies generally take approximately two years, and may be conducted
concurrently with Phase I clinical trials. In addition, Phase I/II clinical
trials may be conducted to evaluate not only the efficacy of the drug on the
patient population, but also its safety.
PHASE III CLINICAL TRIALS: This phase typically lasts about three years and
usually involves 1,000 to 3,000 patients. During the Phase III clinical trials,
physicians monitor the patients to determine efficacy and to observe and report
any reactions that may result from long-term use of the drug.
NEW DRUG APPLICATION: After the completion of all three clinical trial
phases, if the data indicate that the drug is safe and effective, a New Drug
Application, or NDA, is filed with the FDA. The NDA must contain all of the
information on the drug gathered to that date, including data from the clinical
trials. NDAs are often over 100,000 pages in length. The average NDA review time
for new pharmaceuticals is now between 6 and 12 months.
MARKETING APPROVAL: If the FDA approves the NDA, the drug becomes available
for physicians to prescribe. Periodic reports must be submitted to the FDA,
including descriptions of any adverse reactions reported. The FDA may request
additional Phase IV studies to evaluate long-term effects.
PHASE IV CLINICAL TRIALS AND POST-MARKETING STUDIES: In addition to studies
requested by the FDA after approval, these trials and studies are conducted to
explore new indications. The purpose of these trials and studies and related
publications is to broaden the application and use of the drug and its
acceptance in the medical community.
20
<PAGE>
COMPETITION
Companies developing cancer vaccines include Progenics Pharmaceutical,
Inc., Corixa Corporation, Biomira Inc., and Bristol Meyers-Squibb. Their
products are in late stage clinical development, in patients with cancers of
different types than Avicine is being used to treat. We believe that Avicine
will have broader patient applications than other cancer vaccines in development
due to the characteristics of its target. Moreover, we do not expect any company
to introduce a cancer vaccine into the broad commercial market in the immediate
future.
Several companies are pursuing the development of antisense technology,
including Genta, Incorporated, Hybridon, Inc., ISIS Pharmaceuticals, Inc., and
Lorus Therapeutics Inc. All of these companies have products in development
stages, and, in some cases, are in human trials with antisense compounds
generally similar to our NeuGene compounds. ISIS Pharmaceuticals has received
marketing approval from the FDA for an antisense drug to treat a viral infection
of the eye in patients with AIDS. While we believe that none of these companies
is likely to introduce an additional antisense compound into the broad
commercial market in the immediate future, many pharmaceutical and biotechnology
companies have financial and technical resources greater than those currently
available to us. Moreover, some potential competitors have more established
collaborative relationships with industry partners than we do. We believe that
the combination of pharmaceutical properties of our NeuGene compounds for
restenosis and cancer affords us competitive advantages when compared with the
antisense compounds of competitors.
We can also expect to compete with other companies exploiting alternative
technologies that address the same therapeutic needs as do our technologies. The
biopharmaceutical market is subject to rapid technological change, and it can be
expected that competing technologies will emerge and will present a competitive
challenge to us.
EMPLOYEES
As of August 31, 2000, we had 56 employees, 23 of whom hold advanced
degrees. Fifty employees are engaged directly in research and development
activities, and six are in administration. None of our employees is covered by
collective bargaining agreements, and we consider relations with our employees
to be good.
PROPERTIES
We occupy 27,000 square feet of leased laboratory and office space at 4575
S.W. Research Way, Suite 200, Corvallis, Oregon 97333. The lease on our space
expires in December 2007. Our executive office is located in 2,400 square feet
of leased space at One S.W. Columbia, Suite 1105, Portland, Oregon 97258. This
lease expires July 2001. We believe that our facilities are suitable and
adequate for our present operational requirements for the foreseeable future.
LEGAL PROCEEDINGS
We are not aware of any legal proceedings against us that, individually or
in the aggregate, would have a material adverse effect on our business, results
of operations or financial condition.
21
<PAGE>
OUR SELLING SHAREHOLDERS
The following table provides certain information with respect to the Shares
held by each Selling Shareholder as of August 31, 2000. Except as otherwise
noted, all of the Common Shares owned by each Selling Shareholder are registered
for sale pursuant to this Prospectus. The Selling Shareholders, however, are not
under any obligation to sell all of any portion of their Shares, nor are the
Selling Shareholders obligated to sell any of their Shares immediately under
this Prospectus. We will not receive any proceeds from any sales of Shares by
the Selling Shareholders.
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES
BENEFICIALLY SHARES OWNED
OWNED BEFORE SHARES AFTER OFFERING(1)
SELLING SHAREHOLDER OFFERING(1) OFFERED NUMBER PERCENT
------------------- ------------ ------- ------ -------
<S> <C> <C> <C> <C>
SuperGen, Inc. 2,684,211(2) 1,684,211 1,000,000(2) 5.0%(2)
Boston Healthcare Associates, Inc. 40,909 40,909 ---- ----
------------ --------- ------------ -------
2,725,120(2) 1,725,120 1,000,000(2) 5.0%(2)
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options and warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of August 31, 2000, are deemed
beneficially owned and outstanding for computing the percentage of the
person holding such securities, but are not considered outstanding for
computing the percentage of any other person.
(2) Includes 1,000,000 shares of our common stock held by SuperGen, Inc. which
are registered for sale on a Registration Statement on Form S-3, as amended
and filed with the Securities and Exchange Commission on December 21, 1999
(Commission Registration No. 333-93135). These shares may be sold by
SuperGen, Inc. prior to the completion of this offering.
22
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell the common stock:
- through one or more underwriters or dealers for public offering and
sale,
- directly to investors, or
- through agents.
The selling stockholders may distribute the common stock from time to
time in one or more transactions at a fixed price or prices, which may be
changed from time to time:
- at market prices prevailing at the times of sale,
- at prices related to those prevailing market prices, or
- at negotiated prices.
We will not receive any proceeds from the sale of the common stock.
The distribution of the common stock may be effected in one or more of the
following methods:
- ordinary brokers' transactions, which may include long or short sales,
- transactions involving cross or block trades, or otherwise on the
Nasdaq National Market,
- purchases by brokers, dealers or underwriters as principal and resale
by those purchasers for their own accounts pursuant to this
prospectus,
- "at the market" to or through market makers or into an existing market
for the common stock,
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents,
- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise),
- pursuant to Rule 144 under the Securities Act, or
- any combination of the foregoing, or by any other legally available
means.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of common stock in the course of hedging the positions they assume with
the selling stockholders. The selling stockholders or their successors in
interest may also enter into option or other transactions with broker-dealers
that require the delivery by those broker-dealers of the common stock, which
common stock may be resold thereafter pursuant to this prospectus. In connection
with any sales, the selling stockholders and any brokers or dealers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling stockholders and/or purchasers of the shares
offered hereby (and, if it acts as agent for the purchaser of those shares, from
that purchaser). Usual and customary brokerage fees will be paid by the selling
stockholders. Broker-dealers may agree with the selling stockholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
the broker-dealer is unable to do so acting as agent for a selling stockholders,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholders. Broker-dealers who acquire
shares as principal may thereafter resell the shares from time to time in
transactions (which may involve cross and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with the resales may pay to or receive from
the purchasers of those shares commissions computed as described above.
We have advised the selling stockholders that Regulation M promulgated
under the Securities Exchange Act, may apply to their sales in the market, have
furnished the selling stockholders with a copy of this regulation and have
informed the selling stockholders of the need for delivery of copies of this
prospectus. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against
liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such
broker-dealers, and any profits received on the resale of those shares, may be
deemed to be underwriting discounts and commissions under the Securities Act if
any such broker-dealers purchase shares as principal.
23
<PAGE>
We have agreed to indemnify the selling stockholders against certain
liabilities, including liabilities under the Securities Act.
We are required by the Purchase Agreement and Registration Rights Agreement
to register for resale by the selling stockholders and keep registered the
number of shares of common stock they are purchasing or may receive because of a
price adjustment described above under heading "Private Placement to Selling
Shareholders" and 100% of the shares of common stock for which the warrants are
exercisable, including original warrants and warrants received following an
adjustment. We have agreed to and are paying the costs and fees of registering
the common stock. The selling stockholders will pay any brokerage commissions,
discounts or other expenses relating to the sale of the common stock.
Any securities covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that rule rather than
pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell any or
all of the shares of common stock offered by them hereunder.
24
<PAGE>
DESCRIPTION OF SECURITIES
Our authorized capital consists of 50,000,000 shares of common stock, par
value $0.0001 per share, and 2,000,000 shares of preferred stock, par value
$0.0001 per share.
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock. As of August
31, 2000, 21,438,780 shares of common stock were outstanding and were held of
record by approximately 600 shareholders. Holders of common stock are entitled
to one vote for each share at all meetings of our shareholders. Subject to
preferences of preferred stockholders, common stockholders are entitled to
receive ratably dividends declared by our board. Common stockholders have no
preemptive, subscription, redemption or conversion rights. If we are liquidated
or dissolved, common stockholders would share equally in our assets remaining
after the payment of all our liabilities and the liquidation preference of any
preferred stockholders.
PREFERRED STOCK
Our Board of Directors is authorized to issue up to 2,000,000 shares of
undesignated preferred stock. No shares of preferred stock have been issued. Our
Board has the authority to issue preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of the preferred stock,
as well as fix the number of shares, without any further vote or action by the
shareholders. Our Board, without shareholder approval, may issue preferred stock
with voting and conversion rights superior to the voting rights of the common
shares. The preferred stock may also decrease the amount of earnings and assets
distributed to common stockholders. Issuance of preferred stock may delay or
prevent a change in control.
WARRANTS
UNDERWRITERS' WARRANTS. We issued stock purchase warrants that will entitle
the underwriters of this offering to purchase 300,000 shares of our common stock
at a price of $8.70 per share. These warrants are exercisable from July 26, 2001
until July 26, 2005. We have granted the underwriters certain registration
rights which, if exercised, will enable them to sell the shares received upon
exercise of their warrants without restriction.
REPRESENTATIVES' WARRANTS. We issued 200,000 warrants to the
representatives of the underwriters of our initial public offering to purchase
400,000 shares of our common stock. The representatives' warrants entitle the
holders to acquire up to 200,000 units, each unit consisting of a share of
common stock and a warrant to purchase a share of common stock for $10.80 per
unit, and are exercisable until June 3, 2002. Each warrant initially entitles
the holder to purchase one share of common stock at a price of $13.50. As of
August 31, 2000, there were 142,500 representatives' warrants outstanding.
NASDAQ WARRANTS. We have outstanding warrants to purchase 2,300,000 shares
of our common stock that were issued in our initial public offering and are
traded on the Nasdaq National Market under the symbol "AVIIW." These warrants
are exercisable until June 3, 2002. We may redeem them at a price of $0.25 per
warrant if the closing bid price of our common stock has been at least 200% of
the warrant exercise price for 20 consecutive trading days. The initial exercise
price of these warrants is $13.50.
ITC MERGER WARRANTS. We have outstanding warrants to purchase 2,116,814
shares of our common stock that were issued in connection with our acquisition
of ImmunoTherapy Corporation. These warrants are exercisable after September 15,
2000 and until July 15, 2003. We may redeem them at a price of $0.25 per warrant
if the closing bid price of our common stock has been at least 200% of the
exercise price for 20 consecutive trading days and the warrants have been
exercisable. These warrants are traded on the Nasdaq National Market under the
symbol "AVIIZ." The initial exercise price of these warrants is $13.50.
OTHER WARRANTS. In December 1999, we issued 628,573 warrants to purchase
common stock at $4.025 per share in a private placement to five institutional
investors and the placement agent. A total of 557,144 are exercisable until
December 20, 2004 and 71,429 are exercisable after December 20, 2000 and until
December 20, 2004. We have also issued additional warrants to purchase 21,667
shares of our common stock. These warrants are currently exercisable and do not
have a termination date. We have issued a warrant to SuperGen, Inc. to purchase
25
<PAGE>
up to 1,665,478 shares of our common stock at $35.625 per share. This warrant
becomes exercisable on the earlier of the date the U.S. Food and Drug
Administration accepts a new drug application for which products of our products
or the date on which the closing price for our common stock exceeds the exercise
price. The warrant will expire on April 13, 2000 unless the warrant becomes
exercisable.
STOCK OPTIONS
A total of 3,200,000 shares of our common stock are reserved for issuance
under our 1992 Stock Incentive Plan. As of August 31, 2000, we had outstanding
2,319,023 options to purchase shares under the 1992 Stock Incentive Plan.
In 1998, we assumed the obligations under the 1997 Stock Option Plan of
ImmunoTherapy Corporation. As of August 31, 2000, 173,008 options to purchase
shares of our common stock were outstanding under the 1997 plan.
EMPLOYEE STOCK PURCHASE PLAN
A total of 250,000 shares of our common stock have been reserved for
issuance under our 2000 Employee Stock Purchase Plan. As of August 30, 2000, no
shares had been issued under the plan.
RIGHTS OF CERTAIN SHAREHOLDERS TO ADDITIONAL STOCK OR REDEMPTION OF SHARES
Holders of 1,857,147 shares of our common stock have the right to receive
additional shares of our common stock without additional payment to us if we
sell shares of our common stock, or engage in similar financing transactions, at
a price of less than $3.50 per share prior to December 16, 2002. If the holdings
of our stock by the group that has this right will exceed 20 percent of our
outstanding common stock due to the issuance of new shares, we must redeem a
sufficient number of the new shares to be issued at a price equal to $3.85 per
share so that the holdings of this group do not exceed 20 percent.
REGISTRATION RIGHTS
We are required to file a registration statement under the Securities Act
covering the 2,116,814 shares of our common stock underlying the warrants that
were issued in connection with our acquisition of ImmunoTherapy Corporation
prior to the date those warrants become exercisable, or September 15, 2000. Upon
the filing of that registration statement and after September 14, 2000, a person
will be able to sell any shares received upon the exercise of the warrants
without restriction.
OREGON CONTROL SHARES AND BUSINESS COMBINATION STATUTES
We are subject to the Oregon Control Share Act. The Control Share Act
generally provides that a person who acquires voting stock of an Oregon
corporation in a transaction that results in the acquiring person holding more
than 20.0%, 33.3% or 50.0% of the total voting power of the corporation cannot
vote the shares it acquires in the control share acquisition unless voting
rights are accorded to the control shares by (1) a majority of each voting group
entitled to vote and (2) the holders of a majority of the outstanding voting
shares, excluding the control shares held by the acquiring person and shares
held by our officers and inside directors. The terms acquiring person are
broadly defined to include persons acting as a group.
The acquiring person may, but is not required to, submit to us a statement
setting forth certain information about the acquiring person and its plans with
respect to us. The statement may also request that we call a special meeting of
shareholders to determine whether voting rights will be accorded to the control
shares. If the acquiring person does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders. If the acquiring
person's control shares are accorded voting rights and represent a majority or
more of all voting power, shareholders who do not vote in favor of voting rights
for the control shares will have the right to receive the appraised "fair value"
of their shares which may not be less than the highest price per share by the
acquiring person for the control shares.
We are subject to certain provisions of the Oregon Business Corporation Act
that govern business combinations between corporations and interested
shareholders. The Business Combination Act generally provides
26
<PAGE>
that if a person or entity acquires 15% or more of the voting stock of an Oregon
corporation, the corporation and the interested shareholder, or any affiliated
entity of the interested shareholder, may not engage in certain business
combination transactions for three years following the date the person became an
interested shareholder. Business combination transactions for this purpose
include (1) a merger or plan of share exchange, (2) any sale, lease, mortgage or
other disposition of 10% or more of the assets of the corporation, and (3)
certain transactions that result in the issuance of capital stock of the
corporation to the interested shareholder. These restrictions do not apply if
(1) the interested shareholder, as a result of the transaction in which such
person became an interested shareholder, owns at least 85% of the outstanding
voting stock of the corporation, disregarding shares owned by directors who are
officers and certain employee benefit plans, (2) the Board of Directors approves
the share acquisition or business combination before the interested shareholder
acquires 15% or more of the corporation's outstanding voting stock or (3) the
Board of Directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation, disregarding shares owned by the interested
shareholders, approve the transaction after the interested shareholder acquires
15% or more of the corporation's voting stock.
TRANSFER AGENT
Our transfer agent and registrar is ChaseMellon Shareholder Services, LLC.
LEGAL MATTERS
Ater Wynne LLP, 222 S.W. Columbia, Suite 1800, Portland, Oregon 97201,
our attorneys, have opined that the Common Shares are duly and validly
issued, fully paid and nonassessable.
EXPERTS
The audited finanical statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 3,872
Nasdaq Listing Fee 17,500
Accountant's Fees and Expenses 5,000
Legal Fees and Expenses 5,000
Miscellaneous --
-------
Total 31,372
=======
</TABLE>
---------------
* Represents expenses related to the distribution by the Selling Shareholders
pursuant to the Prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by the Company on behalf of the
Selling Shareholders. All amounts are estimates except for the SEC
registration fee and the Nasdaq listing fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for indemnification of the
officers and directors of the Company to the fullest extent permitted by law.
The Oregon Business Corporation Act, permits a corporation to limit, under
certain circumstances, a director's liability for monetary damages in actions
brought by the corporation or its stockholders. As an Oregon corporation, the
Company is subject to the OBCA and the exculpation from liability and
indemnification provision contained therein. Pursuant to Section 60.047(2)(d) of
the OBCA, Article II of the Company's Fifth Restated Articles of Incorporation
(the "Articles") eliminates the liability of the Company's directors to the
Company or its stockholders for monetary damages, except for any liability
related to breach of the duty of loyalty, actions not in good faith and certain
other liabilities.
Section 60.387, ET SEQ., of the OBCA allows corporations to indemnify their
directors and officers against liability where the director or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporation or at least not adverse to the corporation's best
interests and, if in a criminal proceeding, the individual had not reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation but may indemnify against the reasonable
expenses associated with such claims. Corporations may not indemnify against
breached of the duty of loyalty. The OBCA mandates indemnification against all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claims was by or in the right of the corporation.
Finally, a court may order indemnification if it determines that the director or
officer is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances whether or not the director or officer met the good faith
and reasonable belief standards or conduct set out in the statute.
The OBCA also provides that the statutory indemnification provisions are
not deemed exclusive of any other rights to which directors or officers may be
entitled under a corporation's articles of incorporation or bylaws, any
agreement, general or specific action of the board of directors, vote of
stockholders or otherwise.
The Company's Articles also provide for the elimination of liability of
directors for monetary damages to the full extent permitted by the Oregon
Business Corporations Act.
The Company has entered into indemnification agreements with its directors
and certain of its officers.
ITEM 16. EXHIBITS.
Number Exhibits
------ --------
4.1 Common Stock and Warrant Purchase Agreement, dated April 4, 2000,
between SuperGen, Inc. and AVI BioPharma, Inc.
4.2 Registration Rights Agreement, dated April 4, 2000, between
SuperGen, Inc. and AVI BioPharma, Inc.
5.1 Opinion of Ater Wynne LLP 23.1 Consent of Arthur Andersen LLP,
independent public accountants 23.2 Consent of Ater Wynne LLP
(included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
28
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
changes to such information in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall 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 remains unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities shall be deemed to be in the initial
bona fide offering thereof.
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 foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification is against such liabilities (other
than the payment by the registrant 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, 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 of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Beaverton,
State of Oregon, on September 15, 2000.
AVI BIOPHARMA, INC.
By: /s/ Denis R. Burger, Ph.D.
----------------------------------
Denis R. Burger, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Denis R. Burger and Alan P. Timmins,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendment to this
Registration Statement on Form S-3 and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Denis R. Burger, Ph.D.
----------------------------- Chief Executive Officer and September 15, 2000
Denis R. Burger, Ph.D. Chairman of the Board (Principal
Executive Officer)
/s/ Alan P. Timmins
----------------------------- President, Chief Operating Officer September 15, 2000
Alan P. Timmins and Director
/s/ Mark Webber
----------------------------- Chief Financial Officer (Principal September 15, 2000
Mark Webber Financial and Accounting Officer)
/s/ Dwight D. Weller, Ph.D.
----------------------------- Senior Vice President of September 15, 2000
Dwight D. Weller, Ph.D. Chemistry and Manufacturing
and Development and Director
/s/ Patrick L. Iversen, Ph.D.
----------------------------- Senior Vice President of Research and September 15, 2000
Patrick L. Iversen, Ph.D. Development and Director
/s/ Bruce L.A. Carter, Ph.D.
----------------------------- Director September 15, 2000
Bruce L.A. Carter, Ph.D.
/s/ Nick Bunick
----------------------------- Director September 15, 2000
Nick Bunick
/s/ Joseph Rubinfeld, Ph.D.
----------------------------- Director September 15, 2000
Joseph Rubinfeld, Ph.D.
/s/ John Fara, Ph.D.
----------------------------- Director September 15, 2000
John Fara, Ph.D.
</TABLE>
30
<PAGE>
INDEX TO EXHIBITS
NUMBER
4.1 Common Stock and Warrant Purchase Agreement, dated April 4, 2000,
between SuperGen, Inc. and AVI BioPharma, Inc.
4.2 Registration Rights Agreement, dated April 4, 2000, between SuperGen,
Inc. and AVI BioPharma, Inc.
5.1 Opinion of Ater Wynne LLP
23.1 Consent of Arthur Andersen LLP, independent public accountants
23.2 Consent of Ater Wynne LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
31
