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As filed with the Securities and Exchange Commission on March 1, 1999
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Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INCYTE PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3136539
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3174 Porter Drive
Palo Alto, California 94304
(650) 855-0555
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
ROY A. WHITFIELD
Chief Executive Officer
INCYTE PHARMACEUTICALS, INC.
3174 Porter Drive
Palo Alto, California 94304
(650) 855-0555
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
STANTON D. WONG
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, California 94120
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |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. |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
Proposed Proposed
maximum maximum
Title of each class of securities to be Amount to be offering price aggregate Amount of
registered registered per share(1) offering price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value(2) 360,653 shares $28.50 $10,278,611 $2,857.45
====================================================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) based upon the average of the
high and low prices of the Company's Common Stock on the Nasdaq National Market on February 22, 1999.
(2) Associated with the Common Stock are Series A Participating Preferred Stock Purchase Rights that will not be exercisable or be
evidenced separately from the Common Stock prior to the occurrence of certain events. The Registrant hereby amends this
Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the
SecuritieS and Exchange Commission, acting pursuant to said Section 8(a), may determine.
</FN>
</TABLE>
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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated March 1, 1999
PROSPECTUS
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360,653 Shares
I N C Y T E
P H A R M A C E U T I C A L S, I N C.
Common Stock
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These shares may be offered and sold at various times by the stockholders
identified in this prospectus. The offering is not being underwritten. These
shares were issued in connection with our acquisition of Hexagen Limited in
September 1998.
The selling stockholders may offer and sell their shares in transactions on
the Nasdaq National Market, in negotiated transactions, or both. These sales may
occur at fixed prices that are subject to change, at prices that are determined
by prevailing market prices, or at negotiated prices.
The selling stockholders may sell shares to or through broker-dealers, who
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholders, the purchasers of the shares, or both. We will
not receive any of the proceeds from the sale of the shares.
Our common stock is traded on the Nasdaq National Market under the symbol
"INCY."
---------------
Investing in our common stock involves a high degree of risk. You should
carefully read and consider the "Risk Factors" beginning on page 4.
---------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
---------------
The date of this prospectus is March 1, 1999
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We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling stockholders are
offering to sell, and seeking offers to buy, only the shares of Incyte common
stock covered by this prospectus, and only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date, regardless of the time of delivery of
this prospectus or of any sale of the shares.
You should read carefully the entire prospectus, as well as the documents
incorporated by reference in the prospectus, before making an investment
decision. All references to "we," "us," "our," or the "Company" in this
prospectus mean Incyte Pharmaceuticals, Inc. and its subsidiaries, except where
it is made clear that the term means only the parent company. All references to
"Incyte" in this prospectus mean Incyte Pharmaceuticals, Inc., the parent
company.
FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words "expects," "anticipates,"
"estimates," "plans," and similar expressions are intended to identify
forward-looking statements. These are statements that relate to future periods
and include statements under the captions "Risk Factors" and "The Company" as to
the adequacy of capital resources, growth in operations, the ability to
commercialize products developed under collaborations and alliances, the
performance and utility of our products and services, and Year 2000-related
actions. Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. These
risks and uncertainties include, but are not limited to, the extent to which the
pharmaceutical and biotechnology industries use genomic information in research
and development, risks relating to the development of new database products and
their use by our potential collaborators, and the risks set forth under "Risk
Factors."
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THE COMPANY
We have developed an integrated platform of genomic technologies designed
to help pharmaceutical and biotechnology companies understand the molecular
basis of disease. Specifically, we develop and market genomic information-based
tools, including database products, genomic data management software tools,
microarray-based gene expression services, and related reagents.
Our information-based products and services help pharmaceutical and
biotechnology companies to discover and develop new drugs. These products and
services also could be useful in both the clinical development of new drugs and
disease management. Our customers can use these products and services to
identify new disease targets and pathways and to evaluate the safety and
efficacy of new drugs.
Our database products include sequence and expression information. Sequence
information represents the sequence of the nucleotides, also called bases, that
comprise genes. Expression information can identify which genes are active or
inactive, and the levels of activity, in normal and diseased cells. Our reagent
products and services include high-throughput DNA screening, custom robotic
services, contract DNA preparation, gene mapping services, DNA clones, and DNA
libraries.
In February 1999, we announced that we will not pursue a recapitalization
proposal that would have established a new series of common stock, commonly
called tracking stock, intended to track the performance of a new business unit
called Incyte Genetics. We decided to recombine the Incyte Genetics business
unit and its programs with the rest of our businesses. The Incyte Genetics
business unit was formed in August 1998 to focus on human gene mapping, human
genome sequencing, and discovery of a type of genetic variation, called single
nucleotide polymorphisms or SNPs. SNPs represent single base variations in genes
that may correlate to an individual's susceptibility to disease. Gene mapping
determines the relative position of genes on a DNA molecule and the distance
between neighboring genes. Genome sequencing determines the sequence of the
bases that comprise genes.
Incyte was incorporated in Delaware in 1991. Our executive offices are
located at 3174 Porter Drive, Palo Alto, California 94304 and our telephone
number is (650) 855-0555.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
read and consider carefully the following factors before deciding to invest. The
risks and uncertainties described below are not the only ones facing our
company. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial
condition and results of operations could be materially and adversely affected.
In this event, the trading price of our common stock could decline and you could
lose all or part of your investment.
We Have Had Only Limited Periods of Profitability, and We Expect to Incur
Losses in the Future and May Not Return to Profitability
We had net losses each year from inception in 1991 through 1996, and
reported net income in 1997 and 1998. However, because of those prior year
losses, we had an accumulated deficit of $28.4 million as of December 31, 1998.
Because we intend to make a significant investment in the programs formerly
associated with the Incyte Genetics business unit over the next 12 to 24 months,
we expect to report a net loss for 1999 and possibly 2000. We may report net
losses in future periods as well.
We expect that our expenditures will continue to increase, due in part to:
o our continued investment in new product and technology development,
including the ramp-up of our genomic sequencing, mapping and
SNP-discovery programs,
o obligations under existing and future research and development
alliances, and
o our increasing investment in marketing, sales and customer service.
Our profitability depends on our ability to increase our revenues:
To generate significant revenues, we must obtain additional database
collaborators and retain existing collaborators. While we had 22 database
agreements as of December 31, 1998, we may be unable to enter into any
additional agreements. Our database agreements typically have a term of three
years, and we cannot assure you that any will be renewed upon expiration. Our
database revenues are also affected by the extent to which existing
collaborators expand their agreements with us to include our new database
products. Some of our database agreements require us to meet performance
obligations. A database collaborator can terminate its agreement before the end
of its scheduled term if we breach the agreement and fail to cure the breach
within a specified period.
Our revenues and profitability will also depend on our ability to expand
our customer base for microarray services. We acquired Synteni, Inc. in January
1998 primarily for this purpose. Synteni's contribution to our operating results
will depend on whether we can obtain high-volume customers for microarray
services and the costs associated with increasing our microarray production
capacity. Before we acquired Synteni, its microarray service agreements
consisted of small volume pilot or feasibility agreements.
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We do not expect milestone or royalty payments to contribute to revenues
for a substantial period of time. Part of our strategy is to license to database
collaborators our know how and patent rights associated with the gene sequences
and related information in our proprietary databases, for use in the discovery
and development of potential pharmaceutical, diagnostic or other products. Any
potential product that is the subject of such a license will require several
years of further development, clinical testing and regulatory approval before
commercialization. Accordingly, we do not expect to receive any milestone or
royalty payments from any of these licenses for a substantial period of time, if
at all.
Our Operating Results May Fluctuate Significantly
Our operating results are unpredictable and may fluctuate significantly
from period to period due to a variety of factors, including:
o changes in the demand for our products and services;
o the introduction of competitive databases or services;
o the pricing of access to our databases;
o the nature, pricing and timing of other products and services
provided to our collaborators;
o changes in the research and development budgets of our collaborators
and potential collaborators;
o depreciation expense from capital expenditures;
o acquisition, licensing and other costs related to the expansion
of our operations, including operating losses of acquired
businesses such as Synteni and Hexagen Limited;
o losses and expenses related to our investments in joint ventures
and businesses, including our proportionate share of operating
losses of our diaDexus, LLC, joint venture with SmithKline
Beecham Corporation;
o payments of milestones, license fees or research payments under the
terms of our increasing number of external alliances; and
o expenses related to, and the results of, litigation and other
proceedings relating to intellectual property rights (including the
lawsuits filed by Affymetrix, Inc. described below).
In particular, revenues from our database business are unpredictable
because:
o the timing of our database installations is determined by our
collaborators,
o the sales cycle for our database products is lengthy, and
o the time required to complete custom orders can vary significantly.
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We expect our microarray services and reagent sales to represent an
increasing amount of our revenues. Revenues from these sources depend on volume
of usage by our collaborators, and can therefore fluctuate significantly.
We are investing in a number of new areas to try to broaden our business.
These areas include genomic sequencing and mapping, SNP discovery, molecular
diagnostics, and proteomics, or the large scale, high-throughput analysis of
protein expression. Because many of these address new markets or involve
untested technologies, they may not generate any revenues or provide an adequate
return on our investment. In these cases, we may have to recognize expenses or
losses.
We have significant fixed expenses, due in part to our need to continue to
invest in product development and extensive support for our database
collaborators. We may be unable to adjust our expenditures if revenues in a
particular period fail to meet our expectations, which would adversely affect
our operating results for that period. Forecasting operating and integration
expenses for acquired businesses may be particularly difficult, especially where
the acquired business focuses on technologies that do not have an established
market.
We believe that period-to-period comparisons of our financial results will
not necessarily be meaningful. You should not rely on these comparisons as an
indication of our future performance. If our operating results in any future
period fall below the expectations of securities analysts and investors, our
stock price will likely fall, possibly by a significant amount.
We Experience Intense Competition and Rapid Technological Change
Genomic businesses are intensely competitive. The human genome contains a
finite number of genes. Our competitors may seek to identify, sequence and
determine the biological function of numerous genes in order to obtain a
proprietary position with respect to new genes. We believe that the first
company to sequence all or the commercially relevant portion of the human genome
should have a competitive advantage. A number of companies, other institutions
and government-financed entities are engaged in gene sequencing, gene discovery,
gene expression analysis, positional cloning, the study of genetic variation,
and other genomic service businesses. Many of these companies, institutions and
entities have greater financial and human resources than we do.
Some of our competitors have developed databases containing gene sequence,
gene expression, genetic variation or other genomic information and are
marketing or plan to market their data to pharmaceutical companies. Additional
competitors may attempt to establish databases containing this information in
the future. We expect that competition in our industry will continue to
intensify. We also believe that some pharmaceutical companies are discussing the
possibility of working together to discover SNPs and share SNP-related data
among themselves. The formation of this sort of consortium could reduce the
prospective customer base for our SNP-related business.
Patent positions or public disclosures may reduce the value of our
databases. Competitors may discover and establish patent positions with respect
to gene sequences in our databases. Further, certain entities engaged in gene
sequencing have made the results of their sequencing efforts publicly available.
The Celera Genomics Group of The Perkin-Elmer Corporation has announced plans to
sequence the entire human genome within three years and to make the basic human
sequence data publicly available. The public availability of gene sequences or
resulting patent positions covering substantial portions of the human genome or
microbial or plant genomes could reduce the potential
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value of our databases to our collaborators. It could also impair our ability to
realize royalties or other revenue from any commercialized products based on
this genetic information.
Competitors may develop superior technology. The gene sequencing machines
used in our computer-aided sequencing operations are commercially available and
are being used by at least one competitor. In addition, some of our competitors
and potential competitors are developing proprietary sequencing technologies
that may be more advanced than ours. Perkin-Elmer has announced that it has
begun commercial shipments of a new gel-based sequencing machine, and that a
large number of these machines will be provided to Celera. We may be unable to
obtain access to these machines on acceptable terms.
In addition, a number of companies are pursuing alternative methods for
generating gene expression information, including microarray technologies. These
advanced sequencing or gene expression technologies may not be commercially
available for us to purchase or license on reasonable terms, if at all. At least
one other company currently offers microarray-based services that might be
competitive with ours.
Our SNP discovery platform represents a modification of a process that is
in the public domain. We are seeking patent protection for these improvements,
but have not yet received any patents. Other companies could make similar or
superior improvements to this process without infringing our rights, and we may
not have access to those improvements. The discovery of SNPs is a competitive
area. Other companies may develop or obtain access to different SNP discovery
platforms, to which we may not have access, that may make our technology
obsolete.
We also face competition from providers of software. A number of companies
have announced their intent to develop and market software to assist
pharmaceutical companies and academic researchers in managing and analyzing
their own genomic data and publicly available data. Some of these entities have
access to significantly greater resources than we do, and their products may
achieve greater market acceptance than ours.
We must continue to invest in new technologies. The genomics industry is
characterized by extensive research efforts, resulting in rapid technological
progress. To remain competitive, we must continue to expand our databases,
improve our software, and invest in new technologies. New developments are
expected to continue, and discoveries by others may render our services and
potential products noncompetitive.
We Are Involved in Patent Litigation
In January 1998, Affymetrix filed a lawsuit in federal court alleging
infringement of U.S. patent number 5,445,934 by both Synteni and Incyte. The
complaint alleges that the '934 patent has been infringed by Synteni's and
Incyte's making, using, selling, importing, distributing or offering to sell
high density arrays in the United States and that this infringement was willful.
Affymetrix seeks a permanent injunction enjoining Synteni and Incyte from
further infringement of the '934 patent and seeks damages, costs, attorneys'
fees and interest. Affymetrix also requests triple damages based on allegedly
willful infringement.
In September 1998, Affymetrix filed an additional lawsuit alleging
infringement of U.S. patent numbers 5,744,305 and 5,800,992 by Synteni and
Incyte. The complaint alleges that the '305 patent has been infringed by
Synteni's and Incyte's making, using, selling, importing, distributing or
offering
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to sell high density arrays in the United States. It also alleges that the '992
patent has been infringed by the use of Synteni's and Incyte's GEM(TM)
microarray technology to conduct gene expression monitoring using two-color
labeling and that this infringement was willful. Affymetrix seeks a preliminary
injunction enjoining Synteni and Incyte from using GEM microarray technology to
conduct this kind of gene expression monitoring, and a permanent injunction
enjoining Synteni and Incyte from further infringing the '305 and '992 patents.
The lawsuits were initially filed in the United States District Court for
the District of Delaware. In November 1998, the court granted Incyte's motion to
transfer the suits to the United States District Court for the Northern District
of California. A hearing on Affymetrix's request for a preliminary injunction is
scheduled for March 26, 1999. No date has been set regarding the trial of any of
Affymetrix's other allegations.
In January 1999, the United States Patent and Trademark Office notified
Incyte of the patentability of claims directed to two-color hybridization
licensed exclusively to Incyte. The USPTO examiner has agreed with Incyte that
certain claims overlap with those of the '992 patent. Therefore, the USPTO has
recommended that the Board of Patent Appeals and Interferences declare an
interference between Incyte's two-color hybridization claims and the
corresponding claims in the '992 patent.
We believe we have meritorious defenses and intend to defend these suits
vigorously. However, our defense may be unsuccessful. At this time, we cannot
reasonably estimate the possible range of any loss resulting from these suits
due to uncertainty about the ultimate outcome. We have spent and expect to
continue to spend a significant amount of money and management time on this
litigation. Also, if we are required to license any technology as a result of
these suits, we do not know whether we will be able to do so on commercially
acceptable terms, if at all.
We Are Spending a Lot of Money on New and Uncertain Businesses and Demand for
Our Products and Services May be Insufficient to Cover Our Costs
There is no precedent for our microarray-based gene expression service
business or the use of SNP-based genetic variation information. The usefulness
of the information generated by these businesses is unproven. Our collaborators
and potential collaborators may determine that our databases, software tools and
microarray-related services are not useful or cost-effective. Due to the nature
and price of the products and services we offer, only a limited number of
companies are potential collaborators for our products and services. If we do
not develop these new products and services in time to meet market demand or if
there is insufficient demand for these products and services, we may not be able
to cover our costs of developing these products and services or earn a
sufficient return on our investment.
Additional factors that may affect demand for our products and services
include:
o the extent to which pharmaceutical and biotechnology companies
conduct these activities in-house or through industry consortia;
o the emergence of competitors offering similar services at
competitive prices;
o the extent to which the information in our databases is made public
or is covered by others' patents;
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o our ability to establish and enforce proprietary rights to our
products;
o regulatory developments or changes in public perceptions relating
to the use of genetic information and the diagnosis and treatment
of disease based on genetic information; and
o technological innovations that are more advanced than the
technologies that we have developed or that are available to us.
Many of these factors are beyond our control.
Our New Programs Relating to the Role of Genetic Variation in Disease and Drug
Response are Risky
We recently began to focus part of our business on developing databases and
other products and services to assist pharmaceutical companies in a new and
unproven area: the identification and correlation of genetic variation to
disease and drug response. Hexagen, which will be an important part of this
business, was founded in 1996 and has generated no revenues to date. We will
incur significant costs over the next several years in expanding our research
and development in this area. These increased costs will include costs resulting
from hiring a substantial number of new employees and reagent costs associated
with our genomic sequencing, gene mapping and SNP discovery programs. These
activities may never generate significant revenues or profitable operations.
This new aspect of our business will focus on SNPs, one type of genetic
variation. The role of SNPs in disease and drug response is not fully
understood, and relatively few, if any, therapeutic or diagnostic products based
on SNPs have been developed and commercialized. Among other things, demand in
this area may be adversely affected by ethical and social concerns about the
confidentiality of patient-specific genetic information and about the use of
genetic testing for diagnostic purposes.
Except for a few anecdotal examples, there is no proof that SNPs have any
correlation to diseases or a patient's response to a particular drug or class of
drug. Identifying statistically significant correlations is time-consuming and
could involve the collection and screening of a large number of patient samples.
We do not know if the SNPs we have discovered to date are suitable for these
correlation studies. Nor do we currently have access to the patient samples
needed or technology allowing us to rapidly and cost-effectively identify
pre-determined SNPs in large numbers of patients.
Most SNPs may occur too infrequently to warrant their use in analyzing
patients' genetic variation. We may have trouble identifying SNPs that both
correlate with diseases or drug responses and occur frequently enough to justify
their use by pharmaceutical companies.
Our success will also depend upon our ability to develop, use and enhance
new and relatively unproven technologies. Our strategy of using high-throughput
mutation detection processes and sequencing to identify SNPs and genes rapidly
is unproven. Among other things, we will need to improve the throughput of our
SNP-discovery technology. We may not be able to achieve these necessary
improvements, and other factors may impair our ability to develop our
SNP-related database in time to be competitively available.
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Our Strategic Investments May Result in Losses and Other Adverse Effects
We make strategic investments in joint ventures or businesses that
complement our business. These investments, such as our investment in diaDexus,
may:
o often be made in securities lacking a public trading market or
subject to trading restrictions, either of which increases our
risk and reduces the liquidity of our investment,
o require us to record losses and expenses related to our ownership
interest,
o require us to record charges related to the acquisition of
in-process technologies or for the impairment in the value of the
securities underlying our investment, and
o require us to invest greater amounts than anticipated or to
devote substantial management time to the management of research
and development relationships and joint ventures.
The market values of many of these investments fluctuate significantly. We
evaluate our long-term equity investments for impairment of their values on a
quarterly basis. Impairment could result in future charges to our earnings.
These losses and expenses may exceed the amounts that we anticipated. In
addition, as part of our collaborative agreement with Oxford GlycoSciences plc
relating to the joint development of a proteomics database, we agreed to
reimburse Oxford GlycoSciences up to $5.0 million in 1999 if their revenues are
insufficient to offset their expenses for services rendered.
Our Sales Cycle is Lengthy
Our ability to obtain new subscribers for our databases, software tools and
microarray and other services depends upon prospective subscribers' perceptions
that our products and services can help accelerate drug discovery efforts. Our
sales cycle is typically lengthy because we need to educate our potential
subscribers and sell the benefits of our tools and services to a variety of
constituencies within potential subscriber companies. In addition, each database
subscription and microarray services agreement involves the negotiation of
unique terms. We may expend substantial funds and management effort with no
assurance that a subscription or services agreement will result. Actual and
proposed consolidations of pharmaceutical companies have affected the timing and
progress of our sales efforts. We expect that future proposed consolidations
will have similar effects.
Patents and Other Proprietary Rights Provide Uncertain Protection
We may be unable to protect our proprietary information. Our business and
competitive position depend upon our ability to protect our proprietary database
information and software technology, but our strategy of obtaining proprietary
rights in as many genes and SNPs as possible is unproven. Despite our efforts to
protect this information and technology, unauthorized parties may attempt to
obtain and use information that we regard as proprietary. Although our database
subscription agreements require our subscribers to control access to our
databases, policing unauthorized use of our databases and software may be
difficult.
We have been issued a number of patents with respect to the gene sequences
in our databases and have filed for patents on selected features of our
software. However, as of the date of this prospectus, we have no issued patents
or registered copyrights for that software. We cannot prevent
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others from independently developing software that might be covered by
copyrights issued to us, and trade secret laws do not prevent independent
development.
We pursue a policy of having our employees, consultants and advisors
execute proprietary information and invention agreements when they begin working
for us. However, these agreements may not provide meaningful protection for our
trade secrets or other proprietary information in the event of unauthorized use
or disclosure.
Our means of protecting our proprietary rights may not be adequate and our
competitors may:
o independently develop substantially equivalent proprietary
information and techniques,
o otherwise gain access to our proprietary information, or
o design around patents issued to us or our other intellectual
property.
Our patent applications may conflict with others. Our current policy is to
file patent applications on what we believe to be novel full-length and partial
gene sequences obtained through our gene sequencing efforts. We have filed U.S.
patent applications in which we have claimed certain partial gene sequences. We
have also applied for patents in the U.S. and other countries claiming full-
length gene sequences associated with cells and tissues involved in our gene
sequencing program. We hold a number of issued U.S. patents on full-length genes
and one issued U.S. patent claiming multiple partial gene sequences. A number of
entities make certain gene sequences publicly available, which may adversely
affect our ability to obtain patents on those genes.
We believe that some of our patent applications claim genes that may also
be claimed in patent applications filed by others. In some or all of these
applications, a determination of priority of inventorship may need to be decided
in an interference before the United States Patent and Trademark Office.
The USPTO has recommended that the Board of Patent Appeals and
Interferences declare an interference with respect to a patent application
directed to technology licensed exclusively to us and an Affymetrix patent that
is subject of our litigation with Affymetrix. The Board of Patent Appeals has
also declared two interferences involving applications covering Incyte
full-length genes, and has advised us of approximately 15 additional
interferences that might be declared. We cannot predict whether any of the
interferences would be resolved in our favor. Regardless of the outcome,
interferences could be expensive and time-consuming.
Enforcement of gene patents is uncertain. One of our strategies is to
obtain proprietary rights in as many genes (including partial gene sequences)
and SNPs as possible. While the USPTO has issued patents covering full-length
genes, partial gene sequences and SNPs, we do not know whether or how courts may
enforce those patents, if that becomes necessary. If a court finds these types
of inventions to be unpatentable, or interprets them narrowly, the benefits of
our strategy may not materialize.
We may decide to abandon patent applications. The USPTO has had a
substantial backlog of biotechnology patent applications, particularly those
claiming gene sequences. In 1996, the USPTO issued guidelines limiting the
number of partial gene sequences that can be examined within a single patent
application. Many of our patent applications contain more partial sequences than
the maximum
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number allowed under these guidelines. Due to the resources needed to comply
with the guidelines, we may decide to abandon patent applications for some of
our partial gene sequences.
Because filing large numbers of patent applications and maintaining issued
patents can be very costly, we may choose not to pursue every application. If we
do not pursue patent protection for all of our full-length and partial gene
sequences, the value of our intellectual property portfolio could be diminished.
Because of the possible delay in obtaining allowance of some of our patent
applications, and the secrecy of patent applications, we do not know if other
applications having priority over ours have been filed.
We may need to refile some of our patent applications, and the period of
patent protection has been shortened. The value of our patents depends in part
on their duration. The U.S. patent laws were amended in 1995 to change the term
of patent protection from 17 years from patent issuance to 20 years from the
earliest effective filing date of the application. Because the average time from
filing to issuance of biotechnology applications is at least one year and may be
more than three years depending on the subject matter, a 20-year patent term
from the filing date may result in substantially shorter patent protection,
which may adversely affect our rights under any patents that obtain. We may need
to refile applications claiming large numbers of gene sequences and, in these
situations, the patent term will be measured from the date of the earliest
priority application. This would shorten our period of patent exclusivity.
International patent protection is particularly uncertain. Biotechnology
patent law outside the United States is even more uncertain and is currently
undergoing review and revision in many countries. Further, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as U.S. laws. We may participate in opposition proceedings to determine
the validity of our or our competitors' foreign patents, which could result in
substantial costs and diversion of our efforts.
We May be Subject to Additional Litigation and Infringement Claims
The technology that we use to develop our products, and those that we
incorporate in our products, may be subject to claims that they infringe the
patents or proprietary rights of others. The risk of this occurring will tend to
increase as the genomics, biotechnology and software industries expand, more
patents are issued and other companies attempt to discover genes and SNPs and
engage in other genomic-related businesses.
As is typical in the genomics, biotechnology and software industries, we
have received, and we will probably receive in the future, notices from third
parties alleging patent infringement. We believe that we are not infringing the
patent rights of any such third party. Except for Affymetrix, no third party has
filed a patent lawsuit against us.
We may, however, be involved in future lawsuits alleging patent
infringement or other intellectual property rights violations. In addition,
litigation may be necessary to:
o assert claims of infringement,
o enforce our patents,
o protect our trade secrets or know-how, or
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<PAGE>
o determine the enforceability, scope and validity of the proprietary
rights of others.
We may be unsuccessful in defending or pursuing these lawsuits. Regardless
of the outcome, litigation can be very costly and can divert management's
efforts. An adverse determination may subject us to significant liabilities or
require us to seek licenses to other parties' patents or proprietary rights. We
may also be restricted or prevented from manufacturing or selling our products.
Further, we may not be able to obtain the necessary licenses on acceptable
terms, if at all.
We May Encounter Problems in Meeting Customers' Software Needs
Our databases also require extensive software support and will need to
incorporate features determined by database collaborators. If we experience
delays or difficulties in implementing our database software or
collaborator-requested features, we may be unable to service our collaborators.
Our Recent Acquisitions Involve Several Risks
Our recent acquisitions of Synteni and Hexagen involve several potential
operating and business risks, including potential problems and costs associated
with integrating Synteni's and Hexagen's businesses, technologies and management
with ours. Our integration efforts may also result in the loss of efficiency or
employees.
The combined companies may not realize any revenue enhancements or cost
savings. Increases in other expenses and operating losses, including losses due
to problems in integrating the acquired companies with ours, may offset any cost
savings. Our combined operating results and financial condition may not be
superior to what we could have achieved without these acquisitions, even if we
integrate the acquired business efficiently, effectively and quickly. The
combination of these businesses with ours may also take longer than expected.
In particular, we began our integration of Hexagen recently. We will need
to integrate Hexagen's technology with our existing technology and improve its
throughput, in order to develop a SNP database. We may be unable to achieve the
necessary improvements, which could slow our efforts to develop a SNP-related
business. Also, since Hexagen is located in England, we may experience
difficulties in integrating their operations with our U.S.-based operations.
Future Acquisitions Will Create Risks and Uncertainties
As part of our business strategy, we may acquire other assets, technologies
and businesses. We acquired two companies in 1996, Synteni in January 1998, and
Hexagen in September 1998.
These and any future acquisitions involve risks such as the following:
o we may be exposed to unknown liabilities of acquired companies;
o our acquisition and integration costs may be higher than we
anticipated and may cause our quarterly and annual operating
results to fluctuate;
o we may experience difficulty and expense in assimilating the
operations and personnel of the acquired businesses, disrupting our
business and diverting management's time and attention;
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o we may be unable to integrate or complete the development and
application of acquired technology;
o we may experience difficulties in establishing and maintaining
uniform standards, controls, procedures and policies;
o our relationships with key customers of acquired businesses may be
impaired, due to changes in management and ownership of the
acquired businesses;
o we may be unable to retain key employees of the acquired
businesses;
o we may incur amortization expenses if an acquisition results in
significant goodwill or other intangible assets; and
o our stockholders may be diluted if we pay for the acquisition with
equity securities.
In addition, if we acquire additional businesses that are not located near our
Palo Alto, California headquarters, we may experience more difficulty
integrating and managing the acquired businesses' operations.
We May Have Difficulty Managing Our Growth
We expect to continue to experience significant growth in the number of our
employees and the scope of our operations. This growth has placed, and may
continue to place, a significant strain on our management and operations. Our
ability to manage this growth will depend upon our ability to broaden our
management team and our ability to attract, hire and retain skilled employees.
Our success will also depend on the ability of our officers and key employees to
continue to implement and improve our operational and other systems and to hire,
train and manage our employees.
In addition, we must continue to invest in customer support resources as
the number of database collaborators and their requests for support increase.
Our database collaborators typically have worldwide operations and may require
support at multiple U.S. and foreign sites. To provide this support, we may need
to open offices in addition to our Palo Alto, California headquarters and our
offices in Fremont, California, St. Louis, Missouri and Cambridge, England,
which could result in additional burdens on our systems and resources.
We Depend on Key Employees in a Competitive Market for Skilled Personnel
We are highly dependent on the principal members of our management,
operations and scientific staff, including Roy A. Whitfield, our Chief Executive
Officer, and Randal W. Scott, our President and Chief Scientific Officer. The
loss of any of these persons' services would have a material adverse effect on
our business. We have not entered into any employment agreement with any of
these persons and do not maintain a key person life insurance policy on the life
of any employee.
Our future success also will depend in part on the continued service of our
key scientific, software, bioinformatics and management personnel and our
ability to identify, hire and retain additional personnel, including customer
service, marketing and sales staff. We experience intense competition for
qualified personnel. We may not be able to continue to attract and retain
personnel necessary for the development of our business.
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We Depend on Third Parties for Necessary Equipment, Supplies and Data
We rely on a small number of suppliers of gene sequencing machines and
reagents required for gene sequencing. Although we are evaluating alternative
gene sequencing machines, they may not be available in sufficient quantities or
at acceptable costs. In addition, if a third party claims that our use of these
machines infringes their patent rights, our use of these machines could become
more costly or could be prevented. If we are unable to obtain additional
machines or an adequate supply of reagents or other materials at commercially
reasonable rates, our ability to identify genes and SNPs would be adversely
affected.
We rely on outside sources for tissue samples from which we isolate genetic
material used in our operations. Our business could be adversely affected if we
lose access to some of these sources, or if they charged us higher access fees
or imposed tighter restrictions on our use of the information generated from the
samples.
We cannot control the performance of collaborators. We may enter into
research and development relationships with corporate and academic collaborators
and others. The success of these relationships depends upon third parties'
performance of their responsibilities. Our ability to develop these
relationships is uncertain, and any established relationships may prove
unsuccessful. Our collaborators may also be pursuing alternative technologies or
developing alternative products on their own or in collaboration with others,
including our competitors.
We rely on third-party data sources. We rely on scientific and other data
supplied by others, including our academic collaborators and sources of tissue
samples. These data could contain errors or other defects, which could corrupt
our databases. In addition, we cannot guarantee that our data sources acquired
this information in compliance with legal requirements. If either of these
happen and become known, our business prospects could be adversely affected.
We May Need to Raise Additional Capital That May Not be Available
Based upon our current plans, we believe that our existing resources and
anticipated cash flow from operations can satisfy our capital needs for at least
the next 12 months. However, our products and services may not produce revenues
which, together with our existing cash and other resources, are adequate to meet
our cash needs. Our cash requirements depend on numerous factors, including:
o our ability to attract and retain collaborators for our databases
and other products and services;
o expenditures in connection with alliances, license agreements and
acquisitions of and investments in complementary technologies and
businesses;
o the need to increase research and development spending as a result
of competing technological and market developments;
o the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
15
<PAGE>
o the purchase of additional capital equipment, including equipment
necessary to process data for our databases and to ensure that
our sequencing and microarray operations remain competitive;
o capital expenditures required to expand our facilities; and
o costs associated with the integration of acquired operations.
Changes in our research and development plans or other changes affecting
our operating expenses may alter the timing and amount of expenditures of our
capital resources. If we need additional funding, we may be unable to obtain it
on favorable terms, or at all. If adequate funds are not available, we may have
to curtail operations significantly or obtain funds by entering into
arrangements requiring us to relinquish rights to certain technologies, products
or markets. In addition, if we raise funds by selling stock or convertible
securities, our existing stockholders could suffer dilution.
Our Business Could be Affected by the Year 2000 Issue
As a result of computer programs being written using two digits, rather
than four, to represent year dates, the performance of our computer systems and
those of our suppliers and customers in the Year 2000 is uncertain. Any computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations which disrupt our operations, such as a temporary inability
to process transactions, send invoices or engage in other normal business
activities.
We are evaluating the Year 2000 readiness of the software products that we
sell, the information technology systems used in our operations, and our other
systems such as building security and voicemail. We currently anticipate that
this project will consist of the following phases:
o identifying all of our software products, information technology
systems and other systems;
o assessing repair or replacement requirements;
o repair or replacement;
o testing;
o implementation; and
o creating contingency plans in the event of Year 2000 failures.
We will initiate an assessment of all current versions of our software
products and believe that this will be completed in the first half of 1999. Even
so, whether a complete system or device in which a software product is embedded
will operate correctly for an end-user depends largely on the Year 2000
compliance of other components, most of which are supplied by third parties.
We rely, both domestically and internationally, upon various vendors,
government agencies, utility companies, telecommunications service companies,
delivery service companies and other service
16
<PAGE>
providers. We have no control over these third parties and they may suffer a
Year 2000 business disruption.
We also rely upon goods and services purchased from certain vendors, and
our business could be disrupted if they fail to adequately address the Year 2000
issue. We are preparing to survey our principal vendors to assess the potential
effect of the Year 2000 issue on their ability to supply us. We cannot currently
predict the outcome of this effort. We intend to develop contingency plans
regarding vendors whose failure to be Year 2000 ready is expected to have a
material adverse impact on our operations. However, our vendors may be unable to
supply important goods and services without material interruption and our
contingency plans may not keep us adequately supplied.
The demand for our products could also be affected by Year 2000 issues
affecting our customers. We plan to develop a contingency plan for customers
with Year 2000 problems, but we cannot presently determine what impact, if any,
it will have.
To date, we have not incurred any material expenditures in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to the
time spent by our employees in evaluating our software, products, and general
Year 2000 compliance matters. Absent a significant Year 2000 compliance
deficiency, management currently estimates that the cost to complete our Year
2000 compliance programs will be between $1.0 million and $1.5 million, which
will be expensed as incurred. We believe that available cash can cover the
projected costs associated with these activities.
We are focusing on identifying and addressing all aspects of our operations
that may be affected by the Year 2000 issue and are addressing the most critical
applications first. We intend to develop and implement, if necessary,
appropriate contingency plans to mitigate the effects of any Year 2000
noncompliance. We expect to have these plans completed in mid- to late-1999. As
part of the development of a contingency plan, we will evaluate our worst case
scenario for Year 2000 noncompliance. Although the full consequences are
unknown, the failure of our critical systems or those of our material vendors
and other business partners to be Year 2000 complaint would interrupt our
business.
Our Activities Involve Hazardous Materials and May Subject Us to Environmental
Liability
Our research and development involves the controlled use of hazardous and
radioactive materials and biological waste. We are subject to federal, state and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of these materials and certain waste products. Although we believe that
our safety procedures for handling and disposing of these materials comply with
legally prescribed standards, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of an
accident, we could be held liable for damages, and this liability could exceed
our resources.
We believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material additional capital expenditures for environmental control
facilities in the near term. However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.
17
<PAGE>
Our Revenues Are Derived Primarily from the Pharmaceutical and Biotechnology
Industries
We expect that our revenues in the foreseeable future will be derived
primarily from products and services provided to the pharmaceutical and
biotechnology industries. Accordingly, our success will depend directly upon the
success of the companies within these industries and their demand for our
products and services. Our operating results may fluctuate substantially due to
reductions and delays in research and development expenditures by companies in
these industries. These reductions and delays may result from factors such as:
o changes in economic conditions;
o changes in the regulatory environment affecting health care and
health care providers;
o pricing pressures;
o market-driven pressures on companies to consolidate and reduce
costs; and
o other factors affecting research and development spending.
These factors are not within our control.
Our Business Could be Interrupted by Natural Disasters
We conduct our sequencing and a significant portion of our other activities
at our facilities in Palo Alto, California, and conduct our microarray-related
activities at our facilities in Fremont, California. Both locations are in a
seismically active area. Although we maintain business interruption insurance,
we do not have or plan to obtain earthquake insurance. A major catastrophe (such
as an earthquake or other natural disaster) could result in a prolonged
interruption of our business.
Our Stock Price Has Been and Will Likely Continue to be Volatile
Our stock price has been and is likely to be highly volatile, particularly
due to our relatively limited trading volume. Our stock price could fluctuate
significantly due to a number of factors, including:
o variations in our anticipated or actual operating results;
o sales of substantial amounts of our stock;
o announcements about us or about our competitors, including
technological innovations or new products or services;
o litigation and other developments relating to our patents or other
proprietary rights or those of our competitors;
o conditions in the life sciences, pharmaceuticals or genomics
industries;
o governmental regulation and legislation; and
18
<PAGE>
o changes in securities analysts' estimates of our performance,
or our failure to meet analysts' expectations.
Many of these factors are beyond our control.
In addition, the stock markets in general, and the Nasdaq National Market
and the market for life sciences and technology companies in particular, have
experienced extreme price and volume fluctuations recently. These fluctuations
often have been unrelated or disproportionate to the operating performance of
these companies. These broad market and industry factors may adversely affect
the market price of our common stock, regardless of our actual operating
performance.
In the past, companies that have experienced volatility in the market
prices of their stock have been the object of securities class action
litigation. If we were the object of securities class action litigation, it
could result in substantial costs and a diversion of management's attention and
resources.
PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the shares by the selling
stockholders. All proceeds from the sale of the shares will be for the account
of the selling stockholders, as described below. See "Selling Stockholders" and
"Plan of Distribution" below.
19
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of February 1, 1999
regarding the beneficial ownership of common stock by each of the selling
stockholders and the shares being offered by the selling stockholders. Each of
the selling stockholders owns less than 1% of the Company's outstanding common
stock prior to the offering. Information with respect to beneficial ownership is
based upon information obtained from the selling stockholders. Information with
respect to shares owned beneficially after the offering assumes the sale of all
of the shares offered and no other purchases or sales of common stock.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Number Beneficially
Owned Prior of Shares Owned After
to Offering Being Offered Offering
------------- ------------- -------------
<S> <C> <C> <C>
Deutsche Bank AG, London Branch........................... 246,337 98,535 147,802
Abingworth Bioventures SICAV.............................. 90,403 36,162 54,241
Atlas Venture Europe Fund B.V............................. 88,030 35,212 52,818
PaineWebber International (U.K.) Ltd...................... 87,558 35,024 52,534
Schroder Ventures International Life Sciences
Fund LP1................................................ 74,187 29,675 44,512
SUK VF IV Nominees Limited................................ 58,687 23,475 35,212
Mark Bodmer............................................... 42,554 17,022 25,532
Andrew Sandham............................................ 42,554 17,022 25,532
Schroder Ventures International Life Science
Fund Trust.............................................. 26,113 10,446 15,667
Alan Schafer.............................................. 24,582 9,833 14,749
Jamie Foster.............................................. 24,560 9,824 14,736
Rudolf Balling............................................ 24,208 9,684 14,524
Peter Goodfellow.......................................... 24,208 9,684 14,524
Celltech Group Plc........................................ 23,475 9,390 14,085
Schroder Ventures International Life Sciences
Fund LP2................................................ 16,486 6,595 9,891
Thomas G. Micklem......................................... 1,320 528 792
NEA Ventures 1996 L.P..................................... 775 310 465
Michael Gilchrist......................................... 771 309 462
Schroder Ventures Managers Limited (Schroder
Ventures International Life Sciences
Fund Co-Investment)..................................... 587 235 352
Lynda Connon.............................................. 418 168 250
Polly Weller.............................................. 397 159 238
Tom Weaver................................................ 343 138 205
Inge Louden van Bakel..................................... 323 130 193
Jane Reed................................................. 273 110 163
Ines Barroso.............................................. 247 99 148
Karen Thomas.............................................. 220 88 132
David Townley............................................. 212 85 127
Andrew Ambler............................................. 198 80 118
Simon Kelley.............................................. 193 78 115
Rachael Cubberley......................................... 190 76 114
Allison Kingsbury......................................... 190 76 114
Peter Swarbrick........................................... 190 76 114
20
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Naveed Anwar.............................................. 176 71 105
Gareth Maslen............................................. 176 71 105
Mike Palmer............................................... 176 71 105
Anne Elliot............................................... 143 58 85
Darren Cuthbert-Heavens................................... 133 54 79
</TABLE>
The shares being sold by the selling stockholders were issued in connection
with the Company's acquisition of Hexagen Limited. The Company acquired all of
the outstanding shares of Hexagen in exchange for shares of the Company's common
stock. This prospectus is part of a registration statement that was filed
pursuant to a Share Purchase Agreement dated as of September 21, 1998 among the
Company and the former shareholders of Hexagen. Under the Share Purchase
Agreement, the Company agreed to register up to 40% of the shares of common
stock received by each former Hexagen shareholder pursuant to the Share Purchase
Agreement and to keep the registration statement effective for a period of 180
days.
21
<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold at various
times by the selling stockholders. As used in this prospectus, the term "selling
stockholders" includes donees, pledgees, transferees or other
successors-in-interest selling shares received from a named selling stockholder
as a gift, partnership distribution, or other non-sale-related transfer after
the date of this prospectus. The selling stockholders will act independently of
the Company in making decisions with respect to the timing, manner and size of
each sale. The shares may be sold by or for the account of the selling
stockholders in transactions on the Nasdaq National Market, the over-the-counter
market, or otherwise. These sales may be made at fixed prices, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. The shares may be sold by means of one or more of the
following methods:
o a block trade in which the broker-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;
o purchases by a broker-dealer as principal and resale by that
broker-dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions in which the broker solicits
purchasers;
o in connection with short sales, in which the shares are redelivered
to close out short positions;
o in connection with the loan or pledge of shares registered
hereunder to a broker-dealer, and the sale of the shares so loaned
or the sale of the shares so pledged upon a default;
o in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options;
o privately negotiated transactions; or
o in a combination of any of the above methods.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in resales. Broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders or from the purchasers of the shares or from both. This
compensation may exceed customary commissions.
The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933. Any commissions paid or any discounts or concessions allowed to any of
those persons, and any profits received on the resale of the shares purchased by
them, may be deemed to be underwriting commissions or discounts under the
Securities Act.
The Company has agreed to bear all expenses of registration of the shares
(other than fees and expenses, if any, of counsel or other advisors to the
selling stockholders). Any commissions,
22
<PAGE>
discounts, concessions or other fees, if any, payable to broker-dealers in
connection with any sale of the shares will be borne by the selling stockholders
selling those shares.
LEGAL MATTERS
Certain legal matters with respect to the validity of common stock offered
by this prospectus are being passed upon for the Company by Pillsbury Madison &
Sutro LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, audited the financial
statements of Incyte Pharmaceuticals, Inc. at December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997, included in
Incyte's Current Report on Form 8-K dated June 12, 1998, as set forth in Ernst &
Young's report included in that Form 8-K and incorporated by reference in this
prospectus. These financial statements are incorporated in this prospectus by
reference in reliance upon Ernst & Young's report, given on their authority as
experts in accounting and auditing.
The consolidated financial statements of Hexagen plc as of December 31,
1997, and for the year ended December 31, 1997, included in Incyte's Current
Report on Form 8-K/A dated September 21, 1998, and incorporated by reference in
this prospectus, have been audited by Coopers & Lybrand, independent auditors,
as set forth in their report thereof included therein and incorporated herein by
reference.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet Website at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
We have filed with the Commission a registration statement (which
contains this prospectus) on Form S-3 under the Securities Act of 1933. The
registration statement relates to the common stock offered by the selling
stockholders. This prospectus does not contain all of the information set forth
in the registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and
schedules for further information with respect to the Company and the common
stock. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of that contract or document filed as an exhibit to the
registration statement. You may read and obtain a copy of the registration
statement and its exhibits and schedules from the Commission, as described in
the preceding paragraph.
23
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed. The documents
we incorporate by reference are:
o Our Annual Report on Form 10-K for the year ended December 31, 1997.
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998, and September 30, 1998.
o Our Current Reports on Form 8-K dated January 22, 1998 (as amended
on Form 8-K/A filed on April 1, 1998), June 12, 1998, August 17,
1998, September 2, 1998, September 21, 1998 (as amended by Form
8-K/A filed on December 4, 1998), September 25, 1998, and February
3, 1999.
o The description of our common stock contained in our registration
statement on Form 8-A filed under the Exchange Act on January 5,
1996.
o The description of our Series A Participating Preferred Stock
Purchase Rights contained in the registration statement on Form 8-A
filed under the Exchange Act on September 30, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number:
Investor Relations
Incyte Pharmaceuticals, Inc.
3174 Porter Drive
Palo Alto, California 94304
Telephone (650) 845-4589
24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Commission registration fee.
Amount
------
SEC registration fee.............................. $ 2,857.45
Accounting fees and expenses...................... 15,000.00
Legal fees and expenses........................... 25,000.00
Miscellaneous fees and expenses................... 2,142.55
----------
Total.................................... $45,000.00
==========
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Article VII of the Registrant's Restated Certificate of
Incorporation (Exhibit 4.1 to the Registrant's Registration Statement on Form
S-3 (File No. 333-31307)) and Article V of the Registrant's Bylaws (Exhibit 4.2
to the Registrant's Registration Statement on Form S-3 (File No. 333-31307))
provide for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
Delaware General Corporation Law. The Registrant has also entered into
agreements with its directors and officers that will require the Registrant,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors or officers to the fullest
extent not prohibited by law.
Item 16. Exhibits
Exhibit
Number Description of Document
-------- -----------------------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Coopers & Lybrand, Independent Auditors.
23.3 Consent of Pillsbury Madison & Sutro
LLP (included in its opinion filed
as Exhibit 5.1 to this Registration
Statement).
24.1 Power of Attorney (see page II-3).
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been
II-1
<PAGE>
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities 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; and
(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 (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palo Alto, State of California, on February 26, 1999.
INCYTE PHARMACEUTICALS, INC.
By /s/ Roy A. Whitfield
-----------------------------
Roy A. Whitfield
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Roy A. Whitfield, Randal W. Scott, and Denise M.
Gilbert, and each of them, his or her true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments, including post-effective amendments, to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that each of said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Roy A. Whitfield Chief Executive Officer (Principal
- --------------------------------- Executive Officer) and Director February 26, 1999
Roy A. Whitfield
Executive Vice President and Chief
/s/ Denise M. Gilbert Financial Officer (Principal Financial February 26, 1999
- -------------------------------- Officer)
Denise M. Gilbert
/s/ William Delaney Controller (Principal Accounting
- -------------------------------- Officer) February 26, 1999
William Delaney
/s/ Jeffrey J. Collinson February 26, 1999
- ---------------------------------
Jeffrey J. Collinson Chairman of the Board
/s/ Barry M. Bloom Director February 26, 1999
- ----------------------------------
Barry M. Bloom
/s/ Frederick B. Craves February 26, 1999
- ---------------------------------
Frederick B. Craves Director
II-3
<PAGE>
Name Title Date
---- ----- ----
/s/ Jon S. Saxe February 26, 1999
- -------------------------------
Jon S. Saxe Director
/s/ Randal W. Scott Director February 26, 1999
- -------------------------------
Randal W. Scott
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Document
- -------------- -----------------------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Coopers & Lybrand, Independent Auditors.
23.3 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1 to the Registration Statement).
24.1 Power of Attorney (see page II-3).
<PAGE>
EXHIBIT 5.1
LAW OFFICES OF
PILLSBURY MADISON & SUTRO LLP
LOS ANGELES POST OFFICE BOX 7880 PALO ALTO
NEW YORK SAN FRANCISCO, CALIFORNIA 94120 ORANGE COUNTY
SACRAMENTO TELEPHONE (415) 983-1000 SAN DIEGO
SAN FRANCISCO TELECOPIER (415) 983-1200 HONG KONG
WASHINGTON, D.C. TOKYO
March 1, 1999
Incyte Pharmaceuticals, Inc.
3174 Porter Drive
Palo Alto, CA 94304
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Incyte Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of 360,653 shares of Common Stock, $.001 par
value (the "Common Stock"), of the Company, to be offered and sold by certain
stockholders of the Company (the "Selling Stockholders"). In this regard we have
participated in the preparation of a Registration Statement on Form S-3 relating
to such 360,653 shares of Common Stock. (Such Registration Statement, as
amended, is herein referred to as the "Registration Statement.")
We are of the opinion that the shares of Common Stock to be offered and
sold by the Selling Stockholders have been duly authorized and legally issued
and are fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
PILLSBURY MADISON & SUTRO LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Incyte
Pharmaceuticals, Inc. for the registration of 360,653 shares of its common stock
and to the incorporation by reference therein of our report dated January 12,
1998, except for "Principles of Consolidation" in Note 1 and paragraph 3 of Note
7 as to which the date is January 22, 1998 with respect to the consolidated
financial statements of Incyte Pharmaceuticals, Inc. included in its Current
Report on Form 8-K dated June 12, 1998, for the year ended December 31, 1997,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Palo Alto, California
February 23, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND, INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-3 of our
report dated August 14, 1998 and October 1, 1998 on our audit of the financial
statements of Hexagen plc. We also consent to the reference to our firm under
the caption "Experts".
COOPERS & LYBRAND
Cambridge, England
February 26, 1999
