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As filed with the Securities and Exchange Commission on August 2, 2000
Registration No. 333-36318
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INCYTE GENOMICS, INC.
(Previously known as Incyte Pharmaceuticals, Inc.)
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(Exact Name Of Registrant As Specified In Its Charter)
Delaware 94-3136539
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3160 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 GENOMICS, INC.
3160 Porter Drive
Palo Alto, California 94304
(650) 855-0555
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy 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 the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
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.
<PAGE> 2
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.
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SUBJECT TO COMPLETION, DATED AUGUST 2, 2000
PROSPECTUS
$200,000,000
INCYTE GENOMICS, INC.
5.5% CONVERTIBLE SUBORDINATED NOTES DUE 2007
AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
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The notes and shares may be offered and sold at various times by the
securityholders identified in this prospectus.
The notes are due on February 1, 2007. We will pay interest on the notes
on February 1 and August 1 of each year, beginning August 1, 2000.
You may convert your notes at any time after May 15, 2000 and prior to
maturity into shares of our common stock at a conversion price of $134.839 per
share, which is equivalent to a conversion rate of 7.4163 shares of our common
stock per $1,000 principal amount of notes. This conversion rate is subject to
adjustment under the terms of the notes. The notes are general, unsecured
obligations that are subordinated to all existing and future senior
indebtedness.
We may redeem any portion of the notes at any time prior to February 1,
2007 if specific circumstances are satisfied. You may require us to repurchase
your notes upon a change in control, subject to specified exceptions.
Our common stock is traded on the Nasdaq National Market under the
symbol "INCY." The last reported sale price of our common stock on the Nasdaq
National Market on August 1, 2000 was $85.00 per share.
----------------------
INVESTING IN THE NOTES AND OUR COMMON STOCK INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY READ AND CONSIDER THE "RISK FACTORS" BEGINNING ON
PAGE 3.
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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.
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The date of this prospectus is _________, 2000
<PAGE> 4
You should read carefully the entire prospectus, as well as the
documents incorporated by reference in the prospectus, before making an
investment decision.
INCYTE GENOMICS, INC.
We provide products and services based on genomic information. Genomics
involves the analysis of genetic information and its relationship to disease. We
develop and sell the following products and services:
- genomic databases that include
- our proprietary and publicly available genomic information,
including the order, or sequence, of the molecules, or bases, in
the DNA comprising genes,
- information regarding variations in a single base between two
individuals, which are referred to as single nucleotide
polymorphisms or SNPs, and
- gene expression information, which is information regarding the
extent to which specific genes in a cell are active in specified
conditions;
- software that helps to analyze and manage genomic data;
- microarray-based gene expression services that use microarrays, which
are silicon or glass chips that have different DNA fragments, or
probes, located in known positions on the chips, to obtain gene
expression information; and
- physical copies of genes or gene fragments in our databases, called
bioreagents, and related services.
We focus on providing integrated products and services designed to
assist pharmaceutical and biotechnology companies in the discovery and
development of new drugs and diagnostic tests. Our products and services can be
applied to gene discovery, understanding the genetic bases for diseases,
identifying new molecules that may play a role in the disease process, referred
to as drug targets, and the discovery and correlation of variations in the
sequence of individual genes to disease.
Incyte and LifeSeq are our registered trademarks. GEM is our trademark.
We also refer to trademarks of other corporations and organizations in this
prospectus.
Incyte was incorporated in Delaware in 1991. We changed our name from
Incyte Pharmaceuticals, Inc. to Incyte Genomics, Inc. in June 2000. Our
executive offices are located at 3160 Porter Drive, Palo Alto, California 94304
and our telephone number is (650) 855-0555.
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RISK FACTORS
RISKS RELATING TO THE NOTES AND COMMON STOCK
WE MAY NOT HAVE SUFFICIENT CASH FLOW FROM OUR BUSINESS TO PAY THE NOTES
Our ability to pay the principal of and interest on our debt, including
the notes, will depend in part on our future performance. We have substantial
amounts of outstanding indebtedness, which consists primarily of the notes. A
variety of uncertainties and contingencies can affect our future performance.
Many of these uncertainties and contingencies are beyond our control. We may be
unable to generate cash sufficient to pay the principal of, interest on and
other amounts due in respect of our debt when due. For the year ended December
31, 1999, our earnings were insufficient to cover our fixed charges by $21.9
million. We also expect to add additional equipment loans and lease lines to
finance capital expenditures and may obtain additional long term debt, working
capital lines of credit and lease lines. We cannot assure you that any financing
arrangements will be available. If we add additional debt, our cash flow
requirements would increase.
WE HAVE A LARGE AMOUNT OF DEBT AND OUR DEBT SERVICE OBLIGATIONS MAY PREVENT US
FROM TAKING ACTIONS THAT WE WOULD OTHERWISE CONSIDER TO BE IN OUR BEST INTERESTS
As of June 30, 2000, we had
- total consolidated debt of approximately $203.3 million, and
- stockholders' equity of approximately $601.9 million, and
- a deficiency of earnings available to cover fixed charges of $13.5
million for the six months ended June 30, 2000.
A variety of uncertainties and contingencies will affect our future
performance, many of which are beyond our control. We may not generate
sufficient cash flow in the future to enable us to meet our anticipated fixed
charges, including our debt service requirements with respect to the $200
million of convertible subordinated notes we sold in February 2000. The
following table shows the aggregate amount of our principal and interest
payments due in each of the five years:
<TABLE>
<CAPTION>
Year Aggregate Principal Aggregate Interest
---- ------------------- ------------------
<S> <C> <C>
2000 $796,000 $ 5,531,000
2001 -- 11,000,000
2002 -- 11,000,000
2003 -- 11,000,000
2004 -- 11,000,000
</TABLE>
Our substantial proportion of debt to equity, or leverage, could have
significant negative consequences for our future operations, including:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our expected
cash flow from operations to service our indebtedness, thereby
reducing the amount of our expected cash flow available for other
purposes, including working capital and capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in
our business and the industry in which we compete; or
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- placing us at a possible competitive disadvantage compared to less
leveraged competitors and competitors that have better access to
capital resources.
IF WE BECOME INSOLVENT, WE MAY NOT HAVE SUFFICIENT ASSETS TO PAY OUR OBLIGATIONS
UNDER THE NOTES
The notes are general unsecured obligations. We may repay the notes only
after we have repaid all of our existing and future senior indebtedness. As a
result, in the event of bankruptcy, liquidation or reorganization or upon
acceleration of the notes due to an event of default on the notes and in
specific other events, we may pay the principal of and interest on the notes
only after we pay all of our senior indebtedness in full. Sufficient assets may
not remain to pay amounts due on any or all of the notes then outstanding.
Assets of our subsidiaries also will not be available to pay obligations on the
notes until our subsidiaries repay their own indebtedness and other liabilities,
including trade payables. The indenture, which is the contract governing the
notes, does not prohibit or limit us or our subsidiaries from incurring senior
indebtedness or other indebtedness and other liabilities. If we or our
subsidiaries incur other indebtedness or liabilities, our ability to pay
obligations on the notes could be harmed. As of June 30, 2000, our subsidiaries
had approximately $2.2 million of liabilities that would have to be paid before
assets of our subsidiaries would be available to pay obligations under the
notes. We anticipate that from time to time we will incur additional
indebtedness, including senior indebtedness.
BECAUSE WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO PURCHASE THE NOTES IN
THE EVENT OF A CHANGE IN CONTROL, A CHANGE IN CONTROL MAY CAUSE A DEFAULT ON THE
NOTES
In the event of a change in control, you will have the right, at your
option, to require us to purchase all or any part of your notes. If a change in
control occurs, we may be unable to pay the purchase price of your notes. Our
ability to purchase the notes in that event may be limited by law or the terms
of other agreements relating to our debt. We may be required to refinance our
senior indebtedness in order to make any such payment. We may not have the
financial ability to purchase the notes if payment of our senior indebtedness is
accelerated. The term "change in control" is limited to specified transactions.
It may not include some subsidiary mergers as a result of which our stockholders
hold less than 50% of a combined company or other events that might harm our
financial condition or result in a downgrade of any credit rating of the notes.
The requirement that we offer to purchase the notes upon a change in control
does not necessarily give you protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction. The term "change in
control" does not apply to a merger or similar transaction in which 90% of the
consideration paid for our common stock consists of common stock and the
consideration represents a higher price than the conversion price of the notes.
The term "change in control" also does not apply in other circumstances where
our common stock is trading at a higher price than the conversion price of the
notes. See "Description of Notes--Right to Require Purchase of Notes upon a
Change in Control" below.
IF AN ACTIVE TRADING MARKET FOR THE NOTES DOES NOT DEVELOP, THEN THE MARKET
PRICE OF THE NOTES COULD DECLINE AND YOU MAY BE UNABLE TO SELL YOUR NOTES
The notes are eligible for trading in the PORTAL Market of the National
Association of Securities Dealers, Inc. Although the initial purchasers of the
notes have advised us that they intend to make a market in the notes, they are
not obligated to do so and may discontinue market making activities at any time
without notice. We do not intend to apply for listing of the notes on any
securities exchange or any automated quotation system. We cannot ensure that any
market for the notes will develop or, if one does develop, that it will be
maintained. If an active market for the notes fails to develop or be sustained,
the trading price of the notes could decline or you may be unable to sell your
notes. As a result, you may be required to bear the financial risk of your
investment in the notes for an indefinite period of time.
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OUR STOCK PRICE HAS BEEN AND WILL LIKELY CONTINUE TO BE VOLATILE, AND YOU MAY BE
UNABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID
Our stock price has been and is likely to continue to be highly
volatile. For example, our stock price has since the beginning of 2000 traded as
high as $289.06 on February 25, 2000 and as low as $43.38 on May 24, 2000. Our
stock price could fluctuate significantly due to a number of factors, including:
- variations in our actual or anticipated operating results;
- sales of substantial amounts of our stock;
- announcements about us or about our competitors, including
technological innovation or new products or services;
- litigation and other developments relating to our patents or other
proprietary rights or those of our competitors;
- conditions in the life sciences, pharmaceuticals or genomics
industries;
- governmental regulation and legislation; and
- 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
decrease 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, which could affect our profitability.
RISKS RELATING TO OUR BUSINESS
WE HAVE HAD ONLY LIMITED PERIODS OF PROFITABILITY, WE EXPECT TO INCUR LOSSES IN
THE FUTURE AND WE MAY NOT RETURN TO PROFITABILITY
We had net losses from inception in 1991 through 1996 and again incurred
net losses in 1999 and the six months ended June 30, 2000. Because of those
losses, we had an accumulated deficit of $69.9 million as of June 30, 2000. In
2000, we intend to continue to spend significant amounts on new product and
technology development, including making our products available online, and to
increase our investment in marketing, sales and customer service. The amounts we
intend to spend on new product and technology development include spending for
our efforts to determine the sequence of genes, or genomic sequencing, determine
gene functions, develop database and software products such as our gene
expression database, discover SNPs, expand research and development alliances,
and develop electronic commerce products. As a result, we expect to report a net
loss for the year ending December 31, 2000. We may report net losses in future
periods as well. We will not return to profitability unless we will not return
to profitability unless we increase our revenues.
TO GENERATE SIGNIFICANT REVENUES AND RETURN TO PROFITABILITY, WE MUST OBTAIN
ADDITIONAL DATABASE COLLABORATORS AND RETAIN EXISTING COLLABORATORS
As of June 30, 2000, we had over 20 database agreements. If we are
unable to enter into additional agreements we will not generate additional
revenues. Also, our current database collaborators may choose not to
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renew their agreements 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 and the extent that existing collaborators
reduce the number of products or services for which they subscribe. 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 LONGER-TERM STRATEGY FOR PROFITABILITY INCLUDES LICENSES UNDER OUR
GENE-RELATED INTELLECTUAL PROPERTY TO OUR DATABASE COLLABORATORS, BUT THESE
LICENSES WILL NOT CONTRIBUTE TO REVENUES FOR SEVERAL YEARS, AND MAY NEVER RESULT
IN REVENUES
Part of our strategy is to license to database collaborators our know
how and patent rights associated with the genetic 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. Therefore, milestone or
royalty payments from these collaborations may not contribute to revenues for
several years, if at all.
IF WE ARE NOT ABLE TO GENERATE SIGNIFICANT REVENUES FROM EXPRESSION DATABASES
AND MICROARRAY SERVICES, WE MAY NOT BE PROFITABLE
We acquired Synteni, Inc. in January 1998 to provide microarray services
and to generate information for our gene expression database. The contribution
of our microarray operations to our operating results depends on whether we can
continue to obtain high-volume customers for microarray services and expression
databases, whether we can continue to increase our microarray production
capacity in a timely manner and with consistent volumes and quality, and the
costs associated with increasing our microarray production capacity.
OUR OPERATING RESULTS ARE UNPREDICTABLE, WHICH MAY CAUSE OUR STOCK PRICE TO
DECLINE AND RESULT IN LOSSES TO INVESTORS
Our operating results are unpredictable and may fluctuate significantly
from period to period, which may cause our stock price to decline and result in
losses to investors. Some of the factors that could cause our operating results
to fluctuate include:
- changes in the demand for our products and services, including our
database business;
- the introduction of competitive databases or services, including
databases of publicly available, or public domain, genetic
information;
- the nature, pricing and timing of other products and services
provided to our collaborators;
- acquisition, licensing and other costs related to the expansion of
our operations, including operating losses of acquired businesses;
- losses and expenses related to our investments in joint ventures and
businesses;
- 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;
- changes in intellectual property laws that affect our rights in
genetic information that we sell;
- payments of milestones, license fees or research payments under the
terms of our increasing number of external alliances; and
- expenses related to, and the results of, litigation and other
proceedings relating to intellectual property rights, including the
lawsuits filed by Affymetrix, Inc.
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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 harm 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.
OUR INDUSTRY IS INTENSELY COMPETITIVE, AND IF WE DO NOT COMPETE EFFECTIVELY, OUR
REVENUES MAY DECLINE
We compete in markets that are new, intensely competitive, rapidly
changing, and fragmented. Many of our current and potential competitors have
greater financial, human and other resources than we do. If we cannot respond
quickly to changing customer requirements, secure intellectual property
positions, or adapt quickly and obtain access to new and emerging technologies,
our revenues may decline. Our competitors include
- Celera Genomics Group of PE Corporation,
- CuraGen Corporation,
- Gene Logic Inc.,
- Human Genome Sciences, Inc.,
- major pharmaceutical companies, and
- universities and other research institutions, including The SNP
Consortium, which is funded by a number of pharmaceutical companies,
and those receiving funding from the federally funded Human Genome
Project.
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.
In addition, we face competition from companies who are developing and
may seek to develop new technologies for discovering the functions of genes,
gene expression information, including microarray technologies, discovery of
variations among genes and related technologies. Also, if we are unable to
obtain the technology we currently use or new advanced technology on acceptable
terms, but other companies are, we will be unable to compete.
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. If pharmaceutical companies
and researchers are able to manage their own genomic data, they may not
subscribe to our databases.
Extensive research efforts resulting in rapid technological progress
characterize the genomics industry. To remain competitive, we must continue to
expand our databases, improve our software, and invest in new technologies. New
developments will probably continue, and discoveries by others may render our
services and potential products noncompetitive.
IF PATENT POSITIONS BECOME PUBLICLY AVAILABLE, OR IF OUR COMPETITORS PUBLICLY
DISCLOSE THEIR DISCOVERIES, OUR REVENUES COULD DECLINE
Our competitors may discover and establish patent positions with respect
to the genes in our databases. Our competitors and other entities who engage in
discovering the way in which genes are ordered in DNA may also make the results
of their sequencing efforts publicly available. Currently, academic institutions
and other
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laboratories participating in the Human Genome Project make their gene sequence
information available through a number of publicly available databases,
including the GenBank database. Also, Celera Genomics Group has publicly stated
that it is committed to make available to the public basic human sequence data.
The public availability of these discoveries or resulting patent positions
covering substantial portions of the human genome could reduce the potential
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.
WE ARE INVOLVED IN PATENT LITIGATION, WHICH IF NOT RESOLVED FAVORABLY COULD
REQUIRE US TO PAY DAMAGES AND STOP SELLING AND USING MICROARRAY PRODUCTS
We are currently involved in patent litigation. If we lose this
litigation we could be prevented from producing and using our microarray
products and be required to pay damages. 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 Synteni and Incyte
infringed the `934 patent by 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 Synteni and Incyte infringed the '305 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. It
also alleges that Synteni and Incyte infringed the '992 patent by using their
GEM microarray technology to conduct gene expression monitoring using two-color
labeling and that this infringement was willful. Affymetrix had sought 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. Affymetrix's request for a preliminary
injunction was denied in May 1999. As a result of the assignment of the cases to
a new judge, all scheduled trial and pretrial dates have been vacated. The court
is expected to set a new schedule in July 2000.
In April 1999, the Board of Patent Appeals and Interferences of the
United States Patent and Trademark Office declared interferences between pending
patent applications licensed exclusively to us and the Affymetrix '305 and '992
patents. The Board of Patent Appeals and Interferences invokes an interference
proceeding when more than one patent applicant claims the same invention and,
during the proceeding, evaluates all relevant facts and makes a determination as
to who, if anyone, is entitled to the patent on the disputed invention. In
September 1999, the Board of Patent Appeals and Interferences ruled that patents
licensed by Incyte and Synteni from Stanford University were not entitled to
priority over corresponding claims in the two Affymetrix patents. We are seeking
de novo review in the United States District Court for the Northern District of
California.
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. This litigation may also affect our potential
customers' willingness to use our microarray services and gene expression
databases, which could affect our revenues.
IF WE ARE SUBJECT TO ADDITIONAL LITIGATION AND INFRINGEMENT CLAIMS, THEY COULD
BE COSTLY AND DISRUPT OUR BUSINESS
The technology that we use to develop our products, and the technology
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.
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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 third parties. 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:
- assert claims of infringement;
- enforce our patents;
- protect our trade secrets or know-how; or
- 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 and services. Further, we may not be able to obtain any
necessary licenses on acceptable terms, if at all.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY INFORMATION, WHICH MAY RESULT IN ITS
UNAUTHORIZED USE AND A LOSS OF REVENUE
Our business and competitive position depend upon our ability to protect
our proprietary database information and software technology. 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 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:
- independently develop substantially equivalent proprietary
information and techniques;
- otherwise gain access to our proprietary information; or
- design around patents issued to us or our other intellectual
property.
IF THE INVENTIONS DESCRIBED IN OUR PATENT APPLICATIONS ON FULL-LENGTH OR PARTIAL
GENES ARE FOUND TO BE UNPATENTABLE, OUR ISSUED PATENTS ARE NOT ENFORCED OR OUR
PATENT APPLICATIONS CONFLICT WITH PATENT APPLICATIONS FILED BY OTHERS, OUR
REVENUES MAY DECLINE
One of our strategies is to file patent applications on what we believe
to be novel full-length and partial genes and SNPs obtained through our efforts
to discover the order, or sequence, of the molecules, or bases, of genes. We
have filed U.S. patent applications in which we claimed partial sequences of
some genes. 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. While the United States Patent and Trademark Office has issued
patents covering full-length genes, partial gene sequences and SNPs, the Patent
and Trademark Office may choose to interpret new guidelines for the issuance of
patents in a more restrictive manner in the future, which could impact the
issuance of our pending patent applications. We also do not know whether or how
courts may
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enforce our issued patents, if that becomes necessary. If a court finds these
types of inventions to be unpatentable, or interprets them narrowly, the value
of our patent portfolio and possibly our revenues could be diminished.
We believe that some of our patent applications claim genes and partial
sequences of 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, before a patent is issued. If a full-length or
partial length sequence for which we seek a patent is issued to one of our
competitors, we may be unable to include that full-length or partial length
sequence on a microarray or in a library of bioreagents. This could result in a
loss of revenues.
IF THE EFFECTIVE TERM OF OUR PATENTS IS DECREASED DUE TO CHANGES IN THE U.S.
PATENT LAWS OR IF WE NEED TO REFILE SOME OF OUR PATENT APPLICATIONS, THE VALUE
OF OUR PATENT PORTFOLIO AND THE REVENUES WE DERIVE FROM IT MAY BE DECREASED
The value of our patents depends in part on their duration. A shorter
period of patent protection could lessen the value of our rights under any
patents that we obtain and may decrease the revenues we derive from our patents.
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. Also, we may
need to refile some of our 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 and may decrease the revenues that we might obtain from the patents.
INTERNATIONAL PATENT PROTECTION IS PARTICULARLY UNCERTAIN, AND IF WE ARE
INVOLVED IN OPPOSITION PROCEEDINGS IN FOREIGN COUNTRIES, WE MAY HAVE TO EXPEND
SUBSTANTIAL SUMS AND MANAGEMENT RESOURCES
Biotechnology patent law outside the United States is even more
uncertain than in the United States 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 foreign
patents or our competitors foreign patents, which could result in substantial
costs and diversion of our efforts.
IF OUR NEW PROGRAMS RELATING TO THE ROLE OF GENETIC VARIATION IN DISEASE AND
DRUG RESPONSE ARE NOT SUCCESSFUL, THEY MAY NOT GENERATE SIGNIFICANT REVENUES OR
RESULT IN PROFITABLE OPERATIONS
We recently began to focus part of our business on developing
information-based and other products and services to assist pharmaceutical
companies in a new and unproven area: the identification and correlation of
variation in genetic composition to disease and drug response. We will incur
significant costs over the next several years in expanding our research and
development in this area. These activities may never generate significant
revenues or profitable operations.
This new aspect of our business will focus on single nucleotide
polymorphisms or 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 because the variations we discovered may
not occur frequently enough to justify use by a pharmaceutical company.
Our success in this area will also depend upon our ability to develop,
use and enhance new and relatively unproven technologies. Among other things, we
will need to continue to improve the throughput of our SNP-
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discovery technology. We may not be able to achieve these necessary
improvements, and other factors may impair our ability to develop our
SNP-related products and services in time to be competitively available.
IF OUR STRATEGIC INVESTMENTS RESULT IN LOSSES, OUR EARNINGS MAY DECLINE
We make strategic investments in joint ventures or businesses that
complement our business. These investments may:
- 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;
- require us to record losses and expenses related to our ownership
interest, such as the losses we reported in 1997, 1998 and 1999
related to our investment in diaDexus, LLC;
- 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
- 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.
BECAUSE OUR SALES CYCLE IS LENGTHY, WE MAY SPEND A LOT OF TIME AND MONEY TRYING
TO OBTAIN NEW OR RENEWED SUBSCRIPTIONS TO OUR PRODUCTS AND SERVICES BUT MAY BE
UNSUCCESSFUL, WHICH COULD HURT OUR PROFITABILITY
Our ability to obtain new subscribers for our databases, software tools
and microarray and other services or to obtain renewals or additions to existing
subscriptions depends upon prospective subscribers' perceptions that our
products and services can help accelerate drug discovery efforts. Our database
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 new, renewed or expanded subscription or services agreement
will result. These expenditures, without increased revenues, will negatively
impact our profitability. 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.
IF WE ENCOUNTER PROBLEMS IN MEETING CUSTOMERS' SOFTWARE NEEDS, OUR REVENUES
COULD DECLINE AND WE COULD LOSE OUR CUSTOMERS' GOODWILL
Our databases require 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, which could result in a
loss of revenues and customer goodwill.
WE HAVE ENCOUNTERED DIFFICULTIES INTEGRATING COMPANIES WE ACQUIRED, AND IF IN
THE FUTURE WE CANNOT SMOOTHLY INTEGRATE BUSINESSES WE ACQUIRE, OUR OPERATIONS
AND FINANCIAL RESULTS COULD BE HARMED
As part of our business strategy, we may acquire other assets,
technologies and businesses. Our past acquisitions have involved and our future
acquisitions may involve risks such as the following:
- we may be exposed to unknown liabilities of acquired companies;
- our acquisition and integration costs may be higher than we
anticipated and may cause our quarterly and annual operating results
to fluctuate;
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- 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;
- we may be unable to integrate or complete the development and
application of acquired technology;
- we may experience difficulties in establishing and maintaining
uniform standards, controls, procedures and policies;
- our relationships with key customers of acquired businesses may be
impaired, due to changes in management and ownership of the acquired
businesses;
- we may be unable to retain key employees of the acquired businesses;
- we may incur amortization expenses if an acquisition results in
significant goodwill or other intangible assets; and
- 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.
IF WE ARE UNABLE TO MANAGE EFFECTIVELY OUR GROWTH, OUR OPERATIONS AND ABILITY TO
SUPPORT OUR CUSTOMERS COULD BE AFFECTED, WHICH COULD HARM OUR REVENUES
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 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 additional locations, which could result in additional
burdens on our systems and resources.
WE DEPEND ON KEY EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED PERSONNEL, AND
THE LOSS OF THE SERVICES OF ANY OF OUR KEY EMPLOYEES WOULD AFFECT OUR ABILITY TO
ACHIEVE OUR OBJECTIVES
We are highly dependent on the principal members of our management,
operations and scientific staff. Our product development, operations and
marketing efforts would be delayed or curtailed if we lose the services of any
of these people.
Our future success also will depend in part on the continued service of
our executive management team, key scientific, software, bioinformatics and
management personnel and our ability to identify, hire, train and retain
additional personnel, including customer service, marketing and sales staff. We
experience intense competition for qualified personnel. If we are unable to
continue to attract, train and retain these personnel, we may be unable to
expand our business.
WE RELY ON A SMALL NUMBER OF SUPPLIERS OF PRODUCTS WE NEED FOR OUR BUSINESS, AND
IF WE ARE UNABLE TO OBTAIN SUFFICIENT SUPPLIES, WE WILL BE UNABLE TO COMPETE
EFFECTIVELY
Currently, we use gene sequencing machines supplied by Molecular
Dynamics, a subsidiary of Amersham Pharmacia Biotech, Ltd., and chemicals used
in the sequencing process, called reagents, supplied by Sigma-Aldrich, Inc., in
our gene sequencing operations. If we are not able to obtain additional machines
or an adequate supply of reagents or other materials at commercially reasonable
rates, our ability to identify genes or genetic variations would be slower and
more expensive.
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IF THE INFORMATION WE OBTAIN FROM THIRD-PARTY DATA SOURCES IS CORRUPT OR
VIOLATES THE LAW, OUR REVENUES AND OPERATING RESULTS COULD DECLINE
We rely on and include in our databases scientific and other data
supplied by others, including publicly available information from sources such
as the Human Genome Project. This 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
this data caused database corruption or violated legal requirements, we would be
unable to sell subscriptions to our databases. These lost sales would harm our
revenue and operating results.
SECURITY RISKS IN ELECTRONIC COMMERCE OR UNFAVORABLE INTERNET REGULATIONS MAY
DETER FUTURE USE OF OUR PRODUCTS AND SERVICES, WHICH COULD RESULT IN A LOSS OF
REVENUES
We plan to make our products available through our website on the
Internet and have recently introduced our first online product, the LifeSeq
Gene-by-Gene program. Our ability to provide secure transmissions of
confidential information over the Internet may limit online use of our products
and services by our database collaborators as we may be limited by our inability
to provide secure transmissions of confidential information over the Internet.
Advances in computer capabilities and new discoveries in the field of
cryptography may compromise the security measures we use to protect our website,
access to our databases, and transmissions to and from our website. If our
security measures are breached, our proprietary information or confidential
information about our collaborators could be misappropriated. Also, a security
breach could result in interruptions in our operations. The security measures we
adopt may not be sufficient to prevent breaches, and we may be required to incur
significant costs to protect against security breaches or to alleviate problems
caused by breaches. Further, if the security of our website, or the website of
another company, is breached, our collaborators may no longer use the Internet
when the transmission of confidential information is involved. For example,
recent attacks by computer hackers on major e-commerce websites and other
Internet service providers have heightened concerns regarding the security and
reliability of the Internet.
Because of the growth in electronic commerce, the United States Congress
has held hearings on whether to further regulate providers of services and
transactions in the electronic commerce market. The federal government could
enact laws, rules and regulations that would affect our business and operations.
Individual states could also enact laws regulating the use of the Internet. If
enacted, these federal and state laws, rules and regulations could require us to
change our online business and operations, which could limit our growth and our
development of our online products.
BECAUSE OUR ACTIVITIES INVOLVE THE USE OF HAZARDOUS MATERIALS, WE MAY BE SUBJECT
TO COSTLY ENVIRONMENTAL LIABILITY THAT COULD EXCEED OUR RESOURCES
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 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.
BECAUSE OUR REVENUES ARE DERIVED PRIMARILY FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES, OUR REVENUES MAY FLUCTUATE SUBSTANTIALLY DUE TO
REDUCTIONS AND DELAYS IN RESEARCH AND DEVELOPMENT EXPENDITURES
We expect that our revenues in the foreseeable future will be derived
primarily from products and services provided to the pharmaceutical and
biotechnology industries as well as to the academic community. Accordingly, our
success will depend in large part upon the success of the companies within these
industries and their demand for
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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 or by the academic community. These reductions and delays
may result from factors such as:
- changes in economic conditions;
- consolidation in the pharmaceutical industry;
- changes in the regulatory environment affecting health care and
health care providers;
- pricing pressures;
- market-driven pressures on companies to consolidate and reduce costs;
and
- other factors affecting research and development spending.
These factors are not within our control.
IF A NATURAL DISASTER OCCURS, WE MAY HAVE TO CEASE OR LIMIT OUR BUSINESS
OPERATIONS
We conduct our database, 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.
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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 as to expected net losses, expected cash flows, the
adequacy of capital resources, growth in operations, the ability to
commercialize products developed under collaborations and alliances, our ability
to complete the sequence of full-length genes in areas of therapeutic interest
and file patents on these potential drug targets, our ability to integrate
companies and operations that we have acquired or will acquire, our ability to
implement online delivery of our database and software products, the scheduling
and timing of current and future litigation, our strategy with regard to
protecting our proprietary technology, our ability to compete and respond to
rapid technological change, and the performance and utility of our products and
services. 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
pharmaceuticals and biotechnology industries use genomic information in research
and development, risks relating to development of new products and services and
their use by our potential customers and collaborators, our ability to work with
our collaborators to meet the goals of our collaborators and alliances, our
ability to retain and obtain customers, the cost of accessing or acquiring
technologies or intellectual property, the effectiveness of our sequencing
efforts, the impact of alternative technological advances and competition,
uncertainties associated with changes in patent laws and developments in and
expenses related to litigation and interference proceedings, and the risks set
forth above under "Risk Factors."
PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the notes or the
shares of common stock offered by this prospectus. All proceeds from the sale of
the notes and shares will be for the account of the selling securityholders. See
"Selling Securityholders" and "Plan of Distribution" below.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
---------------------------------------------------------- ENDED JUNE 30,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges NM NM 6.75x 4.88x NM NM
</TABLE>
The ratio of earnings to fixed charges is computed by dividing income
(loss) before taxes and losses from joint venture plus fixed charges by fixed
charges. Fixed charges consist of interest expense, including interest expense
from capital leases, and the estimated portion of rental expense deemed by us to
be representative of the interest factor of rental payments under operating
leases. Earnings were insufficient to cover fixed charges for the years ended
December 31, 1995, 1996 and 1999 by approximately $9.9 million, $7.3 million,
and $21.9 million, respectively and for the six months ended June 30, 2000 by
approximately $13.5 million.
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DESCRIPTION OF NOTES
We issued the notes under a contract called an indenture, dated as of
February 4, 2000 between us and State Street Bank and Trust Company of
California, N.A., as Trustee. The following description is only a summary of the
material provisions of the indenture, the notes and the registration rights
agreement. We urge you to read the indenture, the notes and the registration
rights agreement in their entirety because they, and not this description,
define your rights as holders of the notes. You may request copies of these
documents at our address shown under the caption "Documents Incorporated by
Reference." The terms of the notes include those stated in the indenture and
those made part of the indenture by reference to the Trust Indenture Act of
1939.
GENERAL
We issued initially notes with a principal amount of $200,000,000. The
notes are unsecured, subordinated obligations of Incyte and will mature on
February 1, 2007, unless earlier redeemed at our option as described under
"--Redemption of the Notes" below or repurchased by us at a holder's option upon
a change in control of Incyte as described under "--Right to Require Purchase of
Notes upon a Change in Control" below. Interest on the notes accrues at the rate
of 5.5% per year and is payable semiannually in arrears on February 1 and August
1 of each year, commencing on August 1, 2000. Interest on the notes accrues from
the date of original issuance or, if interest has already been paid, from the
date it was most recently paid. We will make each interest payment to the
holders of record of the notes on the immediately preceding January 15 or July
15, whether or not this day is a business day. Interest on the notes is computed
on the basis of a 360-day year comprised of twelve 30-day months.
The Indenture does not contain any restriction on
- the payment of dividends;
- the issuance of senior indebtedness, as defined below, or other
indebtedness; or
- the repurchase of securities of Incyte
and does not contain any financial covenants. Other than as described under
"--Right to Require Purchase of Notes upon a Change in Control" below, the
indenture contains no covenants or other provisions to afford protection to
holders of notes in the event of a highly leveraged transaction or a change in
control of Incyte.
We will pay the principal of, premium, if any, and interest on the notes
at the office or agency maintained by us in the Borough of Manhattan in New York
City. Securityholders may register the transfer of their notes at the same
location. We reserve the right to pay interest to holders of the notes by check
mailed to the holders at their registered addresses or by wire transfer to
holders of at least $5,000,000 aggregate principal amount of notes. Except under
the limited circumstances described below, the notes have been issued only in
fully-registered book-entry form, without coupons, and are represented by two
global notes. There will be no service charge for any registration of transfer
or exchange of notes. We may, however, require holders to pay a sum sufficient
to cover any tax or other governmental charge payable in connection with any
transfer or exchange.
CONVERSION RIGHTS
A holder may, at any time after May 15, 2000 and before the close of
business on the business day immediately preceding the maturity date, convert a
note or any portion of a note into shares of common stock initially at the
conversion price of $134.839, unless the note or a portion of the note has been
previously redeemed or repurchased. The conversion price of $134.839 is
equivalent to a conversion rate of 7.4163 shares per $1,000 principal amount of
notes. Portions of notes may be converted only if they represent $1,000 or whole
multiples of $1,000 of principal amount. The right to convert a note called for
redemption will terminate at the close of business on the third business day
immediately preceding the date fixed for redemption, unless we default in making
the payment due on the redemption date. If a holder of a note has delivered
notice of its election to have the note repurchased as a result of a change in
control, the note may be converted only if the notice of election is withdrawn
as described under "--Right to Require Purchase of Notes upon a Change in
Control."
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We will adjust the conversion price if:
(1) we issue common stock as a dividend or distribution on our common
stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to substantially all holders of our common stock rights,
warrants or options entitling them to subscribe for or purchase common stock at
less than the then current market price;
(4) we distribute to substantially all holders of common stock evidences
of our indebtedness, shares of capital stock, securities, cash or property,
excluding:
- those rights, warrants or options referred to in clause (3) above;
- any dividend or distribution paid exclusively in cash; and
- any dividend or distribution referred to in clause (1) above;
(5) we make a cash distribution to substantially all holders of our
common stock, that together with all other all-cash distributions and
consideration payable in respect of any tender or exchange offer by us or one of
our subsidiaries for our common stock made within the preceding 12 months
exceeds 12.5% of our aggregate market capitalization on the date of the
distribution; or
(6) we complete a tender or exchange offer for our common stock which
involves an aggregate consideration that, together with:
- any cash and other consideration payable in respect of any tender or
exchange offer by us or one of our subsidiaries for our common stock
concluded within the preceding 12 months and
- the amount of any all-cash distributions to all holders of our common
stock made within the preceding 12 months,
exceeds 12.5% of our aggregate market capitalization on the expiration of the
tender or exchange offer. The conversion price will not be adjusted until
adjustments amount to 1% or more of the conversion price as last adjusted. We
will carry forward any adjustment we do not make and will include it in any
future adjustment.
If we distribute rights or warrants, other than those referred to in
clause (3) of the preceding paragraph, pro rata to holders of common stock, so
long as the rights or warrants have not expired or been redeemed by us, the
holder of any note surrendered for conversion will be entitled to receive, in
addition to the shares of common stock issuable upon conversion, the following
upon conversion:
- if conversion occurs on or prior to the date for the distribution of
certificates evidencing the rights or warrants, the holder will be
entitled to the same number of rights or warrants to which a holder
of a number of shares of common stock equal to the number of
conversion shares is entitled; and
- if conversion occurs after the distribution date, the holder will be
entitled to the same number of rights or warrants to which a holder
of the number of shares of common stock into which the note was
convertible immediately prior to the distribution date would have
been entitled on the distribution date in accordance with the terms
and provisions applicable to the rights or warrants.
The conversion price of the notes will not be subject to adjustment on account
of any declaration, distribution or exercise of any rights or warrants other
than those referred to in clause (3) of the preceding paragraph.
If our common stock is converted into the right to receive other
securities, cash or other property as a result of reclassifications,
consolidations, mergers, sales or transfers of assets or other transactions,
each note then outstanding would, without the consent of any holders of notes,
become convertible only into the kind and amount
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of securities, cash and other property receivable upon the transaction by a
holder of the number of shares of common stock which would have been received by
a holder immediately prior to the transaction if the holder had converted the
note.
We will not issue fractional shares of common stock to a holder who
converts a note. In lieu of issuing fractional shares, we will pay cash based
upon the market price.
Except as described in this paragraph, no holder of notes will be
entitled, upon conversion of the notes, to any actual payment or adjustment on
account of accrued and unpaid interest or on account of dividends on shares of
common stock issued in connection with the conversion. If any holder surrenders
a note for conversion between the close of business on any record date for the
payment of an installment of interest and the opening of business on the related
interest payment date the holder must deliver payment to us of an amount equal
to the interest payable on the interest payment date on the principal amount
converted together with the note being surrendered. The foregoing sentence shall
not apply to notes called for redemption on a redemption date within the period
between and including the record date and interest payment date.
If we make a distribution of property to our stockholders which would be
taxable to them as a dividend for federal income tax purposes and the conversion
price of the notes is reduced, this reduction may be deemed to be the receipt of
taxable income to holders of the notes.
In addition, we may make any reductions in the conversion price that our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes or for any other reasons.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
notes will, to the extent described in the indenture, be subordinated in right
of payment to the prior payment in full of all our senior indebtedness. The
holders of all senior indebtedness will first be entitled to receive payment in
full of all amounts due or to become due on the senior indebtedness, or
provision for payment in money or money's worth, before the holders of the notes
will be entitled to receive any payment in respect of the notes, when there is a
payment or distribution of assets to creditors upon our:
- liquidation;
- dissolution;
- winding up;
- reorganization;
- assignment for the benefit of creditors;
- marshaling of assets;
- bankruptcy;
- insolvency; or
- similar proceedings.
No payments on account of the notes or on account of the purchase or
acquisition of notes may be made if a default in any payment with respect to
senior indebtedness has occurred and is continuing. If (1) there is a default on
any senior indebtedness other than a payment default that occurs that permits
the holders of that senior indebtedness to accelerate its maturity and (2) the
Trustee and Incyte receive the notice required by the indenture, no payments
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<PAGE> 21
may be made on the notes for up to 179 days in any 365-day period unless the
default is cured or waived. By reason of this subordination, in the event of our
insolvency, holders of the notes may recover less, ratably, than holders of our
senior indebtedness.
"Senior indebtedness" means:
- the principal of and premium, if any, and interest on, and fees,
costs, enforcement expenses, collateral protection expenses and other
reimbursement or indemnity obligations in respect of all of our
indebtedness or obligations of us to any person for money borrowed
that is evidenced by a note, bond, debenture, loan agreement, or
similar instrument or agreement;
- commitment or standby fees due and payable to lending institutions
with respect to credit facilities available to us;
- all of our noncontingent obligations (1) for the reimbursement of any
obligor on any letter of credit, banker's acceptance, or similar
credit transaction, (2) under interest rate swaps, caps, collars,
options, and similar arrangements, and (3) under any foreign exchange
contract,
- currency swap agreement, futures contract, currency option contract,
or other foreign currency hedge;
- all of our obligations for the payment of money relating to
capitalized lease obligations;
- any liabilities of others described in the preceding clauses that we
have guaranteed or which are otherwise our legal liability; and
- renewals, extensions, refundings, refinancings, restructurings,
amendments, and modifications of any such indebtedness or guarantee;
other than any indebtedness or other obligation of us that by its
terms is not superior in right of payment to the notes.
At June 30, 2000, we had no consolidated senior indebtedness. We expect
from time to time to incur indebtedness. The indenture does not limit or
prohibit us from incurring senior indebtedness or other indebtedness. See "Risk
Factors--Because we may be unable to raise the funds necessary to purchase the
notes in the event of a change in control, a change in control may cause a
default on the notes."
REDEMPTION OF THE NOTES
Provisional Redemption
We may redeem any portion of the notes at any time prior to February 7,
2003, upon at least 20 and no more than 60 days' notice by mail to the holders
of the notes, at a redemption price equal to $1,000 per note plus accrued and
unpaid interest to the redemption date if:
(1) the closing price of our common stock has exceeded 150% of the
conversion price for at least 20 trading days in any consecutive 30-trading day
period ending on the trading day prior to the mailing of the notice of
redemption; and
(2) the shelf registration statement covering resales of the notes and
the common stock is effective and expected to remain effective and available for
use for the 30 days following the redemption date.
If we redeem the notes under these circumstances, we will make an
additional "make whole" payment on the redeemed notes equal to $165 per $1,000
note, minus the amount of any interest we actually paid on the note prior to the
date we mailed the notice of redemption. We must make these "make-whole"
payments on all notes called for redemption, including notes converted after the
date we mailed the notice.
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Optional Redemption
At any time on or after February 7, 2003, we may redeem all or a portion
of the notes upon at least 20 and not more than 60 days' notice by mail to the
holders of the notes, by paying the applicable redemption price, plus accrued
and unpaid interest. The redemption price, expressed as a percentage of the
principal amount, is 102.2% if the notes are redeemed in the period beginning
February 7, 2003 and ending February 1, 2004, and is as follows for the 12-month
periods beginning February 1 shown below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2004 101.1%
2005 and thereafter 100.0%
</TABLE>
SELECTION
If we opt to redeem less than all of the notes at any time, the Trustee
will select or cause to be selected the notes to be redeemed by any method that
it deems fair and appropriate. In the event of a partial redemption, the Trustee
may provide for selection for redemption of portions of the principal amount of
any note of a denomination larger than $1,000.
MANDATORY REDEMPTION
Except as set forth below under "--Right to Require Purchase of Notes
upon a Change of Control," we are not required to make mandatory redemption or
sinking fund payments with respect to the notes.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a change in control occurs, each holder of notes may require that we
repurchase the holder's notes on the date fixed by us that is not less than 45
nor more than 60 days after we give notice of the change in control. We will
repurchase the notes for an amount of cash equal to 100% of the principal amount
of the notes on the date of purchase, plus accrued and unpaid interest, if any,
to the date of purchase.
A change in control occurs when:
(1) any person, or any persons acting together in a manner which would
constitute a "group" for purposes of Section 13(d) of the Securities Exchange
Act of 1934, as amended, becomes the beneficial owner, directly or indirectly,
of our capital stock, entitling the person or persons and its or their
affiliates to exercise more than 50% of the total voting power of all classes of
our capital stock entitled to vote generally in the election of our directors;
or
(2) we consolidate with or merge into any other person or sell or
transfer all or substantially all of our assets to any person other than one of
our subsidiaries, or any other person consolidates with or merges into us, other
than any consolidation or merger where persons who are our stockholders
immediately prior to the transaction become the beneficial owners of more than
50% of the total voting power of the surviving company's capital stock; or
(3) a majority of our board of directors is not comprised of directors
who were members of the board at the beginning of the two-year period before the
date of the change or of directors who were nominated or elected by a majority
of the board of directors who were members of the board at the beginning of such
two-year period or whose nomination or election was previously so approved.
On or prior to the date of repurchase, we will deposit with a paying
agent an amount of money sufficient to pay the aggregate repurchase price of the
notes which is to be paid on the date of repurchase.
At our option, instead of paying the repurchase price in cash, we may
pay the repurchase price in common stock valued at 95% of the average of the
closing sales prices of the common stock for the five trading days
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immediately preceding and including the third day prior to the date of
repurchase. We may only pay the repurchase price in common stock if we satisfy
conditions provided in the indenture.
We may not repurchase any note at any time when the subordination
provisions of the indenture otherwise would prohibit us from making payments of
principal in respect of the notes. If we fail to repurchase the notes when
required under the preceding paragraph, this failure will constitute an event of
default under the indenture whether or not repurchase is permitted by the
subordination provisions of the indenture.
A change in control will not be deemed to have occurred:
(1) if the closing price of our common stock for any five of the ten
trading days before the change in control is at least equal to 105% of the
conversion price in effect immediately before the change in control; or
(2) if:
- at least 90% of the consideration received or to be received by the
holders of our common stock in the transaction or transactions
constituting a change in control consists of shares of common stock,
or securities convertible into the shares of common stock that are,
or upon issuance will be, traded on a national securities exchange or
through the Nasdaq National Market, and
- the consideration paid for our common stock in the transaction or
transactions constituting the change in control consists of cash,
securities that are traded on a national securities exchange or
through the Nasdaq National Market or a combination of cash and such
securities, and the aggregate fair market value of that consideration
is at least 105% of the conversion price in effect immediately before
the closing of the change in control.
On or before the 30th day after the change in control, we must mail to
the trustee and all holders of the notes a notice of the occurrence of the
change in control, stating:
- the repurchase date;
- the date by which the repurchase right must be exercised;
- the repurchase price for the notes; and
- the procedures which a holder of notes must follow to exercise the
repurchase right.
To exercise the repurchase right, the holder of a note must deliver, on
or before the third business day before the repurchase date, a written notice to
us and the trustee of the holder's exercise of the repurchase right. This notice
must be accompanied by certificates evidencing the note or notes with respect to
which the right is being exercised, duly endorsed for transfer. This notice of
exercise may be withdrawn by the holder at any time on or before the close of
business on the business day preceding the repurchase date.
The effect of these provisions granting the holders the right to require
us to repurchase the notes upon the occurrence of a change in control may make
it more difficult for any person or group to acquire control of us or to effect
a business combination with us. Moreover, under the indenture, we will not be
permitted to pay principal of or interest on, or otherwise acquire the notes,
including any repurchase at the election of the holders of notes upon the
occurrence of a change in control, if a payment default on our senior
indebtedness has occurred and is continuing, or if our senior indebtedness is
not paid in full in the event of our insolvency, bankruptcy, reorganization,
dissolution or other winding up. Our ability to pay cash to holders of notes
following the occurrence of a change in control may be limited by our then
existing financial resources. We cannot assure you that sufficient funds will be
available when necessary to make any required repurchases. See "Risk
Factors--Because we may be unable to raise the funds necessary to purchase the
notes in the event of a change in control, a change in control may cause a
default on the notes."
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<PAGE> 24
If a change in control occurs and the holders exercise their rights to
require us to repurchase notes, we intend to comply with applicable tender offer
rules under the Exchange Act with respect to any repurchase.
The term "beneficial owner" will be determined in accordance with Rules
13d-3 and 13d-5 under the Exchange Act or any successor provision, except that a
person will be deemed to have "beneficial ownership" of all shares that the
person has the right to acquire, whether exercisable immediately or only after
the passage of time.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the notes,
consolidate with or merge into any other person or convey, transfer or lease our
properties and assets substantially as an entirety to, any other person, if:
- we are the resulting or surviving corporation or the successor,
transferee or lessee, if other than us, is a corporation organized
under the laws of any U.S. jurisdiction and expressly assumes our
obligations under the indenture and the notes by means of a
supplemental indenture entered into with the trustee; and
- after giving effect to the transaction, no event of default and no
event which, with notice or lapse of time, or both, would constitute
an event of default, shall have occurred and be continuing.
Under any consolidation, merger or any conveyance, transfer or lease of
our properties and assets as described in the preceding paragraph, the successor
company will be our successor and shall succeed to, and be substituted for, and
may exercise every right and power of, Incyte under the indenture. Except in the
case of a lease, if the predecessor is still in existence after the transaction,
it will be released from its obligations and covenants under the indenture and
the notes.
MODIFICATION AND WAIVER
We and the trustee may enter into one or more supplemental indentures
that add, change or eliminate provisions of the indenture or modify the rights
of the holders of the notes with the consent of the holders of at least a
majority in principal amount of the notes then outstanding. However, without the
consent of each holder of an outstanding note, no supplemental indenture may,
among other things:
- change the stated maturity of the principal of or any installment of
interest on any note;
- reduce the principal amount of, or the premium or rate of interest
on, any note;
- change the currency in which the principal of any note or any premium
or interest is payable;
- impair the right to institute suit for the enforcement of any payment
on or with respect to any note when due;
- adversely affect the right provided in the indenture to convert any
note;
- modify the subordination provisions of the indenture in a manner
adverse to the holders of the notes;
- modify the provisions of the indenture relating to our requirement to
offer to repurchase notes upon a change in control in a manner
adverse to the holders of the notes;
- reduce the percentage in principal amount of the outstanding notes
necessary to modify or amend the indenture or to consent to any
waiver provided for in the indenture; or
- waive a default in the payment of principal of or any premium or
interest on any note.
The holders of a majority in principal amount of the outstanding notes
may, on behalf of the holders of all notes:
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<PAGE> 25
- waive compliance by us with restrictive provisions of the indenture
other than as provided in the preceding paragraph; and
- waive any past default under the indenture and its consequences,
except a default in the payment of the principal of or any premium or
interest on any note or in respect of a provision which under the
indenture cannot be modified or amended without the consent of the
holder of each outstanding note affected.
Without the consent of any holders of notes, we and the trustee may
enter into one or more supplemental indentures for any of the following
purposes:
- to cure any ambiguity, omission, defect or inconsistency in the
indenture;
- to evidence a successor to us and the assumption by the successor of
our obligations under the indenture and the notes;
- to make any change that does not adversely affect the rights of any
holder of the notes; or
- to comply with any requirement in connection with the qualification
of the indenture under the Trust Indenture Act.
EVENTS OF DEFAULT
Each of the following is an "event of default":
(1) a default in the payment of any interest upon any of the notes when
due and payable, continued for 30 days;
(2) a default in the payment of the principal of and premium, if any, on
any of the notes when due, including on a redemption date;
(3) failure to pay when due the principal of or interest on indebtedness
for money borrowed by us or our subsidiaries in excess of $10 million, or the
acceleration of that indebtedness that is not withdrawn within 10 days after the
date of written notice to us by the trustee or to us and the trustee by the
holders of at least 25% in principal amount of the outstanding notes;
(4) a default by us in the performance, or breach, of any of our other
covenants in the indenture which are not remedied by the end of a period of 60
days after written notice to us by the trustee or to us and the trustee by the
holders of at least 25% in principal amount of the outstanding notes; or
(5) events of bankruptcy, insolvency or reorganization of Incyte.
If an event of default described in clauses (1), (2), (3) or (4) occurs
and is continuing, either the trustee or the holders of at least 25% in
principal amount of the outstanding notes may declare the principal amount of
and accrued interest on all notes to be immediately due and payable. This
declaration may be rescinded if the conditions described in the indenture are
satisfied. If an event of default of the type referred to in clause (5) occurs,
the principal amount of and accrued interest on the outstanding notes will
automatically become immediately due and payable.
Within 90 days after a default, the trustee must give to the registered
holders of notes notice of all uncured defaults known to it. The trustee will be
protected in withholding the notice if it in good faith determines that the
withholding of the notice is in the best interests of the registered holders,
except in the case of a default in the payment of the principal of, or premium,
if any, or interest on, any of the notes when due or in the payment of any
redemption obligation.
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<PAGE> 26
The holders of not less than a majority in principal amount of the
outstanding notes may direct the time, method and place of conducting any
proceedings for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee. Subject to the provisions of the indenture
relating to the duties of the trustee, if an event of default occurs and is
continuing, the trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction of any of the
holders of the notes unless the holders have offered to the trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium, if any, or interest when due
or the right to convert a note in accordance with the indenture, no holder may
institute any proceeding or pursue any remedy with respect to the indenture or
the notes unless it complies with the conditions provided in the indenture,
including:
- holders of at least 25% in principal amount of the outstanding notes
have requested the trustee to pursue the remedy; and
- holders have offered the trustee security or indemnity satisfactory
to the trustee against any loss, liability or expense.
We are required to deliver to the trustee annually a certificate
indicating whether the officers signing the certificate know of any default by
us in the performance or observance of any of the terms of the indenture. If the
officers know of a default, the certificate must specify the status and nature
of all defaults.
BOOK-ENTRY, DELIVERY AND FORM
We issued the notes in the form of one or more global notes. The global
notes were deposited with, or on behalf of, the clearing agency registered under
the Exchange Act that is designated to act as depositary for the notes and
registered in the name of the depositary or its nominee. The Depository Trust
Company, or DTC, will be the initial depositary. Except as described below, a
global note may be transferred, in whole or in part, only to another nominee of
DTC or to a successor of DTC or its nominee.
You may hold beneficial interests in a global note directly through the
DTC if you have an account with DTC, indirectly through organizations that have
accounts with the DTC, directly through Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System and Clearstream
Banking, if you have an account with those entities, or indirectly through
organizations that have accounts with Euroclear or Clearstream. Euroclear and
Clearstream will hold interests in a global note on behalf of their participants
through DTC.
DTC has advised us that DTC is:
- a limited-purpose trust company organized under the laws of the State
of New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC was created to hold securities of institutions that have accounts
with DTC and to facilitate the clearance and settlement of securities
transactions among its participants in securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include:
- securities brokers and dealers;
- banks;
- trust companies;
- clearing corporations; and
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- various other organizations
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the global notes, DTC credited, on its book-entry
registration and transfer system, the principal amount of the individual
beneficial interests represented by the global note to the accounts of
participants. Ownership of beneficial interests in a global note is shown on,
and the transfer of those ownership interests will be effected only through,
records maintained by DTC and the participants. Ownership of beneficial
interests in a global note is limited to participants or persons that may hold
interests through participants.
So long as DTC or its nominee is the registered holder and owner of a
global note, DTC or its nominee will be considered the sole legal owner of the
notes represented by the global note for all purposes under the indenture and
the notes. Except as described below, as the owner of a beneficial interest in a
global note, you will be subject to the following limitations:
- you will not be entitled to have the notes represented by the global
notes registered in your name;
- you will not receive or be entitled to receive physical delivery of
certificated notes; and
- you will not be considered to be the owner or holder of any notes
under the global note.
We understand that under existing industry practice, in the event an
owner of a beneficial interest in a global note desires to take any action that
DTC, as the holder of the global note, is entitled to take, DTC would authorize
the participants to take the action. The participants would authorize beneficial
owners owning through the participants to take the action or would otherwise act
upon the instructions of beneficial owners owning through them. No beneficial
owner of an interest in a global note will be able to transfer the interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the indenture and, if applicable, those of Euroclear and
Clearstream Banking.
We will make payments of the principal of, and interest on, the notes
represented by a global note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the global note.
We expect that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a global note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global note as shown on the records of
DTC or its nominee. We also expect that payments by participants and indirect
participants to owners of beneficial interests in a global note held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for accounts of customers
registered in the names of nominees for these customers. The payments, however,
will be the responsibility of the participants and indirect participants, and
neither we, the trustee nor any paying agent will have any responsibility or
liability for:
- any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in a global note;
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its
participants; or
- the relationship between the participants and indirect participants
and the owners of beneficial interests in a global note.
Unless and until it is exchanged in whole or in part for definitive
notes, a global note may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.
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<PAGE> 28
We expect that DTC will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose accounts at
the DTC interests in a global note are credited and only in respect of the
portion of the aggregate principal amount of the notes as to which the
participant or participants has or have given direction. However, if there is an
event of default under the notes, DTC will exchange the global notes for
definitive notes, which it will distribute to its participants. These definitive
notes are subject to certain restrictions on registration of transfers and will
bear appropriate legends restricting their transfer.
Although we expect that DTC, Euroclear and Clearstream Banking will
agree to the procedures described above to facilitate transfers of interests in
global notes among participants of DTC, Euroclear, and Clearstream Banking, DTC,
Euroclear and Clearstream Banking are under no obligation to perform or continue
to perform these procedures, and these procedures may be discontinued at any
time. Neither we nor the trustee have any responsibility for the performance by
DTC, Euroclear or Clearstream Banking or their participants or indirect
participants of their obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary
for global notes or ceases to be a clearing agency registered under the
Securities Exchange Act and we do not appoint a successor depositary within 90
days, we will issue definitive notes in exchange for the global notes.
REGISTRATION RIGHTS
We entered into a Registration Rights Agreement with the initial
purchasers of the notes for the benefit of the holders of the notes and the
common stock issuable on conversion of the notes. Under this agreement, we will,
at our cost use all reasonable efforts to keep the shelf registration statement
of which this prospectus forms a part effective after its effective date for as
long as required to permit sales under Rule 144(k) under the Securities Act or
any successor rule or regulation.
We have the right to suspend use of the shelf registration statement
during specified periods of time relating to pending corporate developments and
public filings with the SEC and similar events.
If, after the shelf registration statement has been declared effective,
we fail to keep the shelf registration statement effective or usable in
accordance with and during the periods specified in the registration rights
agreement, then we will pay liquidated damages to all holders of notes and all
holders of common stock issued on conversion of the notes equal to 0.5% per year
until the failure is cured.
A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as selling securityholder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the
Securities Act in connection with any sales; and
- will be bound by the provisions of the registration rights agreement
which are applicable, including indemnification obligations.
We refer to the notes and the common stock issuable on conversion of the
notes as "registrable securities." Promptly upon request from any holder of
registrable securities, we will provide a form of notice and questionnaire to be
completed and delivered by that holder to us at least three business days before
any intended distribution of registrable securities under the shelf registration
statement. If we receive from a holder of registrable securities a completed
questionnaire, together with such other information as may be reasonably
requested by us, after the effectiveness of the shelf registration statement, we
will file an amendment to the shelf registration statement or supplement to the
related prospectus to permit the holder to deliver a prospectus to purchasers of
registrable securities. Any holder that does not complete and deliver a
questionnaire or provide such other information will not
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<PAGE> 29
be named as a selling securityholder in this prospectus, as supplemented, and
therefore will not be permitted to sell any registrable securities under the
shelf registration statement.
GOVERNING LAW
The indenture and the notes will be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the principal United States
federal income tax considerations relevant to purchasing, owning and disposing
of the notes and the common stock into which you may convert the notes. This
discussion is based on currently existing provisions of the Internal Revenue
Code of 1986, existing Treasury regulations promulgated under the Code, and
administrative and judicial interpretations thereof, all as in effect or
proposed on the date of this prospectus and all of which are subject to change,
possibly with retroactive effect or different interpretations.
This discussion does not deal with all aspects of United States federal
income taxation that may be important to holders of the notes or shares of
common stock received upon conversion of the notes, and it does not include any
description of the tax laws of any state, local or foreign government. This
discussion does not address the tax consequences to subsequent beneficial owners
of the notes, and is limited to beneficial owners who hold the notes and the
shares of common stock received upon conversion of the notes as capital assets
within the meaning of Section 1221 of the Code. Moreover, this discussion is for
general information only and does not purport to address all of the United
States federal income tax consequences that may be relevant to particular
purchasers such as financial institutions, insurance companies, tax-exempt
entities, dealers in securities or persons who have hedged the risk of owning a
note or a share of common stock. Particular purchasers may be subject to special
rules.
For the purpose of this discussion, a "United States holder" refers to a
beneficial owner of notes or common stock who or which is:
- a citizen or resident of the United States for United States federal
income tax purposes;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or any political
subdivision of the United States;
- an estate the income of which is subject to United States federal
income taxation regardless of its source;
- a trust if (A) a United States court is able to exercise primary
supervision over the administration of the trust and (B) one or more
United States fiduciaries have authority to control all substantial
decisions of the trust; or
- otherwise subject to United States federal income tax on a net income
basis in respect of its worldwide taxable income.
The term "Non-United States holder" refers to any beneficial owner of a
note or common stock who or which is not a United States holder.
Prospective purchasers are urged to consult their own tax advisers as to
the particular federal, state, local and foreign tax consequences to them of the
acquisition, ownership and disposition of the notes, including the conversion of
the notes into shares of common stock, and the effect that their particular
circumstances may have on such tax consequences.
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FEDERAL TAX CONSIDERATIONS APPLICABLE TO UNITED STATES HOLDERS
Interest on Notes. Interest paid on the notes will be taxable to a
United States holder as ordinary interest income in accordance with the holder's
method of tax accounting. The notes were not issued with original issue discount
within the meaning of the Code.
Constructive Dividend. Some corporate transactions, such as
distributions of assets to holders of common stock, may cause a deemed
distribution to the holders of the notes if the conversion price or conversion
ratio of the notes is adjusted to reflect such corporate transaction. These
deemed distributions will be taxable as a dividend, return of capital, or
capital gain in accordance with the earnings and profits rules discussed under
"--Dividends on Shares of Common Stock."
Conversion of Notes. A United States holder of notes generally will not
recognize gain or loss on the conversion of the notes solely into shares of
common stock, except with respect to cash received in lieu of fractional shares
and common stock treated as attributable to the accrued interest on the notes.
The United States holder's tax basis in the shares of common stock received upon
conversion of the notes, not including shares of common stock attributable to
accrued interest, will be equal to the holder's aggregate tax basis in the notes
converted, less any portion allocable to cash received in lieu of a fractional
share. The holding period of the shares of common stock received by the holder
upon a conversion of the notes generally will include the period during which
the holder held the notes prior to the conversion. However, shares of common
stock attributable to accrued interest will be taxed to the holder as ordinary
income, the holder's tax basis in those shares will equal the amount so taxed
and the holding period for those shares will generally begin the day following
their receipt.
Cash received in lieu of a fractional share of common stock should be
treated as a payment in exchange for such fractional share rather than as a
dividend. Gain or loss recognized on the receipt of cash paid in lieu of such
fractional shares generally will equal the difference between the amount of cash
received and the amount of tax basis allocable to the fractional shares
exchanged.
Dividends on Shares of Common Stock. We have never paid any dividends
and do not anticipate paying dividends for the foreseeable future. If, however,
we make distributions on shares of our common stock, the distributions will
constitute dividends for United States federal income tax purposes to the extent
of our current or accumulated earnings and profits as determined under United
States federal income tax principles. Dividends paid to holders that are United
States corporations may qualify for the dividends-received deduction.
To the extent that a United States holder receives a distribution on its
shares of common stock that would otherwise constitute a dividend for United
States federal income tax purposes but that exceeds our current and accumulated
earnings and profits, the distribution will be treated first as a non-taxable
return of capital reducing the holder's basis in its shares of common stock. Any
such distribution in excess of the holder's basis in its shares of common stock
will be treated as capital gain.
Sale or Exchange of Notes or Shares of Common Stock. In general, a
United States holder of notes will recognize gain or loss upon the sale,
redemption, retirement or other disposition of the notes measured by the
difference between:
- the amount of cash and the fair market value of any property received
(except to the extent attributable to the payment of accrued interest
which will be taxable as such) and
- the United States holder's tax basis in the notes.
A United States holder's tax basis in the notes generally will equal the
cost of the notes to the holder. In general, each United States holder of common
stock into which the notes have been converted will recognize gain or loss upon
the sale, exchange, redemption, or other disposition of the common stock under
rules similar to those applicable to the notes. Special rules may apply to
redemptions of the common stock which may result in the amount paid being
treated as a dividend. Gain or loss on the disposition of the notes or shares of
common stock will be capital gain or loss and will be long-term capital gain or
loss if the holding period of the notes or the common stock disposed of exceeds
one year.
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CERTAIN FEDERAL TAX CONSIDERATIONS APPLICABLE TO NON-UNITED STATES HOLDERS
Interest on Notes. Generally, interest paid on the notes to a Non-United
States holder will not be subject to United States federal income tax if:
- the interest is not effectively connected with the conduct of a trade
or business within the United States by such Non-United States
holder;
- the Non-United States holder does not actually or constructively own
10% or more of the total voting power of all classes of our stock
entitled to vote and is not a controlled foreign corporation with
respect to which we are a "related person" within the meaning of the
Code; for this purpose, the holder of the notes is deemed to own
constructively the common stock into which the notes could be
converted; and
- the beneficial owner, under penalty of perjury, certifies that the
owner is not a United States person and provides the owner's name and
address.
If specified requirements are satisfied, the certification described in
the last clause above may be provided by a securities clearing organization, a
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business. Under recently adopted United States
Treasury regulations, which generally are effective for payments made after
December 31, 2000, subject to certain transition rules, the certification
described in the last clause above also may be provided by a qualified
intermediary on behalf of one or more beneficial owners, or other
intermediaries, provided that the intermediary has entered into a withholding
agreement with the Internal Revenue Service and other conditions are met. A
holder that is not exempt from tax under these rules will be subject to United
States federal income tax withholding at a rate of 30% unless the interest is
effectively connected with the conduct of a United States trade or business, in
which case the interest will be subject to the United States federal income tax
on net income that applies to United States persons generally. Corporate
Non-United States holders that receive interest income that is effectively
connected with the conduct of a trade or business within the United States may
also be subject to an additional "branch profits" tax on such income. Non-United
States holders should consult applicable income tax treaties, which may provide
different rules.
Conversion of Notes. A Non-United States holder generally will not be
subject to United States federal income tax on the conversion of a note into
shares of common stock. To the extent a Non-United States holder receives shares
of common stock attributable to accrued interest, the amounts will be taxed as
described above under "Certain Federal Tax Considerations Applicable to
Non-United States Holders--Interest on Notes." To the extent a Non-United States
holder receives cash in lieu of a fractional share on conversion, the cash may
give rise to gain that would be subject to the rules described below with
respect to the sale or exchange of a note or common stock.
Dividends on Shares of Common Stock. Generally, any distribution on
shares of common stock to a Non-United States holder will be subject to United
States federal income tax withholding at a rate of 30% unless the dividend is
effectively connected with the conduct of a trade or business within the United
States by the Non-United States holder, in which case the dividend will be
subject to the United States federal income tax on net income that applies to
United States persons generally. Corporate Non-United States holders that
receive dividend income that is effectively connected with the conduct of a
trade or business within the United States also may be subject to an additional
"branch profits" tax on such income. Non-United States holders should consult
any applicable income tax treaties, which may provide for a lower rate of
withholding or other rules different from those described above. A Non-United
States holder and partners, shareholders or other beneficiaries of partnerships
or other fiscally transparent entities that are Non-United States holders may be
required to satisfy certification requirements in order to claim a reduction of
or exemption from withholding under the foregoing rules.
Sale or Exchange of Notes or Shares of Common Stock. A Non-United States
holder generally will not be subject to United States federal income tax on gain
recognized upon the sale or other disposition of the notes or shares of common
stock unless:
- the gain is, or is treated as, effectively connected with the conduct
of a trade or business within the United States by the Non-United
States holder;
29
<PAGE> 32
- in the case of a Non-United States holder who is a nonresident alien
individual and holds the common stock as a capital asset, the holder
is present in the United States for 183 or more days in the taxable
year and specified other circumstances are present; or
- we are a "United States real property holding corporation" for United
States federal income tax purposes at any time within the shorter of
the five-year period preceding the disposition or the holder's
holding period. We do not believe that we currently are a "United
States real property holding corporation" or that we will become one
in the future.
Federal Estate Taxes. A note beneficially owned by an individual who is
a Non-United States holder at the time of his or her death generally will not be
subject to U.S. federal estate tax as a result of the individual's death,
provided that:
- the individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of our stock entitled
to vote within the meaning of section 871(h)(3) of the Code; and
- interest payments with respect to the note would not have been, if
received at the time of the individual's death, effectively connected
with the conduct of a U.S. trade or business by the individual.
Common stock owned or treated as owned by an individual who is a
Non-United States holder at the time of his or her death will be included in the
individual's estate for United States federal estate tax purposes and thus will
be subject to United States federal estate tax, unless an applicable estate tax
treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States Holders. Information reporting and backup withholding may
apply to payments of interest or dividends on, or the proceeds of the sale or
other disposition of, the notes or shares of common stock made by us with
respect to non-corporate United States holders. These holders generally will be
subject to backup withholding at a rate of 31% unless the recipient of the
payment supplies a taxpayer identification number, certified under penalties of
perjury, as well as certain other information, or otherwise establishes, in the
manner prescribed by law, an exemption from backup withholding. Any amount
withheld under backup withholding is allowable as a credit against the United
States holder's federal income tax, upon furnishing the required information to
the Internal Revenue Service.
Non-United States holders. Generally, information reporting and backup
withholding of United States federal income tax at a rate of 31% may apply to
the payment of principal, interest and premium, if any, to Non-United States
holders if the payee fails to certify that the holder is a Non-United States
person or if we or our paying agent have actual knowledge that the payee is a
United States person.
The payment of the proceeds on the disposition of notes or shares of
common stock to or through the United States office of a United States or
foreign broker will be subject to information reporting and backup withholding
unless the owner provides the certification described above or otherwise
establishes an exemption. The proceeds of the disposition by a Non-United States
holder of notes or shares of common stock to or through a foreign office of a
broker will not be subject to backup withholding. However, if the broker is (1)
a United States person, (2) a controlled foreign corporation for United States
tax purposes, (3) a foreign person 50% or more of whose gross income from all
sources is from activities that are effectively connected with a United States
trade or business, or (4) with respect to payments made after December 31, 2000,
a foreign partnership in which United States persons hold more than 50% of the
income or capital interests or which is engaged in a United States trade or
business at any time during its tax year, information reporting will apply
unless the broker has documentary evidence of the owner's foreign status and has
no actual knowledge to the contrary or unless the owner otherwise establishes an
exemption. Both backup withholding and information reporting will apply to the
proceeds from the disposition if the broker has actual knowledge that the payee
is a United States holder.
30
<PAGE> 33
Recently adopted United States Treasury regulations, which generally are
effective for payments made after December 31, 2000, subject to transition
rules, alter the rules described above. Among other things, the regulations
provide presumptions under which a Non-United States holder is subject to
information reporting and backup withholding at the rate of 31% unless we
receive certification from the holder of non-U.S. status. Depending on the
circumstances, this certificate will need to be provided:
- directly by the Non-United States holder;
- in the case of a Non-United States holder that is treated as a
partnership or other fiscally transparent entity, by the partners,
shareholders or other beneficiaries of such entity; or
- qualified financial institutions or other qualified entities on
behalf of the Non-United States holder.
31
<PAGE> 34
SELLING SECURITYHOLDERS
The notes were originally issued by us and sold by the initial
purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by the initial purchasers to be
qualified institutional buyers or non-U.S. persons within the meaning of
Regulation S under the Securities Act of 1933. Selling securityholders,
including their transferees, pledgees or donees or their successors, may from
time to time offer and sell pursuant to this prospectus any or all of the notes
and common stock into which the notes are converted.
The following table shows information as of August 1, 2000 regarding the
principal amounts of notes beneficially owned by each of the selling
securityholders that may be offered under this prospectus. Information with
respect to beneficial ownership is based upon information provided by or on
behalf of the selling securityholders. The selling securityholders may offer
all, some or none of the notes or common stock into which the notes are
convertible. Because the selling securityholders may offer all or some portion
of the notes or the common stock, no estimate can be given as to the amount of
the notes or common stock that will be held by the selling securityholders upon
termination of any sales. In addition, the selling securityholders identified
below may have sold, transferred or otherwise disposed of all or a portion of
their notes since the date on which they provided the information regarding
their notes in transactions exempt from the registration requirements of the
Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT COMMON STOCK COMMON STOCK
OF NOTES ISSUABLE UPON COMMON OWNED AFTER
BENEFICIALLY OWNED CONVERSION OF STOCK COMPLETION
NAME AND OFFERED(1) THE NOTES(1) OFFERED(1) OF THE OFFERING
---- ------------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C>
Allstate Insurance Company $ 295,000 2,187 2,187 --
Argent Classic Convertible Arbitrage
Fund (Bermuda) L.P. 3,400,000 25,215 25,215 --
Bank Austria Cayman Island, Ltd. 500,000 3,708 3,708 --
Bear, Stearns & Co. Inc. 1,500,000 11,124 11,124 --
BNP Arbitrage SNC 9,000,000 66,746 66,746 --
Chrysler Corporation Master Retirement Fund 1,620,000 12,014 12,014 --
Credit Suisse First Boston Corporation 2,050,000 15,203 15,203 --
Delta Air Lines Master Trust 1,275,000 9,455 9,455 --
Highbridge International LLC 10,000,000 74,163 74,163 --
JMG Capital Partners, LP 4,500,000 33,373 33,373 --
JMG Triton Offshore Fund, Ltd. 8,000,000 59,330 59,330 --
KBC Financial Products 4,200,000 31,148 31,148 --
Kentfield Trading, Ltd. 933,000 6,919 6,919 --
Lipper Convertibles, L.P. 5,000,000 37,081 37,081 --
Main Picture Industry Health Plan -
Active Member Fund 185,000 1,372 1,372 --
Motion Picture Industry Health Plan
Retiree Member Fund 95,000 704 704 --
OCM Convertible Trust 400,000 2,966 2,966 --
Onyx Fund Holdings, LDC 8,000,000 59,330 59,330 --
Paloma Securities L.L.C. 11,500,000 85,286 85,286 --
Partner Reinsurance Company, Ltd. 335,000 2,484 2,484 --
R(2) Investments, LDC 10,500,000 77,871 77,871 --
Ramius Capital Group Holdings, Ltd. 500,000 3,708 3,708 --
SG Cowen Securities 5,000,000 37,081 37,081 --
State Employees' Retirement Fund of
the State of Delaware 830,000 6,155 6,155 --
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT COMMON STOCK COMMON STOCK
OF NOTES ISSUABLE UPON COMMON OWNED AFTER
BENEFICIALLY OWNED CONVERSION OF STOCK COMPLETION
NAME AND OFFERED(1) THE NOTES(1) OFFERED(1) OF THE OFFERING
---- ------------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C>
State of Connecticut
Combined Investment Fund 865,000 6,415 6,415 --
Teacher's Insurance and
Annuity Association 1,000,000 7,416 7,416 --
Tribeca Investments LLC 10,550,000 78,241 78,241 --
Vanguard Convertible Securities Fund, Inc. 3,495,000 25,919 25,919 --
White River Securities LLC 1,500,000 11,124 11,124 --
</TABLE>
(1) Amounts indicated may be in excess of the total amount registered due to
sales or transfers exempt from the registration requirements of the
Securities Act since the date on which selling securityholders provided
information to us regarding their notes.
None of the selling securityholders nor any of their affiliates,
officers, directors or principal equity holders has held any position or office
or has had any material relationship with us within the past three years.
Information concerning the selling securityholders may change from time
to time and any changed information will be set forth in supplements to this
prospectus if and when necessary. In addition, the per share conversion price
and, therefore, the number of shares of common stock issuable on conversion of
the notes, is subject to adjustment. As a result, the aggregate principal amount
of notes and the number of shares of common stock into which the notes are
convertible may increase or decrease.
33
<PAGE> 36
PLAN OF DISTRIBUTION
The selling securityholders may offer and sell the notes and shares
covered by this prospectus at various times. As used in this prospectus, the
term "selling securityholders" includes donees, pledgees, transferees or other
successors-in-interest selling shares received from a named selling
securityholder as a gift, partnership distribution, or other non-sale-related
transfer after the date of this prospectus. The selling securityholders will act
independently of us 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
securityholders in transactions on the Nasdaq National Market, the
over-the-counter market, or otherwise. Sales of notes and the common stock into
which the notes are convertible 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 notes and shares of common stock may be sold by
means of one or more of the following methods:
- 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;
- purchases by a broker-dealer as principal and resale by that
broker-dealer for its account pursuant to this prospectus;
- ordinary brokerage transactions in which the broker solicits
purchasers;
- in connection with short sales, in which the notes or shares are
redelivered to close out short positions;
- in connection with the loan or pledge of notes or shares covered by
this prospectus to a broker-dealer, and the sale of the notes or
shares so loaned or the sale of the notes or shares so pledged upon a
default;
- 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;
- privately negotiated transactions; or
- in a combination of any of the above methods.
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
In effecting sales, broker-dealers engaged by the selling
securityholders 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 securityholders or from the purchasers of the notes
or shares or from both.
The aggregate proceeds to the selling securityholders from the sale of
the notes or common stock into which the notes are convertible offered by them
will be the purchase price of the notes or common stock less discounts and
commissions, if any. Each of the selling securityholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or
in part, any proposed purchase of notes or common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.
Our outstanding common stock is listed for quotation on the Nasdaq
National Market. We do not intend to list the notes for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if
applicable, the notes and common stock into which the notes are convertible may
be sold in these jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the notes and common stock into which the
notes are convertible may not be sold unless they have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
34
<PAGE> 37
The selling securityholders and any underwriters, broker-dealers or
agents that participate in the sale of the notes and common stock into which the
notes are convertible may be "underwriters" within the meaning of the Securities
Act of 1933. Any discounts, commissions, concessions or profit they earn on any
resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling securityholders who are "underwriters" within the
meaning of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act. The selling securityholders have
acknowledged that they understand their obligations to comply with the
provisions of the Securities Exchange Act of 1934 and the rules under that Act
relating to stock manipulation, particularly Regulation M.
In addition, any securities covered by this prospectus that qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
securityholder may not sell any notes or common stock described in this
prospectus and may not transfer, devise or gift these securities by other means
not described in this prospectus.
We entered into a registration rights agreement for the benefit of
holders of the notes to register their notes and common stock under applicable
federal and state securities laws under specific circumstances and at specific
times. The registration rights agreement provides for us and the selling
securityholders to indemnify each other against specific liabilities in
connection with the offer and sale of the notes and the common stock, including
liabilities under the Securities Act. We will pay substantially all of the
expenses incurred by the selling securityholders incident to the offering and
sale of the notes and the common stock, provided that each selling
securityholder will be responsible for payment of commissions, concessions and
discounts of underwriters, broker-dealers or agents.
LEGAL MATTERS
Selected legal matters with respect to the validity of notes and common
stock offered by this prospectus are being passed upon for us by Pillsbury
Madison & Sutro LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999. Our consolidated financial statements are incorporated
by reference in this prospectus in reliance on Ernst & Young LLP's report, which
is based in part on the report of PricewaterhouseCoopers LLP, given on the
authority of Ernst & Young LLP as experts in accounting and auditing.
The audited financial statements of diaDexus, LLC not separately
presented in this prospectus, have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon appears in the Incyte Genomics,
Inc. annual report on Form 10-K for the year ended December 31, 1999. Such
financial statements, to the extent they have been included in the financial
statements of Incyte Genomics, Inc., have been so included in reliance on the
report of such independent accountants given on the authority of said firm as
experts in auditing and accounting.
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 rooms:
450 Fifth Street, N.W. 500 West Madison Street 7 World Trade Center
Room 1024 14th Floor Suite 1300
Washington, D.C. Chicago, Illinois New York, New York
35
<PAGE> 38
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 that contains
this prospectus on Form S-3 under the Securities Act of 1933. The registration
statement relates to the notes and the common stock issuable on conversion of
the notes offered by the selling securityholders. 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, the notes 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.
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:
- Our Annual Report on Form 10-K for the year ended December 31, 1999.
- Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.
- Our current reports on Form 8-K filed with the Commission on February
1, 2000; February 17, 2000; February 22, 2000; February 24, 2000;
March 24, 2000 and July 25, 2000.
- The description of our common stock contained in our registration
statement on Form 8-A filed under the Exchange Act on January 5,
1996.
- 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 Genomics, Inc.
3160 Porter Drive
Palo Alto, California 94304
Telephone (650) 845-4589
----------------------
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 securityholders are
offering to sell, and seeking offers to buy, only the notes and shares of 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.
36
<PAGE> 39
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 securityholders. All amounts are estimated except
the SEC registration fee.
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
SEC registration fee..................................... $ 52,800
Accounting fees and expenses............................. 15,000
Legal fees and expenses.................................. 30,000
Miscellaneous fees and expenses.......................... 2,200
--------
Total............................................. $100,000
========
</TABLE>
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
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.1* Indenture, dated as of February 4, 2000, between the Registrant and
State Street Bank and Trust Company of California, N.A., including
the form of Note (filed as Exhibit 4.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1999).
4.2* Registration Rights Agreement, dated as of February 4, 2000, among
the Registrant and Deutsche Bank Securities Inc. and Warburg Dillon
Read LLC (filed as Exhibit 10.13 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999).
5.1* Opinion of Pillsbury Madison & Sutro LLP.
12.1* Computation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.3* Consent of Pillsbury Madison & Sutro LLP (included in its opinion
filed as Exhibit 5.1 to this Registration Statement).
</TABLE>
II-1
<PAGE> 40
<TABLE>
<S> <C>
24.1* Power of Attorney (see page II-3).
25.1* Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of a Corporation Designated to Act as a Trustee on Form
T-1.
</TABLE>
---------
* Filed previously.
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 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> 41
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 Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Palo Alto, State of California, on August 1,
2000.
INCYTE GENOMICS, INC.
By /s/ Roy A. Whitfield
-----------------------------------
Roy A. Whitfield
Chief Executive Officer
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 August 1, 2000
------------------------------------ (Principal Executive Officer)
Roy A. Whitfield and Director
/s/ John M. Vuko* Chief Financial Officer August 1, 2000
------------------------------------ (Principal Financial Officer)
John M. Vuko
/s/ Timothy Henn* Controller August 1, 2000
------------------------------------ (Principal Accounting Officer)
Timothy Henn
/s/ Jeffrey J. Collinson* Chairman of the Board August 1, 2000
------------------------------------
Jeffrey J. Collinson
/s/ Barry M. Bloom* Director August 1, 2000
------------------------------------
Barry M. Bloom
/s/ Frederick B. Craves* Director August 1, 2000
------------------------------------
Frederick B. Craves
/s/ Jon S. Saxe* Director August 1, 2000
------------------------------------
Jon S. Saxe
/s/ Randal W. Scott* Director August 1, 2000
------------------------------------
Randal W. Scott
/s/ Roy A. Whitfield*
-----------------------------
Roy A. Whitfield
As Attorney-In-Fact
</TABLE>
II-3
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
<S> <C>
5.1* Opinion of Pillsbury Madison & Sutro LLP.
12.1* Computation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
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).
25.1* Statement of Eligibility and Qualification under the Trust Indenture Act of
1939 of a Corporation Designated to Act as a Trustee on Form T-1.
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</TABLE>
* Filed previously.
II-4
