<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1997
REGISTRATION NO. 333-19955
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALKERMES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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PENNSYLVANIA 23-2472830
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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64 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139-4234
(617) 494-0171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD F. POPS
CHIEF EXECUTIVE OFFICER
ALKERMES, INC.
64 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139-4234
(617) 494-0171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MORRIS CHESTON, JR., ESQ.
MARTHA J. HAYS, ESQ.
BALLARD SPAHR ANDREWS & INGERSOLL
1735 MARKET STREET
PHILADELPHIA, PA 19103-7599
(215) 665-8500
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Approximate date of commencement of proposed sale to the public: From time
to time following 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, 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 of the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1997
[ALKERMES LOGO]
2,000,000 SHARES
COMMON STOCK
This Prospectus relates to 2,000,000 shares of common stock, par value $.01
per share ("Common Stock"), of Alkermes, Inc., a Pennsylvania corporation
("Alkermes" or the "Company"), which are being offered for sale from time to
time by ALZA Corporation, a Delaware corporation, and a shareholder of the
Company (the "Selling Shareholder"). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock being offered hereby (the "Shares"). The Selling
Shareholder directly, through agents designated from time to time, or through
brokers, dealers or underwriters to be designated, may sell the Shares from time
to time on terms to be determined at the time of sale. To the extent required,
the specific number of Shares to be sold, the purchase price and public offering
price, the names of any such agent, broker, dealer or underwriter, and any
applicable commission or discount with respect to the particular offer will be
set forth in a supplement to this Prospectus.
The expenses of registration of the Shares under the Securities Act of
1933, as amended (the "Securities Act"), will be paid by the Company. The
Selling Shareholder will, however, bear the expense of its own counsel and any
transfer taxes and underwriting discounts and commissions applicable to the
Shares sold by it. The Company and the Selling Shareholder have agreed to
indemnify each other against certain liabilities under the Securities Act.
The Selling Shareholder and any brokers, dealers, agents or underwriters
that participate with the Selling Shareholder in the distribution of Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profits on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Common Stock is traded on the Nasdaq National Market under the symbol
"ALKS." On February 13, 1997, the last reported sale price of the Common Stock
was $22.75 per share.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). All such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 90 Devonshire Street, Suite 700, Boston,
Massachusetts 02109; 7 World Trade Center, 13th Floor, New York, New York 10048;
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its public reference
facilities at Boston, Massachusetts, New York, New York and Chicago, Illinois at
prescribed rates. In addition, the aforementioned materials may also be
inspected at the offices of the Nasdaq National Market at 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission maintains a World-Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission under the Exchange Act
are hereby incorporated by reference into this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended March 31, 1996;
2. Quarterly reports on Form 10-Q for the fiscal quarters ended June 30,
September 30 and December 31, 1996;
3. Current Reports on Form 8-K dated November 14, 1996 and February 13,
1997; and
4. Item 1 of Registration Statement on Form 8-A dated June 28, 1991, as
amended by Form 8-A/A dated January 17, 1997.
All documents subsequently filed by Alkermes pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated by reference or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that such statement is
modified or superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Alkermes hereby undertakes to provide without
charge to each person, including any beneficial owner, to whom this Prospectus
has been delivered, on the written or oral request of such person, a copy of any
or all of the documents referred to above which have been or may be incorporated
into this Prospectus and deemed to be part hereof, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents. These documents are available upon request from Michael J.
Landine, Senior Vice President and Chief Financial Officer, Alkermes, Inc., 64
Sidney Street, Cambridge, Massachusetts 02139, (617) 494-0171.
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO OR FROM ANY PERSON OR
BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
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2
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TABLE OF CONTENTS
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PAGE
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Summary............................................................................... 4
Important Factors Regarding Forward-Looking Statements................................ 6
Risk Factors.......................................................................... 7
Use of Proceeds....................................................................... 17
Dividend Policy....................................................................... 17
Business.............................................................................. 18
Selling Shareholder................................................................... 35
Plan of Distribution.................................................................. 35
Legal Matters......................................................................... 36
Experts............................................................................... 36
Additional Information................................................................ 36
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Alkermes(R), the Alkermes logo, ProLease(R) and Medisorb(R) are registered
trademarks of Alkermes, Inc. RMP(TM), RMPs(TM), RMP-7(TM) and Receptor-Mediated
Permeabilizers(TM) are trademarks of Alkermes, Inc.
Intron(R) is a registered trademark of Schering Corporation, a subsidiary
of Schering-Plough Corporation.
3
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SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
See "Important Factors Regarding Forward-Looking Statements."
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," appearing elsewhere in this Prospectus or
incorporated by reference herein.
THE COMPANY
Alkermes, Inc. (together with its subsidiaries, "Alkermes" or the
"Company") is applying the tools of biotechnology to the development of
sophisticated proprietary drug delivery systems. The Company is developing
product candidates based on three independent drug delivery technologies:
ProLease, which is designed to enable single injections lasting a few days to
several months to be made of proteins or peptides otherwise given by more
frequent injection; RMP-7, which is designed to enable increased drug delivery
to the brain by transiently opening the blood-brain barrier; and Medisorb, which
extends Alkermes' technology for injectable sustained release and is designed
for more traditional small molecule pharmaceutical compounds.
ProLease is proprietary technology for the stabilization and encapsulation
of fragile proteins and peptides in microspheres made of common medical
polymers. Several ProLease product candidates are being developed in
collaboration with large pharmaceutical companies. With Genentech, Inc.
("Genentech"), Alkermes is developing a ProLease sustained-release formulation
of Genentech's human growth hormone ("hGH"). In November 1996, Alkermes
announced the results of a Phase I clinical trial of ProLease hGH, the
initiation of a multi-center Phase I/II clinical trial in growth hormone
deficient children, and an expansion of the collaboration with Genentech. In
December 1996, following the successful completion of a feasibility agreement,
Alkermes announced a collaboration with Johnson & Johnson for a ProLease
formulation of an undisclosed product for the treatment of hormone-mediated
disorders. Also, in collaboration with Schering-Plough Corporation ("Schering-
Plough"), Alkermes is developing a sustained-release formulation of Intron A,
Schering-Plough's alpha interferon, which is approved for use in several
infectious diseases and certain oncology indications.
RMP-7, Alkermes' second drug delivery system, is a novel pharmaceutical
peptide based on bradykinin, a compound occurring naturally in the body and
known to affect vascular permeability. Following injection, RMP-7 increases
permeability by triggering a brief relaxation of the tight cellular junctions of
the blood-brain barrier. During the time that permeability is increased, drug
molecules in the bloodstream can diffuse into the brain in concentrations
greater than can usually be achieved.
Alkermes is currently completing a series of four multi-center Phase II
clinical trials of RMP-7 administered in combination with the chemotherapeutic
agent carboplatin in a planned total of 250 patients with recurrent malignant
glioma. Three such trials involve the intravenous administration of RMP-7 and
carboplatin, and the fourth involves intra-arterial administration of the drug
combination. In December 1996, Alkermes announced the results of two of the
three intravenous Phase II clinical trials, Studies 01-013 and 01-019, which
were non-controlled, open label clinical trials of RMP-7 and carboplatin
conducted in Europe. Study-013 enrolled recurrent malignant glioma patients who
had relapsed following treatment with surgery and radiation. In this clinical
trial, 61-91% of patients responded to the treatment as measured by three
standardized tests of neurological impairment and patient performance status,
and 79% of patients responded to the treatment as measured by shrinkage or
stabilization of tumor volume as measured with contrast-enhanced magnetic
resonance imaging ("MRI"). Study-019 enrolled patients who had relapsed
following surgery, radiation and chemotherapy. In this clinical trial, 40-59% of
patients responded to the treatment as measured by three standardized tests of
neurological impairment and patient performance status, and 24% of
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patients responded to the treatment as measured by shrinkage or stabilization of
tumor volume with contrast-enhanced MRI.
The third intravenous Phase II trial is being conducted in the United
States and is a double-blind, placebo-controlled clinical trial comparing
treatment with the combination of RMP-7 and carboplatin to treatment with
carboplatin alone. This clinical trial completed enrollment in May 1996 and
results are expected in the first half of 1997. The fourth Phase II trial is
being conducted in the United States and is a non-controlled, open label
multi-center clinical trial of RMP-7 and carboplatin administered
intra-arterially. Enrollment in this clinical trial was completed in September
1996, and results are expected in the first half of 1997.
There can be no assurance that the results of the European clinical trials
will be sufficient for the Company to obtain approval to market RMP-7 in Europe,
or that the European regulatory bodies will not require additional clinical
trials. In addition, there can be no assurance that the results of the United
States Phase II trials will support the results of the European trials.
To support the extensive clinical development of RMP-7, Alkermes formed and
transferred substantially all of its rights to the receptor-mediated
permeabilizer ("RMP") technology to Alkermes Clinical Partners, L.P. (the
"Partnership"). The research and development funding from the Partnership, which
ended as of June 30, 1996, was not sufficient to complete clinical trials and
obtain regulatory approval of RMP-7. Alkermes has used and intends to continue
to use its own resources to develop RMP-7. The Company has the right to
reacquire such technology by purchasing all of the limited partnership
interests. This right will terminate in the event the Company ceases funding the
development of RMP-7. See "Risk Factors -- Need for Additional Funding;
Uncertainty of Access to Capital" and "-- Rights to RMP Technology; Effect of
Exercise of the Partnership Purchase Option."
Medisorb, the Company's third drug delivery system, is a proprietary
technology for the stabilization and encapsulation of traditional, small
molecule drugs in microspheres made of common medical polymers. In May 1996,
Alkermes announced a collaboration with Janssen Pharmaceutica International
("Janssen") for the development of a Medisorb formulation of a Janssen
proprietary product. Initial Phase I clinical trials of the Medisorb product
candidate were completed in 1996. In October 1996, Alkermes announced an
expansion of the Janssen collaboration.
Alkermes' business strategy is to acquire and develop drug delivery systems
to address significant new drug delivery opportunities arising in the
pharmaceutical industry. This strategy has four key elements: (i) develop and
acquire broadly applicable drug delivery systems and apply them to multiple
pharmaceutical products; (ii) collaborate to develop and finance product
candidates; (iii) apply drug delivery systems to both approved drugs and drugs
in development; and (iv) establish independent product development capabilities.
The Company was incorporated in Pennsylvania in 1987. The Company's
principal executive offices are located at 64 Sidney Street, Cambridge, MA 02139
and its telephone number is (617) 494-0171.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In addition to the other information presented or referenced herein, the
discussion of risk factors on pages 7 to 17 of this Prospectus should be
considered carefully in evaluating an investment in the Common Stock.
COMMON STOCK
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Common Stock Outstanding as of January 31, 1997............. 20,599,579 shares(1)
Nasdaq National Market Symbol............................... ALKS
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(1) Includes 2,000,000 shares of Common Stock to be sold to the Selling
Shareholder pursuant to the Stock Purchase Agreement dated as of February
13, 1997. Excludes as of January 31, 1997, outstanding options and awards
for 2,006,634 shares of Common Stock and outstanding warrants to purchase
1,344,879 shares of Common Stock.
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5
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IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Some of the information presented in this Prospectus constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results of the Company's development activities and its results of operations
will not differ materially from its expectations. Factors which could cause
actual results to differ from expectations include, among others (i) the Company
and its collaborators could not be permitted by regulatory authorities to
undertake additional clinical trials for ProLease, RMP-7 or Medisorb or clinical
trials could be delayed; (ii) product candidates could be ineffective or unsafe
during clinical trials; (iii) the Company's collaborators could elect to
terminate or delay development programs; (iv) the Company could incur
difficulties or set-backs in obtaining the substantial additional funding
required to continue research and development programs and clinical trials; and
(v) even if product candidates appear promising at an early stage of
development, product candidates could fail to receive necessary regulatory
approvals, be difficult to manufacture on a large scale, be uneconomical, fail
to achieve market acceptance, be precluded from commercialization by proprietary
rights of third parties or experience substantial competition in the
marketplace.
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RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. See "Important Factors Regarding Forward-Looking Statements."
In addition to the other information included or incorporated by reference
in this Prospectus, the following risk factors should be considered carefully in
evaluating the Company and its business before purchasing shares of the Common
Stock offered hereby.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial sale of each of
its product candidates under development, Alkermes or its collaborators must
demonstrate through preclinical testing and clinical trials that the product
candidate is safe and efficacious. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in subsequent
clinical trials, and there can be no assurance that the Company's or its
collaborators' clinical trials will demonstrate the safety and efficacy of any
product candidates necessary to obtain regulatory approval. A number of
companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials. In addition, certain clinical trials are conducted
with patients having the most advanced stages of disease. During the course of
treatment, these patients often die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested. Such
events can adversely affect the statistical analysis of clinical trial results.
For example, the Company's RMP-7 clinical trial results for patients with brain
tumor may be adversely affected by the severity and advanced state of disease in
participating patients.
The risk and complexity of clinical trials of the Company's product
candidates is increased by the use of other pharmaceuticals in combination with
ProLease, RMP-7, and Medisorb, the Company's drug delivery technologies. Even if
such other pharmaceutical has received approval by the United States Food and
Drug Administration ("FDA") or other regulatory agencies, the outcome of
clinical trials is dependent upon the performance of ProLease, RMP-7, or
Medisorb in combination with the pharmaceutical agent.
Moreover, drugs used with the drug delivery systems may not have been
approved for the indication for which the Company is conducting clinical trials.
For example, Alkermes is currently conducting Phase II clinical trials of RMP-7
administered in combination with the chemotherapeutic agent carboplatin in
patients with recurrent malignant glioma. Carboplatin has not been approved for
the treatment of this indication. No assurance can be given that the FDA will
not require additional clinical trials to demonstrate the safety and efficacy of
carboplatin in the treatment of brain tumor.
The Company recently announced the results of two Phase II non-controlled,
open label clinical trials in Europe. There can be no assurance that the results
of the clinical trials will be sufficient for the Company to obtain approval to
market RMP-7 in Europe, or that the European regulatory authorities will not
require additional clinical trials. Phase II clinical trials are ongoing in the
United States. There can be no assurance that the Company's United States Phase
II clinical trials will be completed on a timely basis, if at all. In addition,
no assurance can be given that the results of the Company's Phase II clinical
trials in the United States or any other trials will support the results of the
European trials or be sufficient for the Company to obtain approval to market
RMP-7 in the United States, or that the FDA will not require additional clinical
trials.
The completion of clinical trials of the Company's product candidates may
be delayed by many factors and there can be no assurance that delays or
terminations will not occur. One such factor is the rate of enrollment of
patients, which generally varies throughout the course of a clinical trial and
which depends on the size of the patient population, the number of clinical
trial sites, the proximity of patients to clinical trial sites, the eligibility
criteria for the trial and the existence of competitive clinical trials. Neither
the Company nor its collaborators can control the rate at which patients present
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themselves for enrollment, and there can be no assurance that the rate of
patient enrollment will be consistent with the Company's expectations or be
sufficient to enable clinical trials of the Company's product candidates to be
completed in a timely manner. Any significant delays in, or termination of,
clinical trials of the Company's product candidates would have a material
adverse effect on the Company's business, financial condition and results of
operations.
There can be no assurance that Alkermes or its collaborators will be
permitted by regulatory authorities to undertake additional clinical trials for
any of its technologies, or that if such trials are conducted, any of the
Company's product candidates will prove to be safe and efficacious or will
receive regulatory approvals. Any delays in or termination of the Company's or
its collaborator's clinical trial efforts would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Product Candidates in Development."
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
Alkermes has had net operating losses since its inception in 1987. At
December 31, 1996, the Company's accumulated deficit was approximately $115.0
million. The Company's losses have resulted principally from costs incurred in
research and development, including clinical trials, the purchase of in-process
research and development, and from general and administrative costs associated
with the Company's operations. These costs have exceeded the Company's revenues,
which to date have been generated almost entirely from the Partnership,
collaboration and development agreements, research grants, and interest income.
Alkermes expects to incur substantial additional and increasing operating
expenses over the next several years as its research and development and
clinical trial activities accelerate and as manufacturing scale-up occurs. To
the extent that the Company is unable to obtain third-party funding for such
expenses, the Company expects that such increased expenses will result in
increased losses from operations. Alkermes does not expect to generate
significant revenues from the sale of products, if any, for several years. The
Company's future profitability depends in part on the Company and its
collaborators obtaining regulatory approval for products, entering into
agreements for product development and commercialization and developing the
capacity, or entering into agreements, for the manufacture, and marketing of any
products. There can be no assurance that Alkermes or its collaborators will
obtain required regulatory approvals, or successfully develop, commercialize,
manufacture, and market product candidates or that the Company will ever achieve
significant product revenues or profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
All of the Company's product candidates are in research or development. No
significant revenues have been generated from product sales. In order to achieve
profitability, Alkermes must successfully develop, commercialize, manufacture
and market its products, either alone or in collaboration with others. Any
products resulting from the Company's research and development programs may not
be commercially available for several years, if at all.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that the potential products
will be found ineffective or cause harmful side effects during preclinical
testing or clinical trials, fail to receive necessary regulatory approvals, be
difficult to manufacture on a large scale, be uneconomical, fail to achieve
market acceptance, or be precluded from commercialization by proprietary rights
of third parties.
The Company's product candidates require significant additional research
and development efforts. The Company's principal drug delivery systems,
ProLease, RMP-7, and Medisorb, which have not yet been proven safe and effective
in humans, target unsolved drug delivery problems. No assurance can be given
that any of the Company's development programs will be successfully completed,
that required regulatory approvals will be obtained on a timely basis, if at
all, or that any products for which approval is obtained will be commercially
successful. If any of the Company's
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development programs is not successfully completed, required regulatory
approvals are not obtained, or products for which approvals are obtained are not
commercially successful, the Company's business, financial condition and results
of operations would be materially adversely affected. See "Business -- Product
Candidates in Development."
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
Alkermes will require substantial additional funding in order to continue
its research and product development programs and preclinical testing and
clinical trials of its product candidates, for operating expenses, for the
pursuit of regulatory approvals for its product candidates, and for establishing
manufacturing and marketing capabilities. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in its research and development programs, the magnitude of these
programs, progress with preclinical testing and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs involved in filing,
prosecuting and enforcing patent claims, competing technological and market
developments, the establishment of additional collaborative arrangements, the
cost of manufacturing facilities and of commercialization activities and
arrangements, and the cost of product in-licensing and any possible
acquisitions. Although the Company believes that its cash reserves and other
liquid assets, the net proceeds of this offering, funding that may be received
from the Company's collaborators, and interest income earned will be adequate to
satisfy its capital and operating requirements through 1998, there can be no
assurance that these funds will be sufficient.
Alkermes intends to seek additional funding through arrangements with
corporate collaborators and through public or private sales of the Company's
securities, including equity securities. In addition, the Company has obtained
equipment, bank, and other loans and may continue to pursue opportunities to
obtain additional debt financing in the future. There can be no assurance,
however, that additional equity or debt funding will be available on reasonable
terms, if at all. Any additional equity financing would be dilutive to the
Company's shareholders. If adequate funds are not available, Alkermes may be
required to curtail significantly one or more of its research and development
programs and/or obtain funds through arrangements with collaborative partners or
others that may require Alkermes to relinquish rights to certain of its
technologies or product candidates.
The Company's research and development of RMP-7 has been funded by the
Partnership pursuant to a Product Development Agreement, dated as of March 6,
1992, between Alkermes and the Partnership (the "Product Development
Agreement"). Such funding, which ended as of June 30, 1996, was not sufficient
to complete clinical trials and obtain regulatory approval of RMP-7. As a
result, Alkermes has used and intends to continue to use its own resources to
develop RMP-7, but may be forced to seek alternative sources of funding,
including additional collaborators. The Company has the option to purchase the
Partnership interests for cash or stock (the "Purchase Option"). This option
will terminate in the event the Company ceases funding the development of RMP-7.
If the Company elects to exercise its option to purchase the Partnership
interests for cash, the Company will be required to make a substantial cash
payment. The Company would be required to seek additional capital for such a
payment and there is no assurance that it would be able to obtain such capital
on attractive terms or at all. If Alkermes does not purchase the partnership
interests of the limited partners it may not recoup any investment made by it in
the development of RMP-7. See "-- Rights to RMP Technology; Effect of Exercise
of the Partnership Purchase Option."
DEPENDENCE ON COLLABORATORS; POTENTIAL CONFLICTS OF INTEREST
The Company's strategy for research, development and commercialization of
its product candidates is to rely, in part, upon various corporate collaborators
and licensors and will in some cases be dependent upon these outside parties to
conduct preclinical testing and clinical trials, and to provide adequate funding
for the Company's development programs. The Company has established several
collaborative arrangements with pharmaceutical companies including Genentech,
Schering-Plough, and Johnson & Johnson with respect to its ProLease technology,
with the Partnership with respect to its RMP-7 technology, and with Janssen with
respect to its Medisorb technology. The
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collaboration and license agreements may be terminated in some cases at the
discretion of the Company's collaborators with only limited notice to the
Company. See "Business -- Collaborative Arrangements."
Neither ProLease nor Medisorb is an independently commercializable
technology. Both technologies are dependent on therapeutic products from third
parties, which may require licensing, collaboration or other arrangements. There
can be no assurance that the Company will be able to negotiate acceptable
additional collaborative arrangements that the Company deems necessary to
develop or commercialize its product candidates. Even if the Company is able to
negotiate acceptable new collaborative arrangements, there can be no assurance
that such arrangements or the Company's existing collaborations will be
completed or will be successful or that the Company will realize any revenues
pursuant to such arrangements.
Alkermes is currently conducting clinical trials of RMP-7 with carboplatin
in patients with brain tumor. If RMP-7 continues to proceed satisfactorily in
its development, the Company's strategy is to expand the applications of RMP-7
to different drugs and diseases in part through collaborations with
pharmaceutical companies. There can be no assurance that such collaborations
will be completed or will be successful or that the Company will be able to do
so on favorable terms or realize any revenues resulting from them. The Company's
failure to enter into such collaborations could have a material adverse effect
on the development of RMP-7.
The amount and timing of resources which the parties to collaborative
arrangements with the Company devote to these activities is not within the
control of the Company. If any of the Company's collaborators breaches or
terminates its agreement with the Company or otherwise fails to conduct its
collaborative activities in a timely manner, the development or
commercialization of the product candidate or research program under such
collaborative agreement may be delayed, and the Company may be required to
devote unforeseen additional resources to such development or commercialization,
or terminate such programs. The termination of collaborative arrangements could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that disputes will not
arise in the future with respect to the ownership of rights to any technology
developed with third parties. These and other possible disagreements between
collaborators and the Company could lead to delays in the collaborative
research, development or commercialization of certain product candidates, or
could require or result in litigation or arbitration, which would be time
consuming and expensive and would have a material adverse effect on the
Company's business, financial condition and results of operations.
In addition, Alkermes' collaborators may develop, either alone or with
others, products that compete with the development and marketing of the
Company's product candidates. Competing products, either developed by the
Company's collaborators or to which the collaborators have rights, may result in
the Company's collaborators withdrawing research, development or marketing
support with respect to all or a portion of the Company's technology, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
LIMITED MANUFACTURING EXPERIENCE; RELIANCE ON THIRD-PARTY MANUFACTURING
Alkermes has completed construction of an in-house pilot production
facility which has been validated by the Company for manufacturing in accordance
with Good Manufacturing Practices ("GMP") regulations promulgated by the FDA.
The facility is being used to manufacture product candidates incorporating its
ProLease sustained-release delivery system for clinical trials. This facility is
not capable of manufacturing products on a commercial scale. In connection with
its March 1996 acquisition of certain Medisorb assets and technology, Alkermes
acquired a 14,000 square foot manufacturing facility in Wilmington, Ohio at
which it is manufacturing a Medisorb product candidate for Janssen for clinical
trials. Alkermes has no other experience, however, in manufacturing or in
conducting the testing programs required to obtain regulatory approvals. The
manufacture of ProLease and Medisorb products on a commercial scale would
require significant start-up expenses and
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expansion of facilities and personnel, and no assurance can be given that
Alkermes can develop such manufacturing capability on a timely basis, if at all.
The manufacture of the Company's products for clinical trials and
commercial purposes is subject to GMP and other federal regulations. The Company
has never operated an FDA-approved manufacturing facility, and there can be no
assurance that it will obtain necessary approvals for commercial manufacturing.
Alkermes relies on a third party to manufacture RMP-7 for use in clinical
trials and expects to rely on such third party for commercial sales, if any.
There can be no assurance that this manufacturer will continue to meet the
Company's requirements for quality, quantity and timeliness, or that Alkermes
would be able to find alternative manufacturers, if necessary.
If Alkermes is not able to develop manufacturing capacity and experience or
to continue to contract for manufacturing capabilities on acceptable terms, its
ability to conduct preclinical testing and clinical trials will be compromised,
and delays in obtaining regulatory approvals may result, as well as commercial
sales if approvals are obtained. Such delays would materially adversely affect
the Company's competitive position and its business, financial condition, and
results of operations. See "Business -- Manufacturing."
RIGHTS TO RMP TECHNOLOGY; EFFECT OF EXERCISE OF THE PARTNERSHIP PURCHASE OPTION
Alkermes has transferred to the Partnership substantially all of its
technology and commercial rights relating to RMP technology. Under the Product
Development Agreement with the Partnership, Alkermes performs research and
development with respect to such technology on behalf of the Partnership. There
can be no assurance that disputes will not arise with the Partnership over the
ownership of rights to any technology that may be developed by Alkermes pursuant
to such agreement. In addition, there can be no assurance that conflicts of
interest between the Company and the Partnership will not arise in relation to
rights to ownership of the technology or termination of research or marketing
programs.
The Purchase Option will terminate in the event the Company ceases funding
the development of RMP-7. There can be no assurance that the Purchase Option
will not terminate because the Company fails to exercise the Purchase Option or
otherwise. If the Purchase Option terminates, the Company will have no rights to
the RMP technology or products developed on behalf of the Partnership in the
United States and Canada.
If the Company exercises the Purchase Option, it will be required to make a
substantial cash payment or to issue shares of Common Stock. A payment in cash
could have a material adverse effect on the Company's capital resources. A
payment in shares of Common Stock could result in a substantial decrease in the
percentage ownership of the Company by its then-existing shareholders and could
negatively affect the market price of the Common Stock. The exercise of the
Purchase Option may require Alkermes to record a significant charge to earnings
for the purchase of in-process research and development. If Alkermes acquires
rights to RMPs pursuant to the Purchase Option, the Company will have continuing
obligations to pay royalties pursuant to the Product Development Agreement. See
"Business -- Collaborative Arrangements -- Alkermes Clinical Partners, L.P."
INTENSE COMPETITION
Alkermes faces and expects to continue to face intense competition in the
development and marketing of its product candidates from academic institutions,
government agencies, research institutions, biotechnology and pharmaceutical
companies, including its collaborators, and drug delivery companies. Competition
may arise from other drug delivery technologies, methods of preventing or
reducing the incidence of disease, including vaccines, and new small-molecule or
other classes of therapeutic agents that do not require the assistance of a drug
delivery system. There can be no assurance that developments by others will not
render the Company's product candidates or technologies obsolete or
noncompetitive or that the Company's collaborators will not choose to use
competing drug delivery methods. In addition, if Alkermes receives regulatory
approvals for products,
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manufacturing efficiency and marketing capabilities are likely to be significant
competitive factors. At the present time, Alkermes has no sales force or
marketing or commercial manufacturing experience. In addition, many of the
Company's competitors and potential competitors have substantially greater
capital resources, manufacturing and marketing experience, research and
development resources, and production facilities than does Alkermes. Many of
these competitors also have significantly greater experience than does Alkermes
in undertaking preclinical testing and clinical trials of new pharmaceutical
products and obtaining FDA and other regulatory approvals. See "Business --
Collaborative Arrangements" and "-- Competition."
With respect to RMP-7, the Company believes that there are currently no
products approved by the FDA or other regulatory authorities for increasing the
permeability of the blood-brain barrier. There are however many novel
experimental therapies being tested in the United States and Europe. With
respect to ProLease and Medisorb, the Company is aware that there are other
companies developing sustained-release delivery systems for pharmaceutical
products. In addition, other companies are developing new chemical entities
which, if developed successfully, could compete against sustained-release
formulations of products of the Company's collaborators. These chemical entities
are being designed to have different mechanisms of action or improved safety and
efficacy. In addition, Alkermes' collaborators may develop, either alone or with
others, products that compete with the development and marketing of the
Company's product candidates.
There can be no assurance that the Company will be able to compete
successfully with such companies. The existence of products developed by the
Company's competitors, or other products or treatments of which the Company is
not aware, or products or treatments that may be developed in the future, may
adversely affect the marketability of products developed by the Company.
RAPID AND SUBSTANTIAL TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are subject to rapid and
substantial technological change. There can be no assurance that the Company's
competitors will not succeed in developing products based on technologies
similar to its own or completely new technologies, which are more effective than
any that are being developed by the Company, or which render the Company's
technologies or product candidates obsolete and noncompetitive. The development
of such products could have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company's success will be dependent, in part, on obtaining patent
protection for its product candidates and those of its collaborators,
maintaining trade secret protection and operating without infringing upon the
proprietary rights of others.
The Company is aware of several United States patents issued to third
parties containing claims which could be construed to cover some of the
Company's product candidates utilizing its ProLease, RMP-7 and Medisorb delivery
systems. In one case, the Company has received a letter from the owner of a
patent asking the Company to compare the Company's Medisorb technology disclosed
in a published international patent application with such owner's patented
technology. The Company believes that the manufacture, use, offer for sale or
sale of its ProLease, RMP-7 or Medisorb product candidates would not infringe
any valid claim of any of the issued United States patents. However, there can
be no assurance that the claims of the issued United States patents are not
infringed by the proposed manufacture, use, offer for sale, or sale of these
products by the Company or its collaborators. There can be no assurance that a
third party will not file an infringement action, or that the Company would
prevail in any such action. There can be no assurance that the cost of defending
an infringement action would not be substantial and would not have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company is also aware of patent applications filed by third
parties in the United States and in various foreign countries which may cover
some of the Company's product candidates utilizing its ProLease, RMP-7 or
Medisorb delivery systems. Patents may issue from these applications which could
preclude the Company from manufacturing, using, offering for sale or selling
some of its ProLease, RMP-7 or Medisorb product
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candidates. Furthermore, there can be no assurance that any licenses under such
patents would be made available on commercially viable terms, if at all. Failure
to obtain any required license could prevent the Company from commercializing
one or more of its products.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
firms, including Alkermes, are generally uncertain and involve complex legal and
factual questions. In addition, there can be no assurance that the Company's or
its licensors' current patent applications will be allowed or that the claims of
any patents issued to Alkermes or its licensors (in connection with either the
Company's product candidates or the Partnership's product candidate, or both)
will be sufficiently broad to protect the Company's or the Partnership's
technology or to provide Alkermes or the Partnership with any competitive
advantages. Moreover, no assurance can be given that patents issued to Alkermes
(in connection with either the Company's product candidates or the Partnership's
product candidate, or both), or its respective licensors, if any, will not be
contested, narrowed, invalidated or circumvented. In addition, if Alkermes or
the Partnership is required to bring or defend against a charge of patent
infringement or to protect its own proprietary rights against third parties,
substantial costs could be incurred.
In the future, Alkermes may be required to obtain additional licenses to
patents or other proprietary rights of third parties. There can be no assurance
that any such licenses will be available on acceptable terms, if at all, and
failure to obtain such licenses could result in delays in marketing the
Company's products or the inability to proceed with the development, manufacture
or sale of product candidates requiring such licenses.
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors. See "Business -- Patents and Proprietary Rights."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The Company's research and preclinical testing and clinical trials of its
product candidates are, and the manufacturing and marketing of its products will
be, subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where the Company
intends to test and market its product candidates.
Prior to marketing, any product candidate developed by Alkermes or its
collaborators must undergo an extensive regulatory approval process, which
includes preclinical testing and clinical trials of such product candidate to
demonstrate safety and efficacy. This regulatory process can require many years
and the expenditure of substantial resources. Data obtained from preclinical
testing and clinical trials are subject to varying interpretations, which can
delay, limit or prevent FDA approval. In addition, changes in FDA approval
policies or requirements may occur or new regulations may be promulgated which
may result in delay or failure to receive FDA approval. Similar delays or
failures may be encountered in foreign countries. Delays and costs in obtaining
regulatory approvals would have a material adverse effect on the Company's
business, financial condition and results of operations.
There can be no assurance that RMP-7 used in conjunction with any
pharmaceuticals, ProLease or Medisorb formulations or any other product
candidate developed by Alkermes or its collaborators will receive manufacturing
and marketing approval in the United States or any foreign country on a timely
basis, if at all. In the case of RMP-7, the Company must obtain FDA approval for
RMP-7 for use in conjunction with a pharmaceutical agent. The Company is in
clinical trials with RMP-7 for use in conjunction with carboplatin in the
treatment of brain tumor. Carboplatin has not been approved for this specific
use and there can be no assurance that it or any other pharmaceutical agent to
be used with RMP-7 will receive regulatory approval. In the case of ProLease and
Medisorb, the Company or its collaborators must obtain FDA approval for each
formulation even if the pharmaceutical included
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in the formulation has received FDA approval as a standalone product. There can
be no assurance that any such formulation will receive FDA approval. If any
product were approved, there can be no assurance that any such product would be
capable of being produced in commercial quantities at reasonable costs and
successfully marketed. In addition, if regulatory approval of any product is
granted, it may entail limitations on the uses for which the product may be
marketed. Even if regulatory approval is obtained, any marketed drug and its
manufacturer are subject to continual review and any discovery of previously
unrecognized problems with a product or manufacturer could result in
restrictions on the product, including withdrawal of the product from the
market. See "Business -- Government Regulation."
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
The Company's business may be materially adversely affected by the
continuing efforts of government and third-party payors to contain or reduce the
costs of health care through various means. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control. In addition, an increasing emphasis on
managed care in the United States has and will continue to put pressure on
pharmaceutical pricing. Such initiatives and proposals, if adopted, could
decrease the price that the Company receives for any products it may develop and
sell in the future and thereby have a material adverse effect on the Company's
business, financial condition and results of operations. Further, to the extent
that such proposals or initiatives have a material adverse effect on other
pharmaceutical companies that are collaborators or prospective collaborators for
certain of the Company's potential products, the Company's ability to
commercialize its potential products may be adversely affected.
The Company's ability to commercialize pharmaceutical products may depend
in part on the extent to which reimbursement for the costs of such products and
related treatments will be available from government health administration
authorities, private health insurers, and other third-party payors. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third-party payors are increasingly challenging the prices charged
for medical products and services. There can be no assurance that any
third-party insurance coverage will be available to patients for any products
developed by the Company. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products, and by refusing, in
some cases, to provide coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for the Company's products, the market acceptance of these products would
be adversely affected.
NO MARKETING OR SALES EXPERIENCE
Alkermes currently has no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any product candidate
approved by the FDA, Alkermes must either develop a marketing and sales force or
enter into arrangements with third parties to market and sell its products.
There can be no assurance that Alkermes will successfully develop such
experience or that it will be able to enter into marketing and sales agreements
with others on acceptable terms, if at all. If the Company develops its own
marketing and sales capability, it will compete with other companies that
currently have experienced and well funded marketing and sales operations. To
the extent that the Company enters into co-promotion or other sales and
marketing arrangements with other companies, any revenues to be received by
Alkermes will be dependent on the efforts of others and there can be no
assurance that such efforts will be successful.
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PRODUCT LIABILITY EXPOSURE
The use of the Company's product candidates in clinical trials and the sale
of any resulting products may expose Alkermes to liability claims resulting from
the use of such product candidates or products. These claims might be made
directly by consumers or by pharmaceutical companies or others selling such
products. Alkermes has obtained product liability insurance for coverage for
claims arising from the use of its products in clinical trials in the amount of
$5 million per occurrence and $5 million in the aggregate. There can be no
assurance that such insurance will be sufficient to satisfy any liabilities that
may arise. The Company's existing coverage will not be adequate as the Company's
product development activities progress. There can be no assurance that adequate
insurance coverage will be available in the future at an acceptable cost, if at
all. An inability to obtain sufficient insurance coverage at an acceptable cost
or to otherwise protect against potential product liability claims could prevent
or limit the commercialization of any products by the Company. In addition,
there can be no assurance that any product liability claims will not have a
material adverse effect on the business, financial condition and results of
operations of Alkermes.
RESTRICTIVE LOAN COVENANTS
The Company's loan agreements contain certain restrictive financial
covenants that require the Company to maintain minimum levels of working
capital, net worth and liquid assets. Under the terms of one loan agreement, the
Company is required to maintain an unencumbered balance of cash and permitted
investments of at least $12.5 million and a ratio of unencumbered cash and
permitted investments to indebtedness of 2.0 to 1.0. The second loan agreement
requires the Company to maintain a net worth of not less than $20.0 million, a
maximum ratio of total liabilities to net worth of 0.5 to 1.0, a minimum current
ratio of 2.0 to 1.0 and a minimum unencumbered balance of cash and permitted
investments equal to the greater of (i) $20.0 million, (ii) the Company's
projected cash loss over the next 14 months and (iii) an amount equal to the
Company's cash loss for the previous six months multiplied by 2.33. Upon the
breach of any of these financial covenants or the occurrence of any other event
of default under this second loan agreement, the Company will be required to
deposit an amount equal to the then outstanding principal balance of the loan
plus three months interest into a restricted account at the bank. In addition,
the bank will have the right to liquidate such account and apply the proceeds to
repayment of the loan if the Company's unencumbered cash and investment balance
falls below $5.0 million. Upon the breach of any of these covenants or the
occurrence of any other event of default under the loan agreements, the
Company's business, financial condition and results of operations could be
materially adversely affected.
FUTURE SALES OF COMMON STOCK BY CERTAIN SHAREHOLDERS; POTENTIAL ADVERSE EFFECT
ON MARKET PRICE OF COMMON STOCK
As of January 31, 1997, 2,006,634 shares of Common Stock were issuable upon
the exercise of outstanding stock options and vesting of outstanding restricted
stock awards and 1,344,879 shares of Common Stock were issuable upon the
exercise of outstanding warrants. The issuance of Common Stock upon exercise of
such stock options and warrants and the vesting of awards, as well as future
sales of such Common Stock or of shares of Common Stock by existing
shareholders, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock. The foregoing shares will be freely
tradeable upon issuance.
The Selling Shareholder will acquire 2,000,000 shares of Common Stock upon
satisfaction of certain conditions precedent to a Stock Purchase Agreement dated
as of February 13, 1997. All of the Shares have been registered for resale
pursuant to the registration statement of which this Prospectus forms a part. In
addition, pursuant to a Stock Purchase Agreement dated as of February 13, 1997,
the Selling Shareholder has the right to include any of the Shares in an
underwritten public offering of Common Stock by Alkermes, subject to customary
underwriter cutback provisions. The sale by Selling Shareholder or the
perception that the Selling Shareholder could sell all of the Shares or a large
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amount of the Shares, whether pursuant to this Prospectus or otherwise, could
adversely affect the market price of the Common Stock.
Alkermes has issued to Genentech a Convertible Promissory Note, dated
January 31, 1995, in the principal amount of $3.5 million. The Note provides
that Alkermes has the option to convert the outstanding balance of the Note,
together with accrued and unpaid interest thereon, into shares of Common Stock.
Under certain circumstances, Genentech also has the right to convert the Note
into shares of Common Stock and to demand that the Common Stock be registered.
The Company's issuance of Common Stock, whether or not registered, upon exercise
by Alkermes or Genentech of its conversion rights, the perception that such
conversion could occur, the sale of such shares by Genentech, or the perception
that such sale could occur, could adversely affect the market price of the
Common Stock. See "Business -- Collaborative Arrangements -- Genentech, Inc."
In addition, in July 1995, Alkermes received certain prepaid royalties from
Schering-Plough pursuant to their amended Development and License Agreement.
Schering-Plough is entitled to terminate such Agreement under certain
circumstances, in which event Alkermes will be required to repay the prepaid
royalties with interest, either in cash or in Common Stock, at the Company's
election. Any Common Stock issued to Schering-Plough must be freely resalable.
The Company's issuance of Common Stock to Schering-Plough in repayment of the
prepaid royalties, the perception that it may do so, the sale of such shares by
Schering-Plough, or the perception that such sale could occur could adversely
affect the market price of the Common Stock. See "Business -- Collaborative
Arrangements -- Schering-Plough Corporation."
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies, including Alkermes, have historically been highly volatile, and the
market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products by the
Company or others, clinical trial results, developments concerning agreements
with collaborators, governmental regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs developed by the
Company or others, future sales of substantial amounts of Common Stock by
existing shareholders and general market conditions can have an adverse effect
on the market price of the Common Stock. In particular, the realization of any
of the risks described in these "Risk Factors" could have a dramatic and adverse
impact on such market price.
ANTI-TAKEOVER PROVISIONS
The Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"),
contains certain provisions which could delay or impede the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contests
involving the Company, even if such transaction would be beneficial to the
interests of the shareholders, or could discourage a third party from attempting
to acquire control of the Company. For example, the Board of Directors may, in
considering the best interests of the corporation or the effects of any action,
consider the interests of shareholders, employees, customers, creditors and the
community where the corporation is located, as well as long-term and short-term
interests of the corporation. Moreover, when a shareholder's voting power
reaches certain thresholds, among other consequences, its voting power is
removed, its ability to enter into certain business transactions with the
Company is limited, it may be required to pay fair value to certain existing
shareholders, and it will be required to disgorge any profits in the sale, if
any, of the Company's securities within certain time periods.
The Company's Second Amended and Restated Articles of Incorporation, as
amended, also contain certain provisions which could have a similar effect. For
example, the Company has authorized 5,000,000 shares of Capital Stock, which the
Company could issue without further shareholder approval and upon such terms and
conditions, and having such rights, privileges and preferences, as the Board of
Directors may determine. The Company has no current plans to issue any Capital
Stock.
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DILUTION; NO DIVIDENDS
Upon purchase of Common Stock, investors will experience substantial
dilution in the net tangible book value of the Common Stock they acquire.
Alkermes has not paid cash dividends on the Common Stock and does not
expect to do so in the foreseeable future.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends in the foreseeable future.
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BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus. See "Important Factors Regarding Forward-Looking
Statements."
GENERAL
Alkermes is applying the tools of biotechnology to the development of
sophisticated proprietary drug delivery systems. The Company is developing
product candidates based on three independent drug delivery technologies:
ProLease, which is designed to enable single injections lasting a few days to
several months to be made of proteins or peptides otherwise given by more
frequent injection; RMP-7, which is designed to enable increased drug delivery
to the brain by transiently opening the blood-brain barrier; and Medisorb, which
extends Alkermes' technology for injectable sustained release and is designed
for more traditional small molecule pharmaceutical compounds. Utilizing these
drug delivery systems, the Company is currently in various stages of preclinical
and clinical development of five product candidates.
OVERVIEW OF DRUG DELIVERY
Drug delivery companies apply proprietary technologies to create new
pharmaceutical products based on drugs developed by others. These products are
generally novel, cost-effective dosage forms that provide any of several
benefits including control of drug concentration in the blood, improved safety
and efficacy, improved patient compliance and ease of use, and expanded
indications. Drug delivery technologies can provide pharmaceutical companies
with a means of developing new products as well as expanding existing drug
franchises.
The drug delivery industry emerged to address the opportunities for
advanced delivery of traditional pharmaceutical compounds. These compounds are
generally stable, small molecules manufactured by conventional synthetic
methods, for which oral or transdermal (through the skin) delivery could be
enabled or enhanced by drug delivery technologies. Technologies such as passive
transdermal systems (patches) and advanced tablets and capsules have been
developed and successfully applied to a range of pharmaceutical products. In
addition, certain traditional small molecule pharmaceuticals are delivered by
means of encapsulation in polymeric microspheres.
With the advent of biotechnology, new opportunities in drug delivery have
arisen. Advances in biotechnology have facilitated the development of a new
generation of biopharmaceutical products based on proteins, peptides and nucleic
acids. At the same time, the scientific tools of biotechnology have enabled new
approaches to drug delivery based on exploiting particular biological phenomena,
for example utilizing natural properties of the blood-brain barrier to
facilitate drug delivery to the central nervous system.
Proteins and peptides present drug delivery challenges because they are
often large molecules which degrade rapidly in the bloodstream, have limited
ability to cross cell membranes, and generally cannot be delivered orally. As a
result, many proteins and peptides must be administered by injection, often
multiple times per day or per week. Consequently, the methods of administration
of proteins and peptides can limit their clinical applications to certain
disease states that warrant the expense and inconvenience of frequent injection.
Drug delivery to the central nervous system is complicated by the existence
of the blood-brain barrier, the layer of tightly joined endothelial cells which
comprise the walls of the capillaries of the brain and limit the free flow of
many blood constituents into the brain. Many drugs cannot easily cross the
blood-brain barrier and therefore must be administered in relatively high doses
that may result in systemic toxicity or high cost. Drugs with limited ability to
cross the blood-brain barrier include many water soluble chemotherapeutic and
anti-infective agents that are frequently used in the treatment of diseases
outside of the central nervous system.
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BUSINESS STRATEGY
Alkermes' business strategy is to acquire and develop drug delivery systems
to address significant new drug delivery opportunities arising in the
pharmaceutical industry. There are four key elements to the Company's strategy.
Develop and Acquire Broadly Applicable Drug Delivery Systems and Apply Them
to Multiple Pharmaceutical Products. The Company develops or acquires drug
delivery systems that have the potential to be applied to multiple proteins,
peptides, and small molecule pharmaceutical compounds to create new product
opportunities. For example, the Company developed the RMP-7 technology
independently and acquired the ProLease and Medisorb technologies. Alkermes
currently has five product candidates utilizing these technologies in
development.
Collaborate to Develop and Finance Product Candidates. In addition to
conducting product development activities on its own, the Company has entered
into collaborations with pharmaceutical and biotechnology companies and others
to develop product candidates incorporating the Company's technologies, provide
capital for product development and share development risk. Currently, the
Company is collaborating with major pharmaceutical companies, including
Genentech, Schering-Plough, Johnson & Johnson, and Janssen.
Apply Drug Delivery Systems to Both Approved Drugs and Drugs in
Development. Alkermes is applying its drug delivery technologies to novel
applications and formulations of pharmaceutical products that have already been
approved by the FDA or other regulatory authorities. In such cases, the Company
and its partners can develop a novel dosage form or application with the
knowledge of a drug's safety and efficacy profile and a body of clinical
experience from which to draw information for the design of clinical trials and
for regulatory submissions. Alkermes is also applying its technologies to new
pharmaceuticals that require a sustained-release delivery system for successful
development.
Establish Independent Product Development Capabilities. Alkermes has
assembled its own product development organization to enable the Company to
develop product candidates for itself and its collaborators based on its drug
delivery technologies. This capability gives Alkermes flexibility in structuring
development programs, and the ability to conduct both feasibility studies and
clinical development programs for its collaborators. For example, the Company
has developed RMP-7 independently and is currently conducting clinical trials of
ProLease hGH for Genentech.
DRUG DELIVERY TECHNOLOGY
The Company's current focus is on the development of broadly applicable
drug delivery technologies addressing two important drug delivery opportunities:
injectable sustained release of proteins, peptides, and small molecule
pharmaceutical compounds, and drug delivery to the brain across the blood-brain
barrier. The Company is developing product candidates based on three independent
drug delivery technologies.
ProLease: injectable sustained release of fragile proteins and peptides
ProLease is Alkermes' proprietary technology for the stabilization and
encapsulation of fragile proteins and peptides in microspheres made of common
medical polymers. The Company's proprietary expertise in this field lies in its
ability to preserve the biological activity of fragile drugs over an extended
period of time and to manufacture these formulations using components and
processes believed to be suitable for human pharmaceutical use. ProLease is
designed to enable novel formulations of proteins and peptides by replacing
frequent injections with controlled, sustained release over time. The Company
believes ProLease formulations have the potential to improve patient compliance
and ease of use by reducing the need for frequent injection, to lower costs by
reducing the need for frequent office visits, and to improve safety and efficacy
by reducing both the variability in drug levels inherent in frequent injections
and the aggregate amount of drug given over the course of therapy. In addition,
ProLease may provide access to important new markets currently inaccessible to
drugs that require frequent injections or are administered orally.
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<PAGE> 21
The ProLease formulation process has been designed to assure stability of
fragile compounds during the manufacturing process, during storage, and
throughout the release phase in the body. The formulation and manufacturing
process consists of two basic steps. First, the drug is formulated with
stabilizing agents and dried to create a fine powder. Second, the powder is
microencapsulated at very low temperatures. Incorporation of the drug substance
as a stabilized solid under very low temperatures is critical to protecting
fragile molecules from degradation during the manufacturing process and is a key
element of the ProLease technology. The microspheres are suspended in a small
volume of liquid prior to administration to a patient by injection under the
skin or into a muscle. The Company believes drug release from the ProLease drug
delivery system can be controlled to last from a few days to several months.
Drug release from the microsphere is controlled by diffusion of the drug
through the microsphere and by biodegradation of the polymer. These processes
can be modulated through a number of formulation and fabrication variables,
including drug substance and microsphere particle sizing and choice of polymers
and excipients.
The Company's experience with the application of ProLease to a wide range
of proteins and peptides has shown that high incorporation efficiencies and high
drug loads can be achieved. Proteins and peptides incorporated into ProLease
microspheres have maintained their integrity, stability, and biological activity
for up to 30 days in in vitro experiments conducted on formulations manufactured
at the preclinical and clinical trials scale.
The results of animal studies with several different ProLease formulations
have shown that ProLease can release targeted levels of drugs over extended
periods of time and that the pharmacodynamic response with ProLease formulations
can match that of continuous drug infusion. Suitable in vivo delivery patterns
in rodents and primates have been achieved with different therapeutic proteins.
In July 1996, Alkermes' scientists and their collaborators published results of
primate studies of ProLease hGH in Nature Medicine, a peer-reviewed scientific
journal. These results showed that single injections of ProLease hGH could
provide sustained release and biological effect of hGH in primates for several
weeks.
RMP-7: drug delivery across the blood-brain barrier
RMP-7 is a nine amino acid peptide based on bradykinin, a compound
occurring naturally in the body and known to affect vascular permeability. RMP-7
is a proprietary, synthetic analog of bradykinin developed by Alkermes to
increase transiently the permeability of the blood-brain barrier. Following
injection, RMP-7 increases permeability by triggering a brief relaxation of the
tight cellular junctions of the blood-brain barrier. During the time the tight
junctions are relaxed, permeability is increased and drug molecules in the
bloodstream can diffuse into the brain in concentrations greater than can
usually be achieved without RMP-7. Preclinical and clinical data also suggest
that RMP-7 increases the uptake of pharmaceuticals in the region of brain tumor
and other pathology.
RMP-7 exerts a pharmacologic effect on the vasculature of the brain and
does not itself bind to or serve as a carrier for the drug of which it is
facilitating delivery. In the clinical setting, RMP-7 is administered in
conjunction with the therapeutic or diagnostic agent. Timing of RMP-7
administration relative to that of the therapeutic or diagnostic agent is
determined on a drug-by-drug basis to optimize barrier permeability during the
time of peak drug plasma concentrations.
RMP-7 is intended to be marketed as an independent agent to increase the
utility of other therapeutic and diagnostic compounds given with it. The Company
believes RMP-7 may be administered along with cancer chemotherapeutic and
anti-infective agents not currently used in the treatment of central nervous
system disorders because of their limited ability to penetrate the blood-brain
barrier.
Medisorb: injectable sustained release of traditional small molecule
pharmaceuticals
Medisorb is a proprietary technology for encapsulating traditional small
molecule pharmaceuticals in microspheres made of common medical polymers. Like
ProLease, Medisorb is designed to enable
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novel formulations of pharmaceuticals by providing controlled, sustained release
over time. The Company believes Medisorb is suitable for encapsulating stable,
water soluble, small molecule pharmaceuticals at a large scale. The Company
believes that Medisorb formulations may have superior features of safety,
efficacy, compliance, and ease of use for drugs currently administered by
frequent injection or are administered orally. Drug release from the microsphere
is controlled by diffusion of the pharmaceutical through the microsphere and by
biodegradation of the polymer. These processes can be modulated through a number
of formulation and fabrication variables, including drug substance and
microsphere particle sizing and choice of polymers and excipients.
The Medisorb drug delivery system uses manufacturing processes different
from the ProLease manufacturing process. The formulation and manufacturing
process consists of three basic steps. First, the drug is combined with a
polymer solution. Second, the drug/polymer solution is mixed in water to form
liquid microspheres (an emulsion). Third, the liquid microspheres are dried to
produce finished product. The microspheres are suspended in a small volume of
liquid prior to administration to a patient by injection under the skin or into
a muscle. Drug release from the Medisorb drug delivery system can be controlled
to last from a few days to several weeks.
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PRODUCT CANDIDATES IN DEVELOPMENT
The following table summarizes the primary indications, delivery route,
development status and collaborative partner for each of the Company's product
candidates. This table is qualified in its entirety by reference to the more
detailed descriptions appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRODUCT DELIVERY COLLABORATIVE
CANDIDATE INDICATION ROUTE STATUS(1) PARTNER
- ------------- ---------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
ProLease
hGH Short Stature SR Injection(2) Phase I/II Genentech
Intron A Infectious Disease, SR Injection Preclinical Schering-Plough
Cancer
Undisclosed Hormone-Mediated SR Injection Preclinical Johnson & Johnson
Disorders
RMP-7
RMP-7 and Recurrent Malignant Intravenous Phase II complete Alkermes Clinical
Carboplatin Glioma (Europe) Partners, L.P.
Recurrent Malignant Intravenous Phase II Alkermes Clinical
Glioma (U.S.) Partners, L.P.
Recurrent Malignant Intra-arterial Phase II Alkermes Clinical
Glioma Partners, L.P.
Metastatic Brain Tumor Intravenous Phase I/II Alkermes Clinical
Partners, L.P.
Metastatic Brain Tumor Intra-arterial Phase I/II Alkermes Clinical
Partners, L.P.
Pediatric Brain Tumor Intravenous Phase I/II(3) Alkermes Clinical
Partners, L.P.
Medisorb
Undisclosed Undisclosed SR Injection Initial Phase I Janssen
complete
</TABLE>
- ---------------
(1) "Phase II" clinical trials indicates that the compound is being tested in
humans for safety, optimal dosage, and efficacy for the targeted indication.
"Phase I/II" clinical trials indicates that the compound is being tested in
humans for safety and preliminary indications of biological activity in a
limited patient population. "Phase I" clinical trials indicates that the
compound is being tested in humans for preliminary safety and pharmacologic
profile in a volunteer population. "Preclinical" indicates that Alkermes is
conducting efficacy, pharmacology, and/or toxicology testing of a lead
compound in animal models or biochemical or cell culture assays.
(2) Sustained Release Injection.
(3) This clinical trial is being sponsored and conducted by the Pediatric Branch
of the National Cancer Institute.
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PROLEASE
The Company's strategy is to generate multiple product opportunities by
applying ProLease technology to the development of superior formulations of
proteins and peptides that the Company believes address significant market
opportunities. The Company believes these formulations have the potential to
expand the utilization of these products and improve the competitive advantage
of its collaborators in major markets.
The product development plan for individual ProLease formulations is
expected to proceed in several stages. First, the Company, either on its own or
pursuant to a collaboration, conducts initial feasibility work to test various
ProLease formulations for a particular drug in vitro and in vivo. Following the
successful completion of the feasibility stage, preclinical development and
manufacturing scale-up activities directed toward the initiation of clinical
trials of the ProLease formulation would be conducted in collaboration with a
partner. See "-- Collaborative Arrangements."
ProLease Human Growth Hormone
Alkermes is developing a ProLease formulation of Genentech's hGH in
collaboration with Genentech. Growth hormone deficiency results in short stature
and potentially other developmental defects. Genentech is the leading supplier
of hGH in the United States. hGH is approved for use in the treatment of
children with growth hormone deficiency, Turner's syndrome, chronic renal
insufficiency, and other indications and is being tested in additional
indications in adults. hGH is currently administered frequently, often daily, by
subcutaneous injection.
In February 1996, Alkermes commenced a Phase I clinical trial of ProLease
hGH in 13 growth hormone deficient adults. The study was completed in August
1996. In November 1996, Alkermes commenced a multi-center Phase I/II clinical
trial of ProLease hGH in growth hormone deficient children. The trial is being
conducted in up to 10 medical centers in the United States and is expected to
enroll up to 36 patients.
ProLease Alpha Interferon
Alkermes is developing a ProLease formulation of Schering-Plough's Intron A
(interferon alpha-2b) product in collaboration with Schering-Plough.
Schering-Plough is a leading supplier of alpha interferon worldwide. Intron A is
approved for use in several infectious diseases and certain oncology
indications. Intron A is currently administered by frequent injection.
Schering-Plough is conducting preclinical studies and will be responsible for
clinical development.
ProLease Product for Hormone-Mediated Disorders
Alkermes is developing a ProLease formulation of a product for the
treatment of hormone-mediated disorders with Johnson & Johnson. The product
development program was announced in November 1996 following the successful
completion by Alkermes of a feasibility study initiated in early 1996. Johnson &
Johnson is conducting preclinical studies and will be responsible for clinical
development.
Additional ProLease Formulations
Alkermes continues to develop ProLease formulations of other unspecified
compounds pursuant to feasibility agreements with several pharmaceutical and
biotechnology companies.
RMP-7
The Company's strategy to date has been to advance RMP-7 through clinical
trials while establishing its safety, permeability effects in humans, and
efficacy when used in combination with other drugs. In 1992, Alkermes formed the
Partnership and transferred to it substantially all rights to
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RMP technology. Alkermes has the option to purchase all of the limited
partnership interests in the Partnership. See "-- Collaborative
Arrangements -- Alkermes Clinical Partners, L.P."
RMP-7 has the potential to be used in combination with a variety of agents
in various disease settings. The Company's goal is to expand the applications of
RMP-7 through its own development activities and, when appropriate,
collaborations with pharmaceutical companies. Alkermes may collaborate with
companies having drugs whose uses could be expanded to include central nervous
system indications. In such cases, Alkermes and its partner could collaborate in
the clinical development of the combination without any exchange of product
rights. Alkermes may also collaborate with development and marketing partners
for RMP-7 in various business areas and geographic territories. In such cases,
Alkermes could license rights to RMP-7 to its partner, subject to the rights of
the Partnership. See "-- Collaborative Arrangements -- Alkermes Clinical
Partners, L.P."
Brain Tumor
RMP-7 is being tested initially for the treatment of recurrent malignant
glioma, an aggressive form of primary brain tumor. Alkermes believes that RMP-7
may have applicability to the treatment and diagnosis of other types of brain
tumors. In that regard, the Company initiated in February 1996 a Phase I/II
clinical trial of RMP-7 in patients with metastatic brain tumor. The Company, in
collaboration with the National Cancer Institute ("NCI"), also initiated a Phase
I/II clinical trial in July 1996 in pediatric patients with brain tumor.
Brain tumors can be classified into two major groups: primary brain tumors,
which originate and recur in the brain, and metastatic brain tumors, which are
tumors that have spread to the brain from other parts of the body. Each year in
the United States and Europe a total of 40,000 patients are diagnosed with
primary brain tumors, of which approximately 60%-70% are malignant glioma, and
150,000 patients are diagnosed with metastatic brain tumors.
Current treatment for brain tumor is limited and inadequate. Standard
treatment typically involves surgery to remove cancerous tissue, followed by
radiation therapy. After initial treatment with surgery and/or radiotherapy,
brain tumors often recur. Upon recurrence, tumors typically progress rapidly,
neurological function and quality of life deteriorate and patients die within
months. Chemotherapy has played only a limited role in treatment, in part due to
the limited access of many chemotherapeutic agents to the brain because of the
normally restrictive blood-brain barrier. Carboplatin is a chemotherapeutic
agent approved for use by the FDA and other regulatory authorities worldwide for
use in the treatment of various tumor types outside of the brain, but is limited
in its ability to penetrate into the brain. RMP-7 is designed to enable more
effective use of chemotherapeutic agents like carboplatin in the treatment of
brain tumors by transiently increasing the permeability of the blood-brain
barrier.
Alkermes is pursuing two alternative treatment strategies for RMP-7 and
carboplatin in patients with malignant brain tumor: intravenous and
intra-arterial administration. The Company believes that pursuing both treatment
methods strengthens the scientific foundation of the clinical trials program and
increases the likelihood of observing a treatment effect in patients. If the
results of the Company's current Phase II clinical trials are favorable, the
Company intends to test the combination of RMP-7 and carboplatin or other
chemotherapeutic agents earlier in the treatment of primary malignant glioma,
prior to recurrence.
Recurrent Malignant Glioma Clinical Trials
The Company's clinical strategy for RMP-7 has been to establish a
foundation of safety and pharmacologic effect of increasing blood-brain barrier
permeability prior to entering Phase II efficacy clinical trials of RMP-7
administered in combination with carboplatin. To date, over 500 human subjects
have received RMP-7 in a series of clinical trials in all indications studied.
Through the Phase I and Phase I/II clinical trials, RMP-7 was shown to have a
good safety profile in volunteers and patients. Transient flushing was the most
consistent adverse event noted and nausea and vomiting were
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determined to be the dose limiting toxicity. There was no evidence of increased
toxicity associated with the combination of RMP-7 and carboplatin, and the drug
combination was generally well tolerated by patients.
Based on the successful completion of Phase I and Phase I/II clinical
trials, Alkermes initiated multiple Phase II clinical trials both of intravenous
and intra-arterial RMP-7 and carboplatin in patients with recurrent malignant
glioma. Three multi-center Phase II clinical trials of intravenous RMP-7 and
carboplatin and one multi-center Phase II clinical trial of intra-arterial RMP-7
and carboplatin were designed and initiated.
European Intravenous Phase II Clinical Trials: ALK01-013 and ALK01-019
In Europe, two separate non-controlled, open label Phase II clinical trials
of intravenous RMP-7 and carboplatin in patients with recurrent malignant glioma
commenced in the first quarter of 1995. Patient enrollment was completed in May
1996, and preliminary results from the two clinical trials were announced in
December 1996.
The two clinical trials enrolled differing patient populations. ALK01-013
("Study-013") enrolled patients whose brain tumors had recurred following
previous treatment with surgery and radiotherapy. Such patients had not
previously been treated with chemotherapy. ALK01-019 ("Study-019") enrolled
patients whose brain tumors had recurred following previous treatment with
surgery, radiotherapy, and chemotherapy.
In both clinical trials, patients received treatment cycles of RMP-7 and
carboplatin approximately once every four weeks. Each cycle consisted of a
15-minute intravenous infusion of carboplatin and a concurrent 10-minute
intravenous infusion of RMP-7. The prospectively defined endpoints of the
clinical trials included response rates over the first four cycles of treatment
as determined by stabilization or improvement for a minimum of two cycles of
treatment as measured by three standardized tests of neurological impairment and
patient performance status, and stabilization or reduction in tumor volume for a
minimum of two cycles as measured with contrast-enhanced MRI.
In Study-013, 45 patients were treated at nine medical centers in the
United Kingdom. The combination of RMP-7 and carboplatin was generally well
tolerated. Of the patients treated, 61% to 91% responded to treatment as
measured by three tests of neurological impairment and performance status. In
addition, 79% of patients responded to the treatment as measured by the size of
their tumor as measured with contrast-enhanced MRI.
An independent analysis conducted by a statistician from the Medical
Research Council ("MRC"), Cambridge, England, compared the effect on survival of
treatment with RMP-7 and carboplatin versus a group of historical control
patients matched on important prognostic factors. All comparisons favored the
group treated with RMP-7 and carboplatin versus the control group. This finding
was statistically significant (hazard ratio 1.9-2.2, p<=0.02), after accounting
for the effects of prognostic factors.
In Study-019, 42 patients were treated at 11 medical centers in the United
Kingdom, France and Sweden. Treatment with the combination of RMP-7 and
carboplatin was generally well tolerated. Of the patients treated, 40% to 59%
responded to treatment as measured by three tests of neurological impairment and
performance status. In addition, 24% of patients responded to the treatment as
measured by the size of their tumor with contrast-enhanced MRI. The MRC did not
perform a comparison of patients in Study-019 to historical controls due to the
lack of a database of comparable patients who had failed surgery, radiotherapy
and chemotherapy.
There can be no assurance that the results of the European clinical trials
will be sufficient for the Company to obtain approval to market RMP-7 in Europe,
or that the European regulatory bodies will not require additional clinical
trials. In addition, there can be no assurance that the results of the United
States Phase II trials will support the results of the European trials.
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United States Intravenous Phase II Clinical Trial: ALK01-017
In the United States, a Phase II clinical trial of intravenous RMP-7 and
carboplatin commenced in March 1995 and is being conducted at 10 medical
centers. Enrollment of 120 patients was completed in May 1996. Preliminary
results from this clinical trial are expected in the first half of 1997.
The clinical trial is designed as a double-blind, placebo-controlled study
comparing treatment with intravenous RMP-7 and carboplatin to treatment with
carboplatin alone in patients with recurrent malignant glioma. Patients receive
treatment cycles of RMP-7 and carboplatin once approximately every four weeks.
Each cycle consists of an approximately 45-minute intravenous infusion of
carboplatin and a 10-minute intravenous infusion of RMP-7. The prospectively
defined endpoints include time to tumor progression as measured by an increase
of tumor volume measured with contrast-enhanced MRI of greater than 50%, and
three separate measurements of patients' functional capacity, neurological
impairment, and quality of life. No assurance can be given that such trial will
be completed in a timely manner, if at all, or that any results obtained will
support those from the European studies.
United States Intra-arterial Phase II Clinical Trial: ALK01-031
Alkermes initiated a multi-center Phase II clinical trial in the United
States of intra-arterial RMP-7 and carboplatin in March 1996. Enrollment of 51
patients was completed in September 1996 at nine medical centers. Preliminary
results from the study are expected in the first half of 1997.
The clinical trial is designed as a non-controlled open label study of the
treatment with RMP-7 and carboplatin administered intra-arterially in patients
with recurrent malignant glioma. Patients receive treatment cycles of RMP-7 and
carboplatin once approximately every four weeks. Each cycle consists of an
approximately 45-minute intra-arterial infusion of carboplatin and a 10-minute
intra-arterial infusion of RMP-7. The prospectively defined endpoints include
time to tumor progression as measured by an increase of tumor volume measured
with contrast-enhanced MRI of greater than 50%, and three separate measurements
of patients' functional capacity, neurological impairment, and quality of life.
Metastatic Brain Tumor Clinical Trial
Alkermes initiated a multi-center Phase I/II non-controlled, open label
clinical trial in Europe of intravenous RMP-7 and carboplatin in patients with
metastatic brain tumor in February 1996. The study is being conducted at two
medical centers and is expected to enroll approximately 14 patients.
Alkermes also initiated a Phase I/II non-controlled, open label clinical
trial in the United States of intra-arterial RMP-7 and carboplatin in patients
with metastatic brain tumor in October 1995. The study is being conducted at one
medical center and is expected to enroll approximately 18 patients.
Pediatric Brain Tumor Clinical Trial
In July 1996, Alkermes, in collaboration with the NCI, initiated a
non-controlled, open label Phase I/II clinical trial of intravenous RMP-7 and
carboplatin in pediatric brain tumor patients who had failed other therapies.
The study is being sponsored and conducted by the Pediatric Branch of the NCI
and is expected to enroll approximately 24 patients.
MEDISORB
The Company's strategy is to generate multiple product opportunities by
applying Medisorb technology to the development of superior formulations of
small molecule pharmaceutical products. The Company believes these formulations
have the potential to expand the utilization of these products and improve the
competitive advantage of its collaborators in major markets.
The product development plan for individual Medisorb formulations is
expected to proceed in several stages. First, the Company, either on its own or
pursuant to a collaboration, conducts initial
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feasibility work to test various Medisorb formulations for a particular drug in
vitro and in vivo. Following the successful completion of the feasibility stage,
preclinical development and manufacturing scale-up activities directed toward
the initiation of clinical trials of the Medisorb formulation would be conducted
in collaboration with a partner. See "-- Collaborative Arrangements."
Undisclosed Medisorb Product Candidate
Alkermes is developing and manufacturing a Medisorb product candidate in
collaboration with Janssen. In 1996, Janssen completed initial Phase I clinical
trials of the Medisorb product candidate. Janssen is responsible for conducting
all clinical trials.
COLLABORATIVE ARRANGEMENTS
The Company's business strategy includes forming collaborations to provide
technological, financial, marketing, manufacturing and other resources. The
Company has entered into several collaborations.
Genentech, Inc.
In November 1996, Alkermes announced the completion of a Phase I clinical
trial of a ProLease hGH formulation in adults. Based in part on the successful
completion of the Phase I trial, Genentech exercised its option to enter into a
license agreement, and obtained from Alkermes a license coexclusive in the
United States and exclusive in the rest of the world for a ProLease formulation
of hGH. Under the terms of the agreement, Genentech could provide an estimated
$20.0 million in development funding for scale up activities, clinical trials
materials, manufacturing, and clinical trial expenses over the development
period. In addition, Alkermes could receive milestone payments of approximately
$10.0 million, if the ProLease hGH formulation is successfully developed and is
approved by regulatory authorities. Alkermes will be responsible for conducting
Phase I/II clinical trials and manufacturing the ProLease hGH formulation and is
to receive manufacturing revenues and royalties on sales. Alkermes also granted
Genentech an extension until November 1997 of its option to license ProLease for
another Genentech undisclosed protein.
Genentech has the right to terminate the agreement for any reason upon 30
days' written notice or, if the Company has begun manufacturing the ProLease
product for commercial sale, upon six months' written notice. In addition,
either party may terminate the agreement upon the other party's material default
which is not cured within 90 days of written notice, or upon the other party's
insolvency or bankruptcy.
To fund the Company's activities during the first stage of its
collaboration with Genentech, Genentech loaned the Company $3.5 million pursuant
to a convertible promissory note dated January 31, 1995 (the "Note"). The
outstanding principal amount of the Note accrues interest at the prime rate of
interest as reported by the Bank of American NT & SA from time to time. The
outstanding principal amount of the Note and accrued but unpaid interest thereon
becomes due and payable on January 31, 2000.
Under the terms of the Note, the Company has the option to convert, at any
time, all outstanding principal and accrued but unpaid interest thereon (as such
amount may exist from time to time, the "Conversion Amount") into shares of
Common Stock at the 20-day average closing price immediately preceding the
conversion date (the "Conversion Price"). In addition, Genentech shall have the
right to convert the Conversion Amount into shares of Common Stock at the
Conversion Price if at any time the total cash, cash equivalents and marketable
debt instruments of the Company shall be less than the sum of (i) all
indebtedness which ranks senior to the indebtedness evidenced by the Note, and
(ii) the Conversion Amount. Genentech also has the right to demand that the
Common Stock be registered under certain circumstances.
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Schering-Plough Corporation
Under an amended development and license agreement with Schering-Plough,
the Company has agreed to develop an injectable delivery system which
incorporates Intron A as an active ingredient utilizing the Company's ProLease
delivery system and has granted to Schering-Plough an exclusive worldwide
royalty bearing license to manufacture, use and sell any such system that may be
developed pursuant to the amended agreement. Under the amended agreement,
Schering-Plough will also be responsible for conducting clinical trials and
securing regulatory approvals. The amended agreement provides for development
funding to the Company and provides for certain payments to be made by
Schering-Plough to the Company for its achievement of certain milestones. The
Company and Schering-Plough entered into a prepaid royalty agreement pursuant to
which Schering-Plough has prepaid certain royalties. Payments to the Company
were approximately $7.0 million through December 31, 1996, and future milestone
payments could exceed an additional $5.0 million, not including royalties.
Schering-Plough has the right to terminate the amended agreement upon 60
days' written notice upon the occurrence of certain events, including if the
Company fails to meet product specifications or an agreed upon delivery
schedule, the results of a safety and pharmacokinetics study provide Schering-
Plough with reasonable justification not to proceed to a Phase II clinical
trial, the use of the product results in adverse effects that justify
termination of clinical trials, Schering-Plough is unable to manufacture the
product on a commercial scale, or upon completion or permanent discontinuation
of the clinical trials. Either party may terminate the amended agreement upon
the insolvency or bankruptcy of the other party or upon a breach by the other
party which has not been cured after 60 days' notice. Schering-Plough also has
the right to terminate the amended agreement upon 90 days' written notice or
continue the development project on its own in the event Alkermes fails by an
agreed upon date to deliver batches of a ProLease formulation of Intron A that
meet agreed upon specifications. In the event Schering-Plough elects to continue
the development project after termination, it will remain obligated to pay
Alkermes milestone payments and royalties upon commercial sale. In the event
Schering-Plough terminates the amended agreement for any reason, Alkermes must
repay the prepaid royalties received from Schering-Plough with interest. Such
repayment obligation would be evidenced by an interest-bearing note and would be
payable in full on the third anniversary of the date of the note. Alkermes will
have the right, subject to the satisfaction of certain conditions, to satisfy
its repayment obligation through the issuance of shares of its Common Stock. The
number of shares that may be issued would be based upon the average closing
price of Alkermes Common Stock on the Nasdaq National Market for the 30 business
days immediately preceding the date on which the shares are delivered. Any
Common Stock issued to Schering-Plough must be freely resalable.
Johnson & Johnson
In November 1996, the Company entered into a development and license
agreement with Ortho Pharmaceutical Corporation, an affiliate of Johnson &
Johnson, for the development of a ProLease formulation of a Johnson & Johnson
proprietary compound (the "J&J Product Candidate"). The Company is developing a
sustained release formulation of this compound to treat hormone-mediated
disorders.
Pursuant to the development agreement, Johnson & Johnson obtained an
exclusive, worldwide, royalty bearing license to make, use and sell products
resulting from such agreement. In exchange, Johnson & Johnson is to provide the
Company with research and development funding, milestone payments and royalty
payments based on sales, if any, of the J&J Product Candidate. Development
funding and milestone payments could aggregate approximately $20 million,
assuming the development of the J&J Product Candidate proceeds in accordance
with its development plan. Johnson & Johnson is to be responsible for conducting
clinical trials and securing regulatory approvals and, together with its
affiliates, is to be responsible for the marketing of any products that result
from the collaboration. The Company expects to manufacture any such products for
commercial sales.
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Johnson & Johnson may terminate the development agreement for any reason,
upon 90 days' written notice if such termination notice occurs prior to filing a
New Drug Application ("NDA") with the FDA, or upon six months' written notice if
such notice occurs subsequent to such a filing. In addition, either party may
terminate the development agreement and the related manufacturing agreement upon
a material default or breach by the other party of such agreement which is not
cured within 60 days' notice, or upon the other party's insolvency or
bankruptcy.
Janssen Pharmaceutica International
Pursuant to a development agreement, the Company is collaborating with
Janssen in the development of sustained release formulations, utilizing the
Medisorb technology, of an undisclosed Janssen product candidate. Under the
development agreement, the Company is responsible for production of the Janssen
product candidate for clinical trials. Janssen is responsible for conducting
clinical trials of the Janssen product candidate and securing all necessary
regulatory approvals.
In October 1996, the Company announced the expansion of the development
agreement. Janssen has agreed to provide development funding of approximately
$20 million over a two-year period, assuming the product continues in clinical
development. The funding will be used for manufacturing clinical trials material
and scale up for commercial sale.
Under related license agreements, Janssen and an affiliate have exclusive
worldwide licenses from the Company to manufacture, use and sell the Janssen
product candidate. If Janssen decides to employ third-party suppliers of the
commercialized Janssen product developed under the development agreement, the
Company has a right of first refusal for the manufacture and supply of such
product, and component bio-absorbable polymers thereof. Under the license
agreements, Janssen is required to pay Alkermes certain royalties with respect
to all Medisorb formulations of the Janssen product sold to customers. Janssen
can terminate the development agreement or the license agreements upon 30 days'
prior written notice.
Alkermes Clinical Partners, L.P.
In April 1992, Units consisting of limited partnership interests in the
Partnership and warrants to purchase the Company's Common Stock were sold to
investors in a private placement (the "Private Placement"). The proceeds of the
$46 million Private Placement have been used to fund the further development and
clinical testing of RMPs for human pharmaceutical use in the United States,
Canada and Europe. Such funding was not sufficient to complete clinical trials
and seek regulatory approval of RMP-7. Since the completion of funding from the
Partnership, which ended at June 30, 1996, Alkermes has used its own resources,
and intends to continue to use its own resources, to develop RMP-7, but may be
forced to seek alternative sources of funding, including additional
collaborators. The Company is required to fund the development of RMP-7 to
maintain its Purchase Option with the Partnership.
Pursuant to a product development agreement, dated March 6, 1992, Alkermes
transferred substantially all of its rights to the RMP technology to the
Partnership. Alkermes has an option to purchase all of the limited partnership
interests in the Partnership and thereby reacquire the transferred technology.
The Partnership may terminate the research program for any or all products
upon the affirmative vote of 75% of the directors of the general partner of the
Partnership, Alkermes Development Corporation II ("ADC II"), a wholly owned
subsidiary of Alkermes, that such research is not feasible or is uneconomic. The
Partnership may terminate the marketing program for any or all products upon the
affirmative vote of 75% of the directors of ADC II based on the directors' good
faith business judgment. The Partnership may also terminate the research or
marketing program if Alkermes has materially breached the agreement and not
cured such breach within 30 days' written notice. Both parties may terminate the
research or marketing program upon mutual consent to terminate or upon the
insolvency or bankruptcy of the other party.
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The Partnership has granted Alkermes an exclusive interim license to
manufacture and market RMPs for human pharmaceutical use in the United States
and Canada. Upon the first marketing approval of an RMP product by the FDA,
Alkermes is obligated to make a payment to the Partnership equal to 20% of the
aggregate capital contributions of all limited partners. Additionally, Alkermes
will pay royalty payments equal to 12% of United States and Canadian revenues
and, in certain circumstances, 10% of European revenues from any sales of RMPs
by Alkermes. The interim license will terminate if Alkermes does not exercise
its option to acquire all of the limited partners' interests in the Partnership.
Alkermes can exercise its technology purchase option by making a payment to the
partnership equal to 80% of the aggregate capital contributions of all limited
partners in addition to royalty payments in the same percentages as provided for
under the interim license agreement.
The general partner of the Partnership is ADC II. Fifty percent of the
members of the board of directors of ADC II are persons not affiliated with
Alkermes. Such non-affiliated persons were nominated by the sales agent for the
Private Placement. The sales agent will continue to have the right to nominate
at least half of the members of ADC II's board of directors until ADC II or some
other affiliate of Alkermes ceases to be the general partner of the Partnership,
the Partnership terminates in accordance with the terms of the Limited
Partnership Agreement or the sales agent's venture capital investment
partnership ceases to be a limited partner of the Partnership.
MANUFACTURING
Each of the Company's three drug delivery systems utilizes a distinct
manufacturing process.
ProLease
ProLease manufacturing involves microencapsulation of drug substances
provided to Alkermes by its collaborators in small polymeric microspheres using
extremely cold processing conditions suitable for fragile molecules. The
ProLease manufacturing process consists of two basic steps. First, the drug is
formulated with stabilizing agents and dried to create a fine powder. Second,
the powder is microencapsulated at very low temperatures.
Alkermes has completed construction of an in-house pilot production
facility that has been validated by the Company for manufacturing in accordance
with GMP. The facility is being used to manufacture product candidates
incorporating its ProLease sustained-release delivery system for use in clinical
trials. This facility is not capable of manufacturing products on a commercial
scale. Pursuant to agreements with certain of its collaborators, Alkermes has
the right to manufacture ProLease products for commercial sale. Alkermes has
initiated the design of a commercial scale ProLease manufacturing facility of
approximately 20,000 square feet.
RMP-7
RMP-7 is a small peptide manufactured using standard synthetic techniques.
Alkermes relies on an independent European pharmaceutical company for the
manufacture and supply of RMP-7. Scale up of RMP-7 manufacturing process to
support international clinical trials and commercial launch has been completed.
Alkermes believes that, if necessary, there are other companies which could
manufacture and supply its requirements for RMP-7.
Medisorb
The Medisorb manufacturing process is significantly different from the
ProLease process and is based on a method of encapsulating small molecule drugs,
provided by the Company's collaborator, in polymers using a large-scale
emulsification. The Medisorb manufacturing process consists of three basic
steps. First, the drug is combined with a polymer solution. Second, the
drug/polymer solution is mixed in water to form liquid microspheres (an
emulsion). Third, the liquid microspheres are dried to produce finished product.
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Alkermes owns a 14,000 square foot GMP sterile manufacturing facility in
Wilmington, Ohio. Alkermes is manufacturing a product candidate incorporating
its Medisorb sustained-release delivery system for use by Janssen in clinical
trials at this facility. It does not manufacture such product candidates on a
commercial scale. Alkermes has initiated the design of an addition to and
modification of its current manufacturing facility for commercial scale Medisorb
manufacturing.
The manufacture of the Company's products for clinical trials and
commercial purposes is subject to current GMP and other federal regulations. The
Company has never operated an FDA-approved manufacturing facility, and there can
be no assurance that it will obtain necessary approvals for commercial
manufacturing.
If Alkermes is not able to develop manufacturing capacity and experience or
to continue to contract for manufacturing capabilities on acceptable terms, its
ability to conduct preclinical testing and clinical trials will be compromised,
and delays in obtaining regulatory approvals might result, as well as commercial
sales if approvals are obtained. Such delays could materially adversely affect
the Company's competitive position and its business, financial condition and
results of operations.
MARKETING
Alkermes plans to market and sell RMP-7, if successfully developed and
approved, either directly or through co-promotion or other licensing
arrangements with third parties. Such arrangements may be exclusive or
nonexclusive and may provide for marketing rights worldwide or in a specific
market.
Alkermes intends to market any ProLease and Medisorb products through its
corporate partners. Alkermes has entered into development agreements, including
sales and marketing, for ProLease product candidates with Genentech,
Schering-Plough and Johnson & Johnson, and for a Medisorb product candidate with
Janssen. See "-- Collaborative Arrangements."
Alkermes currently has no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any product candidate
approved by the FDA, Alkermes must either develop a marketing and sales force or
enter into arrangements with third parties to market and sell its products.
There can be no assurance that Alkermes will successfully develop such
experience or that it will be able to enter into marketing and sales agreements
with others on acceptable terms, if at all. If the Company develops its own
marketing and sales capability, it will compete with other companies that
currently have experienced and well-funded marketing and sales operations. To
the extent that the Company enters into co-promotion or other sales and
marketing arrangements with other companies, any revenues to be received by
Alkermes will be dependent on the efforts of others and there can be no
assurance that such efforts will be successful.
COMPETITION
The biotechnology and pharmaceutical industries are subject to rapid and
substantial technological change. Alkermes will continue to face intense
competition in the development, manufacturing, marketing, and commercialization
of its product candidates from academic institutions, government agencies,
research institutions, biotechnology and pharmaceutical companies, including its
collaborators, and drug delivery companies. There can be no assurance that
developments by others will not render the Company's product candidates or
technologies obsolete or noncompetitive, or that the Company's collaborators
will not choose to use competing drug delivery methods. At the present time,
Alkermes has no sales force, or marketing or commercial manufacturing
experience. In addition, many of the Company's competitors and potential
competitors have substantially greater capital resources, manufacturing and
marketing experience, research and development resources, and production
facilities than does Alkermes. Many of these competitors also have significantly
greater experience than Alkermes in undertaking preclinical testing and clinical
trials of new pharmaceutical products and obtaining FDA and other regulatory
approvals.
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With respect to RMP-7, the Company believes that there are currently no
products approved by the FDA for increasing the permeability of the blood-brain
barrier. There are, however, many novel experimental therapies for the treatment
of brain tumor and central nervous system infections being tested in the United
States and Europe.
With respect to ProLease and Medisorb, the Company is aware that there are
other companies developing sustained-release delivery systems for pharmaceutical
products. In addition, other companies are developing new chemical entities
which, if developed successfully, could compete against sustained-release
formulations of products of the Company's collaborators. These chemical entities
are being designed to have different mechanisms of action or improved safety and
efficacy. In addition, the Company's collaborators may develop, either alone or
with others, products that compete with the development and marketing of the
Company's product candidates.
There can be no assurance that the Company will be able to compete
successfully with such companies. The existence of products developed by the
Company's competitors, or other products or treatments of which the Company is
not aware, or products or treatments that may be developed in the future, may
adversely affect the marketability of products developed by the Company.
PATENTS AND PROPRIETARY RIGHTS
The Company's success will be dependent, in part, on its ability on
obtaining patent protection for its product candidates and those of its
collaborators, maintaining trade secret protection and operating without
infringing upon the proprietary rights of others.
The Company has a proprietary portfolio of patent rights and exclusive
licenses to patents and patent applications. The Company has filed numerous
United States and international patent applications directed to composition of
matter as well as processes of preparation and methods of use, including
applications relating to: permeabilizers, certain rights to which have been
licensed to the Partnership, of which one United States patent was issued in
each of May 1992, December 1993, April 1996 and December 1996; carriers for
enabling passage into the brain of therapeutic compounds, of which one United
States patent was issued in each of October 1992, January 1993 and June 1996; a
ProLease microencapsulation process, of which one United States patent was
issued in May 1991; the formulation of a ProLease composition of which one
United States patent was issued in May 1995; a Medisorb microencapsulation
process of which one United States patent was issued in June 1983; and 11
additional United States patents related to Medisorb methods and compositions
that were issued between July 1985 and June 1995. In the future, the Company
plans to file further United States and foreign patent applications directed to
new or improved products and processes. The United States patents issued to the
Company will expire between 2000 and 2014. Alkermes intends to file additional
patent applications when appropriate and intends to defend its patent position
aggressively.
Alkermes has exclusive rights through licensing agreements with several
institutions to nine issued United States patents, a number of United States
patent applications and to corresponding foreign patents and patent applications
in many countries, subject in certain instances to the rights of the United
States government to use the technology covered by such patents and patent
applications. The United States patents that have been licensed to the Company
will expire between the years 2003 and 2013. Under certain licensing agreements,
the Company currently pays license maintenance fees and/or minimum annual
royalties. During the fiscal year ended March 31, 1996, such fees were
approximately $127,000. In addition, under all licensing agreements, Alkermes is
obligated to pay royalties on future sales of products, if any, covered by the
licensed patents.
The Company is aware of several United States patents issued to third
parties containing claims which could be construed to cover some of the
Company's product candidates utilizing its ProLease, RMP-7, and Medisorb
delivery systems. In one case, the Company has received a letter from the owner
of a patent asking the Company to compare the Company's Medisorb technology
disclosed in a published international patent application with such owner's
patented technology. The Company believes that the manufacture, use, offer for
sale or sale of its ProLease, RMP-7 or Medisorb product
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candidates would not infringe any valid claim of any of the issued United States
patents. However, there can be no assurance that the claims of the issued United
States patents are not infringed by the proposed manufacture, use, offer for
sale, or sale of these products by the Company or its collaborators. There can
be no assurance that a third party will not file an infringement action, or that
the Company would prevail in any such action. There can be no assurance that the
cost of defending an infringement action would not be substantial, and would not
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company is also aware of patent applications
filed by third parties in the United States and in various foreign countries
which may cover some of the Company's product candidates utilizing its ProLease,
RMP-7 or Medisorb delivery systems. Patents may issue from these applications
which could preclude the Company from manufacturing, using, offering for sale,
or selling some of its ProLease, RMP-7 or Medisorb product candidates.
Furthermore, there can be no assurance that any licenses under such patents
would be made available on commercially viable terms, if at all. Failure to
obtain any required license could prevent the Company from commercializing one
or more of its products.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
firms, including Alkermes, are generally uncertain and involve complex legal and
factual questions. In addition, there can be no assurance that the Company's or
its licensors' current patent applications will be allowed or that the claims of
any patents issued to Alkermes or its licensors (in connection with either or
both the Company's product candidates or the Partnership's product candidate)
will be sufficiently broad to protect the Company's or the Partnership's
technology or to provide Alkermes or the Partnership with any competitive
advantages. Moreover, no assurance can be given that patents issued to Alkermes
(in connection with either or both the Company's product candidates or the
Partnership's product candidate), or its respective licensors, if any, will not
be contested, invalidated or circumvented. In addition, if Alkermes or the
Partnership is required to bring or defend against a narrowed charge of patent
infringement or to protect its own proprietary rights against third parties,
substantial costs could be incurred.
In the future, Alkermes may be required to obtain additional licenses to
patents or other proprietary rights of third parties. There can be no assurance
that any such licenses will be available on acceptable terms, if at all, and
failure to obtain such licenses could result in delays in marketing the
Company's products or the inability to proceed with the development, manufacture
or sale of product candidates requiring such licenses.
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators, employees
and consultants. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.
The Company's practice is to require its employees, consultants and
advisors to execute a confidentiality agreement upon the commencement of an
employment or consulting relationship with the Company. The agreements provide
that all confidential information developed or made known to an individual
during the course of the employment or consulting relationship shall be kept
confidential and not disclosed to third parties except in specified
circumstances. In the case of employees, the agreements provide that all
inventions conceived by the individual while employed by the Company shall be
the exclusive property of the Company. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's trade
secrets in the event of unauthorized use or disclosure of such information.
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GOVERNMENT REGULATION
The manufacture and marketing of pharmaceutical products in the United
States require the approval of the FDA under the Federal Food, Drug and Cosmetic
Act. Similar approvals by comparable agencies are required in most foreign
countries. The FDA has established mandatory procedures and safety standards
which apply to the preclinical testing and clinical trials, manufacture and
marketing of pharmaceutical products. Pharmaceutical manufacturing facilities
are also regulated by state, local and other authorities.
As an initial step in the FDA regulatory approval process, preclinical
studies are typically conducted in animal models to assess the drug's efficacy
and to identify potential safety problems. The results of these studies must be
submitted to the FDA as part of an Investigational New Drug application, which
must be reviewed by the FDA before proposed clinical testing can begin.
Typically, clinical testing involves a three-phase process. Phase I trials are
conducted with a small number of subjects and are designed to provide
information about both product safety and the expected dose of the drug. Phase
II trials are designed to provide additional information on dosing and
preliminary evidence of product efficacy. Phase III trials are large scale
studies designed to provide statistical evidence of efficacy and safety in
humans. The results of the preclinical testing and clinical trials of a
pharmaceutical product are then submitted to the FDA in the form of an NDA, or
for a biological product in the form of a Product License Application ("PLA"),
for approval to commence commercial sales. Preparing such applications involves
considerable data collection, verification, analysis and expense. In responding
to an NDA or PLA, the FDA may grant marketing approval, request additional
information or deny the application if it determines that the application does
not satisfy its regulatory approval criteria.
Prior to marketing, any product developed by Alkermes or its collaborators
must undergo an extensive regulatory approval process, which includes
preclinical testing and clinical trials of such product candidate to demonstrate
safety and efficacy. This regulatory process can require many years and the
expenditure of substantial resources. Data obtained from preclinical testing and
clinical trials are subject to varying interpretations, which can delay, limit
or prevent FDA approval. In addition, changes in FDA approval policies or
requirements may occur or new regulations may be promulgated which may result in
delay or failure to receive FDA approval. Similar delays or failures may be
encountered in foreign countries. Delays and costs in obtaining regulatory
approvals would have a material adverse effect on the Company's business,
financial condition and results of operations.
Among the conditions for NDA or PLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with GMP. Before approval of an NDA or PLA, the FDA will
perform a prelicensing inspection of the facility to determine its compliance
with GMP and other rules and regulations. In complying with GMP, manufacturers
must continue to expend time, money and effort in the area of production and
quality control to ensure full technical compliance. After the establishment is
licensed, it is subject to periodic inspections by the FDA.
The requirements which the Company must satisfy to obtain regulatory
approval by governmental agencies in other countries prior to commercialization
of its products in such countries can be as rigorous and costly as those
described above.
The Company is also subject to various laws and regulations relating to
safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous or potentially
hazardous substances, including radioactive compounds and infectious disease
agents, used in connection with the Company's research. Compliance with laws and
regulations relating to the protection of the environment has not had a material
effect on capital expenditures, earnings or the competitive position of the
Company. However, the extent of government regulation which might result from
any legislative or administrative action cannot be accurately predicted.
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SELLING SHAREHOLDER
The Shares being offered by the Selling Shareholder will be acquired in a
private placement pursuant to a Stock Purchase Agreement dated as of February
13, 1997 upon satisfaction of certain conditions precedent. Because the Selling
Shareholder may offer all or a portion of the Shares pursuant to this
Prospectus, no estimate can be given as to the amount of shares of Common Stock
that will be held by the Selling Shareholder upon termination of any such sale.
Alkermes and the Selling Shareholder have agreed to collaborate on a program for
the development and commercialization of a product utilizing Alkermes' ProLease
or Medisorb drug delivery technology.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the Shares
by the Selling Shareholder. The Shares may be sold from time to time to
purchasers directly by the Selling Shareholder. Alternatively, the Selling
Shareholder may from time to time offer the Shares through underwriters,
brokers, dealers or agents who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholder
and/or the purchasers of the Shares for whom they may act as agent. The Selling
Shareholder and any such underwriters, brokers, dealers or agents who
participate in the distribution of the Shares may be deemed to be
"underwriters," and any profits on the sale of the Shares by them and any
discounts, commissions or concessions received by any such underwriters,
brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the Selling Shareholder may
be deemed to be an underwriter, the Selling Shareholder may be subject to
certain statutory liabilities of the Securities Act, including, but not limited
to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the
Exchange Act.
Any distribution of the Shares by the Selling Shareholder may be effected
from time to time in one or more transactions at fixed prices, at prevailing
market prices at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. The Shares may be sold by one or more of the
following methods without limitation: (i) to underwriters who will acquire
Shares for their own account and resell them in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale (any public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time); (ii) a block trade in which the broker or dealer so engaged
will attempt to sell the Shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (iii) purchases by a
broker or dealer as principal and resale by such broker or dealer for its own
account pursuant to this Prospectus; (iv) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (v) an exchange
distribution in accordance with the rules of such exchange; (vi) face-to-face
transactions between sellers and purchasers without a broker or dealer; (vii)
through the writing of options; and (viii) other legally available means. In
addition, the Shares may be sold in private transactions or under Rule 144
rather than pursuant to this Prospectus. The Selling Shareholder also has the
right to include the Shares in an underwritten public offering of Common Stock
by Alkermes, subject to customary underwriter cutback provisions. Any such
piggyback sale of the Shares would be conducted pursuant to the registration
statement for such public offering.
There is no assurance that the Selling Shareholder will sell any or all of
the Shares or that the Selling Shareholder will not transfer, devise or gift
such Shares by other means not described herein.
Underwriters participating in any offering made pursuant to this Prospectus
(as amended or supplemented from time to time) may receive underwriting
discounts and commissions, and discounts or concessions may be allowed or
reallowed or paid to dealers, and brokers or agents participating in such
transaction may receive brokerage or agent's commissions or fees.
At the time a particular offering of Shares is made, to the extent
required, a revised Prospectus or Prospectus Supplement will be distributed
which will set forth the amount of Shares being offered and the terms of the
offering, including the purchase price or public offering price, the name or
names of any underwriters, brokers, dealers or agents, the purchase price paid
by any underwriter for Shares
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purchased from the Selling Shareholder, any discounts, commissions and other
items constituting compensation from the Selling Shareholder and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. Such revised
Prospectus or Prospectus Supplement and, if necessary, a post-effective
amendment to the registration statement of which this Prospectus is a part, will
be filed with the Commission to reflect the disclosure of additional information
with respect to the distribution of the Shares.
The Selling Shareholder and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules 10b-6
and 10b-7, which may limit the timing of purchases and sales of any of the
Shares by the Selling Shareholder and any other such person. Furthermore, under
Rule 10b-6 under the Exchange Act, any person engaged in the distribution of the
Shares may not simultaneously engage in market-making activities with respect to
the Common Stock for a period of nine business days prior to the commencement of
such distribution. Regulation M, which replaces Rules 10b-6 and 10b-7 effective
as of March 4, 1997, contains similar limitations on the distribution and sale
of the Shares hereunder. All of the foregoing may affect the marketability of
the Shares and the ability of any person or entity to engage in market-making
activities with respect to the Common Stock.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers.
The Company has agreed that all costs, expenses and fees in connection with
the registration of the Shares will be borne by the Company. The Selling
Shareholder will, however, bear the expense of its own counsel and any transfer
taxes and underwriting discounts and commissions applicable to the Shares sold
by it. The Selling Shareholder may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the Shares
against certain liabilities, including liabilities arising under the Securities
Act. The Company and the Selling Shareholder have agreed to indemnify each other
against certain liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania. Morris Cheston, Jr., Secretary of Alkermes and of Alkermes
Controlled Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II, and ADC
II, all of which are wholly owned subsidiaries of Alkermes, and Martha J. Hays,
Secretary of Alkermes Investments, Inc., a wholly owned subsidiary of Alkermes,
are partners in the law firm of Ballard Spahr Andrews & Ingersoll.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act, with respect to the shares of Common Stock offered
hereby (the "Registration Statement"). This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained in this Prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete. For further
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information pertaining to the Company and the Common Stock, reference is made to
the Registration Statement and the exhibits and schedules thereto, which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of which may be obtained from the
Commission at prescribed rates. Statements contained in this Prospectus as to
the contents of any contract or other document filed, or incorporated by
reference, as an exhibit to the Registration Statement are qualified in all
respects by such reference.
37
<PAGE> 39
[ALKERMES LOGO]
[ALKERMES LOGO]
<PAGE> 40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following statement sets forth the amounts of expenses in connection
with the offering of the Common Stock pursuant to this Registration Statement,
all of which shall be borne by the Company.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 13,258
Nasdaq Listing Fee................................................ 17,500
Blue Sky Fees and Expenses........................................ 5,000
Printing and Engraving Expenses................................... 65,000
Accounting Fees and Expenses...................................... 35,000
Legal Fees and Expenses........................................... 100,000
Transfer Agent and Registrar Fees................................. 5,000
Miscellaneous Expenses............................................ 34,242
</TABLE>
All of the expenses listed above, except the SEC Registration Fee and NASD
Fee, represent estimates only.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Pennsylvania Business Corporation law of 1988 authorizes the Company to
grant indemnities to directors and officers in terms sufficiently broad to
permit indemnification of such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933. In addition, the Company has also obtained Directors'
and Officers' Liability Insurance in the amount of $3,000,000 which insures its
officers and directors against certain liabilities such persons may incur in
their capacities as officers or directors of the Company.
Article 5 of the Company's Amended and Restated By-Laws provides as
follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS. The
Corporation shall indemnify any director, officer, employee or agent of the
Corporation or any of its subsidiaries who was or is an "authorized
representative" of the Corporation (which shall mean, for the purpose of this
Article, a director or officer of the Corporation, or a person serving at the
request of the Corporation as a director, officer, partner, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and who was or is a "party" (which shall include for
purposes of this Article the giving of testimony or similar involvement) or is
threatened to be made a party to any "proceeding" (which shall mean for purposes
of this Article any threatened, pending or completed action, suit, appeal or
other proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Corporation, its shareholders or otherwise) by reason of the fact
that such person was or is an authorized representative of the Corporation to
the fullest extent permitted by law, including without limitation
indemnification against expenses (which shall include for purposes of this
Article attorneys' fees and disbursements), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding unless the
act or failure to act giving rise to the claim is finally determined by a court
to have constituted willful misconduct or recklessness. If an authorized
representative is not entitled to indemnification in respect of a portion of any
liabilities to which such person may be subject, the Corporation shall
nonetheless indemnify such person to the maximum extent for the remaining
portion of the liabilities.
II-1
<PAGE> 41
5.2 ADVANCEMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
in defending a proceeding on behalf of any person entitled to indemnification
under Section 5.1 in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and may pay such
expenses in advance on behalf of any employee or agent on receipt of a similar
undertaking. The financial ability of such authorized representative to make
such repayment shall not be prerequisite to the making of an advance.
5.3 EMPLOYEE BENEFIT PLANS. For purposes of this Article, the Corporation
shall be deemed to have requested an officer, director, employee or agent to
serve as fiduciary with respect to an employee benefit plan where the
performance by such person of duties to the Corporation also imposes duties on,
or otherwise involves services by, such person as a fiduciary with respect to
the plan; excise taxes assessed on an authorized representative with respect to
any transaction with an employee benefit plan shall be deemed "fines"; and
action taken or omitted by such person with respect to an employee benefit plan
in the performance of duties for a purpose reasonably believed to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Corporation.
5.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect, satisfy or
secure the indemnification obligations provided herein or otherwise, the
Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate.
5.5 RELIANCE UPON PROVISIONS. Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon the rights of indemnification provided by this Article.
5.6 AMENDMENT OR REPEAL. All rights of indemnification under this Article
shall be deemed a contract between the Corporation and the person entitled to
indemnification under this Article pursuant to which the Corporation and each
such person intend to be legally bound. Any repeal, amendment or modification
hereof shall be prospective only and shall not limit, but may expand, any rights
or obligations in respect of any proceeding whether commenced prior to or after
such change to the extent such proceeding pertains to actions or failures to act
occurring prior to such change.
5.7 SCOPE OF ARTICLE. The indemnification, as authorized by this Article,
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any statute,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in any other capacity while
holding such office. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article shall continue as to a person who has
ceased to be an officer, director, employee or agent in respect of matters
arising prior to such time, and shall inure to the benefit of the heirs,
executors and administrators of such person.
II-2
<PAGE> 42
ITEM 16. EXHIBITS.
This Registration Statement includes the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
4.1 Specimen of Stock Certificate of Alkermes, Inc. (Incorporated by reference to
Exhibit 4 to the Registrant's Registration Statement on Form S-1 as amended
(File No. 33-40250)).
4.2 Second Amended and Restated Articles of Incorporation of Alkermes, Inc.
effective July 23, 1991. (Incorporated by reference to Exhibit 4.1(a) to the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1991).
4.3 Amendment to Second Amended and Restated Articles of Incorporation, as filed
with the Pennsylvania Secretary of State on November 1, 1991. (Incorporated by
reference to Exhibit 4.1(c) to the Registrant's Report on Form 10-Q for the
quarter ended September 30, 1991).
4.4 Amendment to the Second Amended and Restated Articles of Incorporation, as
amended, as filed with the Pennsylvania Secretary of State on February 12,
1993. (Incorporated by reference to Exhibit 4.1(d) to the Registrant's Report
on Form 10-Q for the quarter ended December 31, 1992).
4.5 Stock Purchase Agreement, dated as of February 13, 1997, between the Registrant
and ALZA Corporation.
5 Opinion of Ballard Spahr Andrews & Ingersoll as to the legality of the
securities registered hereunder.
23.1 Consent of Ballard Spahr Andrews & Ingersoll (included as part of Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
</TABLE>
ITEM 17. UNDERTAKINGS.
A. 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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-
II-3
<PAGE> 43
effective amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the 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 remain unsold at the termination of the
offering.
B. The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement 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.
C. Insofar as indemnification for liabilities arising under the Act 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 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 3 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cambridge, Commonwealth of
Massachusetts, on February 27, 1997.
ALKERMES, INC.
By /s/ RICHARD F. POPS
------------------------------------
Richard F. Pops
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- ------------------
<C> <C> <S>
* Director and Chairman of the
- ------------------------------------------ Board
Michael A. Wall
/s/ RICHARD F. POPS Director and Chief Executive February 27, 1997
- ------------------------------------------ Officer (Principal Executive
Richard F. Pops Officer)
/s/ ROBERT A. BREYER Director, President and Chief February 27, 1997
- ------------------------------------------ Operating Officer
Robert A. Breyer
/s/ MICHAEL J. LANDINE Senior Vice President, Chief February 27, 1997
- ------------------------------------------ Financial Officer and Treasurer
Michael J. Landine (Principal Financial Officer
and Principal Accounting
Officer)
* Director
- ------------------------------------------
Robert S. Langer
Director
- ------------------------------------------
Alexander Rich
* Director
- ------------------------------------------
Paul Schimmel
* Director
- ------------------------------------------
Floyd Bloom
* Director
- ------------------------------------------
John K. Clarke
*By: /s/ MICHAEL J. LANDINE February 27, 1997
------------------------------
Michael J. Landine
pursuant to a power of
attorney previously filed
</TABLE>
II-5
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- ---------------------------------------------------------------
<S> <C>
4.1 Specimen of Stock Certificate of Alkermes, Inc. (Incorporated
by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-1 as amended (File No. 33-40250)).
4.2 Second Amended and Restated Articles of Incorporation of
Alkermes, Inc. effective July 23, 1991. (Incorporated by
reference to Exhibit 4.1(a) to the Registrant's Report on Form
10-Q for the quarter ended June 30, 1991).
4.3 Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on November 1, 1991. (Incorporated by reference to
Exhibit 4.1(c) to the Registrant's Report on Form 10-Q for the
quarter ended September 30, 1991).
4.4 Amendment to the Second Amended and Restated Articles of
Incorporation, as amended, as filed with the Pennsylvania
Secretary of State on February 12, 1993. (Incorporated by
reference to Exhibit 4.1(d) to the Registrant's Report on Form
10-Q for the quarter ended December 31, 1992).
4.5 Stock Purchase Agreement, dated as of February 13, 1997,
between the Registrant and ALZA Corporation.
5 Opinion of Ballard Spahr Andrews & Ingersoll as to the legality
of the securities registered hereunder.
23.1 Consent of Ballard Spahr Andrews & Ingersoll (included as part
of Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
</TABLE>
<PAGE> 1
EXHIBIT 4.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 13 day of February,
1997, by and between Alkermes, Inc. a Pennsylvania corporation ("Alkermes"), and
ALZA Corporation, a Delaware corporation ("ALZA").
WHEREAS, ALZA desires to purchase from Alkermes, and Alkermes desires
to sell to ALZA, certain shares of Alkermes' Common Stock, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and obligations
expressed herein, and intending to be legally bound, the parties agree as
follows:
1. PURCHASE AND SALE OF STOCK
--------------------------
1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, ALZA agrees to purchase and Alkermes agrees to
sell and issue to ALZA two million (2,000,000) shares (the "Shares") of
Alkermes' Common Stock, $.01 par value (the "Common Stock"), for a price per
Share of $25 and an aggregate purchase price of $50,000,000 (the "Purchase
Price").
1.2 CLOSING. The Closing for the purchase and sale of the Shares (the
"Closing") shall take place at the offices of ALZA, 950 Page Mill Road, P.O. Box
10950, Palo Alto, California 94303-0802, California time, on the third business
day after the date on which the conditions set forth in Articles 4 and 5 shall
be satisfied or duly waived, or if Alkermes and ALZA mutually agree on a
different date, the date upon which they have mutually agreed (the "Closing
Date"). At the Closing, Alkermes shall deliver a certificate in the name of ALZA
representing the Shares, against delivery to Alkermes by ALZA of the Purchase
Price by wire transfer in immediately available funds to an Alkermes' bank
account specified in written wire transfer instructions supplied to ALZA by
Alkermes at least two business days prior to the Closing.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ALKERMES. Alkermes hereby
represents and warrants to ALZA that:
2.1 ORGANIZATION AND GOOD STANDING. Alkermes is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
under its Articles of Incorporation, as amended (the "Articles") and Bylaws to
own and
<PAGE> 2
operate its properties and assets and to carry on its business as now conducted.
2.2 AUTHORIZATION. Alkermes has the corporate power and authority to
execute, deliver and perform this Agreement and to issue and sell the Shares.
The execution, delivery and performance of this Agreement by Alkermes and the
issuance and delivery of the Shares have been duly authorized by all necessary
corporate action on the part of Alkermes. Alkermes is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its business, properties or
financial condition. This Agreement constitutes a valid and legally binding
obligation of Alkermes, enforceable against Alkermes in accordance with its
terms, expect as such may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights in general and by general
principles of equity.
2.3 VALID ISSUANCE OF SHARES. The Shares, when issued, sold delivered
and paid for in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable, free and clear of any liens, charges, claims or
encumbrances and will not be subject to restrictions on transfer except as
provided by Sections 3.6, 3.7 and 3.8.
2.4 GOVERNMENT CONSENTS.
-------------------
(a) Except for the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act"),
any applicable state securities laws, and as contemplated by Section 6, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority, is required on the part of Alkermes, nor is any waiver,
consent or approval of any third party required to be obtained by Alkermes, in
connection with Alkermes' valid execution, delivery or performance of this
Agreement or the issuance and sale of the Shares by Alkermes hereunder.
(b) Alkermes shall file or cause to be filed with the Antitrust
Division of the United States Department of Justice and the Federal Trade
Commission pursuant to the HSR Act all requisite documents and notifications
required of Alkermes in connection with the transactions contemplated by this
Agreement.
(c) Alkermes shall make any filings required to be made under
applicable state securities laws in connection with the transactions
contemplated by this Agreement, within the applicable stipulated statutory
period before or after the sale of the Shares as may be required pursuant to
such laws.
2
<PAGE> 3
2.5 LITIGATION. As of the date of this Agreement, there is no action,
suit, proceeding or investigation pending or currently threatened against
Alkermes which questions the validity of this Agreement or the right of Alkermes
to enter into it or to consummate the transactions contemplated hereby. Except
as disclosed in the SEC Filings (as defined in Section 2.7), as of the date of
this Agreement there is no action, suit, proceeding or investigation pending or
currently threatened which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely affect the
business, properties, operations, financial condition, income or, to the best of
Alkermes' knowledge, business prospects of Alkermes and its subsidiaries (the
"Subsidiaries"), taken as a whole, as presently being conducted.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement by Alkermes and the consummation by Alkermes of
the transactions contemplated hereby will not conflict with, or result in any
violation of, or constitute, with or without the passage of time and giving of
notice, either a default under any provision of its Articles of Bylaws, or in
default in the performance or observance of any material provision of any
material instrument or contract to which it is a party or by which it is bound.
No third party has any pre-emptive rights, or rights of first refusal or first
opportunity or similar rights to purchase, or to offer to purchase, all or any
part of the Shares.
2.7 DISCLOSURE. Alkermes has furnished to ALZA (i) Alkermes' Annual
Report on Form 10-K for the fiscal year ended March 31, 1996 (the "1996 Annual
Report"), as filed with the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"); (ii) Alkermes' proxy statement for its 1996 Annual Meeting of
Shareholders; (iii) Alkermes' reports on Form 10-Q for the fiscal quarters ended
June 30, 1996, September 20, 1996 and December 31, 1996 (collectively, the
"Quarterly Reports"), as filed with the SEC pursuant to the Exchange Act, and
(v) all other reports as filed by Alkermes with the SEC since March 31, 1996
(the documents referred to in clauses (1)-(v) above being referred to
hereinafter, collectively, as the "SEC Filings"). As of their respective dates,
the SEC Filings (including all documents incorporated by reference therein) do
not contain and untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except, in the case of any SEC Filing, any statement or omission therein which
has been corrected or otherwise disclosed or updated in a subsequent SEC Filing.
Since March 31, 1996, Alkermes has timely filed with the SEC all reports,
documents, definitive proxy statements and all other filings required to be
filed with the SEC under the rules
3
<PAGE> 4
and regulations of the SEC, and all such reports, documents, definitive proxy
statements and other filings complied in all material respects with all
applicable requirements of the Exchange Act. The audited consolidated financial
statements of Alkermes included or incorporated by reference in the 1996 Annual
Report and the unaudited consolidated financial statements contained in the
Quarterly Reports have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis throughout the
period indicated and with each other, except as may be indicated therein or in
the notes thereto and except that the unaudited financial statements may not
contain all footnotes and adjustments required by United States generally
accepted accounting principles, and fairly present the financial position of
Alkermes and its consolidated subsidiaries as at the dates thereof and the
results of its operations and statements of cash flows for the periods then
ended, subject, in the case of the unaudited interim consolidated financial
statements, to normal year-end adjustments, and recognizing that the results of
operations of interim period or full fiscal year. Alkermes has furnished to ALZA
a Private Placement Memorandum dated as of February 13, 1997 (the "Memorandum")
related to the transaction contemplated hereby. The Memorandum does not contain
any untrue statements of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
2.8 CHANGES. Between March 31, 1996 and the date of this Agreement,
except as disclosed in the SEC Filings, there has not been:
(a) any change in the assets, liabilities, financial condition,
operating results or to the best of Alkermes' knowledge, prospects of Alkermes
and its Subsidiaries taken as a whole from that reflected in the 1996 Annual
Report, except changes in the ordinary course of business that have not been, in
the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of Alkermes and its Subsidiaries taken as a whole (and
except that Alkermes expects to continue to incur substantial operating losses,
which may be material);
(c) any waiver or compromise by Alkermes of a material right or
of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Alkermes,
4
<PAGE> 5
except in the ordinary course of business and which is not material to the
business, properties or financial condition of Alkermes and its Subsidiaries
taken as a whole (as such business is presently conducted);
(e) any change to a material contract or arrangement by which
Alkermes or any of its assets is bound or subject, or any breach or waiver of
any breach of or under any such contract or amendment (or the occurrence of any
event which would, as result of the passage of time, become or result in such a
breach or waiver);
(f) any sale, assignment or transfer to a third party that is
not an Affiliated (as hereafter defined) of any material patents, trademarks,
copyrights, trade secrets or other intangible assets for compensation which is
less than fair value;
(g) any mortgage, pledge, transfer of a security interest in, or
lien, created by Alkermes, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(h) any declaration, setting aside or payment or other
distribution in respect of any of Alkermes' capital stock;
(i) received by or on behalf of Alkermes any notice from the
United Stated Food and Drug Administration, the United States or any foreign
Patent Office, or any governmental agency or third party of any claim or adverse
occurrence related to any product in development, patent or trademark of
Alkermes; any negative result of any clinical trials conducted or being
conducted by or on behalf of Alkermes; any information as to the pending or
potential introduction in the near future of any product directly competitive
with RMP-7; or the notice of cancellation, termination or material reduction in
funding of any client project or program; or
(j) any event or condition of any type that has (or will as a
result of the passage of time) materially and adversely affected (or affect) the
business, properties or financial condition or, to the best of Alkermes'
knowledge, the business prospects of Alkermes and its Subsidiaries taken as a
whole.
For purposes of this Agreement the term "Affiliate" means any individual or
entity directly or indirectly controlling by or under common control with, a
party to this Agreement. Without limiting the foregoing, the direct or indirect
ownership of 50% or more of the outstanding voting securities of an entity, or
the right to receive 50% or more of the profits or earnings of an entity, shall
be deemed to constitute control.
5
<PAGE> 6
2.9 NASDAQ NATIONAL MARKET. The Common Stock is currently traded on
the Nasdaq National Market, and Alkermes knows of no reason or set of facts
which is likely to result in the termination of such trading. Nothing in this
Section 2.9 shall be interpreted to preclude Alkermes from listing its Common
Stock on any other national securities exchange. Alkermes shall take all actions
reasonably required in order to have the Shares listed as additional shares on
the Nasdaq National Market prior to the Closing Date.
2.10 CAPITALIZATION: OPTIONS AND WARRANTS. The authorized capital
stock of Alkermes consists of 5,000,000 shares of capital stock, par value .01
per share and 40,000,000 shares of Common Stock, par value $.01 per share, of
which 18,517,394 shares of Common Stock were issued and outstanding on December
31, 1996 and 1,388,308 shares of Common Stock were issuable upon exercise of
outstanding warrants on January 9, 1997. Except as disclosed in the SEC Filings,
and except for the transactions contemplated by this Agreement, since March 31,
1996, Alkermes has not granted any option (except for stock options granted
under Alkermes' stock option and stock award plans), warrants, rights (including
conversion or preemptive rights), or similar right, to any person or entity to
purchase or acquire any rights with respect to any shares of capital stock of
Alkermes, including the Shares. The total number of shares of Common Stock of
Alkermes issued from December 31, 1996 to the date of this Agreement is not more
than 100,000. The total number of shares of Common Stock subject to stock
options granted since December 31, 1996 to the date of this Agreement is 2,750.
There are no outstanding rights to cause Alkermes to register the securities
held by any person or entity under the Securities Act of 1933, as amended (the
"1933 Act"), except with respect to the outstanding warrants.
2.11 SUBSIDIARIES. Alkermes' only subsidiaries are Alkermes Controlled
Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II, Alkermes
Development Corporation II, Alkermes Europe, Ltd., and Alkermes Investments,
Inc. Each United States Subsidiary has been duly incorporated under the laws of
its respective jurisdiction of incorporation. Each subsidiary of Alkermes has
full corporate power and authority to own or lease its properties and conduct
its business as presently conducted, and is duly qualified or licensed to
transact business in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by it requires such
qualification (except where the failure to be so qualified would not have a
material adverse effect on the business, properties, operations, financial
condition or income of Alkermes and its Subsidiaries, taken as a whole, as
presently being conducted). Alkermes owns 100% of the shares of each of its
Subsidiaries, free and clear of any charges or encumbrances, and
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there are no outstanding options, warrants, or rights to purchase any securities
of any subsidiaries.
3. REPRESENTATIONS, WARRANTS AND COVENANTS OF ALZA. ALZA hereby
represents and warrants to Alkermes that:
3.1 AUTHORIZATION. This Agreement constitutes ALZA's valid and
legally binding obligation, enforceable against ALZA in accordance with its
terms, except as such may be limited by bankruptcy, insolvency or other similar
laws effecting the enforcement of creditors' rights in general or by general
principles of equity. ALZA Agreement and perform its obligations hereunder. The
execution, delivery and performance of this Agreement by ALZA has been duly
authorized by all necessary corporate action on the part of ALZA.
3.2 GOVERNMENT CONSENTS.
-------------------
(a) Except for the applicable requirements of the HSR Act, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state or local
governmental authority is required on the part of ALZA in connection with ALZA's
valid execution, delivery or performance of its obligations under this Agreement
or the purchase of the Shares by ALZA hereunder.
(b) ALZA will promptly file or cause to be filed with the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission pursuant to the HSR Act all requisite documents and
notifications required of it in connection with the transactions contemplated by
this Agreement.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares will be acquired
for ALZA's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and ALZA has no present intention of
selling, granting any participation in, or otherwise distributing the same
except in compliance with the registration requirements of the 1933 Act (unless
an exception is available). ALZA does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares.
3.4 INVESTMENT EXPERIENCE. ALZA acknowledges that it can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Shares. ALZA also represents it has not been
organized for the purpose of acquiring the Shares; and ALZA is an "accredited
investor" as that term is defined in Regulation D under the 1933 Act.
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3.5 INFORMATION PROVIDED. ALZA has had full opportunity to ask any
and all questions of the officers of Alkermes and to examine certain documents
of Alkermes, including its most recent Annual Report on Form 10-K and subsequent
quarterly reports on Form 10-Q, its current report on Form 8-K and the
Memorandum. ALZA is aware that the results of Alkermes' double-blind,
placebo-controlled Phase II clinical trials for RMP-7 are expected in the second
calendar quarter of 1997; and that no one, including Alkermes, knows or will
know what the results of those trials will be until the data has been received
and analyzed.
3.6 RESTRICTED SECURITIES. ALZA understands that the Shares have not
been registered under the 1933 Act and therefore are "restricted securities"
under the federal securities laws and that under such laws, and applicable
regulations such Shares may be resold without registration under the 1933 Act
only in certain limited circumstances. In this connection, ALZA represents that
it is familiar with SEC Rule 144 promulgated under the 1933 Act ("Rule 144"), as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
3.7 LIMITATIONS ON DISPOSITION. ALZA further shall not make any
disposition of all or any portion of the Shares unless and until:
(a) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) ALZA shall have furnished Alkermes with an opinion of
counsel, reasonably satisfactory to Alkermes, that such disposition will not
require registration of such Shares under the 1933 Act.
3.8 LEGEND. It is understood that the certificates evidencing the
Shares may bear the following legend: "The securities evidenced by this
certificate have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are "restricted securities" as defined in Rule 144
promulgated under the Act. The securities may not be sold or offered for sale or
otherwise distributed except (i) pursuant to an effective registration statement
for the securities under the Act; (ii) in compliance with Rule 144; or (iii)
after receipt of an opinion of counsel reasonably satisfactory to Alkermes that
such registration or compliance is not required as to said sale, offer or
distribution".
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4. CONDITIONS OF ALZA'S OBLIGATIONS.
--------------------------------
4.1 CONDITIONS OF ALZA'S OBLIGATIONS AT THE CLOSING. The obligations
of ALZA to Alkermes at the Closing are subject to the fulfillment on or before
the Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Alkermes contained in Section 2 hereof shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the closing Date
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct in all
material respects as of such date and time).
(b) PERFORMANCE. Alkermes shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
(c) COMPLIANCE CERTIFICATE. The Chief Executive Officer or
President of Alkermes shall deliver to ALZA at the Closing a certificate, in the
form attached as EXHIBIT A hereto, certifying that the conditions specified in
Sections 4.1(a) and (b) hereof have been fulfilled.
(d) GOVERNMENTAL APPROVALS. Any required governmental approvals
described in Section 2.4(c) shall have been obtained by Alkermes.
(e) WAITING PERIODS. All waiting periods applicable under the
HSR Act shall have expired or been terminated.
(f) TENDER OF SHARES. Alkermes shall have issued and tendered
for delivery to ALZA a certificate representing the Shares, subject only to
delivery of the Purchase Price by ALZA in accordance with Section 1.2.
(g) LISTING OF SHARES. The Shares shall have been listed as
additional shares on the Nasdaq National Market.
5. CONDITIONS OF ALKERMES' OBLIGATIONS.
-----------------------------------
5.1 CONDITIONS OF ALKERMES' OBLIGATIONS AT THE CLOSING. The
obligations of Alkermes to ALZA at the Closing are subject to the fulfillment on
or before the Closing of each of the following conditions by ALZA:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of ALZA contained in Section 3 hereof shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date.
(b) PERFORMANCE. ALZA shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
(c) COMPLIANCE CERTIFICATE. The President or a Vice President of
ALZA shall deliver to Alkermes at the Closing a certificate in the form attached
as EXHIBIT B hereto, certifying that the conditions specified in Section 5.1(a)
and (b) hereof have been fulfilled.
(d) WAITING PERIODS. All waiting periods applicable under the
HSR Act shall have expired or been terminated.
(e) LISTING OF SHARES. The Shares shall have been listed as
additional shares on the Nasdaq National Market.
(f) PAYMENT OF PURCHASE PRICE. ALZA shall have delivered to
Alkermes the Purchase Price in accordance with Section 1.2 subject only to the
delivery by Alkermes of the certificate representing the Shares.
6. REGISTRATION RIGHTS
-------------------
6.1 DEFINITIONS. For purposes of this Section 6:
(a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (1) the Shares, and
(2) any shares of Common Stock of Alkermes issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Shares, excluding all in cases, however, any Registrable
Securities sold by a person in a transaction in which its rights under this
Section 6 are not assigned. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the 1933 Act and such securities shall
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have been disposed of in accordance with such registration statement, (ii) such
securities shall have been distributed pursuant to Rule 144, or (iii) such
securities shall have ceased to be outstanding.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities, which are, in each case, Registrable
Securities;
(d) The term "Managing Underwriter" means one or more nationally
recognized firms of investment bankers selected in accordance with Section
6.2(b).
6.2 REGISTRATION.
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(a) SHELF REGISTRATION. As soon as practicable after the Closing
Date (and in no event later than 30 days after the Closing Date), Alkermes will
file a shelf registration statement under Rule 415 of the 1933 Act with the SEC
(or amend its currently filed registration statement) permitting the disposition
of the Registrable Securities in accordance with the intended methods thereof as
specified in writing by ALZA (the "Shelf Registration"). Alkermes will use its
best efforts to have the Shelf Registration declared effective by the SEC as
soon as practicable after the filing date of the Registration Statement.
(b) PIGGY-BACK REGISTRATION. If (but without any obligation to
do so) Alkermes proposes to register (including for this purpose a registration
effected by Alkermes for any shareholders other than ALZA or any warrant
holders) any of its Common Stock under the 1933 Act in connection with the
underwritten public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Alkermes employee benefits plan), Alkermes shall, at such time, promptly give
ALZA written notice of such registration. Upon the written request of ALZA given
within 5 days after such notice by Alkermes in accordance with Section 7.6
hereof, Alkermes shall, subject to the provisions of Section 6.10 hereof, cause
to be included in such registration and the underwriting involved therein all of
the Registrable Securities that ALZA has requested to be registered.
6.3 OBLIGATIONS OF ALKERMES. Alkermes shall, as expeditiously as
reasonably possible:
(a) With respect to any registration of any Registrable
Securities pursuant to Section 6.2(a), prepare and file with the SEC a
registration statement with respect to such
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Registrable Securities and use its best efforts to cause such registration
statement to become effective. As far in advance as practical before filing such
registration statement or any supplement or amendment thereto (excluding any
document incorporated therein by reference) Alkermes will furnish to ALZA and
its counsel copies of reasonably complete drafts of all such registration
statement supplement or amendment proposed to be filed, and ALZA and its counsel
shall have the opportunity to comment on any information that is contained
therein or omitted therefrom and Alkermes will make the changes reasonably
requested by ALZA and its counsel with respect to such information prior to
filing any such registration statement or amendment or supplement.
(b) With respect to any registration of any Registrable
Securities pursuant to Section 6.2(a), prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus used
in connection with the registration as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by the registration, including at ALZA's request, any amendments or
supplements necessary to reflect any information regarding ALZA or its plan of
distribution, until the earlier of (i) such time as the Shares pursuant to Rule
144, to dispose of all of the Registrable Securities, without registration, in a
three month period.
(c) With respect to any registration of any Registrable
Securities pursuant to Section 6.2, furnish to ALZA such number of copies of a
prospectus, including a preliminary prospectus, as then amended or supplemented,
in conformity with the requirements of the 1933 Act, and such other documents as
it may reasonably request in order to facilitate the disposition of Registrable
Securities owned by it.
(d) With respect to any registration of any Registrable
Securities pursuant to Section 6.2(a), use its best efforts to register and
qualify the securities covered by the Shelf Registration under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by ALZA, provided that Alkermes shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) With respect to any registration of any Registrable
Securities pursuant to Section 6.2, notify ALZA at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act of the happening
of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
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material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of ALZA, as promptly as
practicable prepare and furnish ALZA a reasonable number of copies of a
prospectus included in an effective post-effective amendment or the supplemented
prospectus correcting such misstatement or omission.
(f) With respect to any registration of any Registrable
Securities pursuant to Section 6.2(b), furnish, at the request of ALZA, (i) an
opinion of the counsel representing Alkermes for the purposes of registration,
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to ALZA and (ii) a
comfort letter and subsequent bring-down letter, from the independent certified
public accountants of Alkermes, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any. If the Registrable
Securities are being sold in an underwritten offering pursuant to Section 6.2(b)
hereof, such opinion shall be furnished and dated as of the closing of the sale
to the underwriters, such comfort letter shall be furnished and dated as of the
date of the underwriting agreement and the bring-down letter shall be furnished
and dated as of the closing of the sale to the underwriters. Notwithstanding the
foregoing, if the Registrable Securities are not being sold in an underwritten
offering pursuant to Section 6.2(b), an opinion as described above shall be
furnished and dated as of the date that the registration statement with respect
to such securities becomes effective.
(g) In the event of any underwritten public offering of any
Registrable Securities pursuant to Section 6.2(b), enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering, provided, however, that ALZA shall
also enter into and perform its obligations under any such agreement.
6.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of Alkermes to take any action pursuant to this Section 6 that ALZA
meet the following conditions:
(a) ALZA shall furnish such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required by applicable federal or state securities
laws to effect the registration of the Registrable Securities.
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(b) All information specifically with respect to ALZA furnished
to Alkermes by or on behalf of ALZA for use in connection with the preparation
of any registration statement relating to such Registrable Securities shall be
true and correct in all material respects and shall not omit any material fact
necessary to make such information, in light of the circumstances under which it
was made, not misleading.
(c) ALZA shall distribute in connection with the offering and
sale of the Registrable Securities the prospectus or other offering material
permitted by the 1933 Act and prepared by Alkermes, and only such materials.
(d) ALZA will comply with the provisions of the Exchange Act and
the regulations thereunder.
(e) To assist Alkermes in qualifying the Registrable Securities
for sale under applicable state securities laws, ALZA will advise Alkermes of
each jurisdiction in which it intends to offer or sell any or all Registrable
Securities, and will agree not to offer or sell any Registrable Securities in
any jurisdiction where the Registrable Securities are not registered or exempt
from registration.
(f) ALZA will inform Alkermes in writing of any and all sales,
or other transfers or dispositions, of any Registrable Securities within 15
calendar days following each such disposition.
(g) In the event of any underwritten public offering of any
Registrable Securities pursuant to Section 6.2(b), ALZA shall enter into and
perform its obligations under an underwriting agreement, in the form agreed upon
by Alkermes and the underwriters selected by it that is customary for the type
of transaction contemplated and reasonably acceptable to ALZA.
6.5 EXPENSES OF REGISTRATION. Alkermes shall bear the expenses
incurred in connection with the Shelf Registration and any amendment or
supplement thereof. The expenses borne by Alkermes pursuant to this Section 6.5
shall exclude (i) broker fees and commissions and transfer taxes, if any, in
respect of Registrable Securities agreed to in writing by ALZA, which shall be
payable by ALZA; (ii) all out-of-pocket expenses of ALZA's brokers or dealers;
and (iii) all fees and disbursements of counsel for ALZA or any such brokers or
dealers.
6.6 COMPANY SUSPENSION. ALZA shall upon receipt of any notice from
Alkermes that in the good faith judgment of Alkermes the filing or making of
offers and sales pursuant to the Shelf Registration would require the public
disclosure of
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material information, the disclosure of which would not otherwise be required at
that time and either compiling such information would require unreasonable
effort in the circumstances or disclosure thereof would have a material adverse
effect on Alkermes, Alkermes shall have the right to suspend such sales or
postpone such filing for a period which shall not exceed 30 days (provided that
no such notice may be given beginning when ALZA notifies Alkermes that marketing
efforts have begun by an underwriter on behalf of ALZA in connection with an
offering thereof and ending when such offering is completed or abandoned);
PROVIDED, HOWEVER, that Alkermes may not use the right provided by this
paragraph until 120 days have elapsed from the end of the most recent suspension
or postponement period initiated by Alkermes and PROVIDED, FURTHER, HOWEVER,
that immediately following disclosure of such information or withdrawal or
abandonment of the transaction requiring suspension or postponement Alkermes
will make such filing or take such steps as are necessary to permit such offers
and sales, as the case may be. Any suspension under this Section 6.6(b) will
extend, for an amount of time equal to such suspension, the termination date of
any registration rights, or obligations to keep a registration effective,
otherwise provided in this Agreement.
6.7 MARKET HOLDBACK. Until such time as ALZA holds less than 4% of
the outstanding Common Stock of Alkermes, ALZA shall not sell, transfer or
otherwise dispose of (other than to a transferee who agrees to be similarly
bound) any Registrable Securities during any specified holdback period of up to
120 days following the effective date of a registration statement filed by
Alkermes under the 1933 Act for an offering by Alkermes of Common Stock or other
securities (other than the Shelf Registration or any other registration in which
Registrable Securities are included) if, (i) the holdback is requested in
writing by the managing underwriter of the offering; (ii) the same restriction
is agreed to by all of the executive officers and directors of Alkermes; and
(iii) all other shareholders who have registration rights and whose holding are
more than 4% of the Common Stock of Alkermes (on a converted basis) are also
subject to the same holdback. In such event, ALZA shall execute and deliver a
lockup agreement in substantially the form requested by the managing Underwriter
and signed by the officers and directors of Alkermes and such other
shareholders.
6.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 6:
(a) To the extent permitted by law, Alkermes will indemnify and
hold harmless ALZA, and each of its officers and directors, any underwriter (as
defined in the 1933 Act) for ALZA and each person, if any, who controls ALZA or
any such
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underwriter within the meaning of the 1933 Act or the Exchange Act
(collectively, "Indemnified ALZA parties"), against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
1933 Act, the Exchange Act or other federal or state law or otherwise, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon a claim by a third party alleging any of the
following statements, omissions or violations (collectively, "Indemnified
Violations"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement on the date it becomes effective,
including any preliminary prospectus or final prospectus contained therein, or
any amendments or supplements thereto, or any document incident to such
registration (such as a Blue Sky qualification or compliance); (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading; or (iii)
any other violation or alleged violation by Alkermes of the 1933 Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the 1933 Act, the Exchange Act or any state securities law, and Alkermes
will reimburse the ALZA indemnified Parties for any legal (to the extent
provided in Section 6.8(c) and other expenses reasonably incurred in connection
with defending any such indemnified Violation; provided, however, that the
indemnity agreement contained in this Section 6.8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Alkermes (which consent shall not
be unreasonably withheld), nor shall Alkermes be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it arises out
of or is based upon an indemnified Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any of the indemnified ALZA Parties expressly for use
in connection with the registration; and provided further, however, that the
indemnity provided in this Section 6.8(a) with respect to any preliminary
prospectus shall not apply, if the untrue statement or alleged untrue statement
or omission or alleged omission was corrected in the final prospectus.
(b) To the extent permitted by law, ALZA will indemnify and hold
harmless Alkermes, each of its officers and directors, any underwriter (as
defined in the 1933 Act), any other person selling securities in such
registration statement and each person, if any, who controls Alkermes, any such
underwriter or any such person within the meaning of the 1933 Act or the
Exchange Act (collectively, the "Indemnified Alkermes Parties"), against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing person may become subject, under the 1933 Act, the Exchange Act or
other
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federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect hereto) arise out of or are based upon a claim by a third
party arising out of or based upon any written information furnished by any of
the indemnified ALZA Parties expressly for use in connection with such
registration, and ALZA will reimburse each of the Indemnified Alkermes Parties
for any legal and other expenses reasonably incurred in connection with
defending any such claims, liability, demand, loss or action; provided, however,
that the indemnity agreement contained in this Section 6.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of ALZA (which consent will
not be unreasonably withheld). In no event shall the total amount payable by
ALZA indemnified Parties for indemnity under this Section 6.8(b) exceed ALZA's
proceeds for the offering.
(c) Promptly after receipt by an indemnified party under this
Section 6.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.8, deliver to
the indemnifying party a written notice of the commencement thereof generally
summarize the claims and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to the
availability of legal defenses to the indemnified party which are different from
or in addition to those available to the indemnifying party. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 6.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 6.8.
(d) The obligations of Alkermes and ALZA under this Section 6.8
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 6, and otherwise.
6.9 REPORTS UNDER THE EXCHANGE ACT. With a view to making available
to ALZA the benefits of Rule 144 and any other
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rule or regulation of the SEC that may at any time permit ALZA to sell
securities of Alkermes to the public without registration, Alkermes agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of Alkermes under the Exchange Act; and
(c) furnish to ALZA, so long as ALZA owns any Registrable
Securities, promptly upon request (i) a written statement by Alkermes that it
has complied with the reporting requirements of Rule 144, and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of Alkermes and such
other reports and documents so filed by Alkermes, and (iii) such other
information as may be reasonably requested in availing ALZA of any rule or
regulation of the SEC which permits the selling of any such securities without
registration.
6.10 UNDERWRITING REQUIREMENTS. In connection with any proposed
registration as to which ALZA has a right to notice under Section 6.2(b):
(a) Alkermes shall not be required to include in such
registration any of the Registrable Securities unless ALZA accepts the terms of
the underwriting that are agreed upon between Alkermes and the underwriters
selected by it; and
(b) If the underwriter for the offering advises Alkermes in
writing that the number of Registrable Securities requested to be included will
adversely affect the success of the offering, Alkermes shall include in such
offering only the quantity of Registrable Securities, if any, as shall be
determined as set forth below:
(i) first Alkermes shall include in such underwriting all
of the securities Alkermes proposes to sell; and
(ii) then, Alkermes shall include the number of Registrable
Securities and Alkermes securities of other holders that the underwriter advises
will not adversely affect the success of the offering, allocated, pro rata,
among ALZA and the other holders entitled to registration, based upon the number
of shares of Common Stock each such person shall have requested Alkermes to
include in the offering.
6.11 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause Alkermes to register Registrable Securities and the obligations of
Alkermes pursuant to this Section 6 may be
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transferred or assigned by ALZA in connection with transfers of shares to an
Affiliate of ALZA or in connection with transfers of Shares having a fair market
value of at least $5,000,000, provided that; (i) such transfer is permitted
under this Agreement; (ii) the transferee agrees to be bound by ALZA's remaining
obligations set forth in Section 6 and 7 hereof and (iii) such rights are
transferred to no more than ten transferees.
6.12 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 6
may be amended or the observance thereof may be waived either generally or in a
particular instance and either retroactively or prospectively, only with the
written consent of Alkermes and the holders of 66 2/3% of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section 6.12 shall be binding upon each holder of any Registrable
Securities, each future holder of Registrable Securities, ALZA and Alkermes.
Nothing herein shall prevent a holder of Registrable Securities from waiving its
individual rights.
7. MISCELLANEOUS.
-------------
7.1 SURVIVAL OF WARRANTIES. The warranties and representations of
Alkermes and ALZA contained in or made pursuant to his Agreement shall survive
the Closing, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of ALZA or Alkermes.
7.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania as applied to agreements
among Pennsylvania residents entered into and to be performed entirely within
Pennsylvania.
7.4 COUNTERPARTS. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of Alkermes and ALZA. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, but all of which together shall constitute one
and the same instrument. A facsimile transmission
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of the signed Agreement shall be legal and binding on both parties.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be sent by certified mail or courier
service, charges pre-paid, or by facsimile transmission, to the address or
facsimile number specified below:
If to Alkermes:
64 Sidney Street
Cambridge, MA 02139-4136
Fax No.: (617) 494-9255
Attention: Chief Financial Offer
If to ALZA:
950 Page Mill Road
P.O. Box 10950
Palo Alto, CA 94303
Fax No.: (415) 496-8048
Attention: Senior Vice President and General Counsel
or to such other address or facsimile number as the person may specify in a
notice duly given to the sender as provided herein. A notice will be deemed to
have been given as of the date that is five days after it is deposited in the
United States mail or the date it is delivered by a courier service or, in the
case of facsimile transmission or personal communication, when received.
7.7 FINDERS' FEE. Each party agrees to indemnify and to hold harmless
the other party from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the indemnifying party or any of its
officers, partners, employees, or representatives is responsible.
7.8 EXPENSES. The parties shall shares equally the filing fee for any
HSR filing made prior to the Closing hereunder. Except as otherwise provided in
the preceding sentence and in Section 6 hereof, each party shall pay all costs
and expenses that it incurs with respect to the negotiation, execution, delivery
and performance of this Agreement. If any action at law or in equity is
necessary to enforce or interpret
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the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
7.9 PUBLICITY. Neither party, nor any of their respective Affiliates,
shall issue or cause the publication of any press release or other public
announcement with respect to this Agreement or any of the other transactions
contemplated hereby without the prior consultation of the other party, except as
may be required law or by any listing agreement with a national securities
exchange or by the SEC. The parties shall cooperate in determining the format,
date and time of day of the announcement of the execution and terms of this
Agreement, giving consideration to the requirements of all applicable laws and
regulations, and each party will obtain the prior approval by the other party of
any press release to be issued relating to the announcement of the execution of
this Agreement or the Closing hereunder, which prior approval shall not be
unreasonably withheld or delayed. This Section 7.9 shall not apply to the extent
that any disclosure is of information in the public domain other than through
the fault of the disclosing party in violation hereof.
7.10 AMENDMENTS AND WAIVERS. This Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
both parties that specifically refers to this Agreement. Either party hereto
may, only by an instrument in writing, waive compliance by the other party
hereto with any term or provision of this Agreement on the part of such other
party to be performed or complied with. The waiver by a party hereto of a breach
of any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach. Any amendment or waiver effected in accordance with this
Section 7.10 shall be binding upon each party and its permitted assigns.
7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be amended
to conform, as closely as practicable, to the intent of the parties as set forth
herein or, if such amendment is not possible, such provision, shall be stricken
and the remaining provisions will remain in full force and effect.
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IN WITNESS WHEREOF, the parties, through their duly authorized officers,
have duly executed this Agreement as of the date first above written.
Alkermes, Inc. ALZA Corporation
By:_____________________ By:_______________________
Title:__________________ Title_____________________
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EXHIBIT 5
[Letterhead of Ballard Spahr
Andrews & Ingersoll]
February 27, 1997
Alkermes, Inc.
64 Sidney Street
Cambridge, MA 02139
Re: Alkermes, Inc. -
Registration Statement on Form S-3
----------------------------------
Gentlemen:
We have acted as counsel to Alkermes, Inc., a Pennsylvania corporation (the
"Company"), in connection with the preparation of the Company's Registration
Statement on Form S-3 File No. 333-19955, as amended (the "Registration
Statement"), filed on the date hereof with the Securities and Exchange
Commission (the "Commission") pursuant to which the Company is registering under
the Securities Act of 1933, as amended, 2,000,000 shares of its common stock,
$0.01 par value per share (the "Common Stock"), to be sold by a shareholder,
ALZA Corporation (the "Selling Shareholder").
We are familiar with the proceedings taken and proposed to be taken by the
Company in connection with the proposed authorization, issuance and sale of the
Common Stock. In this connection, we have examined and relied upon such
corporate records and other documents, instruments and certificates and have
made such other investigation as we deemed appropriate as the basis for the
opinion set forth below. In our examination, we have assumed legal capacity of
all natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of such original documents.
Based upon the foregoing, we are of the opinion that the shares of Common
Stock to be sold by the Selling Shareholder
<PAGE> 2
Alkermes, Inc.
February 27, 1997
Page 2
have been duly authorized and, when issued for payment to the Selling
Shareholder pursuant to the Stock Purchase Agreement, dated as of February 13,
1997, between the Company and the Selling Shareholder as described in the
Company's Registration Statement, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part thereof.
Very truly yours,
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 3 to
Registration Statement No. 333-19955 of Alkermes, Inc. on Form S-3 of our report
dated May 24, 1996, appearing in the Annual Report on Form 10-K of Alkermes,
Inc. for the year ended March 31, 1996, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of such Registration
Statement.
Deloitte & Touche LLP
Boston, Massachusetts
February 26, 1997
2
